FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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 0-16684
MULTI-BENEFIT REALTY FUND '87-1
(Exact name of small business issuer as specified 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)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 2,009
Receivables and deposits 342
Restricted escrows 257
Other assets 275
Investment properties:
Land $ 1,447
Buildings and related personal property 16,976
18,423
Less accumulated depreciation (9,512) 8,911
$ 11,794
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 33
Tenant security deposit liabilities 52
Accrued property taxes 265
Other liabilities 356
Mortgage notes payable 9,900
Partners' (Deficit) Capital
General Partner $ (113)
Limited Partner "A" Unit holders -
96,284 units issued and outstanding (3,753)
Limited Partner "B" Unit holders -
75,152 units issued and outstanding 5,054 1,188
$ 11,794
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental revenue $ 860 $ 1,264 $ 3,245 $ 3,739
Other income 79 68 292 220
(Loss) gain on sale of
investment property (4) -- 4,810 --
Total revenues 935 1,332 8,347 3,959
Expenses:
Operating 369 566 1,472 1,628
General and administrative 98 58 306 181
Depreciation 197 240 775 761
Interest 198 245 679 746
Property taxes 57 100 222 300
Total expenses 919 1,209 3,454 3,616
Income before extraordinary loss
on early extinguishment of debt 16 123 4,893 343
Extraordinary loss on early
extinguishment of debt (3) -- (108) --
Net income $ 13 $ 123 $ 4,785 $ 343
Net income allocated to general
partner $ -- $ 1 $ 48 $ 3
Net income allocated to limited
partners 13 122 4,737 340
$ 13 $ 123 $ 4,785 $ 343
Per limited partnership "A" and "B" units:
Income before extraordinary
loss on early extinguishment
of debt $ 0.09 $ 0.71 $ 28.25 $ 1.98
Extraordinary loss on early
extinguishment of debt (0.01) -- (0.62) --
Net income $ 0.08 $ 0.71 $ 27.63 $ 1.98
Distributions per limited
partnership "A" units $ -- $ -- $ 44.37 $ --
Distributions per limited
partnership "B" units $ -- $ -- $ 16.22 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(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
September 30, 2000 -- 96,284 75,152 171,436
Partners' (deficit) capital at
December 31, 1999 $ (134) $ (2,141) $ 4,196 $ 1,921
Distributions to partners (27) (4,272) (1,219) (5,518)
Net income for the nine months
ended September 30, 2000 48 2,660 2,077 4,785
Partners' (deficit) capital
at September 30, 2000 $ (113) $ (3,753) $ 5,054 $ 1,188
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,785 $ 343
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 775 761
Amortization of loan costs 42 49
Gain on sale of investment property (4,810) --
Extraordinary loss on early extinguishment of debt 108 --
Change in accounts:
Receivables and deposits (12) 66
Other assets (1) (36)
Accounts payable (189) 174
Tenant security deposit liabilities (35) (15)
Accrued property taxes (71) 107
Other liabilities (166) 5
Net cash provided by operating activities 426 1,454
Cash flows from investing activities:
Property improvements and replacements (287) (868)
Net (deposits to) withdrawals from restricted escrows (14) 182
Proceeds from sale of investment property 8,005 --
Net cash provided by (used in) investing
activities 7,704 (686)
Cash flows from financing activities:
Payments on mortgage notes payable (55) (57)
Repayment of mortgage notes payable (6,082) --
Proceeds from mortgage note payable 3,900 --
Prepayment penalty paid (62) --
Loan costs paid (157) --
Distributions to partners (5,945) --
Net cash used in financing activities (8,401) (57)
Net (decrease) increase in cash and cash equivalents (271) 711
Cash and cash equivalents at beginning of period 2,280 1,291
Cash and cash equivalents at end of period $ 2,009 $ 2,002
Supplemental disclosure of cash flow information:
Cash paid for interest $ 663 $ 697
Distributions to partners of approximately $427,000 were declared at December
31, 1999 and paid in January 2000.
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
e)
MULTI-BENEFIT REALTY FUND '87-1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Multi-Benefit
Realty Fund '87-1 (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999.
