-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AGMOm6AHSgFCYc70Ah984tficaT7M0dB2ZiJZ4vrKhG0RuZPfdSbLTYA5SkYRKx1 217la/YZ/Y5CWyrpauANFw== 0000950131-99-006276.txt : 19991115 0000950131-99-006276.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950131-99-006276 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CAPITAL INCOME & GROWTH FUND SERIES XII CENTRAL INDEX KEY: 0000811117 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363498223 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16888 FILM NUMBER: 99750843 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: SUITE 1000 CITY: CHICAGO STATE: IL ZIP: 60606-2607 BUSINESS PHONE: 3122070020 MAIL ADDRESS: STREET 1: TWO N RIVERSIDE PLAZA STREET 2: SUITE 1000 CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 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, 1999 --------------------------------------------------- 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 0-16888 -------------------------------------------------- First Capital Income and Growth Fund - Series XII - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Illinois 36-3498223 - ------------------------------- ------------------- (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 Partnership's Prospectus dated May 8, 1987, included in the Partnership's Registration Statement on Form S-11, is incorporated herein by reference in Part I of this report. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BALANCE SHEETS (All dollars rounded to nearest 00s)
September 30, 1999 December 31, (Unaudited) 1998 - ------------------------------------------------------------------------------ ASSETS Investment in commercial rental properties: Land $ 8,617,600 $ 9,757,200 Buildings and improvements 25,313,200 33,926,200 - ------------------------------------------------------------------------------ 33,930,800 43,683,400 Accumulated depreciation and amortization (8,050,300) (11,287,400) - ------------------------------------------------------------------------------ Total investment properties, net of accumulated depreciation and amortization 25,880,500 32,396,000 Cash and cash equivalents 3,491,300 9,704,900 Investments in debt securities 12,807,100 Rents receivable 156,300 351,100 Escrow deposits 724,900 379,000 Due from Affiliates, net 2,100 Other assets (primarily loan acquisition costs, net of accumulated amortization of $688,400 and $773,700, respectively) 77,200 146,100 - ------------------------------------------------------------------------------ $43,137,300 $ 42,979,200 - ------------------------------------------------------------------------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage loans payable $16,182,200 $ 21,387,900 Front-End Fees Loan payable to Affiliate 13,434,400 13,434,400 Accounts payable and accrued expenses 669,500 459,800 Due to Affiliates 432,400 Distributions payable 6,174,000 Security deposits 86,300 152,100 Other liabilities 150,800 216,800 - ------------------------------------------------------------------------------ 37,129,600 35,651,000 - ------------------------------------------------------------------------------ Partners' capital: General Partner (deficit) 692,200 (1,146,000) Limited Partners (1,000,000 Units issued, 949,843 Units outstanding) 5,315,500 8,474,200 - ------------------------------------------------------------------------------ 6,007,700 7,328,200 - ------------------------------------------------------------------------------ $43,137,300 $ 42,979,200 - ------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL For the nine months ended September 30, 1999 (Unaudited) and the year ended December 31, 1998 (All dollars rounded to nearest 00s)
General Limited Partner Partners Total - ------------------------------------------------------------------------------- Partners' (deficit) capital, January 1, 1998 $(1,664,600) $ 12,691,200 $ 11,026,600 Net income for the year ended December 31, 1998 518,600 9,080,800 9,599,400 Distributions for the year ended December 31, 1998 (13,297,800) (13,297,800) - ------------------------------------------------------------------------------- Partners' (deficit) capital, December 31, 1998 (1,146,000) 8,474,200 7,328,200 Net income for the nine months ended September 30, 1999 1,838,200 3,015,300 4,853,500 Distributions for the nine months ended September 30, 1999 (6,174,000) (6,174,000) - ------------------------------------------------------------------------------- Partners' capital, September 30, 1999 $ 692,200 $ 5,315,500 $ 6,007,700 - -------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements 2 STATEMENTS OF INCOME AND EXPENSES For the quarters ended September 30, 1999 and 1998 (Unaudited) (All dollars rounded to nearest 00s except per Unit amounts)
