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 June 30, 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 ____________________
Commission File Number: 0-15632
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FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4
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(Exact name of registrant as specified in its charter)
Illinois 36-3441345
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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 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.
BALANCE SHEETS
(All dollars rounded to nearest 00s)
June 30,
1996 December 31,
(Unaudited) 1995
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ASSETS
Investment in commercial rental properties:
Land $ 5,050,400 $ 5,050,400
Buildings and improvements 38,415,200 38,273,000
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43,465,600 43,323,400
Accumulated depreciation and amortization (9,742,400) (9,091,000)
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Total investment properties, net of accumulated
depreciation and amortization 33,723,200 34,232,400
Cash and cash equivalents 1,191,000 4,655,200
Investments in debt securities 3,170,500
Restricted cash 100,000 62,500
Rents receivable 142,000 225,100
Other assets 44,400 53,600
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$38,371,100 $39,228,800
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable to General Partner $ 4,246,800 $ 4,085,700
Accounts payable and accrued expenses 640,800 732,100
Due to Affiliates 131,300 138,900
Distributions payable 703,300 783,900
Security deposits 93,200 92,600
Other liabilities 49,200 61,400
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5,864,600 5,894,600
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Partners' capital:
General Partner (deficit) (270,300) (270,300)
Limited Partners (593,025 Units issued and
outstanding) 32,776,800 33,604,500
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32,506,500 33,334,200
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$38,371,100 $39,228,800
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STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 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' (deficit) capital,
January 1, 1995 $(246,300) $36,839,000 $36,592,700
Net income (loss) for the year ended
December 31, 1995 137,200 (921,700) (784,500)
Distributions for the year ended December
31, 1995 (161,200) (2,312,800) (2,474,000)
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Partners' (deficit) capital, December 31,
1995 (270,300) 33,604,500 33,334,200
Net income for the six months ended June
30, 1996 80,600 417,700 498,300
Distributions for the six months ended
June 30, 1996 (80,600) (1,245,400) (1,326,000)
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Partners' (deficit) capital,
June 30, 1996 $(270,300) $32,776,800 $32,506,500
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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 June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
1996 1995
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Income:
Rental $1,229,800 $1,376,200
Interest 60,700 66,900
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1,290,500 1,443,100
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Expenses:
Interest on loan payable to General Partner 91,300 87,800
Depreciation and amortization 324,800 348,900
Property operating:
Affiliates 80,400 87,100
Nonaffiliates 202,600 143,000
Real estate taxes 203,500 147,200
Insurance--Affiliate 16,200 12,600
Repairs and maintenance 149,400 97,900
General and administrative:
Affiliates 9,600 8,600
Nonaffiliates 37,700 50,200
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1,115,500 983,300
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Net income $ 175,000 $ 459,800
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Net income allocated to General Partner $ 43,100 $ 53,400
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Net income allocated to Limited Partners $ 131,900 $ 406,400
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Net income allocated to Limited Partners per Unit
(593,025 Units outstanding) $ 0.22 $ 0.69
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STATEMENTS OF INCOME AND EXPENSES
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
1996 1995
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Income:
Rental $2,538,100 $2,839,200
Interest 118,400 124,500
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2,656,500 2,963,700
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Expenses:
Interest on loan payable to General Partner 180,300 172,300
Depreciation and amortization 651,800 700,600
Property operating:
Affiliates 179,500 176,700
Nonaffiliates 361,000 286,300
Real estate taxes 359,600 309,000
Insurance--Affiliate 32,500 29,200
Repairs and maintenance 278,400 214,600
General and administrative:
Affiliates 21,300 16,500
Nonaffiliates 93,800 88,900
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2,158,200 1,994,100
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Net income $ 498,300 $ 969,600
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Net income allocated to General Partner $ 80,600 $ 87,000
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Net income allocated to Limited Partners $ 417,700 $ 882,600
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Net income allocated to Limited Partners per Unit
(593,025 Units outstanding) $ 0.70 $ 1.49
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STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s)
1996 1995
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Cash flows from operating activities:
Net income $ 498,300 $ 969,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 651,800 700,600
Changes in assets and liabilities:
Decrease in rents receivable 83,100 64,600
Decrease in other assets 8,800 4,200
(Decrease) in accounts payable and accrued expenses (91,300) (87,800)
(Decrease) increase in due to Affiliates (7,600) 14,300
(Decrease) increase in other liabilities (12,200) 2,500
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Net cash provided by operating activities 1,130,900 1,668,000
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Cash flows from investing activities:
(Increase) in investments in debt securities (3,170,500)
Payments for capital and tenant improvements (142,200) (91,400)
(Increase) in restricted cash (37,500)
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Net cash (used for) investing activities (3,350,200) (91,400)
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Cash flows from financing activities:
Proceeds received from loan payable to General
Partner 161,100 174,000
Increase (decrease) in security deposits 600 (12,700)
Distributions paid to Partners (1,406,600) (1,211,800)
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Net cash (used for) financing activities (1,244,900) (1,050,500)
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Net (decrease) increase in cash and cash equivalents (3,464,200) 526,100
Cash and cash equivalents at the beginning of the
period 4,655,200 4,142,100
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Cash and cash equivalents at the end of the period $ 1,191,000 $4,668,200
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Supplemental information:
Interest paid to the General Partner during the
period $ 180,100 $ 171,900
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The accompanying notes are an integral part of the financial statements.
