<PAGE>
 
                                 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, 1999
                         -------------------------------------------------------
 
                                      OR
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
    For the transition period from                       to
                                   ---------------------    --------------------
 
Commission File Number                                 0-15632
                       ---------------------------------------------------------
 
 
               First Capital Institutional Real Estate, Ltd.--4
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
 
          Illinois                                               36-3441345
-------------------------------                              -------------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)
 
Two North Riverside Plaza, Suite 1000, 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
                                        ---     ---

Document incorporated by reference:

The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated November 5, 1986,
included in the Partnership's Registration Statement on Form S-11, is
incorporated herein by reference in Part I of this report.
<PAGE>
 
                         PART I. FINANCIAL INFORMATION
 
                          ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                                March 31,
                                                  1999      December 31,
                                               (Unaudited)      1998
------------------------------------------------------------------------
<S>                                            <C>          <C>
ASSETS
Investment in commercial rental property:
 Land                                          $ 2,509,900  $ 2,509,900
 Buildings and improvements                     15,548,600   15,548,600
------------------------------------------------------------------------
                                                18,058,500   18,058,500
Accumulated depreciation and amortization       (4,284,700)  (4,177,200)
------------------------------------------------------------------------
 Total investment property, net of accumulated
  depreciation and amortization                 13,773,800   13,881,300
Cash and cash equivalents                        2,041,300    1,107,100
Investments in debt securities                   2,644,900    3,499,300
Rents receivable                                   140,500      179,600
Other assets                                        12,700       12,700
------------------------------------------------------------------------
                                               $18,613,200  $18,680,000
------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
 Accounts payable and accrued expenses         $   474,800  $   378,200
 Due to Affiliates                                  41,500       42,700
 Distributions payable                             319,500      389,300
 Security deposits                                  25,900       25,900
 Other liabilities                                  30,500       36,900
------------------------------------------------------------------------
                                                   892,200      873,000
------------------------------------------------------------------------
Partners' capital:
 General Partner                                    40,300       40,300
 Limited Partners (593,025 Units issued and
  outstanding)                                  17,680,700   17,766,700
------------------------------------------------------------------------
                                                17,721,000   17,807,000
------------------------------------------------------------------------
                                               $18,613,200  $18,680,000
------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the quarter ended March 31, 1999 (Unaudited)
and the year ended December 31, 1998
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                            General     Limited
                                            Partner    Partners       Total
-------------------------------------------------------------------------------
<S>                                         <C>       <C>          <C>
Partners' capital, January 1, 1998          $ 40,300  $17,767,800  $17,808,100
Net income for the year ended December 31,
 1998                                         92,800    1,185,000    1,277,800
Distributions for the year ended December
 31, 1998                                    (92,800)  (1,186,100)  (1,278,900)
-------------------------------------------------------------------------------
Partners' capital, December 31, 1998          40,300   17,766,700   17,807,000
Net income for the quarter ended March 31,
 1999                                         23,000      210,500      233,500
Distributions for the quarter ended March
 31, 1999                                    (23,000)    (296,500)    (319,500)
-------------------------------------------------------------------------------
Partners' capital, March 31, 1999           $ 40,300  $17,680,700  $17,721,000
-------------------------------------------------------------------------------
</TABLE>
    The accompanying notes are an integral part of the financial statements
2
<PAGE>
 
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended March 31, 1999 and 1998
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
 
