-----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, OBf5L4AriWC1IywUcQY/3l9SVXRDZ1sgMsIzKhPR7raNvi7g9AILxGK55wOgE7vB Vh2dVCzlQERawI57Ikfghg== 0000786622-98-000006.txt : 19980505 0000786622-98-000006.hdr.sgml : 19980505 ACCESSION NUMBER: 0000786622-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980504 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP INSURED PLUS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000786622 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 042915281 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15815 FILM NUMBER: 98609249 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE STREET 2: C/O BERKSHIRE REALTY AFFILIATES CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 FORMER COMPANY: FORMER CONFORMED NAME: KRUPP NATIONAL INSURED MARTGAGE FUND LTD PARTNERSHIP DATE OF NAME CHANGE: 19860702 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 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 0-15815 Krupp Insured Plus Limited Partnership Massachusetts 04-2915281 (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 -1- 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 INSURED PLUS LIMITED PARTNERSHIP BALANCE SHEETS ASSETS March 31, December 31, 1998 1997 Participating Insured Mortgages ("PIMs") $29,241,955 $ 37,769,835 (Note 2) Mortgage-Backed Securities ("MBS") (Note 3) 25,504,177 25,897,592 Total mortgage investments 54,746,132 63,667,427 Cash and cash equivalents 11,749,714 3,100,615 Interest receivable and other assets 375,995 534,178 Prepaid acquisition fees and expenses, net of accumulated amortization of $539,069 and $522,080 respectively 305,183 322,172 Prepaid participation servicing fees, net of accumulated amortization of $168,285 and $160,008,respectively 162,767 171,044 Total assets $67,339,791 $67,795,436 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 21,411 $ 21,117 Partners' equity (deficit): Limited Partners 66,359,791 66,774,981 (7,500,099 Limited Partner interests outstanding) General Partners (238,853) (224,493) Unrealized gain on MBS 1,197,442 1,223,831 Total Partners' equity 67,318,380 67,774,319 Total liabilities and Partners' equity $67,339,791 $67,795,436
The accompanying notes are an integral part of the financial statements. -3-
KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF INCOME For the Three Months Ended March 31, 1998 1997 Revenues: Interest income - PIMs $ 649,078 $ 798,959 Interest income - MBS 505,848 550,841 Other interest income 65,333 25,016 Total revenues 1,220,259 1,374,816 Expenses: Asset management fee to an affiliate 109,342 126,471 Expense reimbursements to affiliates 20,132 16,337 Amortization of prepaid fees and expenses 25,266 188,184 General and administrative 24,458 47,395 Total expenses 179,198 378,387 Net income $1,041,061 $ 996,429 Allocation of net income (Note 4): Limited Partners $1,009,829 $ 966,536 Average net income per Limited Partner interest (7,500,099 Limited Partners interests outstanding) $ .13 $ .13 General Partners $ 31,232 $ 29,893
-4- The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1998 1997 Operating activities: Net income $ 1,041,061 $ 996,429 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid fees and expenses 25,266 188,184 Premium amortization MBS 1,471 2,768 Changes in assets and liabilities: Decrease in interest receivable and other assets 158,183 41,654 Increase (decrease) in liabilities 294 (15,186) Net cash provided by operating activities 1,226,275 1,213,849 Investing activities: Principal collections on MBS 365,555 444,987 Principal collections on PIMs 8,527,880 153,834 Net cash provided by investing activities 8,893,435 598,821 Financing activity: Quarterly distributions (1,470,611) (1,490,301) Net increase in cash and cash equivalents 8,649,099 322,369 Cash and cash equivalents, beginning of period 3,100,615 1,757,197 Cash and cash equivalents, end of period $11,749,714 $2,079,566
The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS 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. However, in the opinion of the general partners, The Krupp Corporation and The Krupp Company Limited Partnership-IV (collectively the "General Partners"), of Krupp Insured Plus Limited Partnership (the "Partnership") the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Financial Statements included in the Partnership's 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 (consisting of only normal recurring accruals) necessary to present fairly the Partnership's financial position as of March 31, 1998 and its results of operations and cash flows for the three months ended March 31, 1998 and 1997. The results of operations for the three months ended March 31, 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. PIMs The borrower on the Greentree PIM defaulted