-----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, LaayKaCQhspP83uieBDj6JQrMxnc6h8T1BuEp5hWReXQ80KCyYCqjkiIVLO2lrl2 CzNj6SN/SlIs4d3jK0vGFA== 0000711642-03-000408.txt : 20031113 0000711642-03-000408.hdr.sgml : 20031113 20031113140328 ACCESSION NUMBER: 0000711642-03-000408 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16684 FILM NUMBER: 03997232 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 10QSB 1 mbrf.txt MBRF UNITED STATES 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, 2003 [ ] 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 registrant 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) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2003
Assets Cash and cash equivalents $ 216 Receivables and deposits 110 Other assets 442 Assets held for sale 4,948 Investment property: Land $ 485 Buildings and related personal property 7,507 7,992 Less accumulated depreciation (5,534) 2,458 $ 8,174 Liabilities and Partners' (Deficiency) Capital Liabilities Accounts payable $ 56 Tenant security deposit liabilities 36 Accrued property taxes 232 Other liabilities 262 Mortgage note payable 3,633 Liabilities related to assets held for sale 8,516 Partners' (Deficiency) Capital General Partner $ (136) Limited Partner "A" Unit holders - 96,284 units issued and outstanding (8,496) Limited Partner "B" Unit holders - 75,152 units issued and outstanding 4,071 (4,561) $ 8,174 See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 (Restated) (Restated) Revenues: Rental income $ 277 $ 318 $ 910 $ 1,016 Other income 60 47 150 124 Total revenues 337 365 1,060 1,140 Expenses: Operating 234 181 618 549 General and administrative 78 75 172 232 Depreciation 95 95 291 293 Interest 78 79 231 236 Property taxes 50 38 165 118 Total expenses 535 468 1,477 1,428 Loss from continuing operations (198) (103) (417) (288) Income from discontinued operations 92 85 187 257 Net loss $ (106) $ (18) $ (230) $ (31) Net loss allocated to general partner (1%) $ (1) $ -- $ (2) $ -- Net loss allocated to limited partners (99%) (105) (18) (228) (31) $ (106) $ (18) $ (230) $ (31) Per limited partnership unit: Loss from continuing operations (1.14) (0.59) (2.41) (1.66) Income from discontinued operations 0.53 0.49 1.08 1.48 Net loss per limited partnership unit $ (0.61) $ (0.10) $ (1.33) $ (0.18) Distributions per limited partnership "A" units $ 1.90 $ 2.05 $ 3.48 $ 7.11 Distributions per limited partnership "B" units $ -- $ -- $ -- $ -- See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL (Unaudited) (in thousands, except unit data)
Total Partners' General Limited Partners (Deficiency) Partner "A" Units "B" Units Capital Original capital contributions $ 1 $ 9,706 $ 7,538 $ 17,245 Limited partnership units at December 31, 2002 and September 30, 2003 -- 96,284 75,152 171,436 Partners' (deficiency) capital at December 31, 2002 $ (131) $ (8,033) $ 4,171 $ (3,993) Distributions to partners (3) (335) -- (338) Net loss for the nine months ended September 30, 2003 (2) (128) (100) (230) Partners' (deficiency) capital at September 30, 2003 $ (136) $ (8,496) $ 4,071 $ (4,561) See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands, except unit data)
Nine Months Ended September 30, 2003 2002 Cash flows from operating activities: Net loss $ (230) $ (31) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 636 638 Amortization of loan costs 20 20 Bad debt 148 78 Change in accounts: Receivables and deposits (88) (40) Other assets (41) (10) Accounts payable 20 (48) Tenant security deposit liabilities 14 7 Accrued property taxes 149 119 Other liabilities 90 108 Net cash provided by operating activities 718 841 Cash flows from investing activities: Property improvements and replacements (142) (121) Net withdrawals from restricted escrows -- 112 Net cash used in investing activities (142) (9) Cash flows from financing activities: Payments on mortgage notes payable (241) (223) Distributions to partners (338) (692) Net cash used in financing activities (579) (915) Net decrease in cash and cash equivalents (3) (83) Cash and cash equivalents at beginning of period 219 342 Cash and cash equivalents at end of period $ 216 $ 259 Supplemental disclosure of cash flow information: Cash paid for interest $ 671 $ 688 See Accompanying Notes to Consolidated Financial Statements
