ITEM 1. BUSINESS
The registrant, First Capital Institutional Real Estate, Ltd.--2 (the "Partnership"), is a limited partnership organized in 1983 under the Florida Uniform Limited Partnership Law. The Partnership sold 84,886 Limited Partnership Units (the "Units") to the public from November 1983 to October 1984, pursuant to a Registration Statement on Form S-11 filed with the Securities and Exchange Commission (Registration Statement No. 2-86361). Capitalized terms used in this report have the same meaning as those terms have in the Partnership's Registration Statement.
The business of the Partnership was to invest primarily in existing, improved, income-producing real estate, such as shopping centers, warehouses and office buildings, and, to a lesser extent, in other types of income-producing real estate. From May 1984 to May 1986, the Partnership made seven real property investments and purchased 50% interests in four joint ventures, which were each formed with an Affiliated partnership for the purpose of acquiring a 100% interest in certain real property. In addition, in January 1987 the Partnership formed a joint venture with an Affiliated partnership (the "Joint Venture"), in which they were each 50% partners. The Joint Venture was formed for the purpose of entering into a limited partnership agreement with an unaffiliated third party to which the Joint Venture contributed 75% of the total purchase price of a property in order to obtain a preferred majority interest in the limited partnership. All of the Partnership's joint ventures were operated under the common control of First Capital Financial Corporation (the "General Partner"). During the year ended 1998, the Partnership sold all of its remaining real property investments. The Partnership is currently addressing post sale matters, including monitoring the remediation of an environmental matter at one of the properties sold during 1997. Upon the successful remediation of the environmental matter and the resolution of other post closing matters, the Partnership will make a liquidating distribution and dissolve.
ITEM 2.
ITEM 2. PROPERTIES
During the year ended December 31, 1998, the Partnership sold its remaining property investments.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
(a & b) The Partnership was not a party to, nor the subject of, any material pending legal proceedings, nor were any such proceedings terminated during the quarter ended December 31, 2000. Ordinary routine legal matters incidental to the business which were not deemed material, were pursued during the quarter ended December 31, 2000.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a, b, c & d) None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS
There has not been, nor is there expected to be, a public market for units.
As of March 1, 2001, there were 11,138 Holders of Units.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
(a) Distributions to Limited Partners per Unit for the years ended December 31, 1998, 1997 and 1996 included Sales Proceeds of $247.36, $274.94 and $59.00, respectively. (b) For the purposes of this table, return of capital represents either: 1) the amount by which distributions, if any, exceed net income for the respective year or 2) total distributions, if any, when the Partnership incurs a net loss for the respective year. Pursuant to the Partnership Agreement, Capital Investment is only reduced by distributions of Sale Proceeds. Accordingly, return of capital as used in the above table does not impact Capital Investment.
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 accounting principles generally accepted in the United States ("GAAP"):
(a) Cash Flow is defined in the Partnership Agreement as Partnership revenues earned from operations (excluding tenant deposits and proceeds from the sale or disposition of any Partnership properties), minus all expenses incurred (including Operating Expenses and any reserves of revenues from operations deemed reasonably necessary by the General Partner), except depreciation and amortization expenses and capital expenditures, lease acquisition expenditures and the General Partner's Partnership Management Fee.
The above selected financial data should be read in conjunction with the financial statements and the related notes appearing on pages A-1 through A-11.
ITEM 7.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The ordinary business of the Partnership is expected to pass through three phases: (i) Offering of Units and investment in properties, (ii) operation of properties and (iii) sale or other disposition of properties.
Statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations, which are not historical facts, may be forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date hereof.
