-----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, Oz3pmqTpR2MnEYHpOioTqQNjxAPW6mq74PwzMkLHHSsS0PKHFk08lUfSAMjbuzIM uN9icOwpW/o7EckCