FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-16684
MULTI-BENEFIT REALTY FUND '87-1
(Exact name of small business issuer as specified in its charter)
California 94-3026785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 431
Receivables and deposits 421
Restricted escrows 111
Other assets 471
Investment properties:
Land $ 1,447
Buildings and related personal property 17,610
19,057
Less accumulated depreciation (10,344) 8,713
$ 10,147
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 83
Tenant security deposit liabilities 51
Accrued property taxes 272
Other liabilities 258
Mortgage notes payable 12,593
Partners' (Deficit) Capital
General Partner $ (125)
Limited Partner "A" Unit holders -
96,284 units issued and outstanding (6,083)
Limited Partner "B" Unit holders -
75,152 units issued and outstanding 3,098 (3,110)
$ 10,147
See Accompanying Notes to Consolidated Financial Statements
b)
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,
2001 2000 2001 2000
Revenues:
Rental income $ 876 $ 860 $ 2,651 $ 3,245
Other income 72 79 208 292
(Loss) gain on sale of investment
property -- (4) -- 4,810
Total revenues 948 935 2,859 8,347
Expenses:
Operating 395 369 1,129 1,472
General and administrative 60 98 261 306
Depreciation 208 197 629 775
Interest 213 198 608 679
Property taxes 61 57 190 222
Total expenses 937 919 2,817 3,454
Income before extraordinary loss 11 16 42 4,893
Extraordinary loss on early
extinguishment of debt (47) (3) (47) (108)
Net (loss) income $ (36) $ 13 $ (5) $ 4,785
Net (loss) income allocated to
general partner (1%) $ -- $ -- $ -- $ 48
Net (loss) income allocated to
limited partners (99%) (36) 13 (5) 4,737
$ (36) $ 13 $ (5) $ 4,785
Per limited partnership "A" and "B" units:
Income before extraordinary
loss $ 0.06 $ 0.09 $ 0.24 $ 28.25
Extraordinary loss on early
extinguishment of debt (0.27) (0.01) (0.27) (0.62)
Net (loss) income $ (0.21) $ 0.08 $ (0.03) $ 27.63
Distributions per limited
partnership "A" units $ 13.33 $ -- $ 14.68 $ 44.37
Distributions per limited
partnership "B" units $ 13.33 $ -- $ 21.57 $ 16.22
See Accompanying Notes to Consolidated Financial Statements
c)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(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
September 30, 2001 -- 96,284 75,152 171,436
Partners' (deficit) capital at
December 31, 2000 $ (117) $ (4,667) $ 4,721 $ (63)
Distributions to partners (8) (1,413) (1,621) (3,042)
Net loss for the nine months
ended September 30, 2001 -- (3) (2) (5)
Partners' (deficit) capital
at September 30, 2001 $ (125) $ (6,083) $ 3,098 $ (3,110)
See Accompanying Notes to Consolidated Financial Statements
d)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (5) $ 4,785
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 629 775
Amortization of loan costs 28 42
Gain on sale of investment property -- (4,810)
Extraordinary loss on early extinguishment of debt 47 108
Change in accounts:
Receivables and deposits (336) (12)
Other assets (12) (1)
Accounts payable 16 (189)
Tenant security deposit liabilities (7) (35)
Accrued property taxes 120 (71)
Other liabilities (19) (166)
Net cash provided by operating activities 461 426
Cash flows from investing activities:
Property improvements and replacements (482) (287)
Net withdrawals from (deposits to) restricted escrows 170 (14)
Proceeds from sale of investment property -- 8,005
Net cash (used in) provided by investing
activities (312) 7,704
Cash flows from financing activities:
Payments on mortgage notes payable (62) (55)
Repayment of mortgage notes payable (6,000) (6,082)
Proceeds from mortgage notes payable 8,775 3,900
Prepayment penalty paid -- (62)
Loan costs paid (281) (157)
Distributions to partners (3,042) (5,945)
Net cash used in financing activities (610) (8,401)
Net decrease in cash and cash equivalents (461) (271)
Cash and cash equivalents at beginning of period 892 2,280
Cash and cash equivalents at end of period $ 431 $ 2,009
Supplemental disclosure of cash flow information:
Cash paid for interest $ 564 $ 663
At December 31, 2000, approximately $125,000 of property improvements and
replacements were included in accounts payable.
