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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the period ended March 31, 2006



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 0-12945



First Capital Institutional Real Estate, Ltd.2

(Exact name of registrant as specified in its charter)



|                                                      |  |                    
|----------------------------------------------------- |  | -------------------
|Florida                                               |  | 59-2313852         
|(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     ̈



Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer      ̈    
                        Accelerated filer      ̈                             Non-accelerated filer    x



Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes     ̈    No     x



Documents incorporated by reference:



The First Amended and Restated Certificate and Agreement of Limited Partnership filed as Exhibit A to
the definitive Prospectus dated October 19, 1983, included in the Registrants Registration Statement on Form S-11 (Registration No. 2-86361), is incorporated herein by reference in Part I of this report.



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



FIRST CAPITAL INSTITUTIONAL REAL
ESTATE, LTD.2



BALANCE SHEETS

(All dollars rounded to nearest 00s)



|                                                            |  |                          |           |                  |   |          
|----------------------------------------------------------- |  | ------------------------ | --------- | ---------------- | - | ---------
|                                                            |  | March 31,2006(Unaudited) |           | December 31,2005
|                                                           
|ASSETS                                                      |  |                          |           |                  |   |          
|Cash and cash equivalents                                   |  | $                        | 2,402,200 |                  | $ | 2,376,600
|                                                           
|                                                            |  | $                        | 2,402,200 |                  | $ | 2,376,600
|                                                           
|                                                           
|LIABILITIES AND PARTNERS CAPITAL                          
|Liabilities:                                                |  |                          |           |                  |   |          
|Accounts payable and accrued expenses                       |  | $                        | 117,500   |                  | $ | 71,000   
|Due to Affiliates                                           |  |                          | 2,400     |                  |   |         
|Other liabilities                                           |  |                          | 2,800     |                  |   | 2,800    
|                                                           
|Total Liabilities                                           |  |                          | 122,700   |                  |   | 73,800   
|                                                           
|Commitments and contingencies for environmental remediation |  |                          |          |                  |   |         
|Partners capital:                                          |  |                          |           |                  |   |          
|General Partner                                             |  |                          | 228,000   |                  |   | 230,300  
|Limited Partners (84,886 Units issued and outstanding)      |  |                          | 2,051,500 |                  |   | 2,072,500
|                                                           
|                                                            |  |                          | 2,279,500 |                  |   | 2,302,800
|                                                           
|                                                            |  | $                        | 2,402,200 |                  | $ | 2,376,600
|                                                           



STATEMENT OF PARTNERS CAPITAL

For the quarter ended March 31, 2006 (Unaudited)

(All dollars rounded to
nearest 00s)



|                                                |  |                |         |   |                 |   |           |       |  |   |           |  
|----------------------------------------------- |  | -------------- | ------- | - | --------------- | - | --------- | ----- |  | - | --------- | -
|                                                |  | GeneralPartner |         |   | LimitedPartners |   |           | Total | 
|                                                | 
|Partners capital, January 1, 2006              |  | $              | 230,300 |   |                 | $ | 2,072,500 |       |  | $ | 2,302,800 |  
|Net (loss) for the quarter ended March 31, 2006 |  |                | (2,300  | ) |                 |   | (21,000   | )     |  |   | (23,300   | )
|                                                | 
|Partners capital, March 31, 2006               |  | $              | 228,000 |   |                 | $ | 2,051,500 |       |  | $ | 2,279,500 |  
|                                                | 

1

The
accompanying notes are an integral part of the financial statements.



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FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.2



STATEMENTS OF INCOME AND EXPENSES

For the quarters ended
March 31, 2006 and 2005

(Unaudited)

(All dollars rounded to nearest 00s

except per Unit amounts)



|                                                                             |  |      |         |   |      |   |         |  
|---------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                             |  | 2006 |         |   | 2005 |  
|                                                                             | 
|Income:                                                                      |  |      |         |   |      |   |         |  
|Interest                                                                     |  | $    | 25,600  |   |      | $ | 14,400  |  
|                                                                             | 
|                                                                             |  |      | 25,600  |   |      |   | 14,400  |  
|                                                                             | 
|Expenses:                                                                    |  |      |         |   |      |   |         |  
|General and administrative:                                                  |  |      |         |   |      |   |         |  
|Affiliates                                                                   |  |      | 2,400   |   |      |   | 2,400   |  
|Nonaffiliates                                                                |  |      | 46,500  |   |      |   | 37,900  |  
|                                                                             | 
|                                                                             |  |      | 48,900  |   |      |   | 40,300  |  
|                                                                             | 
|Net (loss)                                                                   |  | $    | (23,300 | ) |      | $ | (25,900 | )
|                                                                             | 
|Net (loss) allocated to General Partner                                      |  | $    | (2,300  | ) |      | $ | (300    | )
|                                                                             | 
|Net (loss) allocated to Limited Partners                                     |  | $    | (21,000 | ) |      | $ | (25,600 | )
|                                                                             | 
|Net (loss) allocated to Limited Partners per unit (84,886 Units outstanding) |  | $    | (0.25   | ) |      | $ | (0.30   | )
|                                                                             | 



