March 20, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Multi-Benefit Realty Fun '87 - 1
Form 10-KSB
File No. 0-16684
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from _________to _________
Commission file number 0-16684
MULTI-BENEFIT REALTY FUND '87-1
(Name of small business issuer in its charter)
California 94-3026785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Partnership's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form [ ]
State issuer's revenues for its most recent fiscal year. $5,408,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Multi-Benefit Realty Fund '87-1 (the "Partnership" or "Registrant") was
organized on September 8, 1986, as a limited partnership under the California
Revised Limited Partnership Act. ConCap Equities, Inc. ("CEI") is the general
partner of the Partnership (see additional information below). CEI (the "General
Partner") is a subsidiary of Apartment Investment and Management Company
("AIMCO").
The Registrant is engaged in the business of operating and holding real estate
properties for investment. By the end of the Partnership's fiscal year 1988,
three apartment properties had been acquired. The Registrant continues to own
and operate these properties. See "Item 2. Description of Properties". The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2036, unless terminated prior to such date.
Commencing December 10, 1986, the Registrant offered, pursuant to a Registration
Statement filed with the Securities and Exchange Commission, $60,000,000 of
Units of Depositary Receipts (collectively, the "Units," and individually,
"Unit"). Two classes of Units ("A" Units and "B" Units, herein so called),
entitled to different rights and priorities as to cash distributions and
partnership allocations, were offered. The Units represent economic rights
attributable to the limited partnership interests in the Partnership and entitle
the holders ("Unit holders") thereof to participate in certain allocations and
distributions of the Partnership. The General Partner of the Partnership
intended that the "A" Units and "B" Units be allocated such that the "B" Units
would not exceed 25% nor be less than 20% of the total amount of the Units sold.
At the end of the current fiscal year, the "B" Units represented approximately
44% of the total amount of the Units sold. The General Partner is currently
considering several alternative procedures to conform the unit allocations more
closely to the intended investment objectives. The General Partner intends to
continue such consideration, but has not yet determined a feasible alternative.
The corporate limited partner of the Partnership was Multi-Benefit '87-1
Depositary Corporation, an affiliate of the General Partner. The corporate
limited partner served as depositary for the Units pursuant to a Depositary
Agreement entered into with the Partnership. The sale of Units closed on
September 30, 1988, with 172,436 Units sold at $100 each, or gross proceeds of
approximately $17,244,000 to the Partnership. The Partnership may repurchase or
retire any Units, at its absolute discretion, but is under no obligation to do
so. Since its initial offering, 1,000 Units have been retired. Since its initial
offering, the Partnership has not received, nor are limited partners required to
make, additional capital contributions.
Upon the Partnership's formation in 1986, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the sole general partner of
the Partnership and the corporate limited partner, a wholly-owned subsidiary of
CCEC, was the sole limited partner. In 1988, through a series of transactions,
Southmark Corporation ("Southmark") acquired a controlling interest in CCEC. In
December 1988, CCEC filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI
acquired CCEC's general partner interest in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships"), acquired
the stock of the corporate limited partner, and CEI replaced CCEC as managing
general partner in all 16 partnerships. The selection of CEI as the sole
managing general partner was approved by a majority of the Unit holders in the
Partnership and of the limited partners in each of the Affiliated Partnerships
pursuant to a solicitation of the Units holders dated August 10, 1990. As part
of this solicitation, the Unit holders also approved an amendment to the
Partnership Agreement to limit changes of control of the Partnership.
All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT"),
which acquired the stock through two transactions in December 1994, and October
1995. Effective February 26, 1999, IPT was merged into AIMCO (see "Transfer of
Control" below).
The Registrant has no employees. Property management and administrative services
are provided by the General Partner and by agents retained by the General
Partner. An affiliate of the General Partner has been providing such property
management services.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner, in
such market area could have a material effect on the rental market for the
apartments at the Partnership's properties and the rents that may be charged for
such apartments. While the General Partner and its affiliates own and/or control
a significant number of apartment units in the United States, such units
represent an insignificant percentage of total apartment units in the United
States and competition for the apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operations" included in "Item 6" of this Form
10-KSB.
<PAGE>
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO ultimately acquired 100%
ownership interest in the General Partner. The General Partner does not believe
that this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Item 2. Description of Properties
The following table sets forth the Partnership's investments in properties:
Date of
Property Purchase Type of Ownership Use
Carlin Manor Apartments 11/87 Fee ownership subject to Apartment
Columbus, Ohio first mortgage 278 units
Hunt Club Apartments 05/87 Fee ownership subject to Apartment
Indianapolis, Indiana first mortgage (1) 200 units
Shadow Brook Apartments 05/87 Fee ownership subject to Apartment
West Valley City, Utah first mortgage 300 units
(1) The property is held by a limited partnership in which the Partnership
owns a 99% interest.
