UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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 (i) 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
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2005
Assets
Cash and cash equivalents $ 26
Receivables and deposits 114
Other assets 183
Investment property:
Land $ 485
Buildings and related personal property 7,953
8,438
Less accumulated depreciation (6,184) 2,254
$ 2,577
Liabilities and Partners' (Deficiency) Capital
Liabilities
Accounts payable $ 173
Tenant security deposit liabilities 29
Accrued property taxes 144
Other liabilities 182
Due to affiliates (Note B) 258
Mortgage note payable 3,445
Partners' (Deficiency) Capital
General Partner $ (81)
Limited Partner "A" Unit holders -
96,284 units issued and outstanding (8,479)
Limited Partner "B" Unit holders -
75,152 units issued and outstanding 6,906 (1,654)
$ 2,577
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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Rental income $ 329 $ 291 $ 655 $ 600
Other income 31 41 61 95
Casualty gain (Note D) 26 -- 26 --
Total revenues 386 332 742 695
Expenses:
Operating 193 237 456 442
General and administrative 29 30 49 58
Depreciation 99 98 197 195
Interest 76 75 151 150
Property taxes (Note C) 34 41 70 80
Total expenses 431 481 923 925
Net loss $ (45) $ (149) $ (181) $ (230)
Net loss allocated to general
partner (1%) $ (1) $ (1) $ (2) $ (2)
Net loss allocated to limited
partners (99%) (44) (148) (179) (228)
$ (45) $ (149) $ (181) $ (230)
Net loss per limited partnership
"A" and "B" units $ (0.25) $ (0.86) $ (1.04) $ (1.33)
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, 2004 and
June 30, 2005 -- 96,284 75,152 171,436
Partners' (deficiency) capital
at December 31, 2004 $ (79) $(8,378) $ 6,984 $ (1,473)
Net loss for the six months
ended June 30, 2005 (2) (101) (78) (181)
Partners' (deficiency) capital
at June 30, 2005 $ (81) $(8,479) $ 6,906 $ (1,654)
See Accompanying Notes to Consolidated Financial Statements
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except unit data)
Six Months Ended
June 30,
2005 2004
Cash flows from operating activities:
Net loss $ (181) $ (230)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 197 195
Amortization of loan costs 6 6
Bad debt expense 5 24
Casualty gain (26) --
Change in accounts:
Receivables and deposits 8 (37)
Other assets (22) (40)
Accounts payable 16 31
Tenant security deposit liabilities (2) (6)
Accrued property taxes -- (13)
Other liabilities 1 11
Due to affiliates 31 --
Net cash provided by (used in) operating activities 33 (59)
Cash flows from investing activities:
Property improvements and replacements (104) (30)
Insurance proceeds received 32 --
Net cash used in investing activities (72) (30)
Cash flows from financing activities:
Payments on mortgage note payable (56) (52)
Advances from affiliate 105 --
Net cash provided by (used in) financing activities 49 (52)
Net increase (decrease) in cash and cash equivalents 10 (141)
Cash and cash equivalents at beginning of period 16 303
Cash and cash equivalents at end of period $ 26 $ 162
Supplemental disclosure of cash flow information:
Cash paid for interest $ 140 $ 144
Supplemental disclosure of non-cash information:
Property improvements and replacements included in accounts
Payable $ 97 $ 77
At December 31, 2004, there were $9,000 of property improvements and
replacements included in accounts payable.
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 six month periods ended June 30, 2005, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
2005. 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, 2004. The General Partner is an affiliate
of Apartment Investment and Management Company ("AIMCO"), a publicly traded real
estate investment trust.
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 depends 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 receive 5% of gross receipts from the
Partnership's property as compensation for providing property management
services. The Partnership paid to such affiliates approximately $35,000 for both
the six months ended June 30, 2005 and 2004 which is included in operating
expenses.
Affiliates of the General Partner charged the Partnership reimbursement of
accountable administrative expenses amounting to approximately $49,000 and
$29,000 for the six months ended June 30, 2005 and 2004, respectively, which is
included in general and administrative expenses and investment property. The
portion of these reimbursements included in investment property for the six
months ended June 30, 2005 are fees related to construction management services
provided by an affiliate of the General Partner of approximately $22,000. There
were no such fees for the six months ended June 30, 2004. The construction
management service fees are calculated based on a percentage of additions to
investment property. At June 30, 2005, approximately $55,000 of reimbursements
for services was accrued by the Partnership and is included in due to affiliates
on the accompanying consolidated balance sheet.
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. There were no such fees earned for the six
months ended June 30, 2005 and 2004, respectively.
In accordance with the Partnership Agreement, an affiliate of the General
Partner loaned the Partnership approximately $92,000 during the fourth quarter
of 2004 to fund capital projects and accounts payable and $105,000 during the
six months ended June 30, 2005 to fund accounts payable at the Partnership's
sole property. Interest accrues at the prime rate plus 2% (8.25% at June 30,
2005). Interest expense was approximately $5,000 for the six months ended June
30, 2005. At June 30, 2005, approximately $203,000 including accrued interest
was outstanding and is included in due to affiliates on the accompanying
consolidated balance sheet.