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 this
consolidated partnership is the General Partner of the Registrant. The
Partnership may remove the general partner of Hunt Club Associates, Ltd.;
therefore, the consolidated partnership is controlled and consolidated by the
Partnership. All significant interpartnership balances have been eliminated.
Limited Partnership Units
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 and distributions of the
Partnership.
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 Apartment Investment and Management Company ("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 - Transactions with Affiliated Parties
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) 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 the nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expense) $181 $199
Reimbursement for services of affiliates (included in
general and administrative expense) 130 79
Partnership management fee (included in general and
administrative expense) 91 --
Refinancing fee (included in loan costs) 39 --
During the nine months ended September 30, 2000 and 1999, 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 $181,000 and
$199,000 for the nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $130,000 and $79,000 for the
nine months ended September 30, 2000 and 1999, 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. Fees of approximately $91,000 were paid
during the nine months ended September 30, 2000, in association with the
distributions. No fees were earned during the nine months ended September 30,
1999.
An affiliate of the General Partner received $39,000 in conjunction with the
refinancing of the mortgage encumbering Hunt Club Apartments in August 2000 (see
"Note G").
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 61,130 "A" and 38,417 "B"
limited partnership units in the Partnership representing 63.49% and 51.12% of
the outstanding units. A number of these units were acquired pursuant to tender
offers made by AIMCO or its affiliates. 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. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the General
Partner. As a result of its ownership of 63.49% and 51.12% of the outstanding
units, AIMCO is in a position to influence all voting decisions with respect to
the Registrant. 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 D - Commitment
Until October 17, 2000, the Partnership was required by the Partnership
Agreement to maintain working capital reserves for contingencies of not less
than 5% of Net Invested Capital, as defined in the Partnership Agreement. In the
event expenditures were made from this reserve, operating revenue were to be
allocated to such reserve to the extent necessary to maintain the foregoing
level. Reserves, including cash and securities available for sale, totaling
approximately $2,009,000, were greater than the reserve requirement of
approximately $534,000 at September 30, 2000. During the third quarter, the
Partnership solicited the vote of the Limited Partners to approve an amendment
to the Partnership Agreement. The effect of the amendment was to change such
provision to require the Partnership to maintain reasonable reserves for normal
working capital and contingencies in an amount determined from time to time by
the General Partner in its sole discretion. The Solicitation Statement was
mailed to Limited Partners on September 16, 2000. Upon the expiration of the
solicitation period (close of business on October 16, 2000), the requisite
number of positive votes were received to effect this amendment.
Note E - Distributions
During the nine months ended September 30, 2000, the Partnership paid a cash
distribution from operations, which was declared and accrued at December 31,
1999, of approximately $427,000 of which approximately $423,000 ($4.39 per
limited partnership "A" Unit) was paid to the "A" Unit limited partners. In
addition, the Partnership declared and paid distributions from operations of
approximately $1,018,000 (approximately $1,008,000 to "A" Unit holders or $10.47
per limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor
Apartments of approximately $4,500,000 (approximately $3,264,000 to "A" Unit
holders or $33.90 per limited partnership "A" Unit and approximately $1,219,000
to "B" Unit holders or $16.22 per limited partnership "B" Unit). Subsequent to
September 30, 2000, the Partnership declared a distribution from operations of
approximately $494,000 (approximately $489,000 to "A" Unit holders or $5.08 per
limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor
Apartments of approximately $837,000 (approximately $470,000 to "A" Unit holders
or $4.88 per limited partnership "A" Unit and approximately $367,000 to "B" Unit
holders or $4.88 per limited partnership "B" Unit). There were no distributions
paid or declared during the nine months ended September 30, 1999.
Note F - Sale of Investment Property
On June 12, 2000, the Partnership sold Carlin Manor Apartments to an
unaffiliated third party for $8,100,000. After payment of closing costs of
approximately $95,000, the net sales proceeds received by the Partnership were
approximately $8,005,000. The Partnership used a portion of the proceeds to pay
off the mortgage encumbering the property of $2,500,000. Approximately
$4,500,000 of the proceeds were distributed to the partners during the nine
months ended September 30, 2000. The remaining proceeds were used to establish
additional cash reserves for the Partnership. The Partnership's gain on the sale
was approximately $4,810,000 and an extraordinary loss on early extinguishment
of debt was recorded of approximately $105,000 consisting of a prepayment
penalty and the write-off of unamortized loan costs.