3
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 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 Certificate and 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 ("GAAP"). 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 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 six months ended June 30, 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 two joint
ventures and a 75% interest in another joint venture with Affiliated
partnerships. Each of these joint ventures were formed for the purpose of each
acquiring a 100% interest in certain real property and are operated under the
common control of the General Partner. Accordingly, the Partnership's pro rata
share of the ventures' revenues, expenses, assets, liabilities and Partners'
capital was included in the financial statements.
Commercial rental properties held for investment are recorded at cost, net of
any provisions for value impairment, and depreciated (exclusive of amounts, if
any, allocated to land and value impairments) on the straight-line method over
their estimated useful lives. Upon classifying a commercial rental property as
held for disposition, no further depreciation or amortization of such property
is provided for 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.
Investments in debt securities are comprised of corporate debt securities and
are classified as held-to-maturity. These investments are carried at their
amortized cost basis in the financial statements. As of June 30, 1996, these
securities had a fair market value of $3,167,300 and unrealized losses of
$3,200. Substantially all of these securities had maturities of less than one
year 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, 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 share of Sale Proceeds shall be made
until Limited Partners have
4
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
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 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 six months
ended June 30, 1996, the General Partner was entitled to a Partnership
Management Fee, and accordingly, allocated Net Profits, of $43,100 and $80,600,
respectively.
In accordance with the Partnership Agreement, the General Partner made advances
to the Partnership in cumulative amounts equal to the Acquisition Fees and the
Partnership Management Fees which were paid to the General Partner or its
Affiliates for distribution to the Limited Partners on a pro rata basis to the
extent that Cash Flow (as defined in the Partnership Agreement) was less than
sufficient to distribute cash in amounts equal to the Limited Partners'
Preferred Return (7.5% per annum noncompounding cumulative return on the
Limited Partners' Capital Investment); provided, however, that the maximum
amount which shall be advanced to the Partnership by the General Partner for
distribution to the Limited Partners shall be the amount of Acquisition Fees
and Partnership Management Fees actually paid to the General Partner or its
Affiliates. Amounts advanced shall bear interest at the rate of 8.5% per annum
simple interest, payable monthly. Repayment of amounts advanced shall be made
only from Cash Flow (as defined in the Partnership Agreement) if and to the
extent it is more than sufficient to distribute cash to the Limited Partners in
amounts equal to the Limited Partners' Preferred Return and from Sale Proceeds
to the extent permitted in the Partnership Agreement. During the quarter ended
March 31, 1996, the General Partner advanced its Partnership Management Fee for
the year ended December 31, 1995 of $161,100 to the Partnership. As of June 30,
1996, the Partnership has drawn $4,246,800, which represents the total amount
of the General Partner's current commitment.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1996 were as follows:
Paid
-----------------
Six
Quarter Months Payable
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Property management and leasing fees $ 99,200 $165,200 $ 56,100
Real estate commissions (a) None None 40,200
Interest expense on loan payable to General
Partner 92,300 180,100 30,100
Reimbursement of property insurance premiums, at
cost 32,500 32,500 None
Reimbursement of expenses, at cost:
--Accounting 7,700 18,200 3,700
--Investor communication 2,900 6,600 1,200
--Legal 5,200 18,700 None
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$239,800 $421,300 $131,300
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(a) As of June 30, 1996, the Partnership owed $40,200 to the General Partner
for real estate commissions earned in connection with the sales of
Partnership properties. These commissions have been accrued but not paid.
In accordance with the Partnership Agreement, the Partnership will not pay
the General Partner or any Affiliates a real estate commission from the
sale of a Partnership property until Limited Partners have received
cumulative distributions of Sale or Financing Proceeds equal to 100% of
their Original Capital Contribution, plus a cumulative return (including
all Cash Flow (as defined in the Partnership Agreement) which has been
distributed to the Limited Partners from the initial investment date) of 6%
simple interest per annum on their Capital Investment from the initial
investment date.
On-site property management for the Partnership's properties is provided by
Affiliates of the General Partner for fees ranging from 3% to 6% of gross rents
received from the properties.
5
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 each of its remaining properties for the quarters and six months
ended June 30, 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 For the Six Months
Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
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PARK PLAZA PROFESSIONAL BUILDING (50%)
Rental revenues $444,000 $413,100 $849,700 $ 857,600
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Property net income $ 77,900 $ 97,300 $168,100 $ 233,700
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Average occupancy 85% 88% 85% 88%
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INDIAN RIDGE PLAZA SHOPPING CENTER
Rental revenues $331,900 $499,700 $758,000 $1,032,700
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Property net income $ 28,700 $266,500 $173,300 $ 534,400
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Average occupancy 76% 96% 72% 96%
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CARROLLTON CROSSROADS SHOPPING CENTER (50%)
Rental revenues $303,000 $305,500 $612,600 $ 583,700
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Property net income $163,400 $172,900 $337,900 $ 319,900
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Average occupancy 98% 96% 98% 98%
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3120 SOUTHWEST FREEWAY OFFICE BUILDING (75%)
Rental revenues $149,000 $177,400 $311,700 $ 365,200
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Property net (loss) income $(14,000) $ 7,800 $ 1,700 $ 25,100
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Average occupancy 81% 92% 82% 94%
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(a) Excludes certain income and expense items which are either not directly
related to individual property operating results such as interest income,
interest expense and general and administrative expenses or are related to
properties previously owned by the Partnership.
Unless otherwise disclosed, discussions of fluctuations between 1996 and 1995
refer to both the quarters and six months ended June 30, 1996 and 1995.
Net income for the quarter and six months ended June 30, 1996 decreased
$284,800 and $471,300, respectively, when compared to the quarter and six
months ended June 30, 1995. The decreases were primarily due to decreases in
quarterly operating results at all of the Partnership's properties totaling
$288,500 and decreases in six-month operating results at Indian Ridge Plaza
Shopping Center ("Indian Ridge"), Park Plaza Professional Building ("Park
Plaza") and 3120 Southwest Freeway Office Building ("Southwest Freeway")
totaling $450,100. Also contributing to the decreases in net income were
increases in interest expense on the loan payable to the General Partner as a
result of a higher average outstanding loan balance and lower interest income
due to a decrease in the funds available for short-term investments. In
addition, general and administrative expenses for the six-month periods under
comparison increased $9,700 primarily due to an increase in state income taxes.
Partially offsetting the decrease for the six-month periods under comparison
was improved operating results of $18,000 at Carrollton Crossroads Shopping
Center ("Carrollton"). Partially offsetting the decrease for the quarterly
periods under comparison was a decrease in general and administrative expenses
of $11,500 due to lower data processing and printing costs as well as lower
professional service fees.
Rental revenues for the quarter and six months ended June 30, 1996 decreased
$146,400 or 10.6%, and $301,100 or 10.6%, respectively, when compared to the
quarter and six months ended June 30, 1995. The primary factor which
contributed to the decreases in rental revenues was lower average occupancy
rates at all of the Partnership's properties except Carrollton, particularly at
Indian Ridge as a result of a major tenant vacating 45,000 square feet of space
in July 1995 subsequent to filing for bankruptcy. This leasable square footage
accounts for 24% of the total leasable square footage of the property. In
addition, in accordance with its lease, starting in December 1995, the other
major tenant at Indian Ridge began to pay percentage rent, in lieu of the
required base rent, because of the major tenant vacancy. In total, rental
revenues at Indian Ridge decreased $167,800 and $274,700 during the quarter and
six months of 1996, respectively, when compared to the quarterly and six-month
periods of 1995. As of May 1, 1996, a major new tenant began construction on
44,400 square feet of this space and is expected to begin operations in October
1996. The lease term for this new tenant runs from July 1, 1996 to June 30,
2016. Once the new major tenant takes occupancy, the major tenant currently
paying percentage rent at Indian Ridge will resume paying the rental rates
charged prior to the vacancy. Partially offsetting the decreases was an
increase in tenant expense reimbursements at Park Plaza. In addition, the
decrease in the six-month periods under comparison was partially offset by an
increase in the average occupancy rate at Carrollton.
Property operating expenses increased $52,900 and $77,500 for the quarter and
six months ended June 30, 1996, respectively, when compared to the quarter and
six months ended June 30, 1995, primarily due to higher professional service
fees at Park Plaza and Indian Ridge and increased utility costs at Southwest
Freeway. Partially offsetting the increases were lower property management and
leasing fees at Indian Ridge as a result of lower rental revenues.
Real estate tax expense increased $56,300 and $50,600 for the quarterly and
six-month periods under comparison, respectively. The increases were primarily
due to an increase in the tax rate as well as an underestimate of the 1995
liability (paid in 1996) at Indian Ridge and an increase in the assessed value
for real estate tax purposes at Park Plaza.