See Accompanying Notes to Consolidated Financial Statements
e)
MULTI-BENEFIT REALTY FUND '87-1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Multi-Benefit
Realty Fund '87-1 (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of ConCap Equities, Inc. (the "General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2001, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2001. 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, 2000. The General Partner is
an affiliate of Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust.
Principles of Consolidation
The consolidated financial statements of the Registrant include its 99% limited
partnership interest in Hunt Club Associates, Ltd. The general partner of this
partnership is the General Partner. The Partnership may remove the general
partner of Hunt Club Associates, Ltd.; therefore, this partnership is controlled
and consolidated by the Registrant. All significant interpartnership balances
have been eliminated.
Limited Partnership Units
The Partnership has issued two classes of Units of Depositary Receipts
("Units"), "A" Units and "B" Units. The two classes of Units are entitled to
different rights and priorities as to cash distributions and Partnership
allocations. The Units represent economic rights attributable to the limited
partnership interests in the Partnership and entitle the holders thereof ("Unit
holders") to participate in certain allocations and distributions of the
Partnership.
Segment Reporting
Statement of Financial Accounting Standards ("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 required that those enterprises report
selected information about operating segments in interim financial reports. It
also established 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.
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) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
The following transactions with the General Partner and/or its affiliates were
incurred during the nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $144 $181
Reimbursement for services of affiliates (included in
general and administrative expenses and investment
properties) 313 130
Partnership management fee (included in general and
administrative expense) 67 91
Refinancing fee (included in other assets) 88 39
During the nine months ended September 30, 2001 and 2000, 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 $144,000 and
$181,000 for the nine months ended September 30, 2001 and 2000, respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $313,000 and $130,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
amounts for the nine months ended September 30, 2001 is approximately $170,000
of construction service reimbursements.
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 $67,000 and $91,000
were paid for the nine months ended September 30, 2001 and 2000, respectively.
An affiliate of the General Partner received approximately $88,000 for services
provided in conjunction with the refinancing of the mortgage encumbering Shadow
Brook Apartments in August 2001 and $39,000 for services provided in conjunction
with the refinancing of the mortgage encumbering Hunt Club Apartments in August
2000 (see "Note E"). These costs were capitalized and are included in other
assets on the consolidated balance sheet.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 61,650 "A" and 38,612 "B"
limited partnership units in the Partnership representing 64.03% and 51.38% 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 voting
on certain amendments to the Partnership Agreement and voting to remove the
General Partner. As a result of its ownership of 64.03% and 51.38% of the
outstanding "A" and "B" Units, respectively, AIMCO is in a position to control
all such 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 its affiliation with
the General Partner.
Note C - Distributions
During the nine months ended September 30, 2001, the Partnership declared and
paid cash distributions of approximately $3,042,000 (approximately $1,413,000 to
"A" Unit holders or $14.68 per limited partnership "A" Unit and approximately
$1,621,000 to "B" Unit holders or $21.57 per limited partnership "B" Unit) of
which approximately $757,000 (approximately $130,000 to "A" Unit holders or
$1.35 per limited partnership "A" Unit and approximately $619,000 to "B" Unit
holders or $8.24 per limited partnership "B" Unit) was from operations and
approximately $2,285,000 (approximately $1,283,000 to "A" Unit holders or $13.33
per limited partnership "A" Unit and approximately $1,002,000 to "B" Unit
holders or $13.33 per limited partnership "B" Unit) was from proceeds from the
refinance of Shadow Brook Apartments in August 2001. During the nine months
ended September 30, 2000, the Partnership paid a cash distribution from
operations, which was declared and accrued at December 31, 1999, of
approximately $427,000 of which approximately $423,000 ($4.39 per limited
partnership "A" Unit) was paid to the "A" Unit limited partners. In addition,
the Partnership declared and paid distributions from operations of approximately
$1,018,000 (approximately $1,008,000 to "A" Unit holders or $10.47 per limited
partnership "A" Unit) and of proceeds from the sale of Carlin Manor Apartments
of approximately $4,500,000 (approximately $3,264,000 to "A" Unit holders or
$33.90 per limited partnership "A" Unit and approximately $1,219,000 to "B" Unit
holders or $16.22 per limited partnership "B" Unit).
Note D - 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
repay 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 $4,810,000 and there was an extraordinary loss on early
extinguishment of debt of approximately $105,000 consisting of a prepayment
penalty and the write-off of unamortized loan costs.