The Partnership insures its property 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, general
liability and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the six months ended June 30, 2005
and 2004, the Partnership was charged by AIMCO and its affiliates approximately
$21,000 and $20,000 for insurance coverage and fees associated with policy
claims administration.
Note C - Property Taxes
During 2003, the state of Indiana implemented a reassessment of property values.
During 2004, the Partnership successfully appealed the reassessed property tax
value of Hunt Club Apartments. In the state of Indiana property tax bills are
paid one year in arrears. Thus, the 2003 property tax bills were received and
paid in 2004. As a result of the Partnership's successful appeal of the
reassessed property value an adjustment of approximately $16,000 related to 2002
taxes and $48,000 related to 2003 taxes was recorded during the third and fourth
quarters of 2004. The appeal resulted in a lower assessed value which resulted
in a refund of 2002 taxes paid in 2003, a refund for 2003 taxes paid in 2004 and
a reduction in the accrual for 2004 taxes to be paid in 2005.
Note D - Casualty Gain
During the three and six months ended June 30, 2005, a net casualty gain of
approximately $26,000 was recorded at Hunt Club Apartments. The casualty gain
related to a fire, occurring in March 2005, which caused damage to three units
at the property. The gain was the results of the receipt of insurance proceeds
of approximately $32,000 offset by approximately $6,000 of undepreciated
property improvements and replacements being written off.
Note E - Contingencies
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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they 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 attempts to bring a collective action under the FLSA and seeks to
certify state subclass in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week.
On June 23, 2005 the Court conditionally certified the collective action on both
the on-call and overtime issues. The Court ruling allows plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action. Defendants have asked the Court to reconsider
its ruling or in the alternative certify the ruling for appeal on that issue.
After the notice goes out, defendants will have the opportunity to move to
decertify the collective action. The Court further denied plaintiffs' Motion for
Certification of the state subclasses. Although the outcome of any litigation is
uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome
will have a material adverse effect on its consolidated financial condition or
results of operations. Similarly, the General Partner does not believe that the
ultimate outcome will have a material adverse effect on the Partnership's
consolidated financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the General Partner believes that these measures will
minimize the effects that mold could have on residents. To date, the Partnership
has not incurred any material costs or liabilities relating to claims of mold
exposure or to abate mold conditions. Because the law regarding mold is
unsettled and subject to change the General Partner can make no assurance that
liabilities resulting from the presence of or exposure to mold will not have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation have included AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, tax credit transactions, and
tender offers for limited partnership interests. AIMCO is not able to predict
when the investigation will be resolved. AIMCO does not believe that the
ultimate outcome will have a material adverse effect on its consolidated
financial condition or results of operations. Similarly, the General Partner
does not believe that the ultimate outcome will have a material adverse effect
on the Partnership's consolidated financial condition or results of operations.
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 property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
six months ended June 30, 2005 and 2004:
Average Occupancy
Property 2005 2004
Hunt Club Apartments 94% 89%
Indianapolis, Indiana
The General Partner attributes the increase in occupancy to property management
focusing on increasing occupancy through tenant retention and rental
concessions.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the Partnership's remaining
investment property, interest rates on mortgage loans, costs incurred to operate
the investment property, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the General Partner monitors the
rental market environment of its investment property 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.
Further, a number of factors that are outside the control of the Partnership,
such as the local economic climate and weather, can adversely or positively
affect the Partnership's financial results.
Results of Operations
The Partnership had a net loss for the three and six months ended June 30, 2005
of approximately $45,000 and $181,000, respectively, as compared to a net loss
of approximately $149,000 and $230,000 for the three and six months ended June
30, 2004, respectively. The decrease in net loss for the three months ended June
30, 2005 was due to an increase in total revenues and a decrease in total
expenses. The decrease in net loss for the six months ended June 30, 2005 was
mainly due to an increase in total revenues and a slight decrease in total
expenses.
The increase in total revenues for both the three and six months ended June 30,
2005 was due to an increase in rental income and casualty gain partially offset
by a decrease in other income. Rental income increased due to an increase in
occupancy, an increase in the average rental rate at Hunt Club Apartments and a
decrease in bad debt expense. Other income decreased primarily due to a decrease
in late charges, lease cancellation fees and utilities reimbursements.
During the three and six months ended June 30, 2005, the Partnership recorded a
net casualty gain of approximately $26,000 at Hunt Club Apartments. The casualty
gain related to a fire, occurring in March 2005, which caused damage to three
units at the property. The gain was the result of the receipt of insurance
proceeds of approximately $32,000 offset by approximately $6,000 of
undepreciated property improvements and replacements being written off.
Total expenses for the three months ended June 30, 2005 decreased due to
decreases in operating and property tax expense. General and administrative,
depreciation and interest expense remained relatively constant for the
comparable three month period. Operating expense decreased due to a decrease in
maintenance expense partially offset by an increase in property expense.
Maintenance expense decreased due to a decrease in repairs and contract
services. Property expense increased due to increases in utility costs and
salaries and related benefits. Property tax expense decreased as a result of the
Partnership's successful appeal of the reassessed property value as discussed
below.
