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, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-17611
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FIRST CAPITAL GROWTH FUND XIV - A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3552804
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
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(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
Not applicable
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(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
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DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Agreement of Limited Partnership filed as Exhibit
A to the Partnership's Prospectus dated December 8, 1988, 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,
1996 December 31,
(Unaudited) 1995
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ASSETS
Investment in commercial rental property:
Land $ 1,319,000 $1,319,000
Building and improvements 5,813,100 5,807,300
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7,132,100 7,126,300
Accumulated depreciation and amortization (1,046,800) (987,500)
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Total investment property, net of accumulated
depreciation and amortization 6,085,300 6,138,800
Cash and cash equivalents 2,221,500 2,364,800
Rents receivable 5,600 6,000
Other assets 22,700 26,000
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$ 8,335,100 $8,535,600
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued real estate taxes $ 448,300 $ 550,500
Accounts payable and accrued expenses 58,800 97,300
Due to Affiliates 9,900 4,200
Distributions payable 129,100 121,000
Security deposits 38,200 38,100
Other liabilities 19,700 19,700
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704,000 830,800
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Partners' capital:
General Partner 156,000 163,400
Limited Partners (145,182 Units issued and
outstanding) 7,475,100 7,541,400
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7,631,100 7,704,800
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$ 8,335,100 $8,535,600
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STATEMENTS OF PARTNERS' CAPITAL
For the quarter ended March 31, 1996 (Unaudited)
and the year ended December 31, 1995
(All dollars rounded to nearest 00s)
General Limited
Partner Partners Total
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Partners' capital, January 1, 1995 $202,800 $8,842,700 $9,045,500
Net income (loss) for the year ended
December 31, 1995 9,000 (865,800) (856,800)
Distributions for the year ended
December 31, 1995 (48,400) (435,500) (483,900)
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Partners' capital, December 31, 1995 163,400 7,541,400 7,704,800
Net income for the quarter ended March 31,
1996 5,500 49,900 55,400
Distributions for the quarter ended March
31, 1996 (12,900) (116,200) (129,100)
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Partners' capital, March 31, 1996 $156,000 $7,475,100 $7,631,100
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The accompanying notes are an integral part of the financial statements.
2
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended March 31, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
1996 1995
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Income:
Rental $370,700 $384,800
Interest 29,800 30,600
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400,500 415,400
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Expenses:
Real estate taxes 150,000 130,100
Depreciation and amortization 59,300 62,900
Property operating:
Affiliates 22,400 24,200
Nonaffiliates 41,400 42,500
Insurance--Affiliate 3,200 3,200
Repairs and maintenance 44,200 33,900
General and administrative:
Affiliates 5,600 4,900
Nonaffiliates 19,000 19,500
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345,100 321,200
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Net income $ 55,400 $ 94,200
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Net income allocated to General Partner $ 5,500 $ 11,900
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Net income allocated to Limited Partners $ 49,900 $ 82,300
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Net income allocated to Limited Partners per Unit (145,182
Units outstanding) $ 0.34 $ 0.57
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STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s)
1996 1995
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Cash flows from operating activities:
Net income $ 55,400 $ 94,200
Adjustments to reconcile net income to net cash (used
for) provided by operating activities:
Depreciation and amortization 59,300 62,900
Changes in assets and liabilities:
Decrease (increase) in rents receivable 400 (17,100)
Decrease in other assets 3,300 2,900
(Decrease) in accrued real estate taxes (102,200) (108,100)
(Decrease) in accounts payable and accrued expenses (38,500) (800)
Increase in due to Affiliates 5,700 17,900
(Decrease) in prepaid rent (9,800)
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Net cash (used for) provided by operating activities (16,600) 42,100
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Cash flows from investing activities:
Payments for capital and tenant improvements (5,800) (70,400)
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Net cash (used for) investing activities (5,800) (70,400)
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Cash flows from financing activities:
Distributions paid to Partners (121,000) (83,900)
Increase (decrease) in security deposits 100 (400)
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Net cash (used for) financing activities (120,900) (84,300)
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Net (decrease) in cash and cash equivalents (143,300) (112,600)
Cash and cash equivalents at the beginning of the period 2,364,800 2,302,000
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Cash and cash equivalents at the end of the period $2,221,500 $2,189,400
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The accompanying notes are an integral part of the financial statements.