The Partnership commenced the Offering of Units on November 10, 1983 and began operations on December 5, 1983, after achieving the required minimum subscription level. On October 15, 1984, the Offering was terminated upon the sale of 84,886 Units. From May 1984 to May 1986, the Partnership made seven real property investments and purchased 50% interests in four joint ventures, which were each formed with an Affiliated partnership for the purpose of acquiring a 100% interest in certain real property. In addition, in January 1987 the Partnership formed a joint venture with an Affiliated partnership (the "Joint Venture"), in which they were each 50% partners. The Joint Venture was formed for the purpose of entering into a partnership agreement with an unaffiliated third party to which the Joint Venture contributed 75% of the total purchase price of a property in order to obtain a preferred majority interest in the limited partnership. All of the Partnership's joint ventures were operated under the common control of First Capital Financial Corporation (the "General Partner").
The Partnership 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. Partnership operating results are generally expected to decline as real property interests are sold since the Partnership no longer receives income generated from such real property interests. The Partnership has sold all of its real property investments.
OPERATIONS Results of operations for the years ended December 31, 2000 and 1999 were comprised of interest income and post property sale activities.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31, Net income decreased by $42,900 for the year ended December 31, 2000 when compared to the year ended December 31, 1999. The decrease was primarily due to an increase in general and administrative expenses which was due to a 1999 adjustment of estimated overhead expenses to actual. This adjustment resulted in lower than expected general and administrative expenses for the year ended December 31, 1999. The decrease was also due to the 1999 receipt of rental income from properties previously sold by the Partnership.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31, Net income decreased by $6,806,800 for the year ended December 31, 1999 when compared to the year ended December 31, 1998. The decrease was primarily due to the gains recorded in 1998 on the sales of three Partnership properties. The decrease was also due to the absence of operating results in 1999 from the three properties sold by the Partnership during 1998. In addition, the decrease was due to a reduction in interest earned on the Partnership's short-term investments resulting from a decrease in the average cash available for investment.
LIQUIDITY AND CAPITAL RESOURCES The increase in the Partnership's cash position of $3,170,100 for the year ended December 31, 2000 was primarily the result of the maturity of the Partnership's investments in debt securities. Liquid assets (including cash and cash equivalents) of the Partnership as of December 31, 2000 were comprised of amounts reserved for the Lakewood environmental matter (as hereafter discussed) and Partnership liquidation expenses.
The decrease of $16,000 in net cash provided by operating activities for the year ended December 31, 2000 when compared to the year ended December 31, 1999 was primarily the result of the decrease in net income, as previously discussed.
Net cash (used for) provided by investing activities changed from $(2,943,000) for the year ended December 31, 1999 to $2,943,000 the year ended December 31, 2000. The change was due to the 2000 maturity of the 1999 investments in debt securities.
Investments in debt securities are a result of the continued extension of the maturities of certain of the Partnership's short-term investments in an effort to maximize the Partnership's return on these investments, while they are held as working capital reserves. These investments are of investment grade and mature less than one year from their dates of purchase.
The Partnership has no financial instruments for which there are significant market risks.
The decrease of $13,361,200 in net cash used for financing activities for the year ended December 31, 2000 when compared to the year ended December 31, 1999 was due to the February 28, 1999 special distributions to Partners of proceeds from the sales of Ellis Building and Holiday Office Park North and South.
As described in Note 4 of Notes to Financial Statements, the Partnership is awaiting resolution of an environmental matter at Lakewood. The General Partner is continuing to monitor the documentation delivered by the purchaser of Lakewood regarding the purchaser's activities to remedy the hazardous substances at Lakewood. There can be no assurance as to the actual timeframe for the remediation or that it will be completed without cost to the Partnership. As a result of this, together with other potential post-closing matters related to the Partnership's properties, it will be necessary for the Partnership to remain in existence. When the environmental matter at Lakewood is satisfactorily remediated, Limited Partners will receive a final liquidating distribution of the remaining cash held by the Partnership, less amounts reserved for administrative expenses and any amounts deemed necessary to resolve, or provide for, any post closing matters.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report. See page A-1 "Index of Financial Statements, Schedules and Exhibits."
