FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
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 March 31, 1998
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, P.O. 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 Securities Exchange Act of 1934 during the preceding 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)
March 31, 1998
Assets
Cash and cash equivalents $ 1,123
Receivables and deposits 330
Restricted escrows 322
Other assets 276
Investment properties:
Land $ 1,742
Buildings and related personal property 22,249
23,991
Less accumulated depreciation (11,165) 12,826
$14,877
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 91
Tenant security deposit liabilities 120
Accrued property taxes 309
Other liabilities 215
Mortgage notes payable 12,268
Partners' (Deficit) Capital
General Partner $ (134)
Limited Partner "A" Unit holders -
96,284 units issued and outstanding (1,876)
Limited Partner "B" Unit holders -
75,152 units issued and outstanding 3,884 1,874
$14,877
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
March 31,
1998 1997
Revenues:
Rental income $1,220 $1,162
Other income 68 82
Total revenues 1,288 1,244
Expenses:
Operating 507 570
General and administrative 83 84
Depreciation 252 239
Interest 250 251
Property taxes 93 92
Total expenses 1,185 1,236
Net income $ 103 $ 8
Net income allocated to general partner (1%) $ 1 $ --
Net income allocated to limited partners (99%) 102 8
$ 103 $ 8
Net income per limited partnership "A" and "B" units $ .59 $ .05
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
General LIMITED PARTNERS Partners'
Partner "A" Units "B" Units Capital
Original capital contributions $ 1 $ 9,706 $ 7,538 $ 17,245
Limited partnership units at
December 31, 1997 and
March 31, 1998 -- 96,284 75,152 171,436
Partners' (deficit) capital at
December 31, 1997 $ (132) $(1,593) $ 3,839 $ 2,114
Distributions to partners (3) (340) -- (343)
Net income for the three
months ended March 31, 1998 1 57 45 103
Partners' (deficit) capital at
March 31, 1998 $ (134) $(1,876) $ 3,884 $ 1,874
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
d)
MULTI-BENEFIT REALTY FUND '87-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income $ 103 $ 8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 252 239
Amortization of loan costs 16 16
Change in accounts:
Receivables and deposits (63) 106
Other assets 16 9
Accounts payable (14) (66)
Tenant security deposit liabilities 2 --
Accrued property taxes 38 37
Other liabilities (8) (4)
Net cash provided by operating activities 342 345
Cash flows from investing activities:
Property improvements and replacements (48) (59)
Net receipts from restricted escrows 50 91
Net cash provided by investing activities 2 32
Cash flows from financing activities:
Loan costs paid -- (1)
Payments on mortgage notes payable (17) (16)
Distributions to partners (343) (689)
Net cash used in financing activities (360) (706)
Net decrease in cash and cash equivalents (16) (329)
Cash and cash equivalents at beginning of period 1,139 1,860
Cash and cash equivalents at end of period $1,123 $1,531
Supplemental disclosure of cash flow information:
Cash paid for interest $ 234 $ 236
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 "Managing General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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. Both classes of Units represent
economic rights attributable to the limited partnership interests in the
Partnership and entitle the holders thereof ("Unit holders") to participate in
certain allocations and distributions of the Partnership.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership paid property management fees based upon collected gross rental
revenues for property management services as noted below for the three month
periods ended March 31, 1998 and 1997, respectively. Such fees are included in
operating expense in the consolidated statements 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 certain costs
incurred in connection with the administration of Partnership activities. These
reimbursements are included in general and administrative and operating expense
and in investment properties. The General Partner and its affiliates received
reimbursements and fees as reflected in the following table:
For the Three Months Ended
March 31,
1998 1997
(in thousands)
Property management fees $ 64 $ 61
Reimbursements for services of affiliates (1) 31 30
Partnership management fees (2) 31 61
(1) Included in "reimbursements for services of affiliates" for 1997, is
approximately $2,000 in reimbursements for construction oversight costs.
(2) The Agreement provides for 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, 1997 to August 31, 1997 the Partnership insured its
properties under a master policy through an agency affiliated with the General
Partner with an 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 agent assumed the financial obligations
to the affiliate of the General Partner which received payment 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 was not significant.
Insignia Properties Trust ("IPT") owns all of the outstanding stock of the
General Partner of the Partnership. IPT is an affiliate of Insignia Financial
Group, Inc. ("Insignia").