<TABLE>
<CAPTION>
                                                              1999     1998
-----------------------------------------------------------------------------
<S>                                                         <C>      <C>
Income:
 Rental                                                     $525,100 $528,200
 Interest                                                     58,600  175,400
-----------------------------------------------------------------------------
                                                             583,700  703,600
-----------------------------------------------------------------------------
Expenses:
 Interest on loan payable to General Partner                           33,400
 Depreciation and amortization                               107,500  107,100
 Property operating:
  Affiliates                                                   4,800    1,800
  Nonaffiliates                                               51,800   69,000
 Real estate taxes                                            76,000   73,700
 Insurance--Affiliate                                          4,500    4,300
 Repairs and maintenance                                      63,300   26,800
 General and administrative:
  Affiliates                                                   5,300    6,600
  Nonaffiliates                                               37,000   38,500
-----------------------------------------------------------------------------
                                                             350,200  361,200
-----------------------------------------------------------------------------
Net income                                                  $233,500 $342,400
-----------------------------------------------------------------------------
Net income allocated to General Partner                     $ 23,000 $ 18,000
-----------------------------------------------------------------------------
Net income allocated to Limited Partners                    $210,500 $324,400
-----------------------------------------------------------------------------
Net income allocated to Limited Partners per Unit (593,025
 Units outstanding)                                         $   0.35 $   0.55
-----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 1999 and 1998
(Unaudited)
(All dollars rounded to nearest 00s)
 
<TABLE>
<CAPTION>
                                                         1999        1998
------------------------------------------------------------------------------
<S>                                                   <C>         <C>
Cash flows from operating activities:
 Net income                                           $  233,500  $   342,400
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization                          107,500      107,100
  Changes in assets and liabilities:
   Decrease in rents receivable                           39,100       33,900
   Decrease in other assets                                            17,100
   Increase in accounts payable and accrued expenses      96,600       24,800
   (Decrease) increase in due to Affiliates               (1,200)       6,900
   (Decrease) in other liabilities                        (6,400)     (28,500)
------------------------------------------------------------------------------
    Net cash provided by operating activities            469,100      503,700
------------------------------------------------------------------------------
Cash flows from investing activities:
 Decrease (increase) in investments in debt
  securities, net                                        854,400   (2,450,300)
 Decrease in restricted cash                                           50,000
------------------------------------------------------------------------------
    Net cash provided by (used for) investing
     activities                                          854,400   (2,400,300)
------------------------------------------------------------------------------
Cash flows from financing activities:
 Distributions paid to Partners                         (389,300)    (409,900)
------------------------------------------------------------------------------
    Net cash (used for) financing activities            (389,300)    (409,900)
------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents     934,200   (2,306,500)
Cash and cash equivalents at the beginning of the
 period                                                1,107,100   10,407,900
------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period    $2,041,300  $ 8,101,400
------------------------------------------------------------------------------
Supplemental information:
 Interest paid to General Partner during the period   $      --   $    33,400
------------------------------------------------------------------------------
</TABLE>
 
    The accompanying notes are an integral part of the financial statements
                                                                               3
<PAGE>
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Agreement of Limited Partnership,
which is included in the Registration Statement and incorporated herein by
reference.
 
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred.
 
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, 1999, are not necessarily indicative of the
operating results for the year ending December 31, 1999.
 
Commercial rental property 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. 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 commercial rental property for impairment when
conditions exist which may indicate that it is probable that the sum of
expected future cash flows (undiscounted) is less than its carrying basis. Upon
determination that an impairment has occurred, the carrying basis is reduced to
its estimated fair value. Management was not aware of any indicator that would
result in a significant impairment loss during the periods reported.
 
The Partnership has one reportable segment as the Partnership is in the
disposition phase of its life cycle, wherein it is seeking to liquidate its
remaining operating assets. Management's main focus, therefore, is to prepare
its asset for sale and find a purchaser when market conditions warrant such an
action. The Partnership has two tenants who occupy 41% of the Partnership's
rental property. These tenants occupied 24% and 17% of the Partnership's
rentable space, respectively.
 
Cash equivalents are considered all highly liquid investments with a maturity
of three months or less when purchased.
 
Investments in debt securities are comprised of corporate debt securities and
are classified as held-to-maturity. These investments are carried at their
amortized cost basis in the financial statements, which approximated fair
value. All of these securities had maturities of less than one year when
purchased.
 
Reference is made to the Partnership's annual report for the year ended
December 31, 1998, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim or as otherwise
disclosed herein.
 