Total expenses for the six months ended June 30, 2005 decreased due to decreases
in general and administrative and property tax expenses partially offset by an
increase in operating expense. Depreciation and interest expense remained
relatively constant for the comparable six month periods. Property tax expense
decreased due to the successful appeal of the reassessed value of Hunt Club
Apartments by the local taxing authorities. During 2003, the state of Indiana
implemented a reassessment of property tax value of Hunt Club Apartments. In the
state of Indiana, property tax bills are paid one year in arrears. Thus, the
2003 property tax bills are received and paid in 2004. As a result of the
Partnership's successful appeal of the reassessed property value an adjustment
of approximately $16,000 related to 2002 taxes and $48,000 related to 2003 taxes
was recorded during the third and fourth quarters of 2004. The appeal resulted
in a lower value which resulted in a refund for 2002 taxes paid in 2003, a
refund for 2003 taxes paid in 2004 and a reduction in the accrual for 2004 taxes
to be paid in 2005. Operating expense increased due to an increase in property
expense partially offset by a decrease in maintenance expense as discussed
above.
General and administrative expenses decreased for the six months ended June 30,
2005 due to a decrease in accountable reimbursements charged by an affiliate of
the General Partner as allowed under the Partnership Agreement and a decrease in
audit fees. 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.
Liquidity and Capital Resources
At June 30, 2005, the Partnership had cash and cash equivalents of approximately
$26,000 as compared to approximately $162,000 at June 30, 2004. Cash and cash
equivalents increased approximately $10,000 from December 31, 2004 due to
approximately $49,000 and $33,000 of cash provided by financing and operating
activities offset by approximately $72,000 of cash used in investing activities.
Cash provided by financing activities consisted of advances from an affiliate
partially offset by principal payments made on the mortgage encumbering the
Partnership's property. Cash used in investing activities consisted of property
improvements and replacements partially offset by insurance proceeds received.
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 property 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. For example, 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. Capital improvements planned for the Partnership's property are
detailed below.
During the six months ended June 30, 2005, the Partnership completed
approximately $192,000 of capital improvements at Hunt Club Apartments,
consisting primarily of appliances and floor covering replacements, parking lot
and structural improvements, building improvements and balcony replacements.
These improvements were funded from operating cash flow and insurance proceeds.
The Partnership regularly evaluates the capital improvement needs of the
property. While the Partnership has no material commitments for property
improvements and replacements, certain routine expenditures are anticipated
during the remainder of 2005. Such capital expenditures will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such capital
improvements are completed, the Partnership's distributable cash flow, if any,
may be 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 $3,445,000 is
amortized over 20 years and matures September 1, 2020 at which time the loan is
scheduled to be fully amortized.
There were no distributions made during the six months ended June 30, 2005 and
2004. Future cash distributions will depend on the levels of net cash generated
from operations, the timing of the debt maturity, property sale and/or
refinancing. The Partnership's cash available for distribution is reviewed on a
monthly basis. There can be no assurance that the Partnership will generate
sufficient funds from operations after required capital improvements to permit
distributions to its partners in 2005 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 63,163 "A" and 40,151 "B" Units of
Depository Receipts ("Units") in the Partnership representing 65.60% and 53.43%
of the outstanding "A" and "B" Units, respectively, at June 30, 2005. 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 65.60% and 53.43% 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 property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the 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 property. 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 an impairment of the
Partnership's asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 28, 2002, the trial
court granted defendants motion to strike the complaint. Plaintiffs took an
appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeal reversed the trial court's order striking the
first amended complaint.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the General Partner, are defendants in a lawsuit alleging that
they 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 attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. On June 23, 2005 the Court conditionally certified the collective
action on both the on-call and overtime issues. The Court ruling allows
plaintiffs to provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the present. Those employees
will have the opportunity to opt-in to the collective action. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. After the notice goes out, defendants will have
the opportunity to move to decertify the collective action. The Court further
denied plaintiffs' Motion for Certification of the state subclass. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
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/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 12, 2005
MULTI-BENEFIT REALTY FUND '87-1
EXHIBIT INDEX
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.
3.2 Certificate of Limited Partnership (incorporated by reference to
Registration Statement of Registrant (File No. 33-8908) filed
December 10, 1986, as amended by date).
4 Depositary Agreement (Incorporated by reference to Registration
Statement of Registrant (File No. 33-8908) filed December 10,
1986, as amended by date).
10.22 Multifamily Note dated August 31, 2000, by and between Hunt Club
Associates, Ltd., a Texas limited partnership, and ARCS
Commercial Mortgage Co., L.P., a California limited partnership
relating to Hunt Club Apartments. (Incorporated by reference to
the Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2000.)
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.
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.
32.1 Certification of the equivalent of the Chief Executive Officer and
Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, 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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: August 12, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of ConCap Equities,
Inc., equivalent of the chief executive
officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, 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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: August 12, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President 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 June 30, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of
the Partnership, and Stephen B. Waters, 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/Martha L. Long
Name: Martha L. Long
Date: August 12, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 12, 2005
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.