Note G - Refinancing of Mortgage Note Payable
On August 31, 2000, the Partnership refinanced the mortgage encumbering Hunt
Club Apartments. The refinancing replaced indebtedness of approximately
$3,582,000 with a new mortgage of $3,900,000. The new mortgage carries a stated
interest rate of 8.05% as compared to the 8.30% interest rate on the old
mortgage. Payments on the mortgage loan are due monthly until the loan matures
on September 1, 2020. In addition, the Partnership was required to establish a
repair escrow of approximately $239,000 with the lender for certain capital
replacements. Total capitalized loan costs were approximately $157,000 at
September 30, 2000. The Partnership recognized an extraordinary loss on the
early extinguishment of debt of approximately $3,000 due to the write-off of
unamortized loan costs.
Note H - 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 two apartment complexes, one each in Indiana and Utah. On June 12, 2000, the
Partnership sold its residential property located in Ohio. The Partnership rents
apartment units to tenants 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 of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1999.
Factors management used to identify the Partnership's reportable segments: 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 three and nine month periods ended September 30,
2000 and 1999, is shown in the tables below (in thousands). The "Other" column
includes Partnership administration related items and income and expense not
allocated to the reportable segment.
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 860 $ -- $ 860
Other income 58 21 79
Interest expense 198 -- 198
Depreciation 197 -- 197
General and administrative expense -- 98 98
Loss on sale of investment property (4) -- (4)
Extraordinary loss on early
extinguishment of debt (3) -- (3)
Segment profit (loss) 90 (77) 13
Nine Months Ended
September 30, 2000 Residential Other Totals
Rental income $ 3,245 $ -- $ 3,245
Other income 242 50 292
Interest expense 679 -- 679
Depreciation 775 -- 775
General and administrative expense -- 306 306
Gain on sale of investment property 4,810 -- 4,810
Extraordinary loss on early
extinguishment of debt (108) -- (108)
Segment profit (loss) 5,041 (256) 4,785
Total assets 10,353 1,441 11,794
Capital expenditures for investment
properties 287 -- 287
Three Months Ended
September 30, 1999 Residential Other Totals
Rental income $ 1,264 $ -- $ 1,264
Other income 58 10 68
Interest expense 245 -- 245
Depreciation 240 -- 240
General and administrative expense -- 58 58
Segment profit (loss) 171 (48) 123
Nine Months Ended
September 30, 1999 Residential Other Totals
Rental income $ 3,739 $ -- $ 3,739
Other income 185 35 220
Interest expense 746 -- 746
Depreciation 761 -- 761
General and administrative expense -- 181 181
Segment profit (loss) 489 (146) 343
Total assets 13,853 1,388 15,241
Capital expenditures for investment
properties 868 -- 868
</TABLE>
Note I - 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. 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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussions of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operations. 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.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Hunt Club Apartments 94% 92%
Indianapolis, Indiana
Shadow Brook Apartments 97% 98%
West Valley City, Utah
Results of Operations
The Partnership had net income of approximately $4,785,000 for the nine months
ended September 30, 2000 as compared to approximately $343,000 for the nine
months ended September 30, 1999. For the three months ended September 30, 2000
the Partnership had net income of approximately $13,000 as compared to net
income of approximately $123,000 for the three months ended September 30, 1999.
The increase in net income for the nine month period ended September 30, 2000 is
primarily attributable to the gain recorded on the sale of Carlin Manor
Apartments as discussed below. The decrease in net income for the three month
period ended September 30, 2000 is primarily attributable to the sale of Carlin
Manor Apartments, as discussed below.