Schedule of Properties
Set forth below for each of the Partnership's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation, and
Federal tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Carlin Manor Apartments $ 7,285 $ 4,083 5-30 S/L $ 5,326
Hunt Club Apartments 7,324 4,122 5-30 S/L 4,075
Shadow Brook Apartments 10,878 4,788 5-30 S/L 6,235
Total $25,487 $12,993 $15,636
</TABLE>
See "Note A" to the consolidated financial statements included in "Item 7.
Financial Statements" for a description of the Partnership's depreciation policy
and "Note K - Change in Accounting Principle".
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Carlin Manor
1st mortgage $ 2,500 7.33% (1) 11/03 $ 2,500
Hunt Club
1st mortgage 3,637 8.30% 84 mo. 10/00 3,575
Shadow Brook
1st mortgage 6,000 7.33% (1) 11/03 6,000
$12,137 $12,075
(1) Payments consist of interest only.
(2) See "Item 7. Financial Statements - Note C" for information with respect
to the Partnership's ability to prepay these loans and other specific
details about the loans.
</TABLE>
Schedule of Rental Rate and Occupancy
Average annual rental rates and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rate Occupancy
(per unit)
Property 1999 1998 1999 1998
Carlin Manor $6,129 $5,847 93% 92%
Hunt Club 7,720 7,504 93% 95%
Shadow Brook 7,187 7,156 98% 96%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area. The General
Partner believes that all of the properties are adequately insured. Each
property is an apartment complex which leases units for terms of one year or
less. No tenant leases 10% or more of the available rental space. All of the
properties are in good physical condition, subject to normal depreciation and
deterioration as is typical for assets of this type and age.
<PAGE>
Schedule of Real Estate Taxes and Rates
Real estate taxes and rates in 1999 for each property were:
1999 1999
Billing Rate
(in thousands)
Carlin Manor $111 5.58%
Hunt Club 146 8.99%
Shadow Brook 89 1.48%
Capital Improvements
Carlin Manor
During the year ended December 31, 1999, the Partnership expended approximately
$385,000 for capital improvements at Carlin Manor consisting primarily of carpet
and flooring replacement, structural improvements, air conditioning upgrades,
swimming pool and recreational facility improvements, electrical upgrades, new
appliances, and other building enhancements. These improvements were funded from
operating cash flow and replacement reserves. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $83,400.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Hunt Club
During the year ended December 31, 1999, the Partnership expended approximately
$319,000 for capital improvements and replacements at Hunt Club consisting
primarily of carpet and flooring replacement, plumbing, electrical and heating
upgrades, major landscaping, fencing and replacement of curbs and sidewalks.
These improvements were funded from operating cash flow and replacement
reserves. The Partnership is currently evaluating the capital improvement needs
of the property for the upcoming year. The minimum amount to be budgeted is
expected to be $300 per unit or $60,000. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
Shadow Brook
During the year ended December 31, 1999, the Partnership expended approximately
$372,000 for capital improvements and replacements at Shadow Brook consisting
primarily of roof replacements, carpet and flooring replacement, parking lot
upgrades, recreational facility upgrades, major landscaping, appliances,
plumbing enhancements, and structural improvements. These improvements were
funded from operating cash flow and replacement reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $90,000. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The capital improvements planned for the year 2000 at the Partnership's
properties will be made only to the extent of cash available from operations and
Partnership reserves. To the extent that such budgeted capital improvements are
completed, the Registrant's distributable cash flow, if any, may be adversely
affected at least in the short term.
Item 3. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 7. Financial Statements, Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard February 1999. Pending the ruling on such
demurrers, settlement negotiations commenced. On November 2, 1999, the parties
executed and filed a Stipulation of Settlement, settling claims, subject to
final court approval, on behalf of the Partnership and all limited partners who
own units as of November 3, 1999. Preliminary approval of the settlement was
obtained on November 3, 1999 from the Superior Court of the State of California,
County of San Mateo, at which time the Court set a final approval hearing for
December 10, 1999. Prior to the December 10, 1999 hearing the Court received
various objections to the settlement, including a challenge to the Court's
preliminary approval based upon the alleged lack of authority of class
plaintiffs' counsel to enter the settlement. On December 14, 1999, the General
Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Partners
During the quarter ended December 31, 1999, no matters were submitted to a vote
of the Unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Units of Depository Receipts and Related
Security Holder Matters
(A) No established public trading market has developed for the Units and it is
not anticipated that such a market will develop in the future.
(B) Title of Class: Number of Record Unit holders:
Units of Depositary Receipts
A Units 405 as of December 31, 1999
B Units 549 as of December 31, 1999
The Partnership offered and sold 172,436 "A" and "B" Units. At December
31, 1999, the Partnership had 96,284 "A" Units and 75,152 "B" Units
outstanding. Affiliates of the General Partner held 59,995 "A" Units
(62.31%) and 37,548 "B" Units (49.96%) at December 31, 1999.
(C) The following table sets forth the distributions declared by the
Partnership for the years ended December 31, 1998 and 1999 (see "Item 6.
Management's Discussion and Analysis or Plan of Operation" for more
details).
Distributions
Per Limited
Aggregate Partnership "A" Unit
01/01/98 - 12/31/98 $594,000 (1) $6.11
01/01/99 - 12/31/99 $427,000 (1) $4.39
(1) Distribution was made from cash from operations.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Partnership's distribution
policy is reviewed on a semi-annual basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit distributions to its partners in the
year 2000 or subsequent periods. See "Item 2. Description of Properties-Capital
Improvements" for information relating to anticipated capital expenditures at
the properties.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 59,995 "A" and
37,548 "B" limited partnership units in the Partnership representing 62.31% and
49.96% of the outstanding units, respectively. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matter, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net income as reported in the consolidated financial
statements for the year ended December 31, 1999, was approximately $582,000
compared to net income of approximately $246,000 for the year ending December
31, 1998. The increase in net income is attributable to an increase in total
revenues and a decrease in total expenses. The increase in total revenues was
due to an increase in rental income and the gain on sale of equipment in 1999.
Rental income increased due to increases in average rental rates at all three
properties and an increase in occupancy at Shadow Brook and Carlin Manor, which
more than offset a decrease in occupancy at Hunt Club and increased concession
costs and bad debt expense at all the properties. The gain on sale of equipment
was due to the sale of cable equipment at Shadow Brook during the year ended
December 31, 1999.
Total expenses decreased primarily due to a decrease in operating expenses and,
to a lesser extent, a decrease in property tax expense. These decreases were
partially offset by an increase in general and administrative expense. Operating
expenses decreased as a result of decreases in maintenance expense, insurance
expense and utilities. Maintenance expense decreased at all three investment
properties for the year ended December 31, 1999 due to the completion of parking
lot repairs during 1998, the completion of various projects performed to enhance
the appearance of the properties during the year ended December 31, 1998 and the
change in accounting policy discussed below. The decrease in insurance expense
is due to lower premiums as a result of a change in insurance carriers late in
1998. Utility expense decreased as a result of decreased gas charges at Carlin
Manor. The decrease in property tax expense is due to the receipt of a tax
refund on a prior tax payment for Hunt Club.
General and administrative expense increased primarily due to the settlement of
a lawsuit as disclosed in the Partnership's Form 10-KSB at December 31, 1998 as
well as professional fees associated with managing the Partnership. This
increase was partially offset by reduced management fees relating to
distributions from operations. Included in general and administrative expenses
at both December 31, 1999 and 1998 are management reimbursements to the General
Partner allowed under the Partnership Agreement. In addition, costs associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit required by the Partnership Agreement are also
included.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
increase net income by approximately $59,000 ($0.34 per limited partnership "A"
and "B" units). The cumulative effect, had this change been applied to prior
periods, is not material. The accounting principle change will not have an
effect on cash flow, funds available for distribution or fees payable to the
General Partner and affiliates.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $2,280,000 compared to approximately $1,291,000 at December 31,
1998. The net increase in cash and cash equivalents for the year ended December
31, 1999 was approximately $989,000 from the prior year. The increase in cash
and cash equivalents is due to approximately $2,020,000 of cash provided by
operating activities which was partially offset by approximately $954,000 of
cash used in investing activities and approximately $77,000 of cash used in
financing activities. Cash used in investing activities consisted primarily of
property improvements and replacements partially offset by net withdrawals from
escrow accounts maintained by the mortgage lender. Cash used in financing
activities consisted of principal payments on the mortgages encumbering the
Partnership's properties. The Partnership invests its working capital reserves
in money market accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. The Partnership is currently
evaluating the capital improvement needs of each of its properties for the
upcoming year. The minimum amount to be budgeted for the Partnership is expected
to be $300 per unit or $233,400. Additional improvements may be considered and
will depend on the physical condition of the property as well as replacement
reserves and anticipated cash flow generated by the properties.
The additional capital expenditures for the year 2000 at the Partnership's
properties will be made only to the extent of cash available from operations and
Partnership reserves. To the extent that such budgeted capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $12,137,000 is amortized over varying periods and
requires one balloon payment in October 2000 and two in November 2003. The
General Partner will attempt to refinance and/or sell the properties prior to
such maturity dates. If the properties cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing such properties through
foreclosure.
During the year ended December 31, 1999 the Partnership declared a distribution
from operations of approximately $427,000 of which approximately $423,000 ($4.39
per limited partnership "A" unit) was due to the "A" unit limited partners. This
distribution was accrued at December 31, 1999 and paid in January 2000. During
the year ended December 31, 1998, the Partnership paid a cash distribution from
operations of approximately $594,000 of which approximately $588,000 ($6.11 per
limited partnership "A" Unit) was paid to the "A" unit limited partners. The
Partnership's distribution policy is reviewed on a semi-annual basis. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital expenditures to permit distributions to its partners in
the year 2000 or subsequent periods.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 59,995 "A" and
37,548 "B" limited partnership units in the Partnership representing 62.31% and
49.96% of the outstanding units, respectively. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
Item 7. Financial Statements
MULTI-BENEFIT REALTY FUND '87-1
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations - Years ended December 31, 1999 and 1998
Consolidated Statements of Changes in Partners' (Deficit) Capital - Years ended
December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Multi-Benefit Realty Fund '87-1
We have audited the accompanying consolidated balance sheet of Multi-Benefit
Realty Fund '87-1 as of December 31, 1999, and the related consolidated
statements of operations, changes in partners' (deficit) capital and cash flows
for each of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Multi-Benefit
Realty Fund '87-1 at December 31, 1999, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note K to the consolidated financial statements, the Partnership
changed its method of accounting to capitalize the cost of exterior painting and
major landscaping effective January 1, 1999.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 24, 2000
<PAGE>
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,280
Receivables and deposits 330
Restricted escrows 243
Other assets 205
Investment properties (Notes C and G):
Land $ 1,742
Buildings and related personal property 23,745
25,487
Less accumulated depreciation (12,993) 12,494
$ 15,552
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 222
Tenant security deposit liabilities 87
Accrued property taxes 336
Distribution payable 427
Other liabilities 422
Mortgage notes payable (Note C) 12,137
Partners' (Deficit) Capital
General Partner $ (134)
Limited Partner "A" Unit holders -
96,284 units issued and outstanding (2,141)
Limited Partner "B" Unit holders -
75,152 units issued and outstanding 4,196 1,921
$ 15,552
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
<S> <C> <C>
Revenues:
Rental income $ 4,997 $ 4,885
Gain on sale of equipment 100 --
Other income 311 310
Total revenues 5,408 5,195
Expenses:
Operating 2,176 2,319
General and administrative 287 248
Depreciation 1,059 1,037
Interest 991 995
Property taxes 313 350
Total expenses 4,826 4,949
Net income (Note D) $ 582 $ 246
Net income allocated to general partner (1%) $ 6 $ 2
Net income allocated to limited partners (99%) 576 244
$ 582 $ 246
Net income per limited partnership "A" and "B" units $ 3.36 $ 1.42
Distributions per limited partnership "A" units $ 4.39 $ 6.11
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
<TABLE>
<CAPTION>
Total
Partners'
General Limited Partners (Deficit)
Partner "A" Units "B" Units Capital
<S> <C> <C> <C> <C>
Original capital contributions $ 1 $ 9,706 $ 7,538 $ 17,245
Limited partnership units at
December 31, 1999 and
December 31, 1998 -- 96,284 75,152 171,436
Partners' (deficit) capital at
December 31, 1997 $ (132) $(1,593) $ 3,839 $ 2,114
Distribution to partners (6) (588) -- (594)
Net income for the year ended
December 31, 1998 2 137 107 246
Partners' (deficit) capital at
December 31, 1998 (136) (2,044) 3,946 1,766
Distribution to partners (4) (423) -- (427)
Net income for the year ended
December 31, 1999 6 326 250 582
Partners' (deficit) capital at
December 31, 1999 $ (134) $(2,141) $ 4,196 $ 1,921
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1
CONSOLDIATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $ 582 $ 246
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,059 1,037
Amortization of loan costs 64 61
(Gain) loss on disposal of property (100) 23
Change in accounts:
Receivables and deposits 87 (50)
Other assets (35) 13
Accounts payable 143 (26)
Tenant security deposit liabilities (24) (7)
Accrued property taxes 61 4
Other liabilities 183 16
Net cash provided by operating activities 2,020 1,317
Cash flows from investing activities:
Property improvements and replacements (1,076) (507)
Net withdrawals from restricted escrows 122 7
Net cash used in investing activities (954) (500)
Cash flows from financing activities:
Payments on mortgage notes payable (77) (71)
Distributions to partners -- (594)
Net cash used in financing activities (77) (665)
Net increase in cash and cash equivalents 989 152
Cash and cash equivalents at beginning of year 1,291 1,139
Cash and cash equivalents at end of year $ 2,280 $ 1,291
Supplemental disclosure of cash flow information:
Cash paid for interest $ 928 $ 935
Supplemental disclosure of non-cash activity
Distribution payable $ 427 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1
Notes to Consolidated Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization
Multi-Benefit Realty Fund '87-1 (the "Partnership" or "Registrant") was
organized as a limited partnership under the laws of the State of California
pursuant to a Certificate and Agreement of Limited Partnership filed September
8, 1986. The Partnership commenced operations on February 27, 1987, the date on
which impound requirements were met. The Partnership operates three apartment
properties located in the Mid-west and West. ConCap Equities, Inc. ("CEI" or the
"General Partner") is a subsidiary of Apartment Investment and Management
Company ("AIMCO") (see "Note B - Transfer of Control"). The directors and
officers of the General Partner also serve as executive officers of AIMCO. The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2036, unless terminated prior to such date.
Upon the Partnership's formation in 1986, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the sole general partner of
the Partnership and the corporate limited partner, a wholly-owned subsidiary of
CCEC, was the sole limited partner. In 1988, through a series of transactions,
Southmark Corporation ("Southmark") acquired a controlling interest in CCEC. In
December 1988, CCEC filed for reorganization under Chapter 11 of the United
States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI
acquired CCEC's general partner interest in the Partnership and in 15 other
affiliated public limited partnerships (the "Affiliated Partnerships"), acquired
the stock of the corporate limited partner, and CEI replaced CCEC as General
Partner in all 16 partnerships. The selection of CEI as the sole General Partner
was approved by a majority of the Unit holders in the Partnership and of the
limited partners in each of the Affiliated Partnerships pursuant to a
solicitation of the Units holders dated August 10, 1990. As part of this
solicitation, the Unit holders also approved an amendment to the Partnership
Agreement to limit changes of control of the Partnership.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99% limited
partnership interest in Hunt Club Associates, Ltd. The general partner of the
consolidated partnership is the General Partner. The General Partner may be
removed as the general partner of the consolidated partnership by the
Registrant; therefore, the consolidated partnership is controlled and
consolidated by the Registrant. All significant interentity balances have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Partners' (Deficit) Capital
The Partnership has issued two classes of Units of Depositary Receipts
("Units"), "A" Units and "B" Units. The two classes of units are entitled to
different rights and priorities as to cash distributions and partnership
allocations. The Units represent economic rights attributable to the limited
partnership interests in the Partnership and entitle the holders thereof ("Unit
holders") to participate in certain allocations of the Partnership.
The Partnership Agreement ("Agreement") provides for the allocation of net
income and net losses from operations for both financial and tax reporting
purposes as follows: net profits are first allocated in the reverse order of any
net losses then are allocated 99% to the holders of "A" Units until they have
been allocated income equal to their priority return, and 1% to the General
Partner. The priority return represents 9% per annum return on invested capital
for the Partnership's first fiscal year, 9.5% for the second year and 10% per
annum thereafter. Additional net profits are allocated 1% to the General Partner
and 99% to the Unit holders. Net losses are allocated 1% to the General Partner
and 99% to the Unit holders until their capital accounts are depleted.
Additional net losses are allocated to the General Partner. Net income per
limited partnership unit for both 1999 and 1998 was computed as 99% of net
income divided by 171,436 units outstanding.
Distributable cash from operations is allocated 1% to the General Partner and
99% to the Unit holders with holders of "A" Units first receiving their priority
return, then the balance is split equally between holders of "A" Units and "B"
Units. The General Partner receives 1% of surplus funds and holders of "A" Units
will receive a return of their invested capital. Any remainder will be allocated
10% to holders of "A" Units and 90% to holders of "B" Units.
Cash and Cash Equivalents
Includes cash on hand and in banks and money market accounts. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on rental payments.
Escrows for Taxes
Escrows for Hunt Club are held by the mortgagor. Escrows for Carlin Manor and
Shadow Brook are held by the Partnership. All escrowed funds are designated for
the payment of real estate taxes and insurance. The escrows for Hunt Club
totaling approximately $124,000 are included in receivables and deposits. The
escrows for Carlin Manor and Shadow Brook totaling approximately $69,000 are
included in cash and cash equivalents.
Restricted Escrows
In relation to the mortgages at all three properties, the mortgage lenders have
required a "replacement reserve" for certain capital improvements. At December
31, 1999, the balance was approximately $243,000.
Investment Properties
Investment properties consist of three apartment complexes and are stated at
cost. Acquisition fees are capitalized as a cost of real estate. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," the Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. No adjustments for
impairment of value were recorded in the years ended December 31, 1999 and 1998.
Depreciation
Depreciation is provided by the straight-line method over the estimated lives of
the investment properties and related personal property. For Federal income tax
purposes, the accelerated cost recovery method is used (1) for real property
over 18 years for additions after May 8, 1985 and before January 1, 1987. As a
result of the Tax Reform Act of 1986, for additions after December 31, 1986, the
alternative depreciation system is used for depreciation of (1) real property
additions over 40 years, and (2) personal property additions over 5-20 years.
Effective January 1, 1999 the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note K).
Loan Costs
Loan costs of approximately $409,000 less accumulated amortization of
approximately $246,000 are included in other assets and are being amortized on a
straight-line basis over the life of the respective loans.
Leases
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on leases. The General Partner's
policy is to offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area.
Concessions are charged against rental income as incurred.
Segment Reporting
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" established standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
See "Note I" for required disclosure.
Advertising
Advertising costs of approximately $126,000 and $108,000 for the years ended
December 31, 1999 and 1998, respectively, are charged to expense as incurred and
are included in operating expenses.
Fair Value of Financial Statements
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments to
maturity based on borrowing rates currently available to the Partnership,
approximates its carrying amount.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the General Partner. The General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Note C - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Carlin Manor
1st mortgage $ 2,500 $ 15 7.33% 11/01/03 $ 2,500
Hunt Club
1st mortgage 3,637 32 8.30% 10/01/00 3,575
Shadow Brook
1st mortgage 6,000 37 7.33% 11/01/03 6,000
$12,137 $ 84 $12,075
</TABLE>
The mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. Certain of the notes require prepayment penalties if
repaid prior to maturity and prohibit resale of the properties subject to
existing indebtedness.
Scheduled principal payments of the mortgage notes payable subsequent to
December 31, 1999 are as follows (in thousands):
2000 $ 3,637
2001 --
2002 --
2003 8,500
$12,137
Note D - Income Taxes
The Partnership received a ruling from the Internal Revenue Service that it is
to be classified as a partnership for Federal income tax purposes. Accordingly,
no provision for income taxes is made in the consolidated financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable
income (in thousands, except per unit data):
1999 1998
Net income as reported $ 582 $ 246
Add (deduct)
Write-downs of fixed asset values -- 23
Depreciation differences (15) 41
Change in prepaid rental 18 27
Other (4) 40
Federal taxable income $ 581 $ 377
Federal taxable income per limited
partnership unit $ 3.36 $ 2.18
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands) as of December
31, 1999:
Net assets as reported $ 1,921
Land and buildings 2,277
Accumulated depreciation 865
Syndication fees 1,975
Other 175
Net assets - tax basis $ 7,213
<PAGE>
Note E - Related Party Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) for reimbursement of certain expenses incurred by affiliates
on behalf of the Partnership. The following transactions with the General
Partner and/or its affiliates were incurred during each of the years ended
December 31, 1999 and 1998 (in thousands):
1999 1998
Property management fees (included in
operating expenses) $ 266 $ 260
Reimbursement for services of affiliates
(included in operating and general and
administrative expenses, and investment
properties) 105 113
Partnership management fees (included in
general and administrative expense) 38 53
During the years ended December 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $266,000 and
$260,000 for the years ended December 31, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $105,000 and $113,000 for the
years ended December 31, 1999 and 1998, respectively.
The Partnership Agreement provides for a fee equal to 9% of distributable cash
from operations (as defined in the Partnership Agreement) received by the
limited partners to be paid to the General Partner for executive and
administrative management services. These fees are included in general and
administrative expenses. A fee of approximately $53,000 was paid during the year
ended December 31, 1998. A fee of approximately $38,000 was earned during the
year ended December 31, 1999 and paid in January 2000.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 59,995 "A" and
37,548 "B" limited partnership units in the Partnership representing 62.31% and
49.96% of the outstanding units, respectively. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
Note F - Commitments
The Partnership is required by the Partnership Agreement to maintain working
capital reserves of not less than 5% of Net Invested Capital, as defined in the
Agreement. In the event expenditures are made from this reserve, operating
revenue shall be allocated to such reserve to the extent necessary to maintain
the foregoing level. Reserves, including cash and cash equivalents totaling
approximately $2,280,000, exceeded the reserve requirement of approximately
$759,000 at December 31, 1999.
Note G - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
<TABLE>
<CAPTION>
Buildings Net Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Carlin Manor Apartments $ 2,500 $ 408 $ 6,582 $ 295
Hunt Club Apartments 3,637 485 5,673 1,166
Shadow Brook Apartments 6,000 961 8,263 1,654
Totals $12,137 $ 1,854 $20,518 $ 3,115
</TABLE>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And Related
<TABLE>
<CAPTION>
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Carlin Manor $ 295 $ 6,990 $ 7,285 $ 4,083 Phase I 11/87 5-30
1967
Phase II
1972
Hunt Club 485 6,839 7,324 4,122 1979 05/87 5-30
Shadow Brook 962 9,916 10,878 4,788 1985 05/87 5-30
Totals $1,742 $23,745 $25,487 $12,993
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation"
Years Ended December 31,
1999 1998
(in thousands)
Real Estate
Balance at beginning of year $24,411 $23,943
Property improvements 1,076 507
Disposals of property -- (39)
Balance at end of year $25,487 $24,411
Accumulated Depreciation
Balance at beginning of year $11,934 $10,913
Additions charged to expense 1,059 1,037
Disposals of property -- (16)
Balance at end of year $12,993 $11,934
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $27,764,000 and $26,688,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $12,128,000 and $11,053,000,
respectively.
Note H - Distributions
During the year ended December 31, 1998, the Partnership paid a cash
distribution from operations of approximately $594,000 of which approximately
$588,000 ($6.11 per limited partnership "A" Unit) was paid to the "A" unit
limited partners. During the year ended December 31, 1999, the Partnership
declared a cash distribution from operations of approximately $427,000 of which
approximately $423,000 ($4.39 per limited partnership "A" Units) was due to the
"A" Unit limited partners. This distribution was accrued at December 31, 1999
and paid in January 2000.
Note I - Segment Information
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of three apartment
complexes, one each in Ohio, Indiana, and Utah. The Partnership rents apartment
units to people for terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
Factors management used to identify the Partnership's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the years 1999 and 1998 is shown in the tables below.
The "Other" column includes Partnership administration related items and income
and expense not allocated to the reportable segment.
