-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BF0lcxvXzV9kLPvX85QbPnBhr6kiV/3cLMRaXR+s06lOxGfmam81voFnioz+iHXd E8bTqmk9Jnv11mt8/Z4JqQ== 0000711642-01-000052.txt : 20010402 0000711642-01-000052.hdr.sgml : 20010402 ACCESSION NUMBER: 0000711642-01-000052 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MULTI BENEFIT REALTY FUND 87-1 CENTRAL INDEX KEY: 0000802200 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 943026785 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-16684 FILM NUMBER: 1585031 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE CITY: GREENVILLE STATE: SC ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE CITY: GREENVILLE STATE: SC ZIP: 80222 10KSB 1 0001.txt FORM 10-KSB 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, 2000 [ ] 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 [X] State issuer's revenues for its most recent fiscal year. $9,443,000 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, 2000. 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. During the year ended December 31, 2000, one of the properties was sold. The Registrant continues to own and operate two of 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 Unit 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. 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 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 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.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Hunt Club Apartments $ 7,621 $ 4,471 5-30 S/L $ 4,035 Shadow Brook Apartments 11,079 5,244 5-30 S/L 5,998 Total $18,700 $ 9,715 $10,033
See "Note A" to the consolidated financial statements included in "Item 7. Financial Statements" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Registrant's properties.
Principal Principal Balance At Stated Balance December 31, Interest Period Maturity Due At Property 2000 Rate Amortized Date Maturity (2) (in thousands) (in thousands) Hunt Club 1st mortgage $3,880 8.05% 20 years 09/20 $ -- Shadow Brook 1st mortgage 6,000 7.33% (1) 11/03 6,000 $9,880 $6,000
(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. Schedule of Rental Rate and Occupancy Average annual rental rates and occupancy for 2000 and 1999 for each property: Average Annual Average Annual Rental Rate Occupancy (per unit) Property 2000 1999 2000 1999 Hunt Club Apartments $7,861 $7,720 94% 93% Shadow Brook Apartments 7,186 7,187 97% 98% 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. Schedule of Real Estate Taxes and Rates Real estate taxes and rates in 2000 for each property were: 2000 2000 Billing Rate (in thousands) Hunt Club Apartments $147 9.84% Shadow Brook Apartments 103 1.40% Capital Improvements Carlin Manor During the year ended December 31, 2000, the Partnership expended approximately $67,000 for capital improvements at Carlin Manor consisting primarily of floor covering, major landscaping, and appliance replacements. This property was sold on June 12, 2000. Hunt Club During the year ended December 31, 2000, the Partnership expended approximately $297,000 for capital improvements and replacements at Hunt Club consisting primarily of carpet replacements, heating upgrades, parking area improvements, furniture and fixtures, and structural upgrades. 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 $275 per unit or $55,000. In addition, the property is expected to spend approximately $56,000 on common area water heaters. 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, 2000, the Partnership expended approximately $200,000 for capital improvements and replacements at Shadow Brook consisting primarily of roof replacement, carpet and vinyl replacement, lighting improvements, and appliance replacements. 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 $275 per unit or $82,500. 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 2001 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, 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. 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, 2000, no matters were submitted to a vote of the Unit holders through the solicitation of proxies or otherwise. 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 385 as of December 31, 2000 B Units 531 as of December 31, 2000 The Partnership offered and sold 172,436 "A" and "B" Units. At December 31, 2000, the Partnership had 96,284 "A" Units and 75,152 "B" Units outstanding. Affiliates of the General Partner held 61,230 "A" Units (63.59%) and 38,455 "B" Units (51.17%) at December 31, 2000. (C) The following table sets forth the distributions declared by the Partnership for the years ended December 31, 1999 and 2000 and subsequent to December 31, 2000 (see "Item 6. Management's Discussion and Analysis or Plan of Operation" for more details).