Excluding the operations of Carlin Manor Apartments as well as the gain on the
sale and the extraordinary loss on the early extinguishment of the debt at
Carlin Manor, the Partnership had net income of approximately $83,000 for the
nine months ended September 30, 2000 compared to net income of approximately
$22,000 for the comparable period in 1999. For the three months ended September
30, 2000, the Partnership had net income of approximately $83,000 compared to
net income of approximately $5,000 for the three months ended September 30,
1999. The increase in net income for the nine month period ended September 30,
2000 is due to an increase in total revenues partially offset by an increase in
total expenses. The increase in net income for the three month period ended
September 30, 2000 is due to an increase in total revenues and a decrease in
total expenses. The increase in total revenues for both the three and nine month
periods is due to an increase in rental revenue and other income. Rental revenue
increased due primarily to increased occupancy and increased average rental
rates at Hunt Club Apartments. Other income increased as a result of increased
interest income due to higher average cash balances in interest bearing accounts
and increased telephone commissions and tenant charges at both of the
Partnership's properties.
Excluding the operations of Carlin Manor, total expenses increased for the nine
month period ended September 30, 2000 due to increased depreciation and general
and administrative expenses partially offset by decreased operating and property
tax expenses. Total expenses decreased for the three month period ended
September 30, 2000 due to decreased operating and property tax expenses
partially offset by increased general and administrative expense. For the nine
months ended September 30, 2000 versus the comparable period in 1999,
depreciation expense increased due to property improvements and replacements
completed during the past twelve months. General and administrative expenses
increased due to the payment of partnership management fees on distributions
from operations during 2000. There were no distributions from operations during
the nine months ended September 30, 1999 so no such fees were paid during 1999.
General and administrative expenses also increased due to an increase in the
cost of services included in the management reimbursements to the General
Partner as allowed under the Partnership Agreement. Included in general and
administrative expenses for the three and nine months ended September 30, 2000
and 1999, are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with the investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included. Operating
expenses decreased primarily due to reduced snow removal costs and reduced
maintenance expenses primarily at Shadow Brook partially offset by net insurance
proceeds received in 1999 for storm damage at Hunt Club Apartments. Property tax
expense decreased due to a property tax refund and reduced assessed value
received at Hunt Club Apartments.
On June 12, 2000, the Partnership sold Carlin Manor Apartments to an
unaffiliated third party for $8,100,000. After payment of closing costs of
approximately $95,000, the net sales proceeds received by the Partnership were
approximately $8,005,000. The Partnership used a portion of the proceeds to pay
off the mortgage encumbering the property of $2,500,000. Approximately
$4,500,000 of the proceeds were distributed to the partners during the nine
months ended September 30, 2000. The remaining proceeds were used to establish
additional cash reserves for the Partnership. The Partnership's gain on the sale
was approximately $4,810,000 and there was an extraordinary loss on early
extinguishment of debt of approximately $105,000 consisting of a prepayment
penalty and the write-off of unamortized loan costs.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment 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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $2,009,000 as compared to approximately $2,002,000 at September
30, 1999. Cash and cash equivalents decreased approximately $271,000 for the
nine months ended September 30, 2000, from the Partnership's year ended December
31, 1999, due to approximately $8,401,000 of cash used in financing activities,
which was partially offset by approximately $7,704,000 of cash provided by
investing activities and approximately $426,000 of cash provided by operating
activities. Cash used in financing activities consisted primarily of the payoff
of mortgages encumbering Hunt Club Apartments and Carlin Manor Apartments and
distributions to partners, and to a lesser extent, loan costs paid, payments of
principal made on the mortgage encumbering Hunt Club Apartments and prepayment
penalties paid for the payoff of the mortgage encumbering Carlin Manor
Apartments partially offset by the proceeds received from the refinancing of
Hunt Club Apartments. Cash provided by investing activities consisted of
proceeds from the sale of Carlin Manor Apartments partially offset by property
improvements and replacements and net deposits to restricted escrows maintained
by the mortgage lender. The Partnership invests its working capital reserves in
money market accounts.