2. RELATED PARTY TRANSACTIONS:
 
In accordance with the Partnership Agreement, as compensation for services
rendered in managing the affairs of the Partnership, the General Partner shall
be entitled to receive subsequent to May 4, 1988, the Termination of the
Offering, a Partnership Management Fee payable annually within 60 days
following the last day of each fiscal year, which shall be an amount equal to
the lesser of (i) 0.5% of the net value of the Partnership's assets as of the
end of such fiscal year reflected on the Certificate of Value furnished to the
Limited Partners, plus, to the extent the Partnership Management Fee paid in
any prior year was less than 0.5% of the net value of the Partnership's assets
in such prior year, the amount of such deficit, or (ii) an amount equal to the
difference between 10% of the Partnership's aggregate Cash Flow (as defined in
the Partnership Agreement) for the period from the Commencement of Operations
to the end of the fiscal year for which such Partnership Management Fee is
payable, and the aggregate amount previously paid to the General Partner as a
Partnership Management Fee. In addition, Sale Proceeds are distributed: first,
75% to all Limited Partners and 25% to the General Partner until the earlier of
(i) receipt by Limited Partners of cumulative distributions of Sale Proceeds in
an amount equal to 100% of their Original Capital Contribution, or (ii) receipt
by the General Partner of cumulative distributions of Sale Proceeds sufficient
to repay the Loan (as defined hereafter), until the outstanding balance of the
Loan has been repaid; thereafter, to the Limited Partners, until they have
received cumulative distributions of Sale Proceeds in an amount equal to 100%
of their Original Capital Contribution, plus an amount (including Cash Flow (as
defined in the Partnership Agreement)) equal to a cumulative return of 6% per
annum simple interest on their Capital Investment from their investment date in
the Partnership; thereafter, 85% to all Limited Partners; and 15% to the
General Partner, provided, however, that no distribution of the General
Partner's 15% share of Sale Proceeds shall be made until Limited Partners have
received the greater of (i) Sale Proceeds plus Cash Flow (as defined in the
Partnership Agreement) previously received in excess of the Preferred Return
equal to 125% of the Limited Partners' Original Capital Contribution, or (ii)
Sale Proceeds plus all Cash Flow (as defined in the Partnership Agreement)
previously received equal to their Original Capital Contribution plus a 10% per
annum simple interest return on their Capital Investment from the date of
investment.
 
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) shall be
allocated to the General Partner in an amount equal to the greater of 1% of
such Net
 
4
<PAGE>
 
Profits or the Partnership Management Fee paid by the Partnership to the
General Partner during such year, and 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 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 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 each Limited Partner
in an amount, if any, necessary to make the positive balance in its Capital
Account equal to the Sale Proceeds to be distributed to such Limited Partner
with respect to the sale or disposition of such property; third, to the General
Partner in an amount, if any, necessary to make the positive balance in its
Capital Account equal to the Sale Proceeds to be distributed to the General
Partner with respect to the sale or disposition of such property; and fourth,
the balance, if any, 15% to the General Partner and 85% to the Limited
Partners. Net Losses from the sale, disposition or provision for value
impairment of Partnership properties are allocated: first, after giving effect
to any distributions of Sale Proceeds from the transaction to the General
Partner and Limited Partners with positive balances in their Capital Accounts,
pro rata in proportion to such respective positive balances, to the extent of
the total amount of such positive balances; and second, the balance, if any, 1%
to the General Partner and 99% to the Limited Partners. Notwithstanding
anything to the contrary, there shall be allocated to the General Partner not
less than 1% of all items of Partnership income, gain, loss, deduction and
credit during the existence of the Partnership. For the three months ended
March 31, 1999 and 1998, the General Partner was entitled to a Partnership
Management Fee and allocated Net Profits of $23,000 and $18,000, respectively.
 