Note E - Refinancing of Mortgage Notes Payable
On August 31, 2001, the Partnership refinanced the mortgage encumbering Shadow
Brook Apartments. The refinancing replaced indebtedness of approximately
$6,000,000 with a new mortgage of $8,775,000. The new mortgage carries a stated
interest rate of 7.10% as compared to the 7.33% interest rate on the old
mortgage. Payments on the mortgage loan are due monthly until the loan matures
on September 1, 2021 at which time the loan will be fully amortized. Total
capitalized loan costs were approximately $281,000 at September 30, 2001. The
Partnership recognized an extraordinary loss on the early extinguishment of debt
of approximately $47,000 due to the write-off of unamortized loan costs.
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 at which time the loan will be fully amortized. In
addition, the Partnership was required to establish a repair escrow of
approximately $239,000 with the lender for certain capital replacements. Total
capitalized loan costs were approximately $157,000 at September 30, 2000. The
Partnership recognized an extraordinary loss on the early extinguishment of debt
of approximately $3,000 due to the write-off of unamortized loan costs.
Note F - 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 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 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 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which, together with a demurrer filed by other defendants, is
currently scheduled to be heard on November 15, 2001. The Court has set the
matter for trial in January 2003.
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 first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. The matters are currently scheduled to be heard on
November 15, 2001.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussions of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operations. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine months ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Hunt Club Apartments 91% 94%
Indianapolis, Indiana
Shadow Brook Apartments 97% 97%
West Valley City, Utah
The General Partner attributes the decrease in occupancy at Hunt Club Apartments
to increased competition in Indianapolis, Indiana.
Results of Operations
The Partnership had a net loss of approximately $5,000 for the nine months ended
September 30, 2001 as compared to net income of approximately $4,785,000 for the
nine months ended September 30, 2000. For the three months ended September 30,
2001, the Partnership had a net loss of approximately $36,000 as compared to net
income of approximately $13,000 for the three months ended September 30, 2000.
The decrease in net income for the nine month period ended September 30, 2001 is
primarily attributable to the gain recorded on the sale of Carlin Manor
Apartments during 2000 as discussed below and a decrease in total revenues
partially offset by a decrease in total expenses resulting from the sale of
Carlin Manor Apartments.
Excluding the operations and sale of Carlin Manor Apartments, the Partnership
had a net loss of approximately $21,000 for the nine months ended September 30,
2001 compared to net income of approximately $83,000 for the nine months ended
September 30, 2000. For the three months ended September 30, 2001 the
Partnership had a net loss of approximately $36,000 compared to net income of
approximately $83,000 for the three months ended September 30, 2000. The
decrease in net income for the three and nine months ended September 30, 2001 is
due to a decrease in total revenues, an increase in total expenses, and an
increase in the extraordinary loss on early extinguishment of debt due to the
refinance of Shadow Brook Apartments in August 2001. The decrease in total
revenues for the nine months ended September 30, 2001 is due to a decrease in
other income partially offset by an increase in rental income. The decrease in
total revenues for the three months ended September 30, 2001 is due to a
decrease in rental and other income. Other income decreased for the three and
nine months ended September 30, 2001 as a result of decreased interest income
due to lower average cash balances in interest bearing accounts and decreased
telephone commissions primarily at Shadow Brook Apartments partially offset by
increased utility reimbursements at both properties. Rental income increased for
the nine months ended September 30, 2001 due primarily to an increase in average
rental rates at both of the Partnership's properties partially offset by reduced
occupancy at Hunt Club Apartments. Rental income decreased for the three months
ended September 30, 2001 due to the decrease in occupancy at Hunt Club
Apartments, partially offset by increased rental rates at both of the
Partnership's properties.
Excluding the operations of Carlin Manor, total expenses increased for the three
and nine month periods ended September 30, 2001 due to increased operating,
depreciation, interest, and property tax expenses partially offset by decreased
general and administrative expenses. Operating expenses increased primarily due
to increased utility expenses primarily at Hunt Club Apartments and increased
insurance expenses at both of the Partnership's properties partially offset by
reduced maintenance expenses at both of the Partnership properties. Depreciation
expense increased primarily due to property improvements and replacements
completed during the past twelve months. Interest expense increased due to the
refinancing of Hunt Club Apartments in August 2000 and the refinancing of Shadow
Brook Apartments in August 2001 which increased the debt balances at the
properties. Property tax expense increased due to a property tax refund received
during 2000 at Hunt Club Apartments. General and administrative expenses
decreased primarily due to a decrease in the payment of Partnership management
fees due to reduced distributions from operations during 2001, decreased
professional fees necessary to manage the Partnership, and a decrease in the
cost of services included in the management reimbursements to the General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative expenses for the three and nine months ended September 30, 2001
and 2000, are costs associated with the quarterly and annual communications with
the investors and regulatory agencies and the annual audit required by the
Partnership Agreement.
