FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] 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.)
One Insignia Financial Plaza
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, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 917
Restricted--tenant security deposits 123
Accounts receivable 8
Escrow for taxes and insurance 184
Restricted escrows 459
Other assets 337
Investment properties:
Land $ 1,742
Buildings and related personal property 22,107
23,849
Less accumulated depreciation (10,675) 13,174
$ 15,202
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 113
Accrued taxes 349
Tenant security deposit liabilities 123
Other liabilities 228
Mortgage notes payable 12,302
Partners' Capital (Deficit)
General Partner $ (132)
Limited Partner "A" Unitholders -
96,284 units outstanding (1,608)
Limited Partner "B" Unitholders -
75,152 units outstanding 3,827 2,087
$ 15,202
See Accompanying Notes to Consolidated Financial Statements
b) MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 1,191 $ 1,166 $ 3,528 $ 3,441
Other income 89 66 244 198
Total revenues 1,280 1,232 3,772 3,639
Expenses:
Operating 420 360 1,238 1,174
General and administrative 35 43 106 135
Partnership management fee 62 21 123 41
Maintenance 202 201 473 444
Depreciation 252 250 733 737
Interest 251 258 753 782
Property taxes 89 86 272 242
Loss on disposal of property 86 -- 86 --
Total expenses 1,397 1,219 3,784 3,555
Net (loss) income $ (117) $ 13 $ (12) $ 84
Net (loss) income allocated
to general partner (1%) $ (1) $ -- $ -- $ 1
Net (loss) income allocated
to limited partners (99%) (116) 13 (12) 83
$ (117) $ 13 $ (12) $ 84
Net (loss) income per limited
partnership A and B Units $ (.67) $ .08 $ (.07) $ .49
See Accompanying Notes to Consolidated Financial Statements
c) MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Total
Partners'
General Limited Partners Equity
Partner "A" Units "B" Units (Deficit)
Original capital contributions $ 1 $ 9,706 $ 7,538 $ 17,245
Limited partnership units at
December 31, 1996 and
September 30, 1997 -- 96,284 75,152 171,436
Partners' capital (deficit) at
December 31, 1996 $ (118) $ (238) $ 3,832 $ 3,476
Distributions to partners (14) (1,363) -- (1,377)
Net (loss) income for the nine
months ended September 30, 1997 -- (7) (5) (12)
Partners' capital (deficit) at
September 30, 1997 $ (132) $(1,608) $ 3,827 $ 2,087
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,
1997 1996
Cash flows from operating activities:
Net (loss) income $ (12) $ 84
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 733 737
Amortization of loan costs 47 32
Loss on disposal of property 86 --
Change in accounts:
Restricted cash 17 (11)
Accounts receivable 39 89
Escrow for taxes and insurance 24 (67)
Other assets (14) 44
Accounts payable (51) (224)
Tenant security deposit liabilities (17) 10
Accrued taxes 85 72
Other liabilities 10 (87)
Net cash provided by operating activities 947 679
Cash flows from investing activities:
Property improvements and replacements (442) (317)
Deposits to restricted escrows (170) (32)
Receipts from restricted escrows 148 --
Proceeds from sale of investments -- 298
Net cash used in investing activities (464) (51)
Cash flows from financing activities:
Payments on mortgage notes payable (48) (130)
Distributions to partners (1,377) (459)
Loan costs paid (1) (49)
Net cash used in financing activities (1,426) (638)
Net (decrease) in cash (943) (10)
Cash and cash equivalents at beginning of period 1,860 1,234
Cash and cash equivalents at end of period $ 917 $ 1,224
Supplemental disclosure of cash flow information:
Cash paid for interest $ 706 $ 751
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") 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, 1997, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1997. 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 year
ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
Limited Partnership Units
The Partnership has issued two classes of 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 ("Unitholders") to participate in certain allocations and
distributions of the Partnership.
NOTE B - RELATED PARTY TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership paid property management fees based upon collected gross rental
revenues for property management services as noted below for the nine month
periods ended September 30, 1997 and 1996, respectively. Such fees are included
in operating expense on the consolidated statement of operations and are
reflected in the following table. The Limited Partnership Agreement
("Agreement") provides for reimbursement to the General Partner and its
affiliates for costs incurred in connection with the administration of
Partnership activities. The General Partner and its affiliates received
reimbursements and fees as reflected in the following table:
For the Nine Months Ended
September 30,
1997 1996
(in thousands)
Property management fees $185 $179
Reimbursements for services of affiliates (1) 91 140
Partnership management fees (2) 123 41
(1) Included in "reimbursements for services of affiliates" for 1997 and
1996 is approximately $10,500 and $51,000, respectively, in reimbursements
for construction oversight costs.
(2) The Agreement provides that a fee equal to 9% of distributable cash from
operations (as defined in the Agreement) received by the limited partners be
paid to the General Partner for executive and administrative management
services.
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
current agent assumed the financial obligations to the affiliate of the General
Partner who receives payments on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the General Partner by virtue of the agent's obligations is not significant.
NOTE C - COMMITMENT
The Partnership is required by the Agreement to maintain working capital
reserves of not less than 5% of Net Invested Capital, as defined in the
Agreement. In the event expenditures are made from this reserve, operating
revenue shall be allocated to such reserve to the extent necessary to maintain
the foregoing level. Reserves, including cash and cash equivalents and
investments totaling approximately $917,000, exceeded the reserve requirement of
approximately $759,000 at September 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the nine months ended September 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Carlin Manor Apartments
Columbus, Ohio 90% 90%
Hunt Club Apartments
Indianapolis, Indiana 92% 95%
Shadow Brook Apartments
West Valley City, Utah 97% 98%
The Partnership's net loss for the three and nine month periods ended September
30, 1997, was approximately $117,000 and $12,000, respectively, compared to net
income of approximately $13,000 and $84,000, respectively, for the same periods
of 1996. The decrease in net income is primarily due to the loss on disposal of
property related to the replacement of roofs at the Hunt Club and Carlin Manor
properties in 1997. A portion of the original cost of roofs, which was not
fully depreciated, was written off during the third quarter of 1997 and
approximated $86,000. In addition to the loss on disposal, there was an
increase in operating and partnership management fee expenses. The increase in
operating expenses is due to an increase in 1997 utility rates at Hunt Club,
along with an increase in concessions given in an effort to increase the
occupancy levels at Hunt Club. The increase in partnership management fees is
the result of an increase in distributions made to the limited partners from
"cash available for distribution" (as defined in the Agreement, see "Item 1.
Note B - Related Party Transactions"). Partially offsetting these increases in
net loss was an increase in revenues. The increase in revenues is due to an
increase in rental income, interest income and other income. The increase in
rental income is primarily due to an increase in rental rates at Shadow Brook
Apartments which more than offset the slight decrease in average occupancy. The
increase in other income is due to an increase in deposit forfeitures, lease
cancellation fees, and cleaning and damage fees primarily due to an increase in
turnover at Shadow Brook Apartments. Interest income increased due to an
increase in invested cash and cash equivalents and interest earned on the
restricted escrows for the Carlin Manor Apartments which were established with
the 1996 refinancing of this property.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expense. 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.
At September 30, 1997, the Partnership had unrestricted cash of approximately
$917,000 compared to approximately $1,224,000 at September 30, 1996. Net cash
provided by operating activities increased primarily due to the decrease in cash
used for payment of accounts payable and other liabilities related to the timing
of payments, and a decrease in the escrow for taxes and insurance. Net cash used
in investing activities increased due to a decrease in proceeds from the sale of
investments and increases in property improvements and replacements and deposits
to restricted escrows. These increases were partially offset by increases in
receipts from restricted escrows. Net cash used in financing activities
increased due to an increase in distributions to partners. This increase was
partially offset by decreases in the payments made on mortgage notes payable and
in loan costs paid.
The Partnership has no material capital projects scheduled to be performed in
1997, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations, received from the capital
reserve account or available from cash and cash equivalents on hand.
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. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $12,302,000 is amortized over varying
periods and requires balloon payments in October 2000 and November 2003 at which
time the properties will be refinanced or sold. During the first nine months of
1997, a distribution of approximately $1,363,000 was made to the "A" Unit
limited partners, and a distribution of approximately $14,000 was made to the
General Partner. A distribution of approximately $454,000 was made to the "A"
Unit limited partners and a distribution of approximately $5,000 was made to the
General Partner during the first nine months of 1996. Future cash distributions
will depend on the levels of net cash generated from operations, refinancings,
property sales and cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed for the quarter ended September 30, 1997.
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/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President
By: /s/ Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: November 12, 1997