1999 1998 - ------------------------------------------------------------------------ Income: Rental $1,095,800 $1,538,500 Interest 190,500 250,000 Gain on sale of property 4,594,000 1,621,600 - ------------------------------------------------------------------------ 5,880,300 3,410,100 - ------------------------------------------------------------------------ Expenses: Interest: Affiliates 247,000 262,200 Nonaffiliates 320,400 410,800 Depreciation and amortization 175,400 281,400 Property operating: Affiliates 35,500 71,200 Nonaffiliates 82,700 140,500 Real estate taxes 170,700 94,800 Insurance--Affiliate 11,100 11,500 Repairs and maintenance 86,900 126,400 General and administrative: Affiliates 8,000 9,400 Nonaffiliates 26,600 22,000 - ------------------------------------------------------------------------ 1,164,300 1,430,200 - ------------------------------------------------------------------------ Net income $4,716,000 $1,979,900 - ------------------------------------------------------------------------ Net income allocated to General Partner $1,836,800 $ 438,400 - ------------------------------------------------------------------------ Net income allocated to Limited Partners $2,879,200 $1,541,500 - ------------------------------------------------------------------------ Net income allocated to Limited Partners per Unit (949,843 Units outstanding) $ 3.03 $ 1.62 - ------------------------------------------------------------------------
STATEMENTS OF INCOME AND EXPENSES For the nine months ended September 30, 1999 and 1998 (Unaudited) (All dollars rounded to nearest 00s except per Unit amounts)
1999 1998 - ---------------------------------------------------- Income: Rental $4,013,100 $6,425,300 Interest 417,800 577,700 Gain on sales of property 4,594,000 8,565,500 - ---------------------------------------------------- 9,024,900 15,568,500 - ---------------------------------------------------- Expenses: Interest: Affiliates 717,000 783,000 Nonaffiliates 1,115,600 1,687,100 Depreciation and amortization 680,000 936,200 Property operating: Affiliates 105,800 239,000 Nonaffiliates 377,400 711,300 Real estate taxes 709,000 937,300 Insurance--Affiliate 36,000 49,300 Repairs and maintenance 318,800 650,100 General and administrative: Affiliates 36,000 26,900 Nonaffiliates 75,800 89,100
- -------------------------------------------------------------------------------- 4,171,400 6,109,300 - ------------------------------------------------------------------------ Net income $4,853,500 $9,459,200 - ------------------------------------------------------------------------ Net income allocated to General Partner $1,838,200 $ 513,200 - ------------------------------------------------------------------------ Net income allocated to Limited Partners $3,015,300 $8,946,000 - ------------------------------------------------------------------------ Net income allocated to Limited Partners per Unit (949,843 Units outstanding) $ 3.17 $ 9.42 - ------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1999 and 1998 (Unaudited) (All dollars rounded to nearest 00s)
1999 1998 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 4,853,500 $ 9,459,200 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 680,000 936,200 Gain on sales of property (4,594,000) (8,565,500) Changes in assets and liabilities: Decrease in rents receivable 194,800 102,400 Decrease in other assets 12,600 139,300 Increase (decrease) in accounts payable and accrued expenses 209,700 (543,000) Increase in due to Affiliates 434,500 12,300 (Decrease) in other liabilities (66,000) (199,000) - -------------------------------------------------------------------------------- Net cash provided by operating activities 1,725,100 1,341,900 - -------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sales of property 10,897,400 35,234,300 Payments for capital and tenant improvements (411,600) (242,000) (Increase) in investments in debt securities, net (12,807,100) (2,880,400) (Increase) in escrow deposits (345,900) (356,000) Decrease in restricted cash 100,000 - -------------------------------------------------------------------------------- Net cash (used for) provided by investing activities (2,667,200) 31,855,900 - -------------------------------------------------------------------------------- Cash flows from financing activities: Principal payments on mortgage loans payable (479,000) (451,900) Repayments of mortgage loans payable (4,726,700) (21,779,000) Distributions to Partners (6,126,500) (Decrease) in security deposits (65,800) (45,700) - -------------------------------------------------------------------------------- Net cash (used for) financing activities (5,271,500) (28,403,100) - -------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (6,213,600) 4,794,700 Cash and cash equivalents at the beginning of the period 9,704,900 4,879,400 - -------------------------------------------------------------------------------- Cash and cash equivalents at the end of the period $ 3,491,300 $ 9,674,100 - -------------------------------------------------------------------------------- Supplemental information: Interest paid to Affiliate during the period $ 312,400 $ 783,000 - -------------------------------------------------------------------------------- Interest paid to nonaffiliates during the period $ 1,145,400 $ 1,847,300 - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements 3 NOTES TO FINANCIAL STATEMENTS (Unaudited) September 30, 1999 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 ("GAAP"). The Partnership utilizes the accrual method of accounting. Under this method, revenues are recorded when earned and expenses are recorded when incurred. The Partnership recognizes rental income that is contingent upon tenants' achieving specified targets only to the extent that such targets are achieved. 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, 1999 are not necessarily indicative of the operating results for the year ending December 31, 1999. The financial statements include the Partnership's 50% interest in two joint ventures with Affiliated partnerships, which were formed for the purpose of each acquiring a 100% interest in certain real property. These joint ventures until the respective dates of the sale of their real property were 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 joint ventures' revenues, expenses, assets, liabilities and Partners' (deficit) capital is included in the financial statements. The Partnership has one reportable segment as the Partnership is in the disposition phase of its life cycle, wherein it is seeking to liquidate its remaining operating assets. Management's main focus, therefore, is to prepare its assets for sale and find purchasers for its remaining operating assets when market conditions warrant such an action. The Partnership has two tenants who occupy 21% and 11% of the Partnership's rentable space, respectively. Commercial rental properties are recorded at cost, net of any provisions for value impairment, and depreciated (exclusive of amounts allocated to land) on the straight-line method over their estimated useful lives. Lease acquisition fees are recorded at cost and amortized on the straight-line method over the life of each respective lease. Repair and maintenance costs are expensed as incurred; expenditures for improvements are capitalized and depreciated on the straight-line method over the estimated life of such improvements. The Partnership evaluates its commercial rental properties for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (undiscounted) from a property is less than its carrying basis. Upon determination that an impairment has occurred, the carrying basis in the rental property is reduced to its estimated fair value. Management was not aware of any indicator that would result in a significant impairment loss during the periods reported. Loan acquisition costs are amortized over the term of the mortgage loan made in connection with the acquisition of Partnership properties or refinancing of Partnership loans. When a property is disposed of or a loan is refinanced, the related loan acquisition costs and accumulated amortization are removed from the respective accounts and any unamortized balance is expensed. Property sales are recorded when title transfers and sufficient consideration has been received by the Partnership. Upon disposition, the related costs and accumulated depreciation and amortization are removed from the respective accounts. Any gains or losses are recognized in accordance with GAAP. 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 corporate debt securities and 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 market value. All of these securities had a maturity of less than one year when purchased. Reference is made to the Partnership's Annual Report for the year ended December 31, 1998, for a description of other accounting policies and additional details of the Partnership's financial condition, results of operations, changes in Partners' capital (deficit) 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 is entitled to receive subsequent to November 22, 1988, the Termination of the Offering, a Portfolio Management Fee, payable quarterly, in an amount equal to the lesser of (i) 0.5% of the gross value of the Partnership's assets (not reduced by indebtedness collateralized by such assets), all as estimated by the General Partner in its reasonable discretion, plus, to the extent the Portfolio Management Fee paid in any prior year was less than 0.5% of the gross value of the Partnership's assets in such prior year, the amount of such deficit, or (ii) an amount equal to the remainder obtained by subtracting the aggregate amount previously paid to the General Partner as Portfolio Management Fees during such fiscal year, from an amount equal to 10% of the Partnership's aggregate Cash Flow (as defined in the Partnership Agreement) (computed prior to the deduction for Portfolio Management Fees) for such fiscal year. For the quarter and nine months ended September 30, 1999, in conjunction with the suspension of distributions of Cash Flow (as defined in the Partnership Agreement) to Limited Partners, the General Partner was not paid a Portfolio Management Fee. In accordance with the Partnership Agreement, Net Profits and Net Losses (exclusive of Net Profits and Net Losses from a Major Capital Event) are allocated 1% to the General Partner and 99% to the Limited Partners as a group. Net Losses from a Major Capital Event are allocated: first, prior to giving effect to any distributions of Sale or Refinancing Proceeds from the transaction, 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. Net Profits from a Major Capital Event are allocated: first, prior to giving effect to any distributions of Sale or Refinancing Proceeds from the transaction, Net Profit in the amount of the Minimum Gain (as defined in the Partnership Agreement) attributable to the property that is the subject of such Major Capital Event is allocated to the 4 General Partner and Limited Partners with negative balances in their Capital Accounts, pro rata in proportion to such respective negative balances; second, to the General Partner and each Limited Partner in proportion to and to the extent of such amounts, if any, equal to the amount of Sale or Refinancing Proceeds to be distributed to each such General Partner or Limited Partner with respect to such Major Capital Event; and third, the balance, if any, 20% to the General Partner and 80% to the Limited Partners as a group. 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, 1999, the General Partner was allocated a Net Profit of $1,836,800 and $1,838,200, respectively, which included a gain of $1,834,500 from the sale of a Partnership property. Fees and reimbursements paid and payable by the Partnership to Affiliates during the quarter and nine months ended September 30, 1999 were as follows:
Paid ---------------- Nine (Receivable) Quarter Months Payable - ------------------------------------------------------------------------------- Property management and leasing fees $ 2,100 $ 53,900 None Interest expense on Front-End Fees Loan (Note 3) None 312,400 $404,600 Reimbursement of property insurance premiums 11,100 36,000 None Legal 25,700 71,400 25,000 Reimbursement of expenses, at cost: --Accounting 4,700 12,600 2,000 --Investor communication 4,100 10,700 800 - ------------------------------------------------------------------------------- $47,700 $497,000 $432,400 - -------------------------------------------------------------------------------
The variance between amounts listed and the Statement of Income and Expenses is due to capitalized legal costs. Manufactured Home Communities, Inc. ("MHC"), a real estate investment trust, which is an Affiliate of the General Partner and in the business of owning and operating mobil home communities, was obligated to the Partnership under a lease of office space at Prentice Plaza. During the quarter and nine months ended September 30, 1999, MHC paid $2,600 and $46,700, respectively, in rents and reimbursements of expenses. The Partnership owns a 50% joint venture interest in these amounts. The per square foot rent paid by MHC was comparable to that paid by other tenants at Prentice Plaza. On-site property management for the Partnership's properties is provided by Affiliates of the General Partner and a third-party management company for a fee equal to 3% of gross rents received by the properties. The Affiliates and third-party management company are entitled to leasing fees equal to 3% of gross rents received, reduced by leasing fees, if any, paid to other leasing agents. 3. FRONT-END FEES LOAN PAYABLE TO AFFILIATE: The Partnership borrowed from an Affiliate of the General Partner an amount needed for the payment of securities sales commissions, Offering and Organizational Expenses and other Front-End Fees, other than Acquisition Fees. Repayment of the principal amount of the Front-End Fees Loan is subordinated to payment to the Limited Partners of 100% of their Original Capital Contribution from Sale or Refinancing Proceeds (as defined in the Partnership Agreement). Interest on the outstanding balance of this loan is due and payable monthly at a rate no greater than the cost of funds obtained by the Affiliate from unaffiliated lenders. As of September 30, 1999, the Partnership had drawn $13,434,400 under the Front-End Fees Loan agreement. The interest rate paid on the Front-End Fees Loan is subject to change in accordance with the loan agreement. The weighted average interest rate for the quarter and nine months ended September 30, 1999 was 7.11%. As of September 30, 1999, the interest rate was 7.20%. Pursuant to a modification of this loan agreement, the Partnership has the option to defer payment of interest on this loan for a 81-month period beginning April 1, 1993. In addition, any interest payments made by the Partnership from April 1, 1993 through December 31, 1999 may be borrowed from the Affiliate. All deferred and subsequently borrowed amounts (including accrued interest thereon) shall be due and payable on January 1, 2000, and is subordinated to payment of Original Capital Contributions to Limited Partners. Effective June 1, 1999, the Partnership exercised its option to defer the payment of interest on this loan. Deferred interest on this loan as of September 30, 1999 amounted to $404,600. 