Distributions Per Limited Per Limited Aggregate Partnership "A" Partnership "B" Unit 01/01/99 - 12/31/99 $ 427,000 (1) $ 4.39 $ -- 01/01/00 - 12/31/00 6,849,000 (2) 54.33 21.10 Subsequent to 12/31/00 590,000 (1) 0.63 5.58
(1) Distribution was made from cash from operations (see "Item 6" for further details). (2) Distribution consists of $1,512,000 of cash from operations and consists of $5,337,000 of cash from the sale proceeds of Carlin Manor Apartments (see "Item 6" for further details). 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 quarterly basis. 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 in the year 2001 or subsequent periods. See "Item 2. Description of Properties-Capital Improvements" for information relating to anticipated capital expenditures at the properties. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 61,230 "A" and 38,455 "B" limited partnership units in the Partnership representing 63.59% and 51.17% of the outstanding "A" and "B" units, respectively. 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 63.59% and 51.17% of the outstanding "A" and "B" units, respectively, 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. 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 disclosures 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 discussions of the Registrant'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 Registrant'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. 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 had net income of approximately $4,865,000 for the year ended December 31, 2000 as compared to approximately $582,000 for the year ended December 31, 1999. The increase in net income is primarily attributable to an increase in total revenues resulting from the gain recorded on 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 $102,000 for the year ended December 31, 2000 compared to net income of approximately $206,000 for the year ended December 31, 1999. The decrease in net income for the year ended December 31, 2000 is due to an increase in total expenses partially offset by an increase in total revenues. The increase in total revenues is due to increases in rental income and other income partially offset by a decrease in gain on sale of equipment from the sale of equipment in 1999. Rental income increased due primarily to increased occupancy and increased average annual rental rates at Hunt Club Apartments, despite a slight decrease in occupancy at Shadow Brook 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. The gain on sale of equipment during the year ended December 31, 1999 was due to the sale of cable equipment at Shadow Brook. Excluding the operations of Carlin Manor, total expenses increased for the year ended December 31, 2000 due to increased depreciation, property tax, and general and administrative expenses partially offset by decreased operating expenses. Depreciation expense increased primarily due to property improvements and replacements completed during the past twelve months. Property tax expense increased due to the receipt of a tax refund in 1999 on a prior year's tax payment for Hunt Club. General and administrative expenses increased primarily due to the payment of Partnership management fees on distributions from operations during 2000. There were no distributions from operations during the year ended December 31, 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 and increased professional fees necessary to manage the Partnership. Included in general and administrative expenses at both December 31, 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 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 at both of the Partnership's properties, reduced advertising expenses at Hunt Club Apartments, and reduced payroll bonuses at Shadow Brook 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 $5,337,000 of the proceeds were distributed to the partners during the year ended December 31, 2000. The remaining proceeds were used to establish additional cash reserves for the Partnership. The Partnership's gain on the sale was approximately $4,910,000 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 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, 2000, the Partnership had cash and cash equivalents of approximately $892,000 as compared to approximately $2,280,000 at December 31, 1999. Cash and cash equivalents decreased approximately $1,388,000 for the year ended December 31, 2000, from the Partnership's year ended December 31, 1999, due to approximately $9,752,000 of cash used in financing activities, which was partially offset by approximately $7,528,000 of cash provided by investing activities and approximately $836,000 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 December 31, 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. The Partnership is currently evaluating the capital improvement needs of both of its properties for the upcoming year. The minimum amount to be budgeted for the Partnership is expected to be $275 per unit or $137,500. In addition, Hunt Club Apartments is expected to spend approximately $56,000 on common area water heaters. 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 2001 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. 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 revenues were to be allocated to such reserve to the extent necessary to maintain the foregoing level. 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 the 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. 