-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BglZDATeeP24yF0rl0pN/2RqR2nALYZCbFwI6vn/0nZl/9iz+Rwk32fgTSvUzr48 yF+KTgOp3Nzk8NYTcT0EEw== 0000757549-97-000012.txt : 19971117 0000757549-97-000012.hdr.sgml : 19971117 ACCESSION NUMBER: 0000757549-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP INSTITUTIONAL MORTGAGE FUND LTD PARTNERSHIP CENTRAL INDEX KEY: 0000757549 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042860302 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14378 FILM NUMBER: 97719113 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) 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 0-14378 Krupp Institutional Mortgage Fund Limited Partnership Massachusetts 04-2860302 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has 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 The total number of pages in this document is 11. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP BALANCE SHEETS
ASSETS September 30,December 31, 1997 1996 Mortgage notes receivable, net of loan loss reserve of $16,524,000 (Notes 3 and 4)$ 6,949,839 $ 6,973,754 Cash and cash equivalents (Note 2) 1,110,363 1,112,524 Accrued interest receivable - mortgage notes, net of reserve for uncollectible interest of $13,997,634 and $12,225,634, respectively (Notes 3 and 4) 118,642 115,272 Due from affiliates (Note 6) - 16,250 Other assets 1,865 1,672 Total assets $ 8,180,709 $ 8,219,472 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 19,150 $ 25,274 Partners' equity (deficit) (Note 5): Limited Partners (30,059 Units outstanding)8,379,548 8,411,861 General Partners (217,989) (217,663) Total Partners' equity 8,161,559 8,194,198 Total liabilities and Partners' equity $ 8,180,709 $ 8,219,472
The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF INCOME
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 Interest income: Mortgage notes receivable (Notes 3 and 4) $140,876 $ 73,737 $445,796 $359,284 Cash equivalents (Note 2) 15,949 16,793 46,035 62,650 Total interest income 156,825 90,530 491,831 421,934 Expenses: Expense reimbursements (Note 6) 9,156 12,951 25,739 36,644 General and administrative 7,949 7,384 43,292 44,794 Total expenses 17,105 20,335 69,031 81,438 Net income $139,720 $ 70,195 $422,800 $340,496 Allocation of net income (Note 5): Limited Partners (30,059 Units outstanding) $138,323 $ 69,493 $418,572 $337,091 Limited Partners Per Unit $ 4.61 $ 2.31 $ 13.93 $ 11.21 General Partners $ 1,397 $ 702 $ 4,228 $ 3,405
The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 1996 Operating activities: Net income $ 422,800 $ 340,496 Adjustments to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Decrease (increase) in accrued interest receivable-mortgage notes (3,370) 61,575 Decrease in due from affiliates 16,250 1,081 Decrease (increase) in other assets (193) 148 Increase (decrease) in liabilities (6,124) 54,361 Net cash provided by operating activities 429,363 457,661 Investing activities: Principal collections from mortgage notes receivable 23,915 21,648 Principal collections from mortgage notes receivable due to sale of properties - 4,792,959 Net cash provided by investing activities 23,915 4,814,607 Financing activity: Distributions (455,439) (5,296,760) Net decrease in cash and cash equivalents (2,161) (24,492) Cash and cash equivalents, beginning of period 1,112,524 1,260,798 Cash and cash equivalents, end of period $1,110,363 $1,236,306
The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (1)Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of The Krupp Corporation and The Krupp Company Limited Partnership-III ("Krupp Co.-III"), the General Partners of Krupp Institutional Mortgage Fund Limited Partnership (the "Partnership"/"KIMF"), the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Financial Statements in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited financial statements reflect all adjustments necessary to present fairly the Partnership's financial position as of September 30, 1997, its results of operations for the three and nine months ended September 30, 1997 and 1996, and cash flows for the nine months ended September 30, 1997 and 1996. Certain prior year balances have been reclassified to conform with current year financial statement presentation. The results of operations for the three and nine months ended September 30, 1997 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. (2) Cash and Cash Equivalents Cash and cash equivalents consisted of the following:
September 30, December 31, 1997 1996 Cash and money market accounts $ 315,221 $ 316,317 Commercial paper 795,142 796,207 $ 1,110,363 $ 1,112,524