Repairs and maintenance expense increased $51,500 and $63,800 for the quarter
and six months ended June 30, 1996, respectively, when compared to the quarter
and six months ended June 30, 1995, primarily due to increased: 1) expenditures
relating to the parking facility at Park Plaza; 2) snow removal and janitorial
expenses at Indian Ridge and 3) expenses related to the enhancement of the
appearance of Carrollton. Partially offsetting the increases were decreases at
Southwest Freeway as a result of expenditures made during 1995 in order to
enhance the appearance and safety features of the property.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Depreciation and amortization expense decreased $24,100 and $48,800 for the
quarter and six months under comparison, respectively, primarily due to the
effects of the provisions for value impairment recorded for several Partnership
properties as of December 31, 1995.
To increase and/or maintain occupancy levels at the Partnership's properties,
the General Partner, through its Affiliated asset and property management
groups, 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) networking with national level retailers;
5) cold-calling other businesses and tenants in the market area; and 6)
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 properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its remaining
properties. Notwithstanding the Partnership's intention relative to property
sales, 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 will be treated
as a return of capital. Cash Flow (as defined in the Partnership Agreement) is
generally not equal to 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 flows 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
Six Months Ended
6/30/96 6/30/95
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Cash Flow (as defined in the Partnership Agreement) $ 1,069,500 $ 1,583,200
Items of reconciliation:
General Partner's Partnership Management Fee 80,600 87,000
Decrease in current assets 91,900 68,800
(Decrease) in current liabilities (111,100) (71,000)
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Net cash provided by operating activities $ 1,130,900 $ 1,668,000
- ------------------------------------------------------------------------------
Net cash (used for) investing activities $(3,350,200) $ (91,400)
- ------------------------------------------------------------------------------
Net cash (used for) financing activities $(1,244,900) $(1,050,500)
- ------------------------------------------------------------------------------
The decrease in Cash Flow (as defined in the Partnership Agreement) of $513,700
for the six months ended June 30, 1996 when compared to six months ended June
30, 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 as of June 30, 1996 when
compared to December 31, 1995, resulted primarily from the investments in debt
securities, distributions paid to Limited Partners and expenditures for
capital, tenant improvement and leasing costs exceeding the net cash provided
by operating activities. Liquid assets of the Partnership as of June 30, 1996
were comprised of amounts held for working capital purposes.
Net cash provided by operating activities continues to be the primary source of
funds to the Partnership. Net cash provided by operating activities decreased
$537,100 for the six months ended June 30, 1996 when compared to the six months
ended June 30, 1995. The decrease was primarily due to a decrease in net cash
provided by operating activities at all of the Partnership's properties except
Carrollton.
The increase in net cash used for investing activities of $3,258,800 was
primarily due to an increase in investments in debt securities and increases in
the amounts paid for capital expenditures, such as capital, tenant improvement
and leasing costs. The increase in investments in debt securities is 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 generally mature less than one year from their date of purchase. The
Partnership maintains working capital reserves to pay for capital expenditures
and spent $142,200 for capital, tenant improvement and leasing costs during the
six months ended June 30, 1996. Approximately $475,000 is projected to be spent
during the remainder of 1996. This projected amount relates to anticipated
capital, tenant improvement and leasing costs of approximately: 1) $280,000 at
Park Plaza; 2) $75,000 at Southwest Freeway; 3) $70,000 at Indian Ridge and 4)
$50,000 at Carrollton. Actual amounts expended in 1996 may vary depending on a
number of factors including actual leasing activity and other market conditions
throughout the year. The General Partner believes these improvements and
leasing costs are necessary in order to increase and/or maintain the occupancy
levels in very competitive markets, maximize rental rates charged to new and
renewing tenants and prepare the remaining properties for eventual disposition.
The increase in net cash used for financing activities of $194,400 was
primarily due to an increase in the payment of cash distributions to Limited
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 the anticipated capital, tenant improvement and leasing costs necessary
to be made at the Partnership's properties during the next several years. For
the six months ended June 30, 1996, the Partnership included $175,900 of
previously undistributed Cash Flow (as defined in the Partnership Agreement) in
its distributions to Limited Partners.
Distributions to Limited Partners for the quarter ended June 30, 1996 were
declared in the amount of $622,700, or $1.05 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
the Partnership's investments 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 amounts and/or availability of cash for future
distributions to Partners.
7
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 June
30, 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 INSTITUTIONAL REAL ESTATE, LTD. - 4
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Date: August 14, 1996 By: /s/ DOUGLAS CROCKER II
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DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1996 By: /s/ NORMAN M. FIELD
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NORMAN M. FIELD
Vice President - Finance and Treasurer