4. MORTGAGE LOANS PAYABLE: Mortgage loans payable at September 30, 1999 and December 31, 1998 consisted of the following loans, which are non-recourse to nor guaranteed by the Partnership:
Partnership's Share of Principal Balance at Average Property Pledged as -------------------------- Interest Maturity Collateral 9/30/99 12/31/98 Rate Date - ------------------------------------------------------------------ Deerfield Mall $16,182,200(a) $16,633,500 7.60% 3/1/01 Prentice Plaza (50%) (b) 4,754,400 (b) (b) - ------------------------------------------------------------------ $16,182,200 $21,387,900 - ------------------------------------------------------------------
(a) In November 1999, the Partnership repaid the mortgage loan collateralized by Deerfield with a portion of the proceeds generated from its sale. For further information regarding this sale, see Note 6. (b) The Partnership repaid the mortgage loan collateralized by Prentice Plaza with a portion of the proceeds generated from its sale. For further information regarding the sale, see Note 5. For additional information regarding the mortgage loans payable, see notes to the financial statements in the Partnership's Annual Report for the year ended December 31, 1998. 5. PROPERTY SALE: On July 12, 1999, a joint venture in which the Partnership owns a 50% interest, consummated the sale of Prentice Plaza for a sale price of $22,100,000. The Partnership's share of net proceeds from this transaction was approximately $6,170,700, which is net of actual and estimated closing expenses and the repayment of the mortgage loan encumbering the property. The Partnership recorded a gain of $4,594,000 for the quarter ended September 30, 1999 and will distribute $6,174,000 or $6.50 per Unit on November 30, 1999 to Limited Partners of record as of July 12, 1999 from this transaction. 6. SUBSEQUENT EVENT: On November 12, 1999, the Partnership consummated the sale of Deerfield Mall for a sale price of $34,700,000. Net proceeds from this transaction were approximately $18,000,000, which is net of actual and estimated closing expenses and the repayment of the mortgage loan encumbering the property. The Partnership will record a gain of approximately $8,200,000 for the quarter ended December 31, 1999 and will distribute $17,999,500 or $18.95 per Unit on February 28, 2000 to Limited Partners of record as of November 12, 1999 from this transaction. 5 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, 1998 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. 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. The Partnership, in addition to being in the operation of properties phase, is in the disposition phase of its life cycle. During the disposition phase of the Partnership's life cycle, comparisons of operating results are complicated due to the timing and effect of property sales. Components of the Partnership's operating results are generally expected to decline as real property interests are sold since the Partnership no longer receives income nor incurs expense from such real property interests. During the third quarter of 1999, the Partnership consummated the sale of Prentice Plaza. OPERATIONS The table below is a recap of the Partnership's share of certain operating results of each of its properties for the quarters and nine months ended September 30, 1999 and 1998. 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 Nine Months Ended Ended --------------------- ---------------------- 9/30/99 9/30/98 9/30/99 9/30/98 - ------------------------------------------------------------------------ DEERFIELD MALL Rental revenues $1,037,900 $1,038,500 $3,220,100 $3,136,300 - ------------------------------------------------------------------------ Property net income $ 197,400 $ 160,200 $ 624,600 $ 527,900 - ------------------------------------------------------------------------ Average occupancy 90% 90% 91% 90% - ------------------------------------------------------------------------ PRENTICE PLAZA (50%) (B) Rental revenues $ 52,500 $ 334,300 $ 809,700 $1,066,500 - ------------------------------------------------------------------------ Property net income $ 9,900 $ 11,900 $ 62,100 $ 97,000 - ------------------------------------------------------------------------ SOLD PROPERTIES (C) Rental revenues $ 5,400 $ 164,200 $ (16,700) $2,229,200 - ------------------------------------------------------------------------ Property net income (loss) $ 6,200 $ 229,500 $ (15,700) $ 597,800 - ------------------------------------------------------------------------