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
repay 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 $4,810,000 and there was an extraordinary loss on early
extinguishment of debt of approximately $105,000 consisting of a prepayment
penalty and the write-off of unamortized loan costs.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of 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 September 30, 2001, the Partnership had cash and cash equivalents of
approximately $431,000 as compared to approximately $2,009,000 at September 30,
2000. Cash and cash equivalents decreased approximately $461,000 since December
31, 2000, due to approximately $312,000 of cash used in investing activities and
approximately $610,000 of cash used in financing activities, which was partially
offset by approximately $461,000 of cash provided by operating activities. Cash
used in investing activities consisted of property improvements and replacements
which were partially offset by net withdrawals from restricted escrows
maintained by the mortgage lender. Cash used in financing activities consisted
of distributions to partners, the repayment of the mortgage encumbering Shadow
Brook Apartments, loan costs paid, and payments of principal made on the
mortgage encumbering Hunt Club Apartments which were partially offset by the
proceeds received from the refinancing of Shadow Brook Apartments. The
Partnership invests its working capital reserves in interest bearing accounts.
On August 31, 2001, the Partnership refinanced the mortgage encumbering Shadow
Brook Apartments. The refinancing replaced indebtedness of approximately
$6,000,000 with a new mortgage of $8,775,000. The new mortgage carries a stated
interest rate of 7.10% as compared to the 7.33% interest rate on the old
mortgage. Payments on the mortgage loan are due monthly until the loan matures
on September 1, 2021 at which time the loan will be fully amortized. Total
capitalized loan costs were approximately $281,000 at September 30, 2001. The
Partnership recognized an extraordinary loss on the early extinguishment of debt
of approximately $47,000 due to the write-off of unamortized loan costs.
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 at which time the loan will be fully amortized. In
addition, the Partnership was required to establish a repair escrow of
approximately $239,000 with the lender for certain capital replacements. Total
capitalized loan costs were approximately $157,000 at September 30, 2000. The
Partnership recognized an extraordinary loss on the early extinguishment of debt
of approximately $3,000 due to the write-off of unamortized loan costs.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Hunt Club
Approximately $239,000 was budgeted for capital improvements for the year 2001
at Hunt Club Apartments consisting primarily of carpet and tile replacements,
appliances, and water heater replacements. During the nine months ended
September 30, 2001, the Partnership completed approximately $195,000 of capital
improvements at Hunt Club Apartments, consisting primarily of carpet and tile
replacements, appliances, structural improvements, and water heater
replacements. These improvements were funded from operating cash flow and
replacement reserves.
Shadow Brook
Approximately $196,000 was budgeted for capital improvements for the year 2001
at Shadow Brook Apartments consisting primarily of carpet and vinyl
replacements, major landscaping, and appliances. During the nine months ended
September 30, 2001, the Partnership completed approximately $162,000 of capital
improvements at Shadow Brook Apartments, consisting primarily of office
computers, major landscaping, electrical upgrades, carpet and vinyl
replacements, and appliances. These improvements were funded from operating cash
flow and replacement reserves.
The additional capital expenditures for 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.
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 $12,593,000 is amortized over 20 years
and matures in September 2020 and 2021 for Hunt Club Apartments and Shadow Brook
Apartments, respectively, at which time it will be fully amortized.