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, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2003. 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, 2002. The General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as discontinued operations on the statement of operations. As a result, the accompanying consolidated statements of operations as of January 1, 2002 have been restated to reflect the operations of Shadow Brook Apartments, which was sold October 28, 2003, as income from discontinued operations. 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 - 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) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the General Partner are entitled to receive 5% of gross receipts from both of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $134,000 and $146,000 for the nine months ended September 30, 2003 and 2002, respectively, which is included in operating expenses and discontinued operations. An affiliate of the General Partner received reimbursements of accountable administrative expenses amounting to approximately $71,000 and $125,000 for the nine months ended September 30, 2003 and 2002, respectively, which is included in general and administrative expenses. 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 $30,000 and $62,000 were paid for the nine months ended September 30, 2003 and 2002, respectively, in association with operating distributions and are included in general and administrative expenses. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the nine months ended September 30, 2003 and 2002, the Partnership was charged by AIMCO and its affiliates approximately $42,000 and $50,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Distributions Upon distribution of sale proceeds from the sale of Carlin Manor during the year ended December 31, 2000, the "A" unit holders did not receive the correct priority return. As a result, at September 30, 2003 the "B" unit holders have been overpaid approximately $1,328,000 (approximately $17.67 per limited partnership "B" unit). Approximately $1,303,000 of this amount is due to the "A" unit holders (approximately $13.53 per limited partnership "A" unit) and approximately $25,000 is due to the General Partner. All future distributions payable to the "B" Unit holders will be paid to the "A" unit holders until the "A" unit holders receive the correct priority return. During the nine months ended September 30, 2003, the "B" unit holders were not entitled to any distributions. Subsequent to September 30, 2003, the Partnership distributed approximately $5,884,000 of sale proceeds from the sale of Shadow Brook Apartments (see Note D - - Subsequent Event). Due to the prior overpayment to "B" unit holders, the "A" unit holders received approximately $1,303,000 and the General Partner received approximately $25,000 of funds that otherwise would have been paid to the "B" unit holders. Note D - Subsequent Event On October 28, 2003, the Partnership sold Shadow Brook Apartments to an unrelated third party for a gross sale price of $14,750,000. The net proceeds realized by the Partnership were approximately $6,108,000 after payment of closing costs and assumption of the mortgage by the buyer. The Partnership expects to recognize a gain of approximately $9,565,000 during the fourth quarter of 2003 as a result of the sale. In addition, the Partnership expects to recognize a loss on extinguishment of debt of approximately $251,000 as a result of unamortized loan costs being written off. The accompanying statements of operations have been restated as of January 1, 2002 to reflect the operations of Shadow Brook Apartments as income from discontinued operations and includes revenues of approximately $1,611,000 and $1,711,000 for the nine months ended September 30, 2003 and 2002, respectively. Note E - 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. (the "Nuanes action") 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that 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 that 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 series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the General Partner the claims will not result in any material liability to the Partnership. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. 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, 2003 and 2002: Average Occupancy Property 2003 2002 Hunt Club Apartments 90% 94% Indianapolis, Indiana Shadow Brook Apartments 95% 96% West Valley City, Utah The General Partner attributes the decrease in occupancy at Hunt Club Apartments to a slow economy and lower mortgage interest rates which have encouraged home ownership. Results of Operations On October 28, 2003, the Partnership sold Shadow Brook Apartments to an unrelated third party for a gross sale price of $14,750,000. The net proceeds realized by the Partnership were approximately $6,108,000 after payment of closing costs and assumption of the mortgage by the buyer. The Partnership expects to recognize a gain of approximately $9,565,000 during the fourth quarter of 2003 as a result of the sale. In addition, the Partnership expects to recognize a loss on extinguishment of debt of approximately $251,000 as a result of unamortized loan costs being written off. The accompanying statements of operations have been restated as of January 1, 2002 to reflect the operations of Shadow Brook Apartments as income from discontinued operations and includes revenues of approximately $1,611,000 and $1,711,000 for the nine months ended September 30, 2003 and 2002, respectively. The Partnership recognized income from discontinued operations of approximately $187,000 and $257,000 for the nine months