In accordance with the Partnership Agreement, the General Partner made advances
(the "Loan") to the Partnership in cumulative amounts equal to the Acquisition
Fees and the Partnership Management Fees which were paid to the General Partner
or its Affiliates for distribution to the Limited Partners on a pro rata basis
to the extent that Cash Flow (as defined in the Partnership Agreement) was less
than sufficient to distribute cash in amounts equal to the Limited Partners'
Preferred Return (7.5% per annum
noncompounding cumulative return on the Limited Partners' Capital Investment);
provided, however, that the maximum amount advanced to the Partnership by the
General Partner for distribution to the Limited Partners was the amount of
Acquisition Fees and Partnership Management Fees actually paid to the General
Partner or its Affiliates. Amounts advanced bear interest at the rate of 8.5%
per annum simple interest, payable monthly. Repayment of amounts advanced are
made only from Cash Flow (as defined in the Partnership Agreement) if and to
the extent it is more than sufficient to distribute cash to the Limited
Partners in amounts equal to the Limited Partners' Preferred Return and from
Sale Proceeds as disclosed above. In May 1998, the Partnership utilized a
portion of the proceeds from the 1997 sale of Park Plaza to repay the
outstanding balance of the Loan.
 
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter ended March 31, 1999 were as follows:
 
<TABLE>
<CAPTION>
                                                Paid   Payable
--------------------------------------------------------------
<S>                                           <C>      <C>
Asset management fees                         $  2,100    None
Real estate commissions (a)                       None $40,200
Reimbursement of property insurance premiums     4,500    None
Legal                                            2,800    None
Reimbursement of expenses, at cost:
 --Accounting                                    3,600     800
 --Investor communication                        2,900     500
--------------------------------------------------------------
                                              $ 15,900 $41,500
--------------------------------------------------------------
</TABLE>
(a) As of March 31, 1999, the Partnership owed $40,200 to the General Partner
    for real estate commissions earned in connection with the sales of certain
    of the Partnership's properties. These commissions have been accrued but
    not paid. In accordance with the Partnership Agreement, the Partnership
    will not pay the General Partner or any Affiliates a real estate commission
    from the sale of a Partnership property until Limited Partners have
    received cumulative distributions of Sale or Financing 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 investment
    date) of 6% simple interest per annum on their Capital Investment.
 
A third party management group provides on-site property management for the
Partnership's property for a fee equal to 3% of gross rents received from the
property. The third party property management group is entitled to a leasing
fee equal to 3% of gross rents received, reduced by leasing fees paid to other
third parties up to but not exceeding the 3% leasing fee.
 
                                                                               5
<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, 1998 for a discussion of the Partnership's business.
 
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.
 
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sale price. The
Partnership, in addition to being in the operation of properties phase, is also
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 and dispositions. 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. During the year ended December 31, 1997, the
Partnership sold its interest in three of its remaining four properties.
 
OPERATIONS
The table below is a recap of the Partnership's operating results from its
properties for the three months ended March 31, 1999 and 1998. The discussion
following the table should be read in conjunction with the financial statements
and notes thereto appearing in this report.
 
<TABLE>
<CAPTION>
                                       Comparative
                                    Operating Results
                                           (a)
                                    For the Quarters
                                          Ended
                                    3/31/99  3/31/98
------------------------------------------------------
<S>                                 <C>      <C>
INDIAN RIDGE PLAZA SHOPPING CENTER
Rental revenues                     $525,100 $529,800
------------------------------------------------------
Property net income                 $217,600 $277,200
------------------------------------------------------
Average occupancy                        88%      89%
------------------------------------------------------
SOLD PROPERTIES (B)
Rental revenues                              $ (1,700)
------------------------------------------------------
Property net (loss)                          $(25,900)
------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are not directly related to
    individual property operating results such as interest income, interest
    expense and general and administrative expenses.
(b) Sold Properties includes the post-sale operating results from Park Plaza
    Professional Office Building ("Park Plaza"), which was sold during 1997.
 