During the nine months ended September 30, 2001, the Partnership declared and
paid cash distributions of approximately $3,042,000 (approximately $1,413,000 to
"A" Unit holders or $14.68 per limited partnership "A" Unit and approximately
$1,621,000 to "B" Unit holders or $21.57 per limited partnership "B" Unit) of
which approximately $757,000 (approximately $130,000 to "A" Unit holders or
$1.35 per limited partnership "A" Unit and approximately $619,000 to "B" Unit
holders or $8.24 per limited partnership "B" Unit) was from operations and
approximately $2,285,000 (approximately $1,283,000 to "A" Unit holders or $13.33
per limited partnership "A" Unit and approximately $1,002,000 to "B" Unit
holders or $13.33 per limited partnership "B" Unit) was from proceeds from the
refinance of Shadow Brook Apartments in August 2001. During the nine months
ended September 30, 2000, the Partnership paid a cash distribution from
operations, which was declared and accrued at December 31, 1999, of
approximately $427,000 of which approximately $423,000 ($4.39 per limited
partnership "A" Unit) was paid to the "A" Unit limited partners. In addition,
the Partnership declared and paid distributions from operations of approximately
$1,018,000 (approximately $1,008,000 to "A" Unit holders or $10.47 per limited
partnership "A" Unit) and of proceeds from the sale of Carlin Manor Apartments
of approximately $4,500,000 (approximately $3,264,000 to "A" Unit holders or
$33.90 per limited partnership "A" Unit and approximately $1,219,000 to "B" Unit
holders or $16.22 per limited partnership "B" Unit). The Partnership's
distribution policy 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 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 61,650 "A" and 38,612 "B"
limited partnership units in the Partnership representing 64.03% and 51.38% 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 voting
on certain amendments to the Partnership Agreement and voting to remove the
General Partner. As a result of its ownership of 64.03% and 51.38% of the
outstanding "A" and "B" Units, respectively, AIMCO is in a position to control
all such 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 its affiliation with
the General Partner.
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 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 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 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a
motion for reconsideration of the Court's July 10, 2001 order granting in part
and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed
a fourth amended class and derivative action complaint. On September 12, 2001,
the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the
General Partner and affiliated defendants filed a demurrer to the fourth amended
complaint, which, together with a demurrer filed by other defendants, is
currently scheduled to be heard on November 15, 2001. The Court has set the
matter for trial in January 2003.
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 first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants
moved to strike the first amended complaint in its entirety for violating the
Court's July 10, 2001 order granting in part and denying in part defendants'
demurrer in the Nuanes action, or alternatively, to strike certain portions of
the complaint based on the statute of limitations. Other defendants in the
action demurred to the fourth amended complaint, and, alternatively, moved to
strike the complaint. The matters are currently scheduled to be heard on
November 15, 2001.
The General Partner does not anticipate that any costs, whether legal or
settlement costs, associated with these cases will be material to the
Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.23, Multifamily Note dated August 31, 2001, by and
between Multi-Benefit Realty Fund '87-1, a California limited
partnership, and GMAC Commercial Mortgage Corporation, a
California corporation.
b) Reports on Form 8-K filed during the quarter ended September
30, 2001:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MULTI-BENEFIT REALTY FUND '87-1
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
FHLMC Loan No. 002652579
Shadow Brook Apartments
MULTIFAMILY NOTE
(MULTISTATE - REVISION DATE 11-01-2000)
US $8,775,000.00 As of August 30, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Eight Million Seven
Hundred Seventy-Five Thousand and 00/100 Dollars (US $8,775,000.00), with
interest on the unpaid principal balance at the annual rate of seven and one
hundred thousandths percent (7.100%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, and any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of Sixty-Eight Thousand Five Hundred Sixty and 20/100 Dollars (US
$68,560.20), shall be payable on the first day of each month beginning on
October 1, 2001, until the entire unpaid principal balance evidenced by this
Note is fully paid.
(c) Any accrued interest remaining past due for 30 days or more may, at Lender's
discretion, be added to and become part of the unpaid principal balance and
shall bear interest at the rate or rates specified in this Note, and any
reference below to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on September 1, 2021 or on any earlier date on
which the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "Maturity Date"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
(d) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
amount (unless applicable law requires a lesser amount be charged, in which
event such lesser amount shall be substituted). Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the loan evidenced by this Note (the "Loan"), and
that it is extremely difficult and impractical to determine those additional
expenses. Borrower agrees that the late charge payable pursuant to this
Paragraph represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses
Lender will incur by reason of such late payment. The late charge is payable in
addition to, and not in lieu of, any interest payable at the Default Rate
pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for thirty (30) days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of four (4) percentage points
above the rate stated in the first paragraph of this Note and the maximum
interest rate which may be collected from Borrower under applicable law. If the
unpaid principal balance and all accrued interest are not paid in full on the
Maturity Date, the unpaid principal balance and all accrued interest shall bear
interest from the Maturity Date at the Default Rate. Borrower also acknowledges
that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan, that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30)
days, Lender will incur additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other obligations and to take advantage of other investment opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses. Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30) days
or any other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk. Borrower agrees that the increase in the
rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable law, in any action to enforce Borrower's personal liability under
this Paragraph 9, Borrower waives any right to set off the value of the
Mortgaged Property against such personal liability.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment (any
receipt by Lender of principal, other than principal required to be paid in
monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity
Date set forth in Paragraph 3(c)) under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on a Business Day designated as the date for such prepayment in a written
notice from Borrower to Lender given at least 30 days prior to the date of such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Paragraph 10(c). For all purposes including the accrual of interest, any
prepayment received by Lender on any day other than the last calendar day of the
month shall be deemed to have been received on the last calendar day of such
month. For purposes of this Note, a "Business Day" means any day other than a
Saturday, Sunday or any other day on which Lender is not open for business.
