10-Q 1 d10q.txt 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 MARCH 31, 2001 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 0-12537 FIRST CAPITAL INCOME PROPERTIES, LTD.--SERIES VIII (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA 59-2192277 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) TWO NORTH RIVERSIDE PLAZA, 60606-2607 SUITE 600, (ZIP CODE) CHICAGO, ILLINOIS (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (312) 207-0020 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NOT APPLICABLE (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] DOCUMENTS INCORPORATED BY REFERENCE: The First Amended and Restated Certificate and Agreement of Limited Partnership filed as Exhibit A to the Partnership's Prospectus dated July 28, 1982, 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)

STATEMENTS OF PARTNERS' CAPITAL For the quarter ended March 31, 2001 (Unaudited) and the year ended December 31, 2000 (All dollars rounded to nearest 00s)

The accompanying notes are an integral part of the financial statements 2 STATEMENTS OF INCOME AND EXPENSES For the quarters ended March 31, 2001 and 2000 (Unaudited) (All dollars rounded to nearest 00s except per Unit amounts)

STATEMENTS OF CASH FLOWS For the quarters ended March 31, 2001 and 2000 (Unaudited) (All dollars rounded to nearest 00s)

The accompanying notes are an integral part of the financial statements. 3 NOTES TO FINANCIAL STATEMENTS (Unaudited) March 31, 2001 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 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. The Partnership recognizes rental income that is contingent upon tenants' achieving specified targets, only to the extent that such targets are attained. 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 three months ended March 31, 2001 are not necessarily indicative of the operating results for the year ending December 31, 2001. 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 asset. Management's focus, therefore, is to prepare its asset for sale and find a purchaser for its remaining asset when market conditions warrant such an action. Commercial rental property held for investment is recorded at cost, net of any provisions for value impairment, and depreciated (exclusive of amounts allocated to land) on the straight-line method over its estimated useful life. Upon classifying a commercial rental property as held for disposition, no 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 such improvements. The Partnership evaluates its rental property 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 estimated carrying basis. Upon determination that an impairment has occurred, the carrying basis in the rental property is reduced to its estimated fair market value. Management was not aware of any indicator that would result in a significant impairment loss during the periods reported. Cash equivalents are considered all highly liquid investments with maturity of three months or less when purchased. Reference is made to the Partnership's annual report for the year ended December 31, 2000 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, subsequent to December 23, 1982, the Termination of the Offering, the General Partners are entitled to 10% of Cash Flow (as defined in the Partnership Agreement), as a Partnership Management Fee. In addition, Net Profits (exclusive of Net Profits from the sale or disposition of Partnership properties) are allocated: first, to the General Partners, in an amount equal to the greater of the General Partners' Partnership Management Fee for such fiscal year, or 1% of such Net Profits; and second, the balance, if any, to the Limited Partners. Net Profits from the sale or disposition of a Partnership property are allocated: first, to the General Partners 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 Partners, in an amount necessary to make the aggregate amount of their capital accounts equal to the greater of the Sale or Refinancing Proceeds to be distributed to the General Partners with respect to the sale or disposition of such property or 1% of such Net Profits; 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 Partners and 99% to the Limited Partners. Net Losses from the sale, disposition or provision for value impairment of Partnership properties are allocated: first, to the extent that the balance in the General Partners' capital accounts exceeds their 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 Partners and the Limited Partners pro rata in proportion to such Excess Balances until such Excess Balances are reduced to zero; second, to the General Partners and the Limited Partners pro rata in proportion to the balances in their respective capital accounts until the balances in their capital accounts shall be reduced to zero; and third, the balance, if any, 99% to the Limited Partners and 1% to the General Partners. In all events there shall be allocated to the General Partners not less than 1% of Net Profits and Net Losses from the sale, disposition or provision for value impairment of a Partnership property. For both of the three months ended March 31, 2001 and 2000, the General Partners' were paid a Partnership Management Fee and allocated Net Profits of $15,600. 4 Fees and reimbursements paid and payable by the Partnership to Affiliates during the quarter ended March 31, 2001 were as follows:

(a) As of March 31, 2001, the Partnership owed $37,700 to the Managing General Partner for real estate commissions earned in connection with the sale of five of the warehouses comprising a portion of the Atlanta Gateway Park Industrial Center. These commissions have been accrued but not paid. In accordance with the Partnership Agreement, the Partnership will not pay the General Partners or any Affiliates a real estate commission from the sale of a Partnership property until Limited Partners have received cumulative distributions of Sale or Refinancing 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 date of investment) of 6% simple interest per annum on their Capital Investment. 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, 2000 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 sale price. The Partnership, in addition to being in the operation of properties phase, is in the disposition of properties 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 the net income generated from such properties. OPERATIONS The table below is a recap of certain operating results of the Partnership's property for the quarters ended March 31, 2001 and 2000. The discussion following the table should be read in conjunction with the financial statements and notes thereto appearing in this report.