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) & (E) DIRECTORS
The Partnership has no directors. First Capital Financial LLC ("FCFC") (formerly known as First Capital Financial Corporation) is the General Partner. The directors of FCFC, as of March 1, 2001, are shown in the table below. Directors serve for one year or until their successors are elected. The next annual meeting of FCFC will be held in June 2001.
Douglas Crocker II, 60, has been President and Chief Executive Officer since December 1992 and a Director since January 1993 of the General Partner. Mr. Crocker has been President, Chief Executive Officer and trustee of Equity Residential Properties Trust since March 31, 1993. Mr. Crocker is a member of the Board of Directors of Wellsford Real Properties, Inc. and Ventas Inc. and was a member of the Board of Directors of Horizon Group, Inc. from July 1996 to June 1998. Mr. Crocker was an Executive Vice President of Equity Financial and Management Company ("EFMC") from November 1992 until March 31, 1997.
Donald J. Liebentritt, 50, has been Vice President of the General Partner since July 1997 and a Director since May 2000 and is President of Equity Group Investments, LLC, Vice President and Assistant Secretary of Great American Management and Investment and Inc. ("Great American") and was Principal and Chairman of Rosenberg and Liebentritt P.C. until its dissolution in 1999. Mr. Liebentritt has also been a director of Davel Communications, Inc. since November 2000.
(B) & (E) EXECUTIVE OFFICERS
The Partnership does not have any executive officers. The executive officers of the General Partner as of March 1, 2001 are shown in the table. All officers are elected to serve for one year or until their successors are elected and qualified.
PRESIDENT AND CEO--See Table of Directors above.
VICE PRESIDENT--See Table of Directors above.
Norman M. Field, 52, has been Vice President of Finance and Treasurer of the General Partner since February 1984, and also served as Vice President of Great American from July 1983 until March 1995 and from July 1997 until November 2000.
(D) FAMILY RELATIONSHIPS
There are no family relationships among any of the foregoing directors and officers.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no involvements in certain legal proceedings among any of the foregoing directors and officers.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
(a, b, c & d) As stated in Item 10, the Partnership has no officers or directors. Neither the General Partner, nor any director or officer of the General Partner, received any direct remuneration from the Partnership during the year ended December 31, 2000. However, Affiliates of the General Partner do compensate the directors and officers.
For additional information see Item 13(a) Certain Relationships and Related Transactions.
(e) None.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) As of March 1, 2001, no person owned of record or was known by the Partnership to own beneficially more than 5% of the Partnership's 84,886 Units then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1, 2001, the executive officers and directors of the General Partner, as a group, did not own any Units.
(c) None.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Affiliates of the General Partner were entitled to compensation and reimbursements of $9,400 from the Partnership for investor communications and accounting services. Compensation for these services are on terms which are fair, reasonable and no less favorable to the Partnership than reasonably could be obtained from unaffiliated persons. As of December 31, 2000, total fees and reimbursements of $1,400 were due to Affiliates.
In accordance with the Partnership Agreement, subsequent to October 19, 1984, the Termination of the Offering, the General Partner is entitled to 10% of Cash Flow (as defined in the Partnership Agreement) as a Partnership Management Fee. Net Profits (exclusive of Net Profits from the sale or disposition of Partnership properties) are allocated: first, to the General Partner, in an amount equal to the greater of the General Partner's Partnership Management Fee or 1% of such Net Profits; second, the balance, if any, 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 the Limited Partners with negative balances in their capital accounts pro rata in proportion to such respective negative balances, to the extent of the total of such negative balances; second, to the General Partner, in an amount necessary to make the balance in its capital account equal to the amount of Sale Proceeds to be distributed to the General Partner with respect to the sale or disposition of such property and third, 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 Losses from the sale, disposition or provision for value impairment of Partnership properties are allocated: first, prior to giving effect to any distributions of Sale Proceeds from the transaction, to the extent that the balance in the General Partner's capital account exceeds its Capital Investment or the balance in the capital accounts of the Limited Partners exceeds the amount of their Capital Investment (the "Excess Balances"), to the General Partner and the Limited Partners pro rata in proportion to such Excess Balances until such Excess Balances are reduced to zero; second, to the General Partner and the Limited Partners and among them (in the ratio which balances) until the balance in their capital accounts shall be reduced to zero; third, the balance, if any, 99% to the Limited Partners and 1% to the General Partner. Notwithstanding the foregoing, in all events there shall be allocated to the General Partner not less than 1% of Net Profits and Net Losses from the sale, disposition or provision for value impairment of a Partnership property. For the year ended December 31, 2000, the General Partner was not paid a Partnership Management Fee, and was allocated Net Profits of $2,500.