3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
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 financial statements have been prepared in accordance with generally
accepted accounting principles. Under this method of accounting, revenues are
recorded when earned and expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with
generally accepted accounting principles 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 ended March 31, 1996 are not necessarily indicative of the
operating results for the year ending December 31, 1996.
The financial statements include the Partnership's 50% interest in a joint
venture with an Affiliated partnership. This joint venture was formed for the
purpose of acquiring a 100% interest in certain real property and is operated
under the common control of the General Partner and an Affiliate of the General
Partner. Accordingly, the Partnership's pro rata share of the venture's
revenues, expenses, assets, liabilities and Partners' capital is included in
the financial statements.
Commercial rental property held for investment is recorded at cost, net of any
provision for value impairment, and depreciated (exclusive of amounts allocated
to land and value impairments) on the straight-line method over its estimated
useful life. Upon classifying commercial rental property as held for
disposition, no depreciation or amortization of the property is provided in the
Financial Statements. Lease acquisition fees are recorded at cost and amortized
over the life of the lease. Repair and maintenance costs are expensed as
incurred; expenditures for improvements are capitalized and depreciated over
the estimated life of the improvements.
During the first quarter of 1996, the Partnership adopted Financial Accounting
Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The
Standard established guidance for determining if the value of defined assets
are impaired, and if so, how impairment losses should be measured and reported
in the financial statements. The Standard also addressed the accounting for
long-lived assets that are expected to be disposed of. The adoption of the
Standard did not have a material effect on the Partnership's financial
statements.
Cash equivalents are considered all highly liquid investments with an original
maturity of three months or less when purchased.
Certain reclassifications have been made to the previously reported 1995
statements in order to provide comparability with the 1996 statements. These
reclassifications had no effect on net income or Partners' capital.
Reference is made to the Partnership's annual report for the year ended
December 31, 1995 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, commencing with the fiscal
quarter in which the Minimum Subscription Closing Date occurred (the quarter
ended March 31, 1989), distributable Cash Flow (as defined in the Partnership
Agreement), if any, is distributed 90% to the Limited Partners and 10% to the
General Partner. For the quarter ended March 31, 1996 the General Partner was
entitled to distributable Cash Flow (as defined in the Partnership Agreement)
of $12,900.
In accordance with the Partnership Agreement, Losses (exclusive of Losses from
a Major Capital Event) are allocated 1% to the General Partner and 99% to the
Limited Partners as a group. Losses from a Major Capital Event, including any
provisions for value impairment, are allocated prior to giving effect to any
distribution of Sale or Refinancing Proceeds from such Major Capital Event;
first, to the General Partner and Limited Partners with positive balances in
their Capital Accounts, in proportion to and to the extent of such positive
balances; and second, the balance, if any, 1% to the General Partner and 99% to
the Limited Partners as a group. Profits (exclusive of Profits from a Major
Capital Event) are allocated; first, in accordance with the ratio in which Cash
Flow (as defined in the Partnership Agreement) was distributable among the
Partners for such fiscal year, to the extent of such Cash Flow (as defined in
the Partnership Agreement); provided, however, that if the Partnership makes no
distributions of Cash Flow (as defined in the Partnership Agreement) for such
fiscal year, then such Profits are allocated 1% to the General Partner and 99%
to the Limited Partners as a group; and second, the balance, if any, 1% to the
General Partner and 99% to the Limited Partners as a group. Profits from a
Major Capital Event are allocated prior to giving effect to any distributions
of Sale or Refinancing Proceeds from such Major Capital Event; first, to the
General Partner and Limited Partners with negative balances in their Capital
Accounts, in proportion to and to the extent of such negative balances; second,
in proportion to and to the extent of the amounts, if any, necessary to make
the positive balance in the Capital Account of each Limited Partner equal to
the Capital Investment of such Limited Partner; third, in proportion to and to
the extent of the amounts, if any, necessary to make the positive balance in
the Capital Account of each Limited Partner equal to the Capital Investment of
such Limited Partner, plus an amount equal to a cumulative, simple return of 6%
per annum on the Capital Investment from time to time of such Limited Partner
from the date on which the investment in the Partnership was made (less amounts
previously returned by way of Cash Flow (as defined in the Partnership
Agreement) and Sale or Refinancing Proceeds in payment of said cumulative
return); and fourth, any remaining Profits are allocated 17% to the General
Partner and 83% to the Limited Partners as a group. Notwithstanding anything to
the contrary, the interest of the General Partner in each material item of
Partnership income, gain, loss, deduction or credit will be equal to at least
1% of each such item at all times during the existence of the Partnership. For
the quarter ended March 31, 1996, the General Partner was allocated Profits of
$5,500.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter ended March 31, 1996 were as follows:
Paid Payable
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Property management and leasing fees $19,100 $3,600
Reimbursement of property insurance premiums, at cost None 3,200
Reimbursement of expenses, at cost:
--Accounting 3,800 2,000
--Investor communication 2,500 1,100
--Legal 100 None
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$25,500 $9,900
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4
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, 1995, for a discussion of the Partnership's business.