Net income decreased by $108,900 for the three months ended March 31, 1999 when
compared to the three months ended March 31, 1998. The decrease was primarily
due to a reduction in interest earned on the Partnership's short-term
investments, which was due to the May 1998 distribution of Park Plaza Sale
Proceeds. The decrease was also due to diminished operating results at Indian
Ridge. The decrease was partially offset by the 1998 loss from Park Plaza's
post sale operations.
 
The following comparative discussion excludes the results of Sold Properties.
 
Rental revenues decreased by $4,700 or 0.9% for the three months ended March
31, 1999 when compared to the three months ended March 31, 1998. A slight
decrease in tenant expense reimbursements for real estate taxes was partially
offset by an increase in base rental income resulting from an increase in rates
charged to new and renewing tenants.
 
Repair and maintenance expenses increased by $45,700 for the three-month
periods under comparison. The increase was primarily due to an increase in snow
removal costs.
 
Property operating expenses increased by $6,300 for the quarter ended March 31,
1999 when compared to the quarter ended March 31, 1998. The increase was
primarily due to an increase in legal fees.
 
To increase and/or maintain occupancy at Indian Ridge, the General Partner,
through its asset management 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 property 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 properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its remaining
property. 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, 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 generally
accepted accounting principles ("GAAP"), since certain items are treated
differently under the Partnership Agreement than under GAAP. Management
believes that to facilitate a clear understanding of the Partnership's
operations, an analysis of Cash Flow (as defined in the Partnership Agreement)
should be examined in conjunction with an analysis of net income or cash flows
as determined by GAAP. The following table includes a reconciliation of Cash
Flow (as defined in the Partnership Agreement) to cash flow provided by
operating activities as determined by GAAP. Such amounts are not indicative of
actual distributions to Partners and should not be considered as an alternative
to the results disclosed in the Statements of Income and Expenses and
Statements of Cash Flow.
 
<TABLE>
<CAPTION>
                                                           Comparative
                                                        Cash Flow Results
                                                        For the Quarters
                                                              Ended
                                                       3/31/99     3/31/98
-----------------------------------------------------------------------------
<S>                                                   <C>        <C>
Cash Flow (as defined in the
 Partnership Agreement)                               $ 318,000  $   431,500
Items of reconciliation:
 General Partner's Partnership Management Fee            23,000       18,000
 Decrease in current assets                              39,100       51,000
 Increase in current liabilities                         89,000        3,200
-----------------------------------------------------------------------------
Net cash provided by operating activities             $ 469,100  $   503,700
-----------------------------------------------------------------------------
Net cash provided by (used for) investing activities  $ 854,400  $(2,400,300)
-----------------------------------------------------------------------------
Net cash (used for) financing activities              $(389,300) $  (409,900)
-----------------------------------------------------------------------------
</TABLE>
 
The decrease in Cash Flow (as defined in the Partnership Agreement) of $113,500
for the three months ended March 31, 1999 when compared to three months ended
March 31, 1998 was
 
6
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
primarily due to the decrease in Partnership net income, exclusive of
depreciation and amortization, as previously discussed.
 
The increase in the Partnership's cash position of $934,200 for the three
months ended March 31, 1999 resulted primarily from maturities of investments
in debt securities. Also contributing to the increase was net cash provided by
operating activities exceeding distributions paid to Limited Partners. Liquid
assets (including cash, cash equivalents and investments in debt securities) of
the Partnership as of March 31, 1999 were comprised of amounts held for working
capital purposes.
 
Net cash provided by operating activities continues to be a primary source of
funds to the Partnership. Net cash provided by operating activities decreased
by $34,600 for the three months ended March 31, 1999 when compared to the three
months ended March 31, 1998. The decrease was primarily the result of the
decrease in net income, as previously discussed. The decrease was partially
offset by the timing of the payment of expenses at Indian Ridge.
 
Net cash (used for) provided by investing activities changed from $(2,400,300)
for the three months ended March 31, 1998 to $854,400 for the three months
ended March 31, 1999. The change was primarily due to a net increase in
investments in debt securities during the three months ended March 31, 1998 as
compared to a net maturity during the comparable period of 1999. The
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 return on these amounts as they are held for working capital
purposes or for distribution to Partners. These investments are of investment-
grade and mature less than one year from their date of purchase.
 