Unless expressly provided for in the Loan Documents, Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
However, if a partial prepayment is provided for in the Loan Documents or is
accepted by Lender in Lender's discretion, a prepayment premium calculated
pursuant to Paragraph 10(c) shall be due and payable by Borrower.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Paragraph 10(c).
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made during the period from
one hundred eighty (180) days before the scheduled Maturity Date to the
scheduled Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Any prepayment premium payable under this Note shall be computed as follows:
(1) If the prepayment is made between the date of this Note and the
date that is 180 months after the first day of the first calendar month
following the date of this Note (the "Yield Maintenance Period"), the prepayment
premium shall be whichever is the greater of subparagraphs (i) and (ii) below:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the
Assumed Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
this Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by
Lender of collateral or security to a portion of the principal
balance, the date of such application; and in any other case, the
date on which Lender accelerates the unpaid principal balance of
this Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
9.250% U.S. Treasury Security due February 1, 2016, as reported in
The Wall Street Journal, expressed as a decimal calculated to five
digits. In the event that no yield is published on the applicable
date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the
publication of such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine
the Assumed Reinvestment Rate. The selection of an alternate
security pursuant to this Paragraph shall be made in Lender's
discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(2) If the prepayment is made after the expiration of the Yield
Maintenance Period but before the period set forth in Paragraph 10(b)(A) above,
the prepayment premium shall be 1.0% of the unpaid principal balance of this
Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth in this Note represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. To the fullest extent allowed by applicable law,
Borrower shall pay all expenses and costs, including fees and out-of-pocket
expenses of attorneys (including Lender's in-house attorneys) and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. Neither this Note nor any of the other Loan Documents shall be
construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate greater than the maximum interest rate
permitted to be charged under applicable law. If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge
provided for in any Loan Document, whether considered separately or together
with other charges provided for in any other Loan Document, violates that law,
and Borrower is entitled to the benefit of that law, that interest or charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the unpaid principal balance of this Note. For the
purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness that constitutes interest, as well as all other
charges made in connection with the Indebtedness that constitute interest, shall
be deemed to be allocated and spread ratably over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family, household or agricultural
purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices; Written Modifications. All notices, demands and other
communications required or permitted to be given by Lender to Borrower pursuant
to this Note shall be given in accordance with Section 31 of the Security
Instrument. Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, that in the event of a Transfer
under the terms of the Security Instrument, any or some or all of the
Modifications to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Note:
-----
X Exhibit A Modifications to Multifamily Note
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IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
MULTI-BENEFIT REALTY FUND '87-1, A CALIFORNIA
LIMITED PARTNERSHIP, a California limited
partnership
By: CONCAP Equities, Inc., a Delaware
corporation, its general partner
By:_________________________________
Patti K. Fielding
Senior Vice President
94-2653686
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS ____ DAY OF _____________, 2001.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
EXHIBIT A
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
3. Paragraph 19 is modified by deleting: "; provided, however, that in the
event of a Transfer under the terms of the Security Instrument, any or
some or all of the Modifications to Multifamily Note may be modified or
rendered void by Lender at Lender's option by notice to
Borrower/transferee" in the last sentence of the Paragraph; and by adding
the following new sentence:
The Modifications to Multifamily Note set forth in this Exhibit A
shall be null and void unless title to the Mortgaged Property is
vested in an entity whose Controlling Interest(s) are directly or
indirectly held by AIMCO REIT or AIMCO OP. The capitalized terms
used in this paragraph are defined in the Security Instrument.