OPERATIONS
The table below is a recap of the Partnership's share of certain operating
results of its remaining property, 1800 Sherman Office Building ("1800
Sherman") for the quarters ended March 31, 1996 and 1995. The discussion
following the table should be read in conjunction with the Financial Statements
and Notes thereto appearing in this report.
Comparative
Operating Results
(a)
For the Quarters
Ended
3/31/96 3/31/95
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1800 SHERMAN OFFICE BUILDING
(50%)
Rental revenues $ 370,700 $384,800
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Property net income $ 50,700 $ 88,900
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Average occupancy 96% 98%
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(a) Excludes certain income and expense items which are not directly related to
individual property operating results such as interest income and general
and administrative expenses.
Net income for the quarter ended March 31, 1996 decreased $38,800 when compared
to the quarter ended March 31, 1995. The decrease in net income was primarily
due to diminished operating results of $38,200 at 1800 Sherman.
Rental revenues decreased $14,100 or 3.7% for the quarter ended March 31, 1996
when compared to the quarter ended March 31, 1995. The primary factors which
caused this decrease were decreases in the quarterly average occupancy rate at
1800 Sherman and in revenues generated by its parking facility.
Real estate tax expense increased $19,900 for the quarter ended March 31, 1996
when compared to the quarter ended March 31, 1995. The increase was primarily
the result of a projected increase in the tax rate charged by the taxing
authority.
Repairs and maintenance expense increased $10,300 for the quarter ended March
31, 1996 when compared to the quarter ended March 31, 1995. The increase was
due to increased costs associated with the removal of snow from the property
and an increase in the costs connected with the cleaning of the property.
Property operating expense decreased $2,900 for the quarterly periods under
comparison primarily due to a decrease in professional service fees.
Insurance expense and general and administrative expenses remained relatively
stable between the quarters under comparison.
To maintain the occupancy level at 1800 Sherman, the General Partner, through
its Affiliated asset and property management group, continues to take the
following actions: 1) implementation of marketing programs, including hiring of
third-party leasing agents or providing on-site leasing personnel, advertising,
direct mail campaigns and development of building brochures; 2) early renewal
of existing tenant leases and addressing any expansion needs these tenants may
have; 3) promotion of local broker events and networking with local brokers; 4)
cold-calling other businesses and tenants in the market area; and 5) providing
rental concessions or competitively pricing rental rates depending on market
conditions.
LIQUIDITY AND CAPITAL RESOURCES
One of the Partnership's objectives is to dispose of its remaining property
when market conditions allow for the achievement of the maximum possible sales
price. In the interim, the Partnership continues to manage and maintain this
property. Notwithstanding the Partnership's intention relative to the sale of
the property, another primary objective of the Partnership is to provide cash
distributions to Partners from Partnership operations. To the extent cumulative
cash distributions exceed net income, such excess distributions are treated as
a return of capital. Cash Flow (as defined in the Partnership Agreement) is
generally not equal to Partnership net income or cash flows as defined by
generally accepted accounting principles ("GAAP"), since certain items are
treated differently under the Partnership Agreement than under GAAP. Management
believes that to facilitate a clear understanding of the Partnership's
operations, an analysis of Cash Flow (as defined in the Partnership Agreement)
should be examined in conjunction with an analysis of net income or cash flows,
as defined by GAAP. The following table includes a reconciliation of Cash Flow
(as defined in the Partnership Agreement) to cash flow provided by operating
activities as defined by GAAP. Such amounts are not indicative of actual
distributions to Partners and should not necessarily be considered as an
alternative to the results disclosed in the Statements of Income and Expenses
and Statements of Cash Flows.