(b) None.
(c) No management person is indebted to the Partnership.
(d) None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a, c & d) (1, 2 & 3) See Index of Financial Statements, Schedule and Exhibits on page A-1 of Form 10-K.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended December 31, 2000.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.-2
BY: FIRST CAPITAL FINANCIAL LLC GENERAL PARTNER
Dated: March 23, 2001 /s/ DOUGLAS CROCKER II By: ____________________________________ DOUGLAS CROCKER II PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
INDEX OF FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
SCHEDULES FILED AS PART OF THIS REPORT
All schedules have been omitted as inapplicable, or for the reason that the required information is shown in the financial statements or notes thereto.
EXHIBITS FILED AS PART OF THIS REPORT
EXHIBITS (3 & 4) First Amended and Restated Certificate and Agreement of Limited Partnership as set forth on pages A-1 through A-31 of the Partnership's definitive Prospectus dated October 19, 1983; Registration Statement No. 2- 86361, filed pursuant to Rule 424 (b), is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1999 Annual Report to Limited Partners is being sent under separate cover, not as a filed document and not via EDGAR, for the information of the Commission.
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REPORT OF INDEPENDENT AUDITORS
Partners First Capital Institutional Real Estate, Ltd.-2 Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Institutional Real Estate, Ltd.-2 as of December 31, 2000 and 1999, and the related statements of income and expenses, partners' capital and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Capital Institutional Real Estate, Ltd.-2 at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Chicago, Illinois January 30, 2001
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BALANCE SHEETS December 31, 2000 and 1999 (All dollars rounded to nearest 00s)
STATEMENTS OF PARTNERS' CAPITAL For the years ended December 31, 2000, 1999 and 1998 (All dollars rounded to nearest 00s)
The accompanying notes are an integral part of the financial statements. A-3
STATEMENTS OF INCOME AND EXPENSES For the years ended December 31, 2000, 1999 and 1998 (All dollars rounded to nearest 00s except per Unit amounts)
STATEMENTS OF CASH FLOWS For the years ended December 31, 2000, 1999 and 1998 (All dollars rounded to nearest 00s)
The accompanying notes are an integral part of the financial statements. A-4
NOTES TO FINANCIAL STATEMENTS December 31, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS: Capitalized terms used in this report have the same meaning as those terms 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.
ORGANIZATION: The Partnership was formed on August 22, 1983, by the filing of a Certificate and Agreement of Limited Partnership with the Department of State of the State of Florida, and commenced the Offering of Units on November 10, 1983. The Certificate and Agreement, as amended and restated, authorized the sale to the public of up to 85,000 Units and not less than 1,400 Units pursuant to the Prospectus. On December 5, 1983, the required minimum subscription level was reached and Partnership operations commenced. A total of 84,886 Units were sold prior to Termination of the Offering in October, 1984. The Partnership was formed to invest primarily in existing, income-producing commercial real estate.
The Partnership has disposed of its real estate properties. Upon resolution of the environmental matter disclosed in Note 4 and other post closing matters related to the sales of the Partnership's properties, the Partnership will make a liquidating distribution and dissolve.