on the first mortgage obligation. The Partnership had continued to receive its full principal and interest payments due on the PIM because GNMA had guaranteed those payments to the Partnership. In March 1998, the GNMA mortgagee exercised the right to prepay the GNMA because of the continuing default of the first mortgage loan, and the Partnership received proceeds from the prepayment in the amount of $8,362,336. In April 1998, the Partnership will make a special distribution to the investors of $1.12 per Limited Partner interest. There was no participation income related to the Greentree Apartment PIM prepayment due to the default. At March 31, 1998, the Partnership's PIMs have a fair value of $29,248,707 and gross unrealized gains and losses of $28,130 and $21,378, respectively. The PIMs have maturities ranging from 2006 to 2033. 3. MBS At March 31,1998, the Partnership's MBS portfolio has an amortized cost of $24,306,735 and gross unrealized gains of $1,197,442 with maturities from 2004 to 2033. -8- KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, continued 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the three months ended March 31, 1998 is as follows: Total Limited General Unrealized Partners' Partners Partners Gain Equity Balance at December 31, 1997 $ 66,774,981 $(224,493) $1,223,831 $67,774,319 Net income 1,009,829 31,232 - 1,041,061 Quarterly distributions (1,425,019) (45,592) - (1,470,611) Decrease in unrealized gain on MBS - - (26,389) (26,389) Balance at March 31, 1998 $ 66,359,791 $(238,853)$1,197,442 $67,318,380 -10- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Managements 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 The most significant demands on the Partnership's liquidity are regular quarterly distributions paid to investors of approximately $1.5 million. Funds used for investor distributions come from (i) interest received on the PIMs, MBS, cash and cash equivalents, (ii) the principal collections received on the PIMs and MBS and(iii) cash reserves. The Partnership funds a portion of the distribution from principal collections and as a result the capital resources of the Partnership will continually decrease. As a result of this decrease, the total cash inflows to the Partnership will also decrease which will result in periodic adjustments to the quarterly distributions paid to investors. The General Partners periodically review the distribution rate to determine whether an adjustment to the distribution rate is necessary based on projected future cash flows. In general, the General Partners try to set a distribution rate that provides for level quarterly distributions of cash available for distribution. To the extent quarterly distributions differ from cash available for distribution,the General Partners may adjust the distribution rate or distribute funds through a special distribution. The borrower on the Greentree PIM defaulted on the first mortgage obligation during the third quarter of 1997 when he did not make the July 1997 payment until August. During the remainder of 1997, payments continued to be late or funded with withdrawals from reserves held for replacements. As of the end of the first quarter 1998, the GNMA mortgagee had received no payments for January, February or March. However, the Partnership had continued to receive its full principal and interest payments due on the PIM because GNMA had guaranteed those payments to the Partnership. In March, the GNMA mortgagee exercised its right to prepay the GNMA because of the continuing default of the first mortgage loan, and the Partnership received prepayment proceeds of $8,362,336 when the PIM was paid off. The Partnership did not receive any participation interest as a result of the PIM prepayment. In April 1998, the Partnership will make a special distribution to the investors of $1.12 per Limited Partner interest. Based on current projections,the General Partners believe,the Partnership can maintain the current distribution rate through 1998. However, in the event of PIM prepayments, the Partnership would be required to distribute any proceeds from the prepayments as a special distribution, which may cause an adjustment to the distribution rate to reflect the anticipated future cash inflows from the remaining mortgage investments. As an ongoing result of the Partnerships agreement to a modification of the Royal Palm PIM in December of 1995, the Partnership will receive interest only payments on the FNMA MBS at an interest rate of 6.5% in 1998, thereafter interest rates will range from 7.0% to 8.775% per annum through maturity. Also, the Partnership received its pro-rata share of the principal payment totaling $250,000 due in January. The Partnership has the option to call certain PIMs by accelerating their maturity if