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 $9,880,000 is amortized over varying periods with the Shadow Brook Apartments mortgage requiring a balloon payment in November 2003. Hunt Club Apartments' mortgage indebtedness is amortized over 20 years and matures September 1, 2020. 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 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" Unit) was paid 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, 2000, the Partnership declared and paid distributions from operations of approximately $1,512,000 (approximately $1,497,000 to "A" Unit holders or $15.55 per limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor Apartments of approximately $5,337,000 (approximately $3,734,000 to "A" Unit holders or $38.78 per limited partnership "A" Unit and approximately $1,586,000 to "B" Unit holders or $21.10 per limited partnership "B" Unit). Subsequent to December 31, 2000, the Partnership declared a distribution from operations of approximately $590,000 (approximately $47,000 to "A" Unit holders or $0.49 per limited partnership "A" Unit and approximately $537,000 to "B" Unit holders or $7.14 per limited partnership "B" Unit). 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 in the year 2001 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 61,230 "A" and 38,455 "B" limited partnership units in the Partnership representing 63.59% and 51.17% of the outstanding "A" and "B" units, respectively. 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 63.59% and 51.17% of the outstanding "A" and "B" units, respectively, 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. 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, 2000 Consolidated Statements of Operations - Years ended December 31, 2000 and 1999 Consolidated Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 2000 and 1999 Consolidated Statements of Cash Flows - Years ended December 31, 2000 and 1999 Notes to Consolidated Financial Statements 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, 2000, 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, 2000. 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, 2000, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina March 2, 2001 MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 2000
Assets Cash and cash equivalents $ 892 Receivables and deposits (net of $34,000 allowance for bad debt) 85 Restricted escrows 281 Other assets 253 Investment properties (Notes C and G): Land $ 1,447 Buildings and related personal property 17,253 18,700 Less accumulated depreciation (9,715) 8,985 $ 10,496 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 192 Tenant security deposit liabilities 58 Accrued property taxes 152 Other liabilities 277 Mortgage notes payable (Note C) 9,880 Partners' (Deficit) Capital General Partner $ (117) Limited Partner "A" Unit holders - 96,284 units issued and outstanding (4,667) Limited Partner "B" Unit holders - 75,152 units issued and outstanding 4,721 (63) $ 10,496 See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data)
Years Ended December 31, 2000 1999 Revenues: Rental income $ 4,167 $ 4,997 Gain on sale of equipment -- 100 Other income 366 311 Gain on sale of investment property 4,910 -- Total revenues 9,443 5,408 Expenses: Operating 1,883 2,176 General and administrative 444 287 Depreciation 978 1,059 Interest 879 991 Property taxes 286 313 Total expenses 4,470 4,826 Income before extraordinary loss on early extinguishment of debt 4,973 582 Extraordinary loss on early extinguishment of debt (108) -- Net income (Note D) $ 4,865 $ 582 Net income allocated to general partner (1%) $ 49 $ 6 Net income allocated to limited partners (99%) 4,816 576 $ 4,865 $ 582 Per limited partnership "A" and "B" units: Income before extraordinary loss on early extinguishment of debt $ 28.71 $ 3.36 Extraordinary loss on early extinguishment of debt (0.62) -- Net income $ 28.09 $ 3.36 Distributions per limited partnership "A" units $ 54.33 $ 4.39 Distributions per limited partnership "B" units $ 21.10 $ -- See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (in thousands, except unit data)
Total Partners' General Limited Partners (Deficit) Partner "A" Units "B" Units Capital Original capital contributions $ 1 $ 9,706 $ 7,538 $ 17,245 Limited partnership units at December 31, 2000 and December 31, 1999 -- 96,284 75,152 171,436 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 Distributions to partners (32) (5,231) (1,586) (6,849) Net income for the year ended December 31, 2000 49 2,705 2,111 4,865 Partners' (deficit) capital at December 31, 2000 $ (117) $(4,667) $ 4,721 $ (63) See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2000 1999 Cash flows from operating activities: Net income $ 4,865 $ 582 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 978 1,059 Amortization of loan costs 51 64 Gain on disposal of property -- (100) Gain on sale of investment property (4,910) -- Extraordinary loss on early extinguishment of debt 108 -- Change in accounts: Receivables and deposits 245 87 Other assets 12 (35) Accounts payable (155) 143 Tenant security deposit liabilities (29) (24) Accrued property taxes (184) 61 Other liabilities (145) 183 Net cash provided by operating activities 836 2,020 Cash flows from investing activities: Property improvements and replacements (439) (1,076) Net (deposits to) withdrawals from restricted escrows (38) 122 Proceeds from sale of investment property 8,005 -- Net cash provided by (used in) investing activities 7,528 (954) Cash flows from financing activities: Payments on mortgage notes payable (75) (77) 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 (7,276) -- Net cash used in financing activities (9,752) (77) Net (decrease) increase in cash and cash equivalents (1,388) 989 Cash and cash equivalents at beginning of year 2,280 1,291 Cash and cash equivalents at end of year $ 892 $ 2,280 Supplemental disclosure of cash flow information: Cash paid for interest $ 851 $ 928 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 125 $ -- Distribution payable $ -- $ 427 See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 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 two apartment properties, one each 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 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. 