In 1998, the Company adopted Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Partnership has one reportable segment as the Partnership is in the disposition phase of its life cycle, wherein it is seeking to resolve post-closing matters relating to properties sold by the Partnership. The adoption of Statement 131 did not affect the results of operations or financial position.
The Partnership Agreement provides that the Partnership will be dissolved on or before December 2014. The Limited Partners, by a majority vote, may dissolve the Partnership at any time.
ACCOUNTING POLICIES: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The Partnership utilizes the accrual method of accounting. Under this method, revenues are recorded when earned and expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The financial 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 until its sale in August 1998, was operated under the common control 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.
Investment in joint venture, represented the recording of the Partnership's interest, under the equity method of accounting, in a joint venture with an Affiliated partnership. The joint venture acquired a preferred majority interest in a limited partnership with the sellers of the Lansing, Michigan property ("Holiday"). Under the equity method of accounting, the Partnership recorded its initial investment at cost and adjusted its investment account for its share of Holiday's income or loss and its distributions of cash flow (as defined in the limited partnership agreement). During 1998, Holiday was sold and the remaining assets and liabilities of the limited partnership were distributed to the Partnership. In December 1998, the limited partnership was dissolved.
The Partnership is not liable for Federal income taxes as the Partners recognize their proportionate share of the Partnership's income or loss on their income tax returns; therefore, no provision for Federal income taxes is made in the financial statements of the Partnership. It is not practicable for the Partnership to determine the aggregate tax bases of the Limited Partners; therefore, the disclosure of the difference between the tax bases and the reported assets and liabilities of the Partnership would not be meaningful.
Property sales are recorded when title transfers and sufficient consideration has been received by the Partnership. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with GAAP.
Cash equivalents are considered all highly liquid investments with maturity of three months or less when purchased.
Investments in debt securities are comprised of obligations of the United States government and are classified as held-to-maturity. These investments are carried at their amortized cost basis in the financial statements, which approximated fair market value. All of these securities had a maturity of less than one year when purchased.
The Partnership's financial statements include financial instruments, including receivables and trade liabilities. The fair value of financial instruments, including cash and cash equivalents, was not materially different from their carrying values at December 31, 2000 and 1999.
A-5
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, subsequent to October 19, 1984, the Termination of the Offering, the General Partner is entitled to 10% of Cash Flow (as defined in the Partnership Agreement) as a Partnership Management Fee. Net Profits (exclusive of Net Profits from the sale or disposition of Partnership properties) are allocated: first, to the General Partner, in an amount equal to the greater of the General Partner's Partnership Management Fee or 1% of such Net Profits; second, the balance, if any, 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 the Limited Partners with negative balances in their capital accounts pro rata in proportion to such respective negative balances, to the extent of the total of such negative balances; second, to the General Partner, in an amount necessary to make the balance in its capital account equal to the amount of Sale Proceeds to be distributed to the General Partner with respect to the sale or disposition of such property and third, 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 Losses from the sale, disposition or provision for value impairment of Partnership properties are allocated: first, prior to giving effect to any distributions of Sale Proceeds from the transaction, to the extent that the balance in the General Partner's capital account exceeds its Capital Investment or the balance in the capital accounts of the Limited Partners exceeds the amount of their Capital Investment (the "Excess Balances"), to the General Partner and the Limited Partners pro rata in proportion to such Excess Balances until such Excess Balances are reduced to zero; second, to the General Partner and the Limited Partners and among them (in the ratio which balances) until the balance in their capital accounts shall be reduced to zero; third, the balance, if any, 99% to the Limited Partners and 1% to the General Partner. Notwithstanding the foregoing, in all events there shall be allocated to the General Partner not less than 1% of Net Profits and Net Losses from the sale or disposition of a Partnership property. For the year ended December 31, 2000 the General Partner was not paid a Partnership Management Fee and was allocated Net Profits of $2,500. For the year ended December 31, 1999 the General Partner was not paid a Partnership Management Fee and was allocated Net Profits of $2,900. For the year ended December 31, 1998, the General Partner was paid a Partnership Management Fee of $141,500 and was allocated Net Profits of $214,800, which includes $73,300 from the sales of Partnership properties.