September 30, 2003 and 2002, respectively. The Partnership recognized income from discontinued operations of approximately $92,000 and $85,000 for the three months ended September 30, 2003 and 2002, respectively. The decrease in income from discontinued operations for the nine month period was due to a decrease in rental revenue as a result of a slight decrease in occupancy, a decrease in average rental rates and an increase in bad debt and concession expenses at Shadow Brook Apartments. The increase in income for the three month period was due primarily to increases in lease cancellation fees and late charges at Shadow Brook Apartments. The Partnership recognized losses from continuing operations of approximately $417,000 and $288,000 for the nine months ended September 30, 2003 and 2002, respectively. The Partnership recognized losses from continuing operations of approximately $198,000 and $103,000 for the three months ended September 30, 2003 and 2002, respectively. The increase in losses from continuing operations for the respective periods was due to a decrease in total revenues and an increase in total expenses. Total revenues decreased for the three and nine months ended September 30, 2003 due to a decrease in rental income partially offset by an increase in other income. Rental income decreased primarily due to decreases in both occupancy and average rental rates and an increase in bad debt expense at Hunt Club Apartments. Other income increased primarily due to an increase in lease cancellation fees and late charges partially offset by a decrease in utilities reimbursements at Hunt Club Apartments. Total expenses increased for the three and nine months ended September 30, 2003 due primarily to increases in operating and property tax expenses. The increase in total expenses for the nine months ended September 30, 2003 was partially offset by a decrease in general and administrative expense. Depreciation and interest expenses remained relatively constant for the comparable periods. Operating expenses increased primarily due to increases in utilities and contract cleaning and repairs partially offset by decreases in salaries and related employee expenses and management fees at Hunt Club Apartments. Property tax expense increased at Hunt Club Apartments which is located in Indiana. During 2003, Indiana adjusted its methodology for assessing property tax values and rates, which has resulted in a significant increase in property tax expense. General and administrative expenses decreased for the nine months ended September 30, 2003 primarily due to reduced costs of services included in the management reimbursements paid to an affiliate of the General Partner as allowed under the Partnership Agreement and decreased fees paid to the General Partner in connection with distributions made from operations. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. 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, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2003, the Partnership had cash and cash equivalents of approximately $216,000 as compared to approximately $259,000 at September 30, 2002. Cash and cash equivalents decreased approximately $3,000 for the nine months ended September 30, 2003, from December 31, 2002, due to approximately $579,000 and $142,000 of cash used in financing and investing activities, respectively, partially offset by approximately $718,000 of cash used in operating activities. Cash used in financing activities consisted of distributions to partners and principal payments made on the mortgages encumbering the Partnership's investment properties. Cash used in investing activities consisted of property improvements and replacements. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for each of the Partnership's properties are detailed below. Hunt Club During the nine months ended September 30, 2003, the Partnership completed approximately $55,000 of capital improvements at Hunt Club Apartments, consisting primarily of floor covering and appliance replacements and water heater upgrades. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $13,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of floor covering and siding replacements and exterior concrete upgrades. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Shadow Brook During the nine months ended September 30, 2003, the Partnership completed approximately $87,000 of capital improvements at Shadow Brook Apartments, consisting primarily of water heater and furniture and fixture upgrades, appliance and floor covering replacements and air conditioning improvements. These improvements were funded from operating cash flow. Capital improvements of approximately $6,000 were expended during the period October 1, 2003 to October 28, 2003 when the property was sold, consisting primarily of appliances and floor covering replacements. The additional capital expenditures for 2003 at the Partnership's property 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 thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering Hunt Club Apartments of approximately $3,633,000 is being amortized over 20 years and matures September 1, 2020, at which time the mortgage is scheduled to be fully amortized. The mortgage indebtedness encumbering Shadow Brook Apartments of approximately $8,347,000 at September 30, 2003 was assumed by the buyer in connection with the sale of the property. The Partnership distributed the following amounts during the nine months ended September 30, 2003 and 2002 (in thousands, except per unit data):