During December 1997, Insignia affiliates (the "Purchaser") commenced tender
offers for limited partnership interests in ten real estate limited partnerships
(including the Partnership) in which various Insignia affiliates act as general
partner. The Purchaser offered to purchase up to 24,000 and 23,000 of the
outstanding "A" and "B" units, respectively, of limited partnership interest in
the Partnership at $50 and $25 per Unit, respectively, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated December 23, 1997 (the "Offer to Purchase") and the related
Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed
with the Securities and Exchange Commission on December 23, 1997. Because of the
existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the Managing General Partner
expressed any opinion as to the Offer to Purchase and made no recommendation as
to whether unit holders should tender their units in response to the Offer to
Purchase. In addition, because of these conflicts of interest, including as a
result of the Purchaser's affiliation with various Insignia affiliates that
provide property management services to the Partnership's properties, the manner
in which the Purchaser votes its limited partner interests in the Partnership
may not always be consistent with the best interests of the other limited
partners. During February 1998 the tender offers were completed and an
affiliate of Insignia acquired 21,457 and 13,822 of the outstanding "A" and "B"
units, respectively.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
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 totaling
approximately $1,123,000, exceeded the reserve requirement of approximately
$759,000 at March 31, 1998.
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 three months ended March 31, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Carlin Manor Apartments
Columbus, Ohio (1) 92% 90%
Hunt Club Apartments
Indianapolis, Indiana (2) 97% 93%
Shadow Brook Apartments
West Valley City, Utah (3) 95% 97%
(1)Although occupancy at Carlin Manor increased slightly, it remains relatively
low due to market conditions of competition from new construction and first
time homebuyers due to favorable interest rates.
(2)The increase in occupancy at Hunt Club is attributable to an increase in
lease renewal and fewer vacancies as a result of incentives programs offered
during the first quarter of 1998.
(3)The decrease in occupancy at Shadow Brook is also attributable to market
conditions of competition and home purchases.
The Partnership's net income for the three month period ended March 31, 1998,
was approximately $103,000 compared to net income of approximately $8,000 for
the same period of 1997. The increase in net income is primarily due to an
increase in rental income and a decrease in operating expenses. Rental income
increased at all of the properties due to an increase in rental rates. Also,
occupancy increased at Hunt Club and Carlin Manor, but decreased slightly at
Shadow Brook as discussed above. Operating expenses decreased due to a decrease
in salaries as a result of net staff reductions at Carlin Manor. Also,
utilities decreased at the property due to milder winter conditions in the
Columbus, OH area. Further operating expense reductions were the result of
nonrecurring parking lot repairs and interior improvements at Hunt Club in the
first quarter of 1997. Partially offsetting the increase in net income was a
decrease in other income as a result of slightly lower investment balances held
in the first quarter of 1998 versus the comparable period in 1997.
Included in operating expenses for the three months ended March 31, 1998 is
approximately $3,000 of parking lot repairs and major landscaping. Included in
operating expenses for the comparable period in 1997, is approximately $27,000
of parking lot repairs, window coverings, computers and swimming pool repairs.
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 March 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,123,000 as compared to approximately $1,531,000 at March 31,
1997. The net decrease in cash and cash equivalents for the three months ended
March 31, 1998 was approximately $16,000 compared to a decrease of approximately
$329,000 for the three months ended March 31, 1997. Net cash provided by
operating activities decreased slightly despite an increase in net income due to
an increase in receivables and deposits. Partially offsetting the net decrease
in cash provided by operating activities was a decrease in accounts payable
related to the timing of payments. Net cash provided by investing activities
decreased due to a decrease in net receipts from restricted escrows partially
offset by a decrease in property improvements and replacements. Net cash used in
financing activities decreased due to a decrease in distributions to partners.
The Partnership has no material capital projects scheduled to be performed in
1998, although certain routine capital expenditures and maintenance expenses
have been budgeted.
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 $12,268,000 is amortized over varying
periods and requires one balloon payment in October 2000 and two in November
2003 at which time the properties will be refinanced or sold. During the three
months ended March 31 1998, a distribution of approximately $340,000 was made to
the "A" Unit limited partners, and a distribution of approximately $3,000 was
made to the General Partner. A distribution of approximately $682,000 was made
to the "A" Unit limited partners and a distribution of approximately $7,000
was made to the General Partner during the three months ended March 31, 1997.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales and cash reserves. The General Partner
expects to make a further distribution during the third quarter of 1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this interim report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this interim report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-
looking statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, the Managing General Partner was named in a legal action entitled
ROSALIE NUANES, ET AL. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior
Court of the State of California for the County of San Mateo. The plaintiffs
named as defendants, among others, the Managing General Partner and several of
their affiliated partnerships and corporate entities. The complaint purports to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships which are named as nominal
defendants, challenging the acquisition by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates as well as a recently announced agreement between
Insignia and Apartment Investment and Management Company. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
partnerships named in the action. The Managing General Partner was only
recently served with the complaint which it believes to be without merit, and
intends to vigorously defend the action.
In January 1998, a limited partner of the Partnership commenced an arbitration
proceeding against the General Partner claiming that the General Partner had
breached certain contractual and fiduciary duties allegedly owed to the
claimant. The General Partner believes the claim to be without merit and intends
to vigorously defend the claim.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner believes that all such other
matters are adequately covered by insurance and will be resolved without a
material adverse effect upon the business, financial condition, results
of operations, or liquidity of the Partnership.
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 March 31, 1998.
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: May 1, 1998