Fees and reimbursements paid and payable by the Partnership to Affiliates for the years ended December 31, were as follows:
The variance between the amounts listed in the table and the Statement of Income and Expense is due to capitalizable legal costs.
3. PROPERTY SALES:
On September 22, 1998, the joint venture in which the Partnership owned a 50% interest, treated under the equity method, consummated the sale of its property, Holiday Office Park North and South, located in Lansing, Michigan for a sale price of $13,500,000. The Partnership's share of proceeds from this transaction was $6,526,900, which was net of closing expenses. The Partnership reported a net gain of $1,439,100 for the year ended December 31, 1998 in connection with this sale and distributed $6,499,700 or $76.57 per Unit on February 28, 1999 to Limited Partners of record as of September 22, 1998. For tax reporting purposes, the Partnership reported a (loss) of $(367,300) for the year ended December 31, 1998 in connection with this sale.
On August 21, 1998, a joint venture in which the Partnership owned a 50% interest, consummated the sale of the Ellis Building, located in Sarasota, Florida, for a sale price of $13,875,000. The Partnership's share of proceeds from this transaction was $6,673,800, which was net of closing expenses. The Partnership reported a net of gain of $2,942,000 for the year ended December 31, 1998 in connection with this sale and distributed $6,672,900 or $78.61 per Unit on February 28, 1999 to Limited Partners of record as of August 21, 1998. For tax reporting purposes, the Partnership reported a gain of $1,525,100 for the year ended December 31, 1998 in connection with this sale.
On March 4, 1998, the Partnership sold Marketplace at Rivergate Shopping Center, located in Nashville, Tennessee, for a sale price of $8,128,000. Proceeds from this transaction were $7,823,100, which was net of closing expenses. The Partnership reported a gain for financial reporting purposes of $1,639,300 for the year ended December 31, 1998 from this sale and distributed $7,824,800 or $92.18 per Unit on August 31, 1998 to Limited Partners of record as of March 4, 1998. For tax reporting purposes, the Partnership reported a gain of $1,013,500 for the year ended December 31, 1998 in connection with this sale.
4. ENVIRONMENTAL MATTER:
In 1996, the General Partner became aware of the existence of hazardous substances in the soil and groundwater under Lakewood Square Shopping Center ("Lakewood"). In connection with the 1997 sale of Lakewood, the purchaser assumed the obligation to remedy the hazardous substances in the manner required by law, which includes, but is not limited to, payment of all costs in connection with the remediation work. In addition, the purchaser provided the Partnership with certain indemnification
A-6
protection in relation to clean-up costs and related expenses arising from the presence of these hazardous substances. At the present time, the General Partner is unaware of any claims or other matters referred to above against the Partnership. The purchaser provided the California Regional Water Quality Control Board (the "Water Board") with its corrective action plan (the "Plan") for the clean up of the site. The Water Board's recommended modifications to the plan have been implemented. Currently, the purchaser is monitoring to determine the extent of the contamination of the groundwater at the site. Upon determination of the groundwater concentrations, the purchaser will submit a revised plan to the Water Board and request its approval. The timing of the completion of the remediation process is contingent upon, among other things, the Water Board's issuance of this approval. Accordingly, there can be no assurance as to the timing of the completion of the remediation process. The General Partner continues to monitor the documentation delivered by the purchaser regarding the purchaser's activities to remedy the hazardous substances at Lakewood.
5. STATE INCOME TAX EXPENSE:
State income tax expense is comprised substantially of taxes based on taxable income imposed by the District of Columbia and the states of Michigan and Florida.
A-7