At September 30, 1997, commercial paper represents corporate issues maturing in the fourth quarter of 1997. At September 30, 1997, the carrying value of the Partnership's investment in commercial paper approximates fair value. (3)Krupp Equity Limited Partnership ("KELP") The Partnership made loans to KELP, an affiliate of the Partnership, as provided under the Master Loan Agreement and Collateral Pledge Agreement. Pursuant to the Agreements, the mortgage notes receivable are cross collateralized by the KELP properties. The purpose of KELP is to acquire, manage, operate and sell real estate and personal property; and to borrow funds from the Partnership and other sources to finance the acquisition, management and operation of real estate and personal property related thereto. Condensed financial statements of KELP are as follows: Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (3) Krupp Equity Limited Partnership ("KELP") - Continued KRUPP EQUITY LIMITED PARTNERSHIP CONDENSED BALANCE SHEETS
ASSETS September 30,December 31, 1997 1996 Real estate assets: Real estate, at cost $ 12,749,857 $ 12,716,122 Property valuation provision (5,000,000) (5,000,000) Accumulated depreciation (3,972,535) (3,795,870) Total real estate assets 3,777,322 3,920,252 Other assets 287,710 305,538 Total assets $ 4,065,032 $ 4,225,790 LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable to the Partnership$ 28,266,798 $ 28,290,713 Notes payable to an affiliate 300,000 300,000 Accrued interest payable to affiliates (A) 9,677,093 7,880,286 Due to affiliates 716,966 666,702 Other liabilities 346,477 386,780 Total liabilities 39,307,334 37,524,481 Partners' deficit (35,242,302)(33,298,691) Total liabilities and Partners' deficit $ 4,065,032 $ 4,225,790
KRUPP EQUITY LIMITED PARTNERSHIP CONDENSED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 Revenue (A)(B)$ 254,830 $ 257,067 $ 1,160,346$ 1,459,430 Property operating expenses (62,248) (70,704) (316,281) (637,314) Depreciation and amortization (A)(B)(61,924) (58,966) (356,637) (724,149) Interest (B) (754,227) (754,808) (2,541,770)(2,411,839) Loss before gain on sale of properties and extinguishment of debt(623,569) (627,411) (2,054,342)(2,313,872) Gain: Sale of properties (A) - - - 1,661,996 Extinguishment of debt (B) - - 108,711 - Net loss$(623,569) $(627,411) $(1,945,631)$(651,876)
Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (3)Krupp Equity Limited Partnership ("KELP") - Continued (A)On March 5, 1996, KELP sold Village Green Apartments to an unaffiliated third party for $5,200,000. On May 16, 1996, KELP sold North Salado to an unaffiliated third party for $7,350,000. KELP remitted available sale proceeds of $4,792,959 to the Partnership. For KELP's financial reporting purposes, sales proceeds paid to KIMF of $4,792,959 were applied against accrued interest in 1996. (B)On May 13, 1997, KELP acquired all of the beneficial interests in four Delaware business trusts and a 99% member interest in a limited liability company (collectively referred to as the "Entities") for an aggregate purchase price of $32,025,603. KELP acquired the Entities for cash of $3,309,761, subject to their outstanding mortgage balances as of May 13, 1997, totaling $28,715,842. KELP obtained the cash used in the exchange through the proceeds of a loan made by KCLP III ("KCLP III Note"), its general partner and limited partner. Each of the Entities acquired owns real property, which is net leased to a national retail franchise. On June 23, 1997, KELP admitted KGP-II Inc. as a limited partner. Subsequently, on June 30, 1997, KELP distributed its interests in the Entities to KCLP III in full satisfaction of the KCLP III Note and in exchange for its entire partnership interest in KELP. The promissory notes due KIMF from KCLP III, which total $2,767,388 and are pledged as collateral on the participating promissory notes ("Participating Notes"), remain as an obligation of KCLP III. The above transactions had no effect on KELP's net loss and there was no positive or negative cash flow which resulted from the operations of the Entities. Accordingly, the transaction had no impact on KELP's ability to make the required quarterly cash flow payment to KIMF, the holder of its Participating Notes, or its ability to meet other obligations with respect to the Participating Notes. (4)Provision for Credit Losses and Accrued Interest Reserves The General Partners of the Partnership have recorded a cumulative provision for credit losses of $16,524,000 on its mortgage notes receivable as of September 30, 1997 and December 31, 1996. Additionally, the Partnership has recorded cumulative provisions for uncollectible interest of $13,997,634 and $12,225,634 as of September 30, 1997 and December 31, 1996, respectively. These cumulative provisions are recorded against the carrying value of the assets in order to reflect management's current estimates of the underlying property values which, given the inherent uncertainty of real estate valuation in the current market, could differ from the ultimate value obtained upon sale of such properties. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (5) Summary of Change in Partners' Equity