The Partnership has no financial instruments for which there are significant
market risks. Due to the timing of the maturities and liquid nature of the
Partnership's investments in debt securities, the Partnership does not believe
that it has material market risk.
 
The Partnership maintains working capital reserves to pay for capital
expenditures. Approximately $140,000 is projected to be spent at Indian Ridge
during the remainder of 1999. Actual amounts expended may vary depending on a
number of factors, including leasing activity and other market conditions
throughout the remainder of the year. The General Partner believes these
improvements and leasing costs are necessary in order to increase and/or
maintain the occupancy level in a very competitive market, maximize rental
rates charged to new and renewing tenants and prepare the remaining property
for eventual disposition.
 
The decrease in net cash used for financing activities of $20,600 was due
primarily to a decrease in distributions to the General Partner.
 
The Year 2000 problem is the result of the inability of existing computer
programs to distinguish between a year beginning with "20" rather than "19".
This is the result of computer programs using two rather than four digits to
define an applicable year. If not corrected, any program having time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a variety of problems including miscalculations,
loss of data and failure of entire systems. Critical areas that could be
effected are accounts receivable and rent collections, accounts payable,
general ledger, cash management, fixed assets, investor services, computer
hardware, telecommunications systems and health, security, fire and life
systems.
 
The Partnership has engaged Affiliated and unaffiliated entities to perform all
of its critical functions that utilize software that may have time-sensitive
applications. All of these providers are providing these services for their own
organizations as well as for other clients. The General Partner, on behalf of
the Partnership, has been in close communications with each of these service
providers regarding steps that are being taken to assure that there will be no
serious interruption of the operations of the Partnership resulting from Year
2000 problems. Based on the results of the inquiries, as well as a review of
the disclosures by these service providers, the General Partner believes that
the Partnership will be able to continue normal business operations and will
incur no material costs related to Year 2000 issues.
 
The Partnership has not formulated a contingency plan. However, the General
Partner believes that based on the size of the Partnership's portfolio and its
limited number of transactions, aside from catastrophic failure of banks,
governmental agencies, etc., it could carry out substantially all of its
critical operations on a manual basis or easily convert to systems that are
Year 2000 compliant.
 
The General Partner continues to take a conservative approach to projections of
future rental income in its determination of adequate levels of cash reserves
due to the potential capital and tenant improvements and leasing costs to be
made at the Partnership's remaining property. For the three months ended March
31, 1999, Cash Flow (as defined in the Partnership Agreement) retained to
supplement working capital reserves amounted to $21,500.
 
Distributions to Limited Partners of Cash Flow (as defined in the Partnership
Agreement) for the three months ended March 31, 1999 were declared in the
amount of $296,500, or $0.50 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 the
Partnership's remaining property as well as the General Partner's determination
of the amount of cash necessary to supplement working capital reserves to meet
future liquidity requirements of the Partnership.
 
Based upon the current estimated value of its assets, net of its outstanding
liabilities, together with its expected results and capital expenditure
requirements, the General Partner believes that the Partnership's cumulative
distributions to its Limited Partners from inception through the termination of
the Partnership may be less than such Limited Partners' Original Capital
Contributions.
                                                                               7
<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 filed on Form 8-K for the three months ended 
     March 31, 1999.
<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.

                             FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4

                             By: FIRST CAPITAL FINANCIAL CORPORATION
                                 GENERAL PARTNER

Date:  May 13, 1999          By:  /s/ DOUGLAS CROCKER II
       ------------               -------------------------------------
                                      DOUGLAS CROCKER II
                                  President and Chief Executive Officer

Date:  May 13, 1999          By:  /s/ NORMAN M. FIELD
       ------------               -------------------------------------
                                      NORMAN M. FIELD
                                  Vice President - Finance and Treasurer