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 2000 and 1999 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" and "B" 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, in banks and money market accounts. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $781,000 at December 31, 2000 that are maintained by the affiliated management company on behalf of affiliated entities in cash concentration accounts. 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 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 $26,000 and the escrows for Shadow Brook totaling approximately $8,000 are included in receivables and deposits. Restricted Escrows In relation to the mortgages at Shadow Brook Apartments, the mortgage lender has required a "replacement reserve" for certain capital improvements. At December 31, 2000, the balance was approximately $42,000. In relation to the mortgage at Hunt Club Apartments, the mortgage lender has required a "repair escrow" for certain capital replacements. At December 31, 2000, the balance was approximately $239,000. Investment Properties Investment properties consist of two 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, 2000 and 1999. 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. Loan Costs Loan costs of approximately $318,000 less accumulated amortization of approximately $95,000 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. As defined in SFAS No. 131, the Partnership has only one reportable segment. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Advertising Advertising costs of approximately $87,000 and $126,000 for the years ended December 31, 2000 and 1999, 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:
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 2000 Interest Rate Date Maturity (in thousands) (in thousands) Hunt Club 1st mortgage $ 3,880 $ 33 8.05% 09/01/20 $ -- Shadow Brook 1st mortgage 6,000 37 7.33% 11/01/03 6,000 $ 9,880 $ 70 $ 6,000
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. Both of the notes require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. 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 December 31, 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. Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2000 are as follows (in thousands): 2001 $ 84 2002 91 2003 6,098 2004 106 2005 115 Thereafter 3,386 $9,880 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): 2000 1999 Net income as reported $ 4,865 $ 582 Add (deduct) Depreciation differences (19) (15) Unearned income (94) 18 Gain on sale of investment property (1,975) -- Other (37) (4) Federal taxable income $ 2,740 $ 581 Federal taxable income per limited partnership unit $ 15.83 $ 3.36 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, 2000: Net liabilities as reported $ (63) Land and buildings 313 Accumulated depreciation 735 Syndication fees 1,975 Other 141 Net assets - tax basis $ 3,101 Note E - 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 each of the years ended December 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expense) $ 228 $ 266 Reimbursement for services of affiliates (included in general and administrative expenses and investment properties) 191 105 Partnership management fees (included in general and administrative expense) 135 38 Refinancing fee (included in loan costs) 39 -- During the years ended December 31, 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 $228,000 and $266,000 for the years ended December 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $191,000 and $105,000 for the years ended December 31, 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 $135,000 and $38,000 were earned during the years ended December 31, 2000 and 1999, respectively, in association with the distributions. 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 C"). In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 61,230 "A" and 38,455 "B" limited partnership units in the Partnership representing 63.59% and 51.17% of the outstanding "A" and "B" units, respectively. 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 63.59% and 51.17% of the outstanding "A" and "B" units, respectively, 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 F - 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 revenues were to be allocated to such reserve to the extent necessary to maintain the foregoing level. 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 G - Real Estate and Accumulated Depreciation
Initial Cost To Partnership (in thousands) Buildings Net Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) Hunt Club Apartments $ 3,880 $ 485 $ 5,673 $ 1,463 Shadow Brook Apartments 6,000 961 8,263 1,855 Totals $ 9,880 $ 1,446 $13,936 $ 3,318
Gross Amount At Which Carried At December 31, 2000 (in thousands) Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years (in thousands) Hunt Club $ 485 $ 7,136 $ 7,621 $ 4,471 1979 05/87 5-30 Shadow Brook 962 10,117 11,079 5,244 1985 05/87 5-30 Totals $1,447 $17,253 $18,700 $ 9,715