(a) Excludes certain income and expense items, which are not directly related to individual property operating results such as interest income and general and administrative expenses. Net income decreased by $295,800 for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The decrease was primarily the result of a decrease in interest earned on the Partnership's short-term investments, which was due to a decrease in cash available for investment. Proceeds from the sale of Brookwood Metroplex were invested until their distribution to Limited Partners on May 31, 2000. The decrease was also due to diminished operating results at Walker Springs Plaza Shopping Center ("Walker Springs"). The following comparative discussion includes only the operating results of Walker Springs. Rental revenues decreased by $69,900 or 29.8% for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The decrease was primarily due to a decrease in tenant reimbursement for common area and real estate tax expenses. The decrease was also due to a decrease in base rental income, which was due to the decline in occupancy. Real estate tax expense decreased by $12,300 for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The decrease was primarily due to a projected decrease in the assessed value of the property. Property operating expenses increased by $9,600 for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The increase was primarily due to legal expenses incurred in re-tenanting the property. To increase and/or maintain occupancy the level at the Partnership's remaining property, the Managing General Partner, through the 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 tenants' 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 property 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. 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 during a fiscal year, 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 determined by accounting principles generally accepted in the United States ("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 and 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. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The decrease in Cash Flow (as defined in the Partnership Agreement) of $302,500 for the three months ended March 31, 2001 when compared to three months ended March 31, 2000 was primarily due to the decrease in net income, as previously discussed. The decrease in the Partnership's cash position of $25,000 for the three months ended March 31, 2001 was primarily the result of distributions to Partners exceeding net cash provided by operating activities. Liquid assets (including cash and cash equivalents) of the Partnership as of March 31, 2001 are comprised of amounts held for distribution to Partners and working capital purposes. Net cash provided by operating activities decreased by $321,300 for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The decrease was primarily due the decrease in net income, as previously discussed. The decrease was also due to the timing of the payment of certain expenses. Net cash provided by investing activities decreased by $249,900 for the three months ended March 31, 2001 when compared to the three months ended March 31, 2000. The decrease was due to the net maturity of amounts invested in debt securities during the quarter ended March 31, 2000. The Partnership has no financial instruments for which there are significant market risks. As of December 31, 2000, Walker Springs had approximately 65,100 square feet of vacant space or 40% of its net leasable square footage ("NLS"). During 2001, the Partnership entered into a lease agreement with a new tenant to occupy approximately 24% of the NLS. This tenant's lease, which runs for ten years, with tenant options for three additional five year periods, commences during 2001 with the Partnership scheduled to begin receiving monthly base rent of $19,500 in early 2002. In accordance with the terms of this lease, the Partnership will incur approximately $180,000 of capital and tenant improvements during 2001. The decrease in net cash used for financing activities of $272,200 for the quarter ended March 31, 2001 as compared to the quarter ended March 31, 2000 was due to a reduction in distributions to Partners. The Managing General Partner continues to review and evaluate projections of future rental income in its determination of adequate levels of cash reserves due to the anticipated building and tenant improvements and leasing costs necessary to be incurred at Walker Springs during the next several years. For the quarter ended March 31, 2001, the Partnership utilized Cash Flow (as defined by the Partnership Agreement) and $11,200 of previously retained Cash Flow (as defined in the Partnership Agreement) in its distribution to Partners. As a result of the sale of Brookwood, the Partnership's Cash Flow (as defined in the Partnership Agreement) has been reduced. Consistent with this, the Partnership has reduced it quarterly cash distributions to Partners. Distributions to Limited Partners for the quarter ended March 31, 2001 were declared in the amount of $140,000, or $2.00 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 Walker Springs as well as the Managing General Partner's determination of the amount of cash necessary to supplement working capital reserves to meet future liquidity requirements of the Partnership, including the costs associated with the re-tenanting of Walker Springs. Accordingly, there can be no assurance as to the amounts of cash available for future distributions to Partners. 7 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: There were no reports filed on Form 8-K during the quarter ended March 31, 2001. 8 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 PROPERTIES, LTD.-- SERIES VIII By: FIRST CAPITAL FINANCIAL LLC MANAGING GENERAL PARTNER /s/ DOUGLAS CROCKER II Date: May 11, 2001 By: ______________________________________ DOUGLAS CROCKER II PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ PHILIP G. TINKLER Date: May 11, 2001 By: ______________________________________ PHILIP G. TINKLER VICE PRESIDENT--FINANCE AND TREASURER 9

FIRST CAPITAL INCOME PROPERTIES LTD SERIES VIII 10-Q