A summary of changes in Partners' equity (deficit) for the nine months ended September 30, 1997 is as follows: Total Limited General Partners' Partners Partners Equity Balance at December 31, 1996 $ 8,411,861 $(217,663)$ 8,194,198 Net income 418,572 4,228 422,800 Distributions (450,885) (4,554) (455,439) Balance at September 30, 1997 $ 8,379,548 $(217,989)$ 8,161,559
(6)Related Party Transactions The Partnership reimburses affiliates of the General Partners for certain expenses incurred in connection with the activities of the Partnership, including communications, bookkeeping and clerical work necessary in maintaining relations with Limited Partners, and accounting, tax and computer services necessary for the maintenance of the books and records of the Partnership. Due from affiliates consisted of expense reimbursements of $16,250 at December 31, 1996. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management's expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources Currently, the Partnership has sufficient liquidity to meet its operating needs. The most significant demand on the Partnership's capital is distributions to investors. Distributions are dependent on the Partnership's current capital cash resources and on cash flow received from KELP's interest payments on the Participating Notes. These cash flow payments are based upon the cash flow generated by the underlying properties. Due to fluctuations in the cash flow payments received from KELP and its effect on the Partnership's liquidity, the Partnership may need to periodically adjust its distribution rate. Therefore, sustaining the current distribution rate is mainly dependent upon the future cash flow payments received from KELP. KELP's properties have not generated cash flow sufficient to meet the terms of their existing obligations. Recently, the remaining properties have generated a consistent level of operating cash flow. The Partners of KELP have made cumulative capital contributions of approximately $4,673,000 to cover prior operating deficits and have arranged for certain short-term borrowings. Additionally, the affiliated management agent has not received payment of management fees since 1991. The General Partners of the Partnership have not commenced foreclosure proceedings because they believe that it is in the Partnership's best interest to continue to permit KELP to hold the properties, attempt to increase cash flows and selectively sell the properties, as the market deems appropriate. Operations Total revenue increased for the three and nine months ended September 30, 1997, as compared to the three and nine months ended September 30, 1996, as a result of the increase in interest income earned on mortgage notes due to increased cash flow interest payments received from KELP's properties. This increase was partially offset by a decrease in interest income earned on cash equivalents which was attributable to lower average cash and cash equivalents available for investment. Total expenses decreased for the three and nine months ended September 30, 1997, as compared to the same periods in 1996, due to a decrease in expense reimbursements. The decrease in expense reimbursements is due to decreased costs incurred in connection with the preparation and mailing of reports and other investor communications. KELP Operations Net loss, after giving effect to the sales of Village Green Apartments and North Salado Shopping Center and the acquisition and distribution of the Entities (as described in Note 3), remained stable for the three and nine months ended September 30, 1997, when compared to the same periods in 1996, as total revenue and total expenses remained relatively constant. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6. Exhibits and Reports on Form 8-K Response: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Institutional Mortgage Fund Limited Partnership (Registrant) BY: /s/Wayne H. Zarozny Wayne H. Zarozny Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner. DATE: November 12, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Krupp Institutional Mortgage Fund Limited Partnership Financial Statements for the nine months ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1997 SEP-30-1997 1,110,363 0 23,473,839 (16,524,000) 0 120,507 0 0 8,180,709 19,150 0 0 0 8,161,559 0 8,180,709 0 491,831 0 0 69,031 0 0 0 0 0 0 0 0 422,800 0 0 Represents Limited Partners equity of $8,379,548 and General Partners deficit of ($217,989), respectively. Net income allocated $4,228 to the General Partners and $418,572 to the Limited Partners. Average net income per Unit of Limited Partners interest is $13.39 on 30,059 Units outstanding.
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