Reconciliation of "Real Estate and Accumulated Depreciation" Years Ended December 31, 2000 1999 (in thousands) Real Estate Balance at beginning of year $25,487 $24,411 Property improvements 564 1,076 Sale of investment property (7,351) -- Balance at end of year $18,700 $25,487 Accumulated Depreciation Balance at beginning of year $12,993 $11,934 Additions charged to expense 978 1,059 Sale of investment property (4,256) -- Balance at end of year $ 9,715 $12,993 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2000 and 1999, is approximately $19,013,000 and $27,764,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2000 and 1999, is approximately $8,980,000 and $12,128,000, respectively. Note H - Distributions 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" Unit) was paid 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, 2000, the Partnership declared and paid distributions from operations of approximately $1,512,000 (approximately $1,497,000 to "A" Unit holders or $15.55 per limited partnership "A" Unit) and of proceeds from the sale of Carlin Manor Apartments of approximately $5,337,000 (approximately $3,734,000 to "A" Unit holders or $38.78 per limited partnership "A" Unit and approximately $1,586,000 to "B" Unit holders or $21.10 per limited partnership "B" Unit). Subsequent to December 31, 2000, the Partnership declared a distribution from operations of approximately $590,000 (approximately $47,000 to "A" Unit holders or $0.49 per limited partnership "A" Unit and approximately $537,000 to "B" Unit holders or $7.14 per limited partnership "B" Unit). Note I - 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 $5,337,000 of the proceeds were distributed to the partners during the year ended December 31, 2000. The remaining proceeds were used to establish additional cash reserves for the Partnership. The Partnership's gain on the sale was approximately $4,910,000 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 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, 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. 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 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 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 43 Executive Vice President and Director Martha L. Long 41 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 since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. 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. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act: Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under generally accepted auditing standards. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner has approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2000 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were annual audit services of approximately $49,000 and non-audit services (principally tax-related) of approximately $24,000. Item 10. Executive Compensation Neither the director nor the officers of the General Partner received any remuneration from the Registrant. 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, 2000. Number of Percent Units of Total AIMCO Properties LP (1) 32,347 A units 33.59% (an affiliate of AIMCO) 20,015 B units 26.63% Insignia Properties LP (2) 2,243 A units 2.33% (an affiliate of AIMCO) 210 B units 0.28% 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, 2000, 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) 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, 2000 and 1999: 2000 1999 (in thousands) Property management fees $ 228 $ 266 Reimbursement for services of affiliates 191 105 Partnership management fees 135 38 Refinancing fee 39 -- During the years ended December 31, 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 $228,000 and $266,000 for the years ended December 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $191,000 and $105,000 for the years ended December 31, 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 $135,000 and $38,000 were earned during the years ended December 31, 2000 and 1999, respectively, in association with the distributions. An affiliate of the General Partner received $39,000 in conjunction with the refinancing of the mortgage encumbering Hunt Club Apartments in August 2000. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 61,230 "A" and 38,455 "B" limited partnership units in the Partnership representing 63.59% and 51.17% of the outstanding "A" and "B" units, respectively. 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 63.59% and 51.17% of the outstanding "A" and "B" units, respectively, 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. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K filed during the fourth quarter of calendar year 2000: None. 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 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. 10.21 Purchase and Sale Contract between Registrant and Carlin Manor Investors, Ltd., an Ohio Limited Liability Company, dated April 7, 2000. (Incorporated by reference to the Current Report on Form 8-K dated June 13, 2000.) 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 relating to Hunt Club Apartments. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended September 30, 2000.) 11 Statement regarding computation of Net Income per Unit of Depositary Receipt (Incorporated by reference to Note A of Item 7. Financial Statements of this Form 10-KSB). 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.) -----END PRIVACY-ENHANCED MESSAGE-----