STATEMENTS OF CASH FLOWS

For the quarters ended March 31, 2006 and 2005

(Unaudited)

(All dollars rounded to nearest 00s)



|                                                                                  |  |      |           |   |      |   |           |  
|--------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                  |  | 2006 |           |   | 2005 |  
|                                                                                  | 
|Cash flows from operating activities:                                             |  |      |           |   |      |   |           |  
|Net (loss)                                                                        |  | $    | (23,300   | ) |      | $ | (25,900   | )
|Adjustments to reconcile net (loss) to net cash provided by operating activities: |  |      |           |   |      |   |           |  
|Changes in assets and liabilities:                                                |  |      |           |   |      |   |           |  
|Decrease in other assets                                                          |  |      |          |   |      |   | 3,200     |  
|Increase in accounts payable and accrued expenses                                 |  |      | 46,500    |   |      |   | 40,300    |  
|Increase in due to Affiliates                                                     |  |      | 2,400     |   |      |   |          |  
|                                                                                  | 
|Cash provided by operating activities                                             |  |      | 25,600    |   |      |   | 17,600    |  
|Cash and cash equivalents at the beginning of the period                          |  |      | 2,376,600 |   |      |   | 2,481,400 |  
|                                                                                  | 
|Cash and cash equivalents at the end of the period                                |  | $    | 2,402,200 |   |      | $ | 2,499,000 |  
|                                                                                  | 



2

The accompanying notes are
an integral part of the financial statements.



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FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.2

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



1. 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.



Accounting policies:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the quarter ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. Reference is made to the Partnerships Annual Report for the year ended
December 31, 2005, 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.



The Partnership has disposed of its real estate properties and upon resolution of the environmental matter disclosed in Note 3, the Partnership will make a liquidating distribution
and dissolve.



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 accounting principles generally accepted in the United States 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.



Cash equivalents are considered all highly liquid investments with a maturity of three months or less
when purchased.



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 related to the properties sold by the Partnership.



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 quarters ended March 31, 2006
and 2005 the General Partner was not paid a Partnership Management Fee. For the quarters ended March 31, 2006 and 2005 the General Partner was allocated Net (Losses) of $(2,300) and $(300), respectively.



Fees and reimbursements paid and payable by the Partnership to Affiliates during the quarter ended
March 31, 2006 were as follows:



|                                    |  |      |   |         |   |      
|----------------------------------- |  | ---- | - | ------- | - | -----
|                                    |  | Paid |   | Payable
|                                   
|Reimbursement of expenses, at cost: |  |      |   |         |   |      
|Accounting                         |  | $    | 0 |         | $ | 2,400
|                                   



3



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3. 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 protection in relation to clean-up costs and related expenses arising from the presence of these hazardous substances. A pilot test of a specific cleanup technology was
completed, however for engineering and geologic reasons the pilot test was unsuccessful. As a result, the environmental engineers and Los Angeles Regional Water Quality Control Board staff overseeing the remediation decided not to proceed with
full-scale cleanup utilizing the technology of the pilot test. Groundwater monitoring continues at the site and the current owner is required to conduct a new pilot test using a different cleanup technique. The General Partner continues to monitor
the documentation delivered by the current owner regarding the hazardous substances at Lakewood.



4



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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, 2005 for a discussion of the Partnerships business.



Certain statements in the Report on Form 10-Q may constitute forward-looking statements as defined in Section 27A of the Securities Act of 1933 (the
Securities Act), Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), the Private Securities Litigation Reform Act of 1995 (the PSLRA) or in releases made by the SEC, all as may be amended
from time to time. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Partnership, or industry results, to differ
materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward looking statements can be identified by, among
other things, the use of forward-looking language, such as the words plan, believe, expect, anticipate, intend, estimate, project, may, will,
would, could, should, seeks, or scheduled to, or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy
or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the safe harbor provisions of such laws. The Partnership cautions
investors that any forward-looking statements made by the Partnership are not guarantees or indicative of future performance. Important assumptions and other important factors could cause actual results to differ materially from those
forward-looking statements with respect to the Partnership. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.



Although the Partnership believes that its plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of its forward-looking statements. The Partnerships future financial condition and results of
operations, as well as any forward-looking statements, are made only as of the date hereof and the partnership does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information,
subsequent events or otherwise, unless otherwise required by law.



The Partnership has
substantially completed the disposition phase of its life cycle. The Partnership has sold its remaining property investments and is working towards resolution of post-closing property sale matters.



Operations

Net (loss) decreased from $(25,900) for the quarter ended March 31, 2005 to $(23,300) for the quarter ended March 31, 2006. The change was primarily due to an increase in the interest earned on the Partnerships short-term
investments, the result of an increase in the interest rates earned on those investments, partially offset by an increase in the costs related to investor services.



Liquidity and Capital Resources

The increase in the
Partnerships cash position of $25,600 for the quarter ended March 31, 2006 was the result of net cash provided by operating activities. Liquid assets (including cash and cash equivalents) of the Partnership as of March 31, 2006 were
comprised of amounts reserved for the Lakewood Square Shopping Center (Lakewood) (sold in 1997) environmental matter (as hereafter discussed) and Partnership liquidation expenses.



Net cash provided by operating activities changed from $17,600 for the quarter ended March 31,
2005 to $25,600 for the quarter ended March 31, 2006. The change was primarily due to the increase in outstanding obligations at March 31, 2006.



The Partnership has no financial instruments for which there are significant market risks.



As described in Note 3 of the Notes to Financial Statements, the Partnership is awaiting resolution of an environmental matter at Lakewood. A pilot test of a specific cleanup
technology was completed, however for engineering and geologic reasons the pilot test was unsuccessful. As a result, the environmental engineers and Los Angeles Regional Water Quality Control Board staff overseeing the remediation decided not to
proceed with full-scale cleanup utilizing the technology of the pilot test. Groundwater monitoring continues at the site and the current owner is required to conduct a new pilot test using a different cleanup technique. The new pilot test should
commence in 2006. The General Partner is continuing to monitor the documentation delivered by the successor owner regarding the hazardous substances at Lakewood. Until the environmental matter at Lakewood is resolved to the satisfaction of the
General Partner, the Partnership will continue to maintain a reserve.



5



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ITEM 4. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures

The principal executive officer and the
principal financial officer of the General Partner, Philip G. Tinkler, has evaluated the effectiveness of the Partnerships disclosure controls and procedures, as required by Rule 13a-15(e) and 15d  15(e) under the Securities Exchange Act
of 1934 (the Exchange Act). Based upon the results of that evaluation, the executive officer has concluded that as of the end of the period covered by this quarterly report, the Partnerships disclosure controls and procedures were
effective in all material respects to ensure that the information required to be disclosed by the Partnership in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the SECs rules and forms.



The General Partner of the Partnership is responsible
for establishing and maintaining a system of internal control over financial reporting for the Partnership (as defined in Rules 13A-15(f) and 15d-15(f) under the Exchange Act) designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. The principal executive officer and principal financial officer of the General
Partner has determined that during the most recent fiscal quarter, there have been no changes in internal control over financial reporting that occurred that have materially affected or are reasonably likely to materially affect internal control
over financial reporting.



The executive officer of the General Partner does not expect
that the Partnerships disclosure controls and procedures or internal controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Partnership have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.



6



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PART II. OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibits:



31.1: Certification of Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith).



32.1: Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).



(b) Reports on Form 8-K:



The Partnership filed Current Reports on Form 8-K as follows:



|               |  |                                                 
|-------------- |  | ------------------------------------------------
|Date           |  | Description                                     
|              
|March 15, 2006 |  | Departure and appointment of principal officers.



7



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.



|                   |  |  |  |                                                 |  |                                                 |  |                                                                                         
|------------------ |  |  |  | ----------------------------------------------- |  | ----------------------------------------------- |  | ----------------------------------------------------------------------------------------
|                   |  |  |  | FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.2
|                   |  |  | 
|                   |  |  |  | By:                                             |  | FIRST CAPITAL FINANCIAL, L.L.C. GENERAL PARTNER
|                   |  |  | 
|Date: May 12, 2006 |  |  |  | By:                                             |  | /S/    PHILIP TINKLER                          
|                   |  |  |  |                                                 |  |                                                 |  | PHILIP TINKLER President, Chief Executive Officer, Chief Financial Officer and Treasurer



8