-----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, HJYfV5Jz10rOW2CDU8N13dFMdhROxp19sFuuBH6JfnGAyQO5kY1Q4ILmIi0tVCRt WkVEuu2PWpI5eEzq+upziA== 0000757549-98-000010.txt : 19981113 0000757549-98-000010.hdr.sgml : 19981113 ACCESSION NUMBER: 0000757549-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: 98745448 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, 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 0-14378 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 12. 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 (Unaudited) September 30,December 31, 1998 1997 Mortgage notes receivable, net of loan loss reserve of $0 and $15,851,013, respectively (Notes 3 and 4) $ - $ 7,614,449 Cash and cash equivalents (Note 2) 1,638,990 1,110,110 Accrued interest receivable - mortgage notes, net of reserve for uncollectible interest of $0 and $14,638,760, respectively (Notes 3 and 4) - 83,585 Other assets 15,738 4,375 Total assets $ 1,654,728 $ 8,812,519 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 18,899$ 25,200 Partners' equity (deficit) (Note 5): Limited Partners (30,059 Units outstanding)1,851,443 8,999,051 General Partners (215,614) (211,732) Total Partners' equity 1,635,829 8,787,319 Total liabilities and Partners' equity $ 1,654,728$ 8,812,519
The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF INCOME (LOSS) (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Interest income: Mortgage notes receivable (Notes 3 and 4) $ - $140,876 $ - $ 445,796 Cash equivalents 22,742 15,949 134,329 46,035 Total income 22,742 156,825 134,329 491,831 Expenses: Expense reimbursements (Note 6) 5,325 9,156 7,699 25,739 General and administrative 14,314 7,949 57,668 43,292 Bad debt expense-mortgage notes receivable (Note 4) - - 305,364 - Total expenses 19,639 17,105 370,731 69,031 Net income (loss) $ 3,103 $139,720 $(236,402)$ 422,800 Allocation of net income (loss) (Note 5): Limited Partners (30,059 Units outstanding) $ 3,072 $138,323 $(234,038)$ 418,572 Limited Partner Interest Per Unit $ .10 $ 4.61 $ (7.79) $ 13.93 General Partners $ 31 $ 1,397 $ (2,364)$ 4,228
The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 1998 1997 Operating activities: Net income (loss) $ (236,402)$ 422,800 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Changes in assets and liabilities: Decrease (increase) in accrued interest receivable-mortgage notes 83,585 (3,370) Decrease in due from affiliates - 16,250 Increase in other assets (11,363) (193) Decrease in liabilities (6,301) (6,124) Net cash provided by (used in) operating activities (170,481) 429,363 Investing activities: Principal collections from mortgage notes receivable 7,569,084 23,915 Decrease in mortgage notes receivable 45,365 - Net cash provided by investing activities 7,614,449 23,915 Financing activity: Distributions (6,915,088) (455,439) Net increase (decrease) in cash and cash equivalents 528,880 (2,161) Cash and cash equivalents, beginning of period 1,110,110 1,112,524 Cash and cash equivalents, end of period $ 1,638,990 $1,110,363
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"), 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, 1997 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, 1998, its results of operations for the three and nine months ended September 30, 1998 and 1997, and cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the three and nine months ended September 30, 1998 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, 1998 1997 Cash and money market accounts $ 1,342,351 $ 316,218 Commercial paper 296,639 793,892 $ 1,638,990 $ 1,110,110
(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 ("Agreements"). 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
(Unaudited) September 30,December 31, 1998 1997 Real estate assets: Real estate, at cost {A} $ - $ 12,810,945 Property valuation provision {B} - (3,995,696) Accumulated depreciation {A} - (4,036,553) Total real estate assets - 4,778,696 Other assets - 258,748 Total assets $ - $ 5,037,444 LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable to the Partnership {A}{C} $ - $ 28,258,421 Notes payable to an affiliate {C} - 300,000 Accrued interest payable to affiliates {A}{C} - 10,290,445 Due to affiliates {C} - 670,367 Other liabilities {D} - 315,202 Total liabilities - 39,834,435 Partners' deficit - (34,796,991) Total liabilities and Partners' deficit $ - $ 5,037,444
KRUPP EQUITY LIMITED PARTNERSHIP CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Revenue {A} $ - $ 254,830 $ 107,422$ 1,160,346 Property operating expenses {C - (62,248) (358,207) (316,281) Depreciation and amortization {A} - (61,924) - (356,637) Interest {A} - (754,227) - 1,541,770) Loss before gain on sale of properties and extinguishment of debt - (623,569) (250,785) (2,054,342) Gain: Sale of properties {A} - - 171,625 - Extinguishment of debt {C} - - 34,920,970 108,711 Net income (loss) $ - $(623,569)$34,841,810 $(1,945,631)
Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (3)Krupp Equity Limited Partnership ("KELP"), Continued {A}Pursuant to its disposition strategy, KELP sold its remaining properties on January 30, 1998 to unaffiliated third parties. KELP's properties were included in a package with twelve other properties owned by affiliates of KELP's General Partner. The total selling price of the fourteen properties was $138,000,000, of which KELP received $5,027,200 for the sale of its properties, less its share of closing costs. KELP used the net sales proceeds of $4,778,696 to pay down the mortgage notes payable to the Partnership. For financial reporting purposes, KELP realized a gain of $171,625 on the sale. The gain was calculated as the difference between the properties' selling prices less net book value of the properties and closing costs. The sale of KELP's properties is considered cause for dissolution of KELP, as defined by KELP's Partnership Agreement. Accordingly, KELP's remaining liabilities of $374,243 were transferred to its General Partner in the second quarter of 1998. Subsequently, KELP distributed its remaining assets of $45,075 to its partners. In conjunction with the final distribution, KELP was effectively dissolved. As a result of the sale of KELP's properties, certain notes totaling $2,790,388, pledged to the Partnership under a Collateral Pledge Agreement, were paid by the original General Partners of KELP to the Partnership, on May 12, 1998. {B}In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", at December 31, 1997, KELP recorded a cumulative property valuation provision of $3,995,696 based on the selling prices of the properties less estimated costs to sell. {C}At March 31, 1998, KELP was released from $34,920,970 of obligations with respect to the mortgage notes and accrued interest payable to an affiliate of $33,585,515, a demand note and accrued interest payable to an affiliate of $661,070 and expense reimbursements to an affiliate of $674,385. KELP recorded a gain on extinguishment of debt which was equivalent to the releases. {D}KELP was named in a lawsuit filed during 1996, in which the plaintiff has stated a claim for a brokerage commission in the amount of $260,000 as a result of the sale of Village Green Apartments. In 1993, the plaintiff fortuitously found a party interested in purchasing Village Green Apartments from the defendant, however, no purchase was ultimately negotiated, as the prospective purchaser would not meet KELP's asking price. In October, 1995, negotiations were rekindled and KELP entered into a purchase and sale agreement and consummated the sale in March, 1996. The plaintiffs have filed suit seeking a full commission, $260,000, calculated as 5% of the selling price, related to the sale. The plaintiffs did not have a written brokerage agreement and were not the procuring cause of the ultimate sale of the property, however they did introduce the parties to the ultimate transaction. The outcome of this litigation cannot be presently determined, however KELP recorded a provision of $260,000 which was subsequently transferred to its General Partner during the second quarter of 1998, as discussed above. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (4)Bad Debt Expense, Provisions for Credit Losses and Accrued Interest Reserves As of September 30, 1998, the General Partners of the Partnership recognized bad debt expense on its mortgage notes receivable of $305,364, based on the difference between the net sales proceeds received from the sale of KELP's properties and the carrying values of the loans. At December 31, 1997, the General Partners of the Partnership had cumulative provisions for credit losses of $15,851,013 recorded on its mortgage notes receivable and $14,638,760 recorded as uncollectible interest on accrued interest receivable. These cumulative provisions were recorded against the carrying value of the assets in order to reflect management's estimates of the underlying property values. (5)Summary of Change in Partners' Equity A summary of changes in Partners' equity (deficit) for the nine months ended September 30, 1998 is as follows: Total
Limited General Partners' Partners Partners Equity Balance at December 31, 1997 $ 8,999,051$(211,732) $ 8,787,319 Net loss (234,038) (2,364) (236,402) Distributions: Operations (150,295) (1,518) (151,813) Capital transaction (6,763,275) - (6,763,275) Balance at September 30, 1998 $ 1,851,443 $(215,614)$ 1,635,829