Comparative
Cash Flow Results
For the Quarters Ended
3/31/96 3/31/95
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Cash Flow (as defined in the Partnership Agreement) $ 114,700 $ 157,100
Items of reconciliation:
Decrease (increase) in current assets 3,700 (14,200)
(Decrease) in current liabilities (135,000) (100,800)
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Net cash (used for) provided by operating activities $ (16,600) $ 42,100
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Net cash (used for) investing activities $ (5,800) $ (70,400)
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Net cash (used for) financing activities $ (120,900) $ (84,300)
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The decrease in Cash Flow (as defined in the Partnership Agreement) of $42,400
for the quarter ended March 31, 1996 when compared to the quarter ended March
31, 1995 was primarily due to the decrease in net income, as previously
discussed, exclusive of depreciation and amortization expense.
The decrease in the Partnership's cash position of $143,300 as of March 31,
1996 when compared to December 31, 1995 was primarily the result of
distributions made to Partners together with a reduction of a portion of its
outstanding liabilities at December 31, 1995. Liquid assets of the Partnership
as of March 31, 1996 were comprised of working capital reserves and
undistributed cash from operations.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net cash provided by (used for) operating activities changed from $42,100 for
the quarter ended March 31, 1995 to $(16,600) for the quarter ended March 31,
1996. The change was primarily due to the decrease in net income, as previously
discussed and the timing of the payment of certain Partnership expenses,
partially offset by the timing of the collection of tenant's rental payments.
The decrease in net cash (used for) investing activities of $64,600 for the
quarter ended March 31, 1996 when compared to the quarter ended March 31, 1995
was due to a decrease in expenditures for capital, tenant improvement and
leasing costs for the Partnership's remaining property. During the quarter
ended March 31, 1996, the Partnership spent $5,800 for building and tenant
improvements and leasing costs and has budgeted to spend approximately $75,000
during the remainder of 1996. The General Partner believes these improvements
and leasing costs are necessary in order to increase and/or maintain occupancy
in a very competitive market and to maximize rental rates charged to new and
renewing tenants.
Net cash used for financing activities increased by $36,600 for the quarter
ended March 31, 1996 when compared to the quarter ended March 31, 1995. The
increase was primarily due to the increase in cash distributions paid to
Partners.
The General Partner continues to take a conservative approach to projections of
future rental income in its determination of adequate levels of cash reserves
due to anticipated capital, tenant improvement and leasing costs necessary to
be made at the Partnership's property during the next several years. For the
quarter ended March 31, 1996, the Partnership included $14,400 of previously
undistributed Cash Flow (as included in the Partnership Agreement) in its first
quarter distribution to Partners.
Distributions to Limited Partners for the quarter ended March 31, 1996 were
declared in the amount of $116,200 or $0.80 per Unit. Cash distributions are
made 60 days after the last day of each fiscal quarter. The amount of future
distributions to Partners will ultimately be dependent upon the performance of
1800 Sherman as well as the General Partner's determination of the amount of
cash necessary to supplement working capital reserves to meet future liquidity
requirements of the Partnership. Accordingly, there can be no assurance as to
the amount and/or availability of cash for future distribution to Partners.
Based upon the current estimated value of its assets, net of its outstanding
liabilities, together with its expected operating results and capital
expenditure requirements, the General Partner believes that the Partnership's
cumulative distributions to its Limited Partners from inception through the
termination of the Partnership will be less than such Limited Partners'
original Capital Investment.
6
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
March 31, 1996.
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 GROWTH FUND--XIV,
A REAL ESTATE LIMITED PARTNERSHIP
BY: FIRST CAPITAL FUND--XIV, INC.
GENERAL PARTNER
Date: May 13, 1996 By: /s/ DOUGLAS CROCKER II
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DOUGLAS CROCKER II
President and Chief Executive Officer
Date: May 13, 1996 By: /s/ NORMAN M. FIELD
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NORMAN M. FIELD
Vice President--Finance and Treasurer