(a) Excludes certain income and expense items which are either not directly related to individual property operating results such as interest income, interest expense on the Partnership's Front-End Fees loan and general and administrative expenses or are related to properties disposed of by the Partnership prior to the periods under comparison. (b) Prentice Plaza was sold on July 12, 1999. Property net income excludes the gain on sale of the Property. (c) Sold Properties includes results, exclusive of gains on the sales of 1800 Sherman Office Building ("1800 Sherman") (sold August 6, 1998) and Meidinger Tower (sold April 1, 1998). Unless otherwise disclosed, discussions of fluctuations between 1999 and 1998 refer to both the quarters and nine months ended September 30, 1999 and 1998. Net income increased by $2,736,100 for the quarter ended September 30, 1999 when compared to the quarter ended September 30, 1998. The increase was primarily due to the 1999 gain recorded on the sale of Prentice Plaza exceeding the 1998 gain recorded on the sale of 1800 Sherman. The increase was partially offset by the absence of operating results in 1999 from properties sold by the Partnership during 1998. Net income decreased by $4,605,700 for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. The decrease was primarily due to the gains recorded in 1998 on the sales of 1800 Sherman and Meidinger Tower exceeding the gain recorded in 1999 on the sale of Prentice Plaza. The decrease was also due to the absence of operating results in 1999 due to the 1998 sales of 1800 Sherman and Meidinger Tower. Net income, exclusive of the results from the Properties sold by the Partnership, decreased by $11,000 for the quarter ended September 30, 1999 when compared to the quarter ended September 30, 1998. The decrease was primarily due to a decrease in interest earned on the Partnership's short-term investments, which was due to a decrease in the average amount of cash available for investment. The decrease was partially offset by improved operating results at Deerfield Mall. Net income, exclusive of the results from the Properties sold by the Partnership, increased by $14,200 for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. The increase was primarily due to the improved operating results at Deerfield Mall and a decrease in interest expense on the Front-End Fees Loan. The increase was partially offset by a decrease in interest earned on the Partnership's short- term investments. The following comparative discussion includes only the results of Deerfield Mall. Rental revenues increased by $83,800 or 2.7% for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. The increase was primarily due to an increase in tenant expense reimbursements for real estate taxes. The increase was also due to an increase in base rental income, which was due to the slight increase in average occupancy. Rental revenues remained relatively unchanged for the quarter ended September 30, 1999 when compared to the quarter ended September 30, 1998. Real estate tax expense increased by $50,900 for the nine-month periods under comparison. The increase was primarily due to a projected increase in 1999 tax liability. Real estate tax expense remained relatively unchanged for the quarterly periods under comparison. Interest expense on the Partnership's mortgage loan decreased by $11,100 and $32,900 for the quarter and nine months ended September 30, 1999 when compared to the quarter and nine months ended September 30, 1998, respectively. The decreases were due to the effects of principal payments made during the past 21 months on the mortgage loan collateralized by Deerfield Mall. Repairs and maintenance expense decreased by $23,700 and $14,100 for the quarter and nine months ended September 30, 1999 when compared to the quarter and nine months ended September 30, 1998. The decreases were primarily due to a decrease in landscaping costs and the change to an outside service provider for repair and maintenance work from on-site personnel. 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 property. Cash Flow (as defined in the Partnership Agreement) is generally not equal to net income or cash flows as determined 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 determined 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 determined by GAAP. Such amounts should not be considered as an alternative to the results 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) disclosed in the Statements of Income and Expenses and Statements of Cash Flow.
