<PAGE>

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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549-1004

                               -----------------

                                   FORM 10-Q

                               -----------------

<TABLE>
<CAPTION>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
<C> <S>                                           <C>  <C>  <C>   <C>
    EXCHANGE ACT OF 1934

    For the period ended September 30, 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 0-12945

           First Capital Institutional Real Estate, Ltd.--2
        (Exact name of registrant as specified in its charter)
</TABLE>
<TABLE>
<CAPTION>

                Florida                      59-2313852
<S>                                      <C>
    (State or other jurisdiction of       (I.R.S. Employer
     incorporation or organization)      Identification No.)

       Two North Riverside Plaza,            60606-2607
               Suite 600,                    (Zip Code)
           Chicago, Illinois
(Address of principal executive offices)
</TABLE>

                                (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 October 19, 1983,
included in the Partnership's Registration Statement on Form S-11, is
incorporated herein by reference in Part I of this report.

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<PAGE>

BALANCE SHEETS
(All dollars rounded to nearest 00s)


<TABLE>
<CAPTION>
                                        September 30,
                                            2001      December 31,
                                         (Unaudited)      2000
              <S>                       <C>           <C>
              ----------------------------------------------------

              ASSETS
              Cash and cash equivalents  $6,289,100    $6,187,600
              Other assets                    1,300         1,300
              ----------------------------------------------------
                                         $6,290,400    $6,188,900
              ----------------------------------------------------

              LIABILITIES AND PARTNERS' CAPITAL
              Liabilities:
               Accounts payable and
                 accrued expenses        $   90,800    $   86,000
               Due to Affiliates              5,500         1,400
               Other liabilities              2,800         1,300
              ----------------------------------------------------
                                             99,100        88,700
              ----------------------------------------------------
              Partners' capital:
               General Partner               79,600        78,700
               Limited Partners (84,886
                 Units issued and
                 outstanding)             6,111,700     6,021,500
              ----------------------------------------------------
                                          6,191,300     6,100,200
              ----------------------------------------------------
                                         $6,290,400    $6,188,900
              ----------------------------------------------------
</TABLE>

STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 30, 2001
(Unaudited)
and the year ended December 31, 2000
(All dollars rounded to nearest 00s)

<TABLE>
<CAPTION>
                                    General  Limited
                                    Partner  Partners    Total
               <S>                  <C>     <C>        <C>
               --------------------------------------------------
               Partners' capital,
                 January 1, 2000    $76,200 $5,775,100 $5,851,300
               Net income for the
                 year ended
                December 31, 2000     2,500    246,400    248,900
               --------------------------------------------------
               Partners' capital,
                 December 31, 2000   78,700  6,021,500  6,100,200
               Net income for the
                 nine months ended
                September 30, 2001      900     90,200     91,100
               --------------------------------------------------
               Partners' capital,
                 September 30, 2001 $79,600 $6,111,700 $6,191,300
               --------------------------------------------------
</TABLE>

                                                                             3
   The accompanying notes are an integral part of the financial statements.

<PAGE>

STATEMENTS OF INCOME AND EXPENSES
For the quarters ended September 30, 2001 and 2000
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)

<TABLE>
<CAPTION>
                                   2001    2000
<S>                               <C>     <C>
-------------------------------------------------
Income:
 Interest                         $57,300 $98,000
-------------------------------------------------
                                   57,300  98,000
-------------------------------------------------
Expenses:
 General and administrative:
   Affiliates                      10,000   2,000
   Nonaffiliates                   36,300  31,700
-------------------------------------------------
                                   46,300  33,700
-------------------------------------------------
Net income                        $11,000 $64,300
-------------------------------------------------
Net income allocated to General
  Partner                         $   100 $   600
-------------------------------------------------
Net income allocated to Limited
  Partners                        $10,900 $63,700
-------------------------------------------------
Net income allocated to Limited
  Partners per Unit (84,886 Units
  outstanding)                    $  0.13 $  0.75
-------------------------------------------------
</TABLE>

STATEMENTS OF INCOME AND EXPENSES
For the nine months ended September 30, 2001 and 2000
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)

<TABLE>
<CAPTION>
                                    2001     2000
<S>                               <C>      <C>
---------------------------------------------------
Income:
 Interest                         $212,600 $281,900
---------------------------------------------------
                                   212,600  281,900
---------------------------------------------------
Expenses:
 General and administrative:
   Affiliates                       17,000    7,700
   Nonaffiliates                   104,500   99,700
---------------------------------------------------
                                   121,500  107,400
---------------------------------------------------
Net income                        $ 91,100 $174,500
---------------------------------------------------
Net income allocated to General
  Partner                         $    900 $  1,700
---------------------------------------------------
Net income allocated to Limited
  Partners                        $ 90,200 $172,800
---------------------------------------------------
Net income allocated to Limited
  Partners per Unit (84,886 Units
  outstanding)                    $   1.06 $   2.04
---------------------------------------------------
</TABLE>

STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2001 and 2000
(Unaudited)
(All dollars rounded to nearest 00s)