On August 31, 2000, the Partnership refinanced the mortgage encumbering Hunt
Club Apartments. The refinancing replaced indebtedness of approximately
$3,582,000 with a new mortgage of $3,900,000. The new mortgage carries a stated
interest rate of 8.05% as compared to the 8.30% interest rate on the old
mortgage. Payments on the mortgage loan are due monthly until the loan matures
on September 1, 2020. In addition, the Partnership was required to establish a
repair escrow of approximately $239,000 with the lender for certain capital
replacements. Total capitalized loan costs were approximately $157,000 at
September 30, 2000. The Partnership recognized an extraordinary loss on the
early extinguishment of debt of approximately $3,000 due to the write-off of
unamortized loan costs.
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 Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Carlin Manor
During the nine months ended September 30, 2000 the Partnership expended
approximately $67,000 primarily for floor covering, major landscaping, and
appliance replacements at Carlin Manor. This property was sold on June 12, 2000.
Hunt Club
Approximately $193,000 was budgeted for capital improvements for the year 2000
at Hunt Club Apartments consisting primarily of structural upgrades, fencing,
carpet and vinyl replacement, and appliance replacement. During the nine months
ended September 30, 2000, the Partnership completed approximately $89,000 of
capital improvements at Hunt Club Apartments, consisting primarily of floor
covering replacements, exterior painting, structural upgrades, and appliance
replacements. These improvements were funded from operating cash flow and
replacement reserves.
Shadow Brook
Approximately $186,000 was budgeted for capital improvements for the year 2000
at Shadow Brook Apartments consisting primarily of carpet and vinyl replacement,
roof replacement, and lighting improvements. During the nine months ended
September 30, 2000, the Partnership completed approximately $131,000 of capital
improvements at Shadow Brook Apartments, consisting primarily of roof
replacement, carpet and vinyl replacement, lighting improvements, and appliance
replacements. These improvements were funded from replacement reserves.
The additional capital expenditures for 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 assets are currently thought to be sufficient for any
near-term needs (exclusive of capital improvements) of the Partnership. The
mortgage indebtedness of approximately $9,900,000 is amortized over varying
periods and the Shadow Brook Apartments mortgage requires a balloon payment in
November 2003. The General Partner will attempt to refinance such indebtedness
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 nine months ended September 30, 2000, the Partnership paid a cash
distribution from operations, which was declared and accrued at December 31,
1999, of approximately $427,000 of which approximately $423,000 ($4.39 per
limited partnership "A" Unit) was paid to the "A" Unit limited partners. In
addition, the Partnership declared and paid distributions from operations of
approximately $1,018,000 (approximately $1,008,000 to "A" Unit holders or $10.47
per limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor
Apartments of approximately $4,500,000 (approximately $3,264,000 to "A" Unit
holders or $33.90 per limited partnership "A" Unit and approximately $1,219,000
to "B" Unit holders or $16.22 per limited partnership "B" Unit). Subsequent to
September 30, 2000, the Partnership declared a distribution from operations of
approximately $494,000 (approximately $489,000 to "A" Unit holders or $5.08 per
limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor
Apartments of approximately $837,000 (approximately $470,000 to "A" Unit holders
or $4.88 per limited partnership "A" Unit and approximately $367,000 to "B" Unit
holders or $4.88 per limited partnership "B" Unit). There were no distributions
paid or declared during the nine months ended September 30, 1999. The
Partnership's distribution policy is reviewed on a quarterly 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 further distributions to its partners during the
remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 16, 2000, the Partnership sought the vote of limited partners to
amend the Partnership Agreement to eliminate the requirement for the Partnership
to maintain reserves equal to at least 5% of the limited partners' capital
contributions less distributions to limited partners and instead permit the
General Partner to determine reasonable reserve requirements of the Partnership.
The vote was sought pursuant to a Consent Solicitation that expired on October
16, 2000 at which time the amendment was approved by the requisite percent of
limited partnership interests. Upon expiration of the consent period, a total
number of 120,712 units had voted of which 115,007.5 units had voted in favor of
the amendment, 4,972.50 voted against the amendment and 732 units abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.22, Multifamily Note dated August 31, 2000, by
and between Hunt Club Associates, Ltd., a Texas limited
partnership, and ARCS Commercial Mortgage Co., L.P., a
California limited partnership.