Per Limited Per Limited Nine Months Ended Partnership Nine Months Ended Partnership September 30, 2003 Unit September 30, 2002 Unit Operations $ 338 $ 3.48 $ 692 $ 7.11
The limited partner portion of the distribution during the nine months ended September 30, 2003 was approximately $335,000 to "A" unit holders or $3.48 per limited partnership "A" unit and zero to "B" unit holders. The limited partner portion of the distribution during the nine months ended September 30, 2002 was approximately $685,000 to "A" unit holders or $7.11 per limited partnership "A" unit and zero to "B" Unit holders. The Partnership's cash available for distribution is reviewed on a monthly 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 2003 or subsequent periods. Upon distribution of sale proceeds from the sale of Carlin Manor during the year ended December 31, 2000, the "A" unit holders did not receive the correct priority return. As a result, at September 30, 2003 the "B" unit holders have been overpaid approximately $1,328,000 (approximately $17.67 per limited partnership "B" unit). Approximately $1,303,000 of this amount is due to the "A" unit holders (approximately $13.53 per limited partnership "A" unit) and approximately $25,000 is due to the General Partner. All future distributions payable to the "B" Unit holders will be paid to the "A" unit holders until the "A" unit holders receive the correct priority return. During the nine months ended September 30, 2003, the "B" unit holders were not entitled to any distributions. Subsequent to September 30, 2003, the Partnership distributed approximately $5,884,000 of sale proceeds from the sale of Shadow Brook Apartments (see "Item 1. Financial Statements, Note D - Subsequent Event"). Due to the prior overpayment to "B" unit holders, the "A" unit holders received approximately $1,303,000 and the General Partner received approximately $25,000 of funds that otherwise would have been paid to "B" unit holders. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 62,627 "A" and 39,384 "B" Units of Depository Receipts ("Units") in the Partnership representing 65.04% and 52.41% of the outstanding "A" and "B" Units, respectively, at September 30, 2003. 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 acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 65.04% and 52.41% of the outstanding "A" and "B" Units, respectively, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned and the Partnership fully reserves all balances outstanding over thirty days. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 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. (the "Nuanes action") 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 purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that 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 that 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 series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the General Partner the claims will not result in any material liability to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 3.1, Agreement of Limited Partnership, incorporated by reference to Exhibit A-5 to the Prospectus of the Registrant dated December 10, 1986 as filed with the Commission pursuant to Rule 424(b) under the Act. Exhibit 3.2, Certificate of Limited Partnership (incorporated by reference to Registration Statement of Registrant (File No. 3-38908) filed December 10, 1986, as amended to date). Exhibit 31.1, Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2, Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2003. 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/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer Date: November 12, 2003 Exhibit 31.1 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Multi-Benefit Realty Fund '87-1; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Patrick J. Foye Patrick J. Foye Executive Vice President of ConCap Equities, Inc., equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Multi-Benefit Realty Fund '87-1; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer of ConCap Equities, Inc., equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Multi-Benefit Realty Fund '87-1 (the "Partnership"), for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Patrick J. Foye Name: Patrick J. Foye Date: November 12, 2003 /s/Paul J. McAuliffe Name: Paul J. McAuliffe Date: November 12, 2003 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----