1999 Residential Other Totals
(in thousands)
Rental income $ 4,997 $ -- $ 4,997
Gain on sale of equipment 100 -- 100
Other income 258 53 311
Interest expense 991 -- 991
Depreciation 1,059 -- 1,059
General and administrative expense -- 287 287
Segment profit (loss) 816 (234) 582
Total assets 13,926 1,626 15,552
Capital expenditures for investment
properties 1,076 -- 1,076
1998 Residential Other Totals
(in thousands)
Rental income $ 4,885 $ -- $ 4,885
Other income 262 48 310
Interest expense 995 -- 995
Depreciation 1,037 -- 1,037
General and administrative expense -- 248 248
Segment profit (loss) 446 (200) 246
Total assets 13,589 1,095 14,684
Capital expenditures for investment
properties 507 -- 507
Note J - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
<PAGE>
Note K - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
increase net income by approximately $59,000 ($0.34 per limited partnership "A"
and "B" units). The cumulative effect, had this change been applied to prior
periods, is not material. The accounting principle change will not have an
effect on cash flow, funds available for distribution or fees payable to the
General Partner and affiliates.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The general partner of Multi-Benefit Realty Fund '87-1 (the "Partnership" or the
"Registrant") is ConCap Equities, Inc. ("CEI" or the "General Partner"). The
names of the directors and executive officers of the General Partner, their ages
and the nature of all positions with CEI presently held by them are as follows:
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council. He
received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Martha L. Long has been Senior Vice President and Controller of the General
Partner and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO Properties, L.P. and its joint filers failed to timely file a Form 3 with
respect to its acquisition of both Class A and Class B Units and AIMCO and its
joint filers failed to timely file a Form 4 with respect to its acquisition of
both Class A and Class B Units.
Item 10. Executive Compensation
Neither the director nor the officers of the General Partner received any
remuneration from the Registrant.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
Except as noted below, no person or entity was known to CEI to own of
record or beneficially more than 5% of the Units of the Partnership as of
December 31, 1999.
Number of Percent
Units of Total
AIMCO Properties LP (1) 31,112 A units 32.31%
(an affiliate of AIMCO) 19,108 B units 25.42%
Insignia Properties LP (2) 2,243 A units 2.33%
(an affiliate of AIMCO) 210 B units .28%
Madison River Properties LLC (2) 21,457 A units 22.29%
(an affiliate of AIMCO) 13,822 B units 18.39%
Cooper River Properties LLC (2) 5,183 A units 5.38%
(an affiliate of AIMCO) 4,408 B units 5.87%
(1) Entity is indirectly ultimately controlled by AIMCO. Its
business address is 2000 South Colorado Blvd., Denver, Colorado
80222.
(2) Entity is indirectly ultimately owned by AIMCO. Its business address
is 55 Beattie Place, Greenville, SC 29601.
(b) Beneficial Owners of Management
Neither CEI nor any of its directors or officers or associates of CEI own
any units of the Partnership of record or beneficially.
(c) Changes in Control
Beneficial Owners of CEI
As of December 31, 1999, the following entity was known to CEI to be the
beneficial owner of more than 5 percent of its common stock:
Name and address Number of CEI SHARES Percent of Total
---------------- -------------------- ----------------
Insignia Properties Trust (1) 100,000 100%
(1) Entity is indirectly ultimately owned by AIMCO. Its business address
is 55 Beattie Place, Greenville, SC 29601.
Item 12. Certain Relationships and Related Transactions
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) for reimbursement of certain expenses incurred by affiliates
on behalf of the Partnership. The following transactions with the General
Partner and/or its affiliates were incurred during each of the years ended
December 31, 1999 and 1998 (in thousands):
1999 1998
Property management fees $ 266 $ 260
Reimbursement for services of affiliates 105 113
Partnership management fees 38 53
During the years ended December 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $266,000 and
$260,000 for the years ended December 31, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $105,000 and $113,000 for the
years ended December 31, 1999 and 1998, respectively.
The Partnership Agreement provides for a fee equal to 9% of distributable cash
from operations (as defined in the Partnership Agreement) received by the
limited partners to be paid to be the General Partner for executive and
administrative management services. These fees are included in general and
administrative expenses. A fee of approximately $53,000 was paid during the year
ended December 31, 1998. A fee of approximately $38,000 was earned during the
year ended December 31, 1999.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 59,995 "A" and
37,548 "B" limited partnership units in the Partnership representing 62.31% and
49.96% of the outstanding units, respectively. It is possible that AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the General Partner because of their affiliation with the
General Partner.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for Change
in Accounting Principle, is filed as an exhibit to this report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of calendar year
1999: None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MULTI-BENEFIT REALTY FUND '87-1
By: CONCAP EQUITIES, INC.
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Partnership and in the capacities and on the
dates indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President Date:
Martha L. Long and Controller
<PAGE>
EXHIBIT INDEX
Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT, incorporated by reference to Registrant's
Current Report on Form 8-K dated October 1, 1998.
3 Certificate of Limited Partnership, as amended to date.
4 Depositary Agreement (Incorporated by reference to Registration
Statement of Registrant (File No. 33-8908) filed December 10, 1986, as
amended by date).
10.1 Property Management Agreement No. 310 dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1990).
10.2 Bill of Sale and Assignment dated October 23, 1990, by and between
CCEC and ConCap Services Company (Incorporated by reference to the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1990).