the loans are not prepaid by the tenth year after permanent funding. The Partnership will determine the merits of exercising the call option for each PIM as economic conditions warrant. Such factors as the condition of the asset, local market conditions, interest rates and available f inancing will have an impact on this decision. Assessment of Credit Risk The Partnership's investments in mortgages are guaranteed or insured by the Federal National Mortgage Association (FNMA), the Government National Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") or the United States Department of Housing and Urban Development ("HUD") and therefore the certainty of their cash flows and the risk of material loss of the amounts invested depends on the creditworthiness of these entities. FNMA is a federally chartered private corporation that guarantees obligations originated under its programs. FHLMC is a federally chartered corporation that guarantees obligations originated under its programs and is wholly- owned by the twelve Federal Home Loan Banks. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA guarantees the full and timely payment of principal and basic interest on the securities it issues, which represents interest in pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by the full faith and credit of the U.S. Government. The Partnership includes in cash and cash equivalents approximately $2 million of commercial paper, which is issued by entities with a credit rating equal to one of the top two rating categories of a nationally recognized statistical rating organization. Operations The following discussion relates to the operations of the Partnership during the three months ended March 31, 1998 and 1997. Net income increased approximately $45,000 for the three months ended March 31, 1998 as compared to the same period in 1997, due primarily to a reduction in amortization and general and administrative expenses and an increase in other interest income which offset a decline in interest income on PIMS. Amortization expense decreased as all the prepaid fees and expenses associated with all the remaining PIMs, except Vista Montana were fully amortized. General and administrative expenses decreased due to was primarily due to lower transfer agent costs of approximately $23,000 for the three months ended March 31, 1998 as compared to the same period in 1997. Other interest income increased due to higher average short-term investment balances during the first quarter of 1998 when compared to the same period in 1997.PIM interest income was lower due primarily to the prepayment of the Pine Hills Apartments PIM in November of 1997 and the Greentree PIM prepayment in March 1998. Interest income on PIMs and MBS will continue to decline as principal collections reduce the outstanding balance of the portfolios. The Partnership funds a portion of distributions with MBS and PIM principal collections, which reduces the invested assets generating income for the Partnership. As the invested assets decline so will interest income on MBS, base interest income on PIMs and other interest income. -13- KRUPP INSURED PLUS 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 -14- 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 Insured Plus Limited Partnership (Registrant) BY: /s/Robert A. Barrows Robert A. Barrows Vice-President and Chief Mortgage Accounting Officer of The Krupp Corporation, a General Partner of the Registrant. DATE: April 23, 1998 -15- EX-27 2
5 The schedule contains summary financial information extracted from the balance sheet and statement of income and is qualified in its entirety by reference to such financial statements. 0000786622 KRUPP INSURED PLUS LIMITED PARTNERSHIP 3-MOS MAR-31-1998 MAR-31-1998 11,749,714 54,746,132 375,995 0 0 467,950 0 0 67,339,791 21,411 0 0 0 66,120,938 1,197,442 67,339,791 0 1,220,259 0 0 179,198 0 0 1,041,061 0 1,041,061 0 0 0 1,041,061 0 0 Includes Participating Insured Mortgages ("PIMs") of $29,241,995 and Mortgage-Backed Securities ("MBS") of $25,504,177. Includes prepaid acquisition fees and expenses of $844,252 net of accumulated amortization of $539,069 and prepaid participation servicing fees of $331,052 net accumulated amortization of $168,285. Represents total equity of General Partners and Limited Partners. General Partners deficit of ($238,853) and Limited Partners equity of $66,359,791. Unrealized gain on MBS. Represents interest income on investments in mortgages and cash. Includes $25,266 of amortization of prepaid fees and expenses. Net income allocated $31,232 to the General Partners and $1,009,829 to the Limited Partners. Average net income per Limited Partner interest is $.13 on 7,500,099 Limited Partner interests outstanding.
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