(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. 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 Pursuant to its disposition strategy, on January 30, 1998 the General Partner of KELP sold KELP's remaining properties to unaffiliated third parties. KELP's properties were included in a package with twelve other properties owned by affiliates of KELP's General Partner. The total selling price of the fourteen properties was $138,000,000, of which KELP received $5,027,200 for the sale of its properties, less its share of the closing costs. KELP used the net proceeds from the sale to pay down the mortgage notes payable to the Partnership (see Note 3). The sale of KELP's properties is considered cause for Dissolution of KELP, as defined by KELP's Partnership Agreement. Accordingly, KELP's remaining liabilities were transferred to its General Partner and its remaining assets distributed to its partners in the second quarter of 1998. In conjunction with the final distribution, KELP was effectively dissolved. As a result of the sale of KELP's properties, certain notes totaling $2,790,388, issued by the original General Partners of KELP, which had been pledged to the Partnership under a Collateral Pledge Agreement, were paid to the Partnership by the original General Partners of KELP on May 12, 1998. As of September 30, 1998, the General Partners of the Partnership recognized bad debt expense on its mortgage notes receivable of $305,364, based on the difference between the net sales proceeds received from the sale of KELP's properties and the carrying values of the loans. The sale of KELP's properties and the subsequent pay down of the Partnership's mortgage notes receivable, together represent an Event Causing Dissolution, as defined by the Partnership Agreement. On May 15, 1998, the Partnership made a special distribution of $225 per Unit based upon approximately 80% of the proceeds of the sale and estimated liquidation value of remaining Partnership assets. Once all necessary reserves and contingent liabilities are funded, the remaining proceeds will be distributed. All Partnership affairs are expected to be completed by year-end. Operations Net income, net of bad debt expense from mortgage notes receivable, decreased for the three and nine months ended September 30, 1998 when compared to the same periods in 1997, primarily due to the decrease in total income. Total income decreased during the three and nine months ended September 30, 1998, as compared to the three and nine months ended September 30, 1997, due to a decrease in interest income on mortgage notes receivable as a result of the sale of KELP's properties (see Note 3). This decrease was partially offset by an increase in interest income earned on cash equivalents as a result of higher cash and cash equivalent balances available for investment. Total expenses for the three months ended September 30, 1998 as compared to the three months ended September 30, 1997 remained stable. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP Operations, Continued Total expenses, net of bad debt expense from mortgage notes receivable, decreased when comparing the nine months ended September 30, 1998 to the nine months ended September 30, 1997, primarily due to lower expense reimbursements incurred in connection with the preparation and mailing of Partnership reports and other investor communications. 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 10, 1998 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, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 1,638,990 0 15,738 0 0 0 0 0 1,654,728 18,899 0 0 0 1,635,829 0 1,654,728 0 134,329 0 0 370,731 0 0 0 0 0 0 0 0 (236,402) 0 0 Includes all receivables on the Balance Sheet. KELP sold its remaining properties on January 30, 1998 to unaffiliated third parties with twelve other properties for a total selling price of $138,000,000, of which KELP received $5,027,200 for the sale of its properties, less its share of closing costs. KELP used the net sales proceeds of $4,778,696 to pay down the mortgage notes payable to the Partnership. As a result of the sale of KELP's properties, certain notes totaling $2,790,388,pledged to the Partnership under a Collateral Pledge Agreement, were paid by the original General Partners of KELP to the Partnership on May 12, 1998. Represents Limited Partners equity of $1,851,443 and General Partners deficit of ($215,614), respectively. Includes all income of the Partnership consisting of interest income only. Represents total expenses of the Partnership. Net loss allocated ($2,364)to the General Partners and ($234,038) to the Limited Partners. Average net loss per Unit of Limited Partners interest is ($7.79) on 30,059 Units outstanding.
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