<TABLE>
<CAPTION>
                                         2001       2000
<S>                                   <C>        <C>
---------------------------------------------------------
Cash flows from operating
  activities:
 Net income                           $   91,100 $  174,500
 Adjustments to reconcile net
   income to net cash provided
   by operating activities:
   Changes in assets and
     liabilities:
     Increase (decrease) in
       accounts payable and
       accrued expenses                    4,800    (16,600)
     Increase (decrease) in due
       to Affiliates                       4,100     (2,100)
     Increase in other liabilities         1,500
---------------------------------------------------------
       Net cash provided by
         operating activities            101,500    155,800
---------------------------------------------------------
Cash flows from investing
  activities:
 Decrease in investments in debt
   securities, net                                   54,400
---------------------------------------------------------
       Net cash provided by
         investing activities                 --     54,400
---------------------------------------------------------
       Net cash from financing
         activities                           --         --
---------------------------------------------------------
Net increase in cash and cash
  equivalents                            101,500    210,200
---------------------------------------------------------
Cash and cash equivalents at the
  beginning of the period              6,187,600  3,017,500
---------------------------------------------------------
Cash and cash equivalents at the
  end of the period                   $6,289,100 $3,227,700
---------------------------------------------------------
</TABLE>


4
   The accompanying notes are an integral part of the financial statements.

<PAGE>

NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 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 Partnership has disposed of its real estate properties. Upon resolution of
the environmental matter disclosed in Note 3 and other post-closing matters
related to the sales of the Partnership's properties, the Partnership will make
a liquidating distribution and dissolve.

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 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, 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 resolve
post-closing matters related to the properties sold by the Partnership.

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 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.
For the quarter and nine months ended September 30, 2001 and 2000, the General
Partner was not paid 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 quarter and nine months ended September 30, 2001,
the General Partner was allocated Net Profits of $100 and $900, respectively.
For the quarter and nine months ended September 30, 2000, the General Partner
was allocated Net Profits of $600 and $1,700, respectively.

Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and nine months ended September 30, 2001 were as follows:

<TABLE>
<CAPTION>
                                Paid
                           ---------------
                                    Nine
                           Quarter Months  Payable
<S>                        <C>     <C>     <C>
--------------------------------------------------
Reimbursement of expenses,
  at cost:
 --Accounting              $    -- $    -- $2,000
 --Investor communications  10,700  12,900  3,500
--------------------------------------------------
                           $10,700 $12,900 $5,500
--------------------------------------------------
</TABLE>

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

                                                                             5

<PAGE>

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. At the present time, the General
Partner is unaware of any claims or other matters referred to above against the
Partnership. The purchaser's revised remedial action plan (the "Plan") for the
site has been approved by the California Regional Water Quality Control Board
(the "Water Board"). The remediation is scheduled to begin in 2002, providing
the proper permits are obtained. There can be no assurance as to the timing or
successful completion of the plan. The General Partner continues to monitor the
documentation delivered by the purchaser regarding the purchaser's activities
to remedy the hazardous substances at Lakewood.


TRANSFER AGENT AND REGISTRAR
THE BANK OF NEW YORK
P.O. Box 7090
Troy, Michigan 48007-7090
(800) 447-7364

[LOGO] FIRST CAPITAL
INSTITUTIONAL
REAL ESTATE, Ltd.-2
                                    [Graphic]

sponsored by FIRST CAPITAL FINANCIAL LLC
             Two North Riverside Plaza
       Chicago, Illinois 60606

<PAGE>

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.

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

Operations
Net income decreased by $53,300 and $83,400 for the quarter and nine-months
ended September 30, 2001 when compared to the quarter and nine-months ended
September 30, 2000, respectively. The decreases were primarily due to the
decrease in interest earned on the Partnership's short-term investments, which
was due to the decrease in interest rates earned on those investments.

Liquidity and Capital Resources
The increase in the Partnership's cash position of $101,500 for the nine months
ended September 30, 2001 was primarily the result of net cash provided by
operating activities. Liquid assets (including cash and cash equivalents) of
the Partnership as of September 30, 2001 were comprised of amounts held for the
Lakewood environmental matter (as hereafter discussed) and Partnership
liquidation expenses.

The decrease of $54,300 in net cash provided by operating activities for the
nine months ended September 30, 2001 when compared to the nine months ended
September 30, 2000 was primarily the result of the decrease in net income
partially offset by the timing of the payment of certain of the Partnership's
expenses.

Net cash provided by investing activities decreased by $54,400 for the nine
months ended September 30, 2001 when compared to the nine months ended
September 30, 2000. The decrease was primarily due to the maturity of the
Partnership's investments in debt securities in 2000.

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

As described in Note 3 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. When the environmental matter is satisfactorily remediated and the
other post closing matters are resolved, the Partnership will pay a liquidating
distribution to Partners of the remaining assets held by the Partnership, less
amounts reserved for administrative expenses and any amounts deemed necessary
for contingencies and other post closing matters. In line with reduced Cash
Flow (as defined in the Partnership Agreement) following the sale of the
Partnership's remaining properties, distributions to Partners have been
suspended until such time as a liquidating distribution is paid.


2

<PAGE>

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 on Form 8-K filed during the three months ended September
30, 2001.

6

<PAGE>

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.

<TABLE>
<CAPTION>
-                       FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--2
<S>                     <C>

                             By: FIRST CAPITAL FINANCIAL LLC
                                GENERAL PARTNER
                                    /S/ DOUGLAS CROCKER II
                        ------------------------------------------------
Date: November 13, 2001      By:
                                      DOUGLAS CROCKER II
                             President and Chief Executive Officer
                                     /S/ PHILIP G. TINKLER
                        ------------------------------------------------
Date: November 13, 2001      By:
                                       PHILIP G. TINKLER
                             Vice President--Finance and Treasurer
</TABLE>

                                                                             7