Comparative Cash Flow Results For the Nine Months Ended ------------------------- 9/30/99 9/30/98 - -------------------------------------------------------------------------------- Cash Flow (as defined in the Partnership Agreement) $ 460,500 $ 1,378,000 Items of reconciliation: Scheduled principal payments on mortgage loans payable 479,000 451,900 Decrease in current assets 207,400 241,700 Increase (decrease) in current liabilities 578,200 (729,700) - -------------------------------------------------------------------------------- Net cash provided by operating activities $ 1,725,100 $ 1,341,900 - -------------------------------------------------------------------------------- Net cash (used for) provided by investing activities $(2,667,200) $ 31,855,900 - -------------------------------------------------------------------------------- Net cash (used for) financing activities $(5,271,500) $(28,403,100) - --------------------------------------------------------------------------------
The decrease in Cash Flow (as defined in the Partnership Agreement) of $917,500 for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998 was primarily due to the absence of operating results during 1999 resulting primarily from the 1998 and 1999 sales of Partnership properties. The net decrease in the Partnership's cash of $6,213,600 for the nine months ended September 30, 1999 was primarily the result of an increase in the amount of net investments in debt securities, which included the investment of proceeds received from the sale of Prentice Plaza and cash previously held for working capital purposes. Liquid assets (including cash, cash equivalents and investments in debt securities) of the Partnership as of September 30, 1999 were comprised of amounts held for working capital purposes and undistributed Sale Proceeds. Net cash provided by operating activities increased by $383,200 for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. The increase was primarily due to the 1998 satisfaction of all trade liabilities in connection with the sales of 1800 Sherman and Meidinger Tower. The increase was also due to the timing of payment of Partnership expenses, which included the deferral of the payment of interest on the Front-End Fee Loan. The increase was partially offset by the satisfaction of all trade liabilities in connection with the 1999 sale of Prentice Plaza. Net cash provided by (used for) investing activities changed from $31,855,900 for the nine months ended September 30, 1998 to $(2,667,200) for the nine months ended September 30, 1999. The change was primarily due to the 1998 receipt of gross proceeds from the sales of 1800 Sherman and Meidinger Tower exceeding the 1999 receipt of gross proceeds from the sale of Prentice Plaza. The change was also due to an increase in net investments in debt securities. The increase in investments in debt securities is a result of the continued extension of the maturities of certain of the Partnership's short-term investments in an effort to maximize the return on these amounts while they are held for working capital purposes or pending distribution to Limited Partners. These investments are of investment-grade and mature less than one year from their date of purchase. The Partnership maintains working capital reserves to pay for capital expenditures such as building and tenant improvements and leasing costs. During the nine months ended September 30, 1999, the Partnership spent $411,600 for these items. The General Partner believes these improvements and leasing costs are necessary in order to increase and/or maintain the occupancy level in a very competitive market, maximize rental rates charged to new and renewing tenants and to prepare the remaining property for eventual disposition. On July 12, 1999, a joint venture in which the Partnership owns a 50% interest consummated the sale of Prentice Plaza. The Partnership's share of net proceeds from this transaction was $6,170,700, which was net of actual and estimated closing costs and the repayment of the mortgage loan encumbering the property. The Partnership will distribute $6,174,000 or $6.50 per Unit on November 30, 1999 to Limited Partners of record as of July 12, 1999. On November 12, 1999, the Partnership consummated the sale of Deerfield. Net proceeds from this transaction were approximately $18,000,000, which was net of actual and estimated closing costs and the repayment of the mortgage loan encumbering the property. The Partnership intends to distribute $17,999,500 or $18.95 per Unit on February 28, 2000 to Limited Partners of record as of November 12, 1999. With the exception of variable rate debt, the Partnership has no financial instruments for which there is significant market risk. Based on variable rate debt outstanding as of September 30, 1999, for every 1% change in interest rates, the Partnership's annual interest expense would change by $134,300. Due to the timing and liquid nature of the Partnership's investments in debt securities, the