10.3 Assignment and Assumption Agreement dated October 23, 1990, by and
between CCEC and ConCap Management Limited Partnership ("CCMLP")
(Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990).
10.4 Assignment and Agreement as to Certain Property Management Services
dated October 23, 1990, by the between CCMLP and ConCap Capital
Company (Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1990).
10.5 Assignment and Assumption Agreement dated October 23, 1990, by and
between CCMLP and Metro ConCap, Inc. (300 Series of Property
Management Contracts) (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990).
10.6 Construction Management Cost Reimbursement Agreement dated January 1,
1991, by and between the Partnership and Metro ConCap, Inc.
(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 1991).
10.9 Construction Management Cost Reimbursement Agreement dated January 1,
1991, by and between the Partnership and The Hayman Company.
(Incorporated by reference to the Annual Report on Form 10-K for the
year ended December 31, 1991).
10.10 Investor Services Agreement dated October 23, 1990, by and between
the Partnership and CCEC (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990).
10.11 Assignment and Assumption Agreement (Investor Services Agreement)
dated October 23, 1990, by and between CCEC and ConCap Services
Company (Incorporated by reference to the Annual Report on Form 10-K
for the year ended December 31, 1990).
10.12 Letter of Notice dated December 20, 1991, from Partnership
Services, Inc. ("PSI") to the Partnership regarding the change
in ownership and dissolution of ConCap Services Company
whereby PSI assumed the Investor Services Agreement.
(Incorporated by reference to the Annual Report on Form 10-K
for the year ended December 31, 1991).
10.13 Financial Services Agreement dated October 23, 1990, by and
between the Partnership and CCEC (Incorporated by reference to
the Quarterly Report on Form 10-Q for the quarter ended September
30, 1990).
10.14 Assignment and Assumption Agreement (Financial Services
Agreement) dated October 23, 1990, by and between CCEC and ConCap
Capital Company (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990).
10.15 Letter of Notice dated December 20, 1991, from PSI to the
Partnership regarding the change in ownership and dissolution
of ConCap Capital Company whereby PSI assumed the Financial
Services Agreement. (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1991).
10.16 Property Management Agreement No. 518 dated June 1, 1993, by and
between the Partnership and Coventry Management, Inc.
10.17 Assignment and Assumption Agreement (Financial Services
Agreement) dated October 23, 1990, by and between CCEC and ConCap
Capital Company (Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1990).
10.18 Letter dated December 8, 1994 reporting a change in control of
the General Partner of the Registrant. (Incorporated by
reference to Form 8-K dated December 8, 1994).
10.19 Multifamily Note dated November 1, 1996, between Multi-Benefit
Realty Fund '87-1, a California limited partnership, and Lehman
Brokers Holdings, Inc. d/b/a Lehman Capital, A Division of Lehman
Brothers Holdings, Inc.
10.20 Multifamily Note dated November 1, 1996, between Multi-Benefit
Realty Fund '87-1, a California limited partnership, and Lehman
Brokers Holdings, Inc. d/b/a Lehman Capital, A Division of Lehman
Brothers Holdings, Inc.
11 Statement regarding computation of Net Income per Unit of
Depositary Receipt (Incorporated by reference to Note 5 of Item 8
- Financial Statements of this Form 10-K).
16 Letter, dated August 12, 1992, from Ernst & Young to the
Securities and Exchange Commission regarding change in certifying
accountant. (Incorporated by reference to Form 8-K dated August
6, 1992.)
16.1 Letter dated May 3, 1995, from Arthur Anderson to the Securities
and Exchange Commission regarding change in certifying
accountant. (Incorporated by reference to Form 8-K dated May 3,
1995.)
18 Independent Accountants' Preferability Letter for Change in
Accounting Principle.
27 Financial Data Schedule is filed as an Exhibit to this report.
Exhibit 18
February 24, 2000
Mr. Patrick J. Foye
Executive Vice President
ConCap Equities, Inc.
General Partner of Multi-Benefit Realty Fund '87-1
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note K of Notes to the Consolidated Financial Statements of Multi-Benefit Realty
Fund '87-1 included in its Form 10-KSB for the year ended December 31, 1999
describes a change in the method of accounting to capitalize exterior painting
and major landscaping, which would have been expensed under the old policy. You
have advised us that you believe that the change is to a preferable method in
your circumstances because it provides a better matching of expenses with the
related benefit of the expenditures and is consistent with policies currently
being used by your industry and conforms to the policies of the General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Multi-Benefit Realty Fund '87-1 1999 Fourth Quarter 10-KSB and is qualified in
its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000802200
<NAME> Multi-Benefit Realty Fund '87-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,280
<SECURITIES> 0
<RECEIVABLES> 330
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 25,487
<DEPRECIATION> 12,993
<TOTAL-ASSETS> 15,552
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 12,137
0
0
<COMMON> 0
<OTHER-SE> 1,921
<TOTAL-LIABILITY-AND-EQUITY> 15,552
<SALES> 0
<TOTAL-REVENUES> 5,408
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 991
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 582
<EPS-BASIC> 3.36 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