Exhibit 27, Financial Data Schedule, is filed as an exhibit
to this report.
b) Reports on Form 8-K filed during the quarter ended September
30, 2000:
Current Report on Form 8-K dated June 13, 2000, and filed
August 1, 2000, disclosing the sale of Carlin Manor
Apartments to an unrelated party.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant 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.
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:
<PAGE>
Exhibit 10.22
FHLMC# 002727706
MULTIFAMILY NOTE
(INDIANA)
US $3,900,000.00 As of August 31, 2000
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of ARCS COMMERCIAL MORTGAGE CO.,
L.P., a California limited partnership the principal sum of THREE MILLION NINE
HUNDRED THOUSAND AND 00/100 DOLLARS (US $3,900,000.00), with interest on the
unpaid principal balance at the annual rate of Eight and 05/100 percent (8.05%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of this Note, and (ii) the term "Indebtedness" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable
at 26901 Agoura Road, Suite 200, Calabasas Hills, California 91301, or such
other place as may be designated by written notice to Borrower from or on behalf
of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid
as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of THIRTY TWO THOUSAND SEVEN HUNDRED FORTY TWO AND 63/100 DOLLARS (US
$32,742.63), shall be payable on the first day of each month beginning on
October 1, 2000, until the entire unpaid principal balance evidenced by this
Note is fully paid. Any accrued interest remaining past due for 30 days or more
shall be added to and become part of the unpaid principal balance and shall bear
interest at the rate or rates specified in this Note, and any reference below to
"accrued interest" shall refer to accrued interest which has not become part of
the unpaid principal balance. Any remaining principal and interest shall be due
and payable on September 1, 2020 or on any earlier date on which the unpaid
principal balance of this Note becomes due and payable, by acceleration or
otherwise (the "Maturity Date"). The unpaid principal balance shall continue to
bear interest after the Maturity Date at the Default Rate set forth in this Note
until and including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest
that is received by Lender before the date it is due shall be deemed to have
been received on the due date solely for the purpose of calculating interest
due.
(d) Borrower shall make all payments of principal and interest under this
Note without relief from valuation and appraisement laws.
4. Application of Payments. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
TEN (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to FIVE (5%) percent of such
amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note
remains past due for 30 days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of 4 percentage points above the
rate stated in the first paragraph of this Note or the maximum interest rate
which may be collected from Borrower under applicable law. If the unpaid
principal balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate. Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Loan, that, during the time that any monthly
installment under this Note is delinquent for more than 30 days, Lender will
incur additional costs and expenses arising from its loss of the use of the
money due and from the adverse impact on Lender's ability to meet its other
obligations and to take advantage of other investment opportunities, and that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for more than 30 days or any other
Event of Default and has occurred and is continuing, Lender's risk of nonpayment
of this Note will be materially increased and Lender is entitled to be
compensated for such increased risk. Borrower agrees that the increase in the
rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to Zero percent (0%)of the ORIGINAL principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment of
all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on the last Business Day of a calendar month if
Borrower has given Lender at least 30 days prior notice of its intention
to make such prepayment. Such prepayment shall be made by paying (A) the
amount of principal being prepaid, (B) all accrued interest, (C) all other
sums due Lender at the time of such prepayment, and (D) the prepayment
premium calculated pursuant to Schedule A. For all purposes including the
accrual of interest, any prepayment received by Lender on any day other
than the last calendar day of the month shall be deemed to have been
received on the last calendar day of such month. For purposes of this
Note, a "Business Day" means any day other than a Saturday, Sunday or any
other day on which Lender is not open for business. Borrower shall not
have the option to voluntarily prepay less than all of the unpaid
principal balance.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid
principal balance of this Note outstanding at the time of the
acceleration, (A) all accrued interest and all other sums due Lender, and
(B) the prepayment premium calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note
prior to the Maturity Date and in the absence of acceleration shall be
deemed to be a partial prepayment by Borrower, requiring the payment to
Lender by Borrower of a prepayment premium. The amount of any such partial
prepayment shall be computed so as to provide to Lender a prepayment
premium computed pursuant to Schedule A without Borrower having to pay
out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
ONE HUNDRED EIGHTY (180) days before the Maturity Date, or (B) any prepayment
occurring as a result of the application of any insurance proceeds or
condemnation award under the Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this Note, whether voluntary or involuntary or resulting from a
default by Borrower, will result in Lender's incurring loss, including
reinvestment loss, additional expense and frustration or impairment of Lender's
ability to meet its commitments to third parties. Borrower agrees to pay to
Lender upon demand damages for the detriment caused by any prepayment, and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages. Borrower therefore acknowledges and agrees that the formula for
calculating prepayment premiums set forth on Schedule A represents a reasonable
estimate of the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding. For purposes of
Paragraph 9(f) and this Paragraph, attorneys' out of pocket expenses shall
include support staff costs, costs of preparing for litigation, computerized
research, telephone and facsimile transmission expenses, mileage, deposition
costs, postage, duplicating, process service, videotaping and similar costs and
expenses.