Partnership believes that it does not have material risk. The decrease in net cash used for financing activities of $23,131,600 for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998 was primarily the result of the 1998 repayment of the Meidinger Tower mortgage loan exceeding the 1999 repayment of the Prentice Plaza mortgage loan. The decrease was also due to the 1998 distribution to Limited Partners of Sale Proceeds from Meidinger Tower. Pursuant to a modification of the Partnership's Front-End Fees loan agreement, the Partnership has the option to defer payment of interest on this loan for a 81-month period beginning April 1, 1993. In addition, any interest payments made by the Partnership from April 1, 1993 through December 31, 1999 may be borrowed from an Affiliate of the General Partner. All deferred and subsequently borrowed amounts (including accrued interest thereon) shall be due and payable on January 1, 2000, and shall not be subordinated to payment of Original Capital Contributions to Limited Partners. As of June 1, 1999, the Partnership elected to defer interest payments on this loan. The Year 2000 problem is the result of the inability of existing computer programs to distinguish between a year beginning with "20" rather than "19". This is the result of computer programs using two rather than four digits to define an applicable year. If not corrected, any program having time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a wide variety of problems including miscalculations, loss of data and failure of entire systems. Critical areas that could be effected are accounts receivable and rent collections, accounts payable, general ledger, cash management, fixed assets, investor services, computer hardware, telecommunications systems and health, security, fire and life safety systems. The Partnership has engaged Affiliated and unaffiliated entities to perform all of its critical functions that utilize software that may have time-sensitive applications. All of these providers are providing these services for their own organizations as well as for their clients. The General Partner, on behalf of the Partnership, has been in close communication with each of these service providers regarding steps that they are taking to assure that there will be no serious interruption of the operations of the Partnership resulting from Year 2000 problems. Based on the results of these inquiries, as well as a review of the disclosures by these service providers, the General Partner believes that the Partnership will be able to continue normal business operations and will incur no material costs related to Year 2000 issues. While the Partnership has not formulated a written contingency plan, it has selected the Year 2000 compliant systems that it intends to use beginning in the Year 2000. The General Partner believes that based on the size of the Partnership's portfolio and its limited number of transactions, aside from catastrophic failures of banks, government agencies, etc., it will be able carry out substantially all of its critical operations. With the sale of Prentice Plaza and Deerfield, the Partnership has sold all of its real property investments. In addition to the above-mentioned distributions of Sale Proceeds during 2000, the General Partner intends to make a special distribution of previously retained working capital. The amount to be distributed will be disclosed following an evaluation of the Partnership's needs during the process of dissolving the Partnership. The dissolution of the Partnership is expected to be completed in the fourth quarter of 2000, however, there can be no assurance that it will be completed as scheduled. Based upon the current value of its assets, net of its outstanding liabilities, together with its expected operating results, the General Partner believes that the Partnership's cumulative distributions to its Limited Partners from inception through the termination of the Partnership will be significantly less than such Limited Partners' Original Capital Contribution. 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: - ----------------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: A report on Form 8-K was filed on July 27, 1999 reporting the sale of Prentice Plaza. 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 INCOME AND GROWTH FUND - SERIES XII By: FIRST CAPITAL FINANCIAL CORPORATION GENERAL PARTNER Date: November 10, 1999 By: /s/ DOUGLAS CROCKER II ------------------------------------- DOUGLAS CROCKER II President and Chief Executive Officer Date: November 10, 1999 By: /s/ NORMAN M. FIELD ------------------------------------- NORMAN M. FIELD Vice President - Finance and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 3,491,300 12,807,100 156,300 0 0 17,179,600 33,930,800 8,050,300 43,137,300 7,362,200 29,616,600 0 0 0 6,007,700 43,137,300 0 9,024,900 0 1,547,000 111,800 0 1,832,600 4,853,500 0 4,853,500 0 0 0 4,853,500 3.17 3.17
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