12. Forbearance. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of the Note. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "Property
Jurisdiction"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
|X | Schedule A Prepayment Premium (required)
|X | Schedule B Modifications to Multifamily Note
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
HUNT CLUB ASSOCIATES, LTD., a
Texas limited partnership
By: MBRF HUNT CLUB GP, L.L.C., a South Carolina
limited liability company, Its General Partner
By: MULTI-BENEFIT REALTY FUND 87-1, a
California limited partnership, Its Managing Member
By: CONCAP EQUITIES, INC., a Delaware corporation,
Its General Partner
By:
Name: Patti K. Fielding
Title: Senior Vice President
75-2470353
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF
WITHOUT RECOURSE, AS OF THE 31ST DAY OF AUGUST, 2000.
ARCS COMMERCIAL MORTGAGE CO., L.P.,
a California limited partnership
By: ACMC REALTY, INC., a
California corporation, Its General Partner
By:
Name: Steven D. Heller
Title: Senior Vice President
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date
that is ONE HUNDRED EIGHTY (180) months after the first day of the first
calendar month following the date of this Note (the "Yield Maintenance Period"),
the prepayment premium shall be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate
of the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date
on which the prepayment is made; in any other case, the date on
which Lender accelerates the unpaid principal balance of the
Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate
as of the date 5 Business Days before the Prepayment Date, on the
9.25% U.S. Treasury Security due February 2016, as reported in
The Wall Street Journal, expressed as a decimal calculated to
five digits. In the event that no yield is published on the
applicable date for the Treasury Security used to determine the
Assumed Reinvestment Rate, Lender, in its discretion, shall
select the non-callable Treasury Security maturing in the same
year as the Treasury Security specified above with the lowest
yield published in The Wall Street Journal as of the applicable
date. If the publication of such yield rates in The Wall Street
Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security
used to determine the Assumed Reinvestment Rate. The selection of
an alternate security pursuant to this Paragraph shall be made in
Lender's discretion.
Present Value Factor: the factor that discounts to present value
the costs resulting to Lender from the difference in interest
rates during the months remaining in the Yield Maintenance
Period, using the Assumed Reinvestment Rate as the discount rate,
with monthly compounding, expressed numerically as follows:
<PAGE>
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than ONE HUNDRED EIGHTY (180) days before the
Maturity Date, the prepayment premium shall be 1.0% of the unpaid principal
balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past due
for more than thirty (30) days or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the
unpaid principal balance from the earlier of the due date of the first
unpaid monthly installment or the occurrence of such other Event of
Default, as applicable, at a rate (the "Default Rate") equal to the lesser
of (1) the maximum interest rate which may be collected from Borrower
under applicable law or (2) the greater of (i) three percent (3%) above
the Interest Rate or (ii) four percent (4.0%) above the then-prevailing
Prime Rate. As used herein, the term "Prime Rate" shall mean the rate of
interest announced by The Wall Street Journal from time to time as the
"Prime Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph
(4): (4) failure by Borrower to pay the amount of the water and sewer
charges, fire, hazard or other insurance premiums, ground rents,
assessments or other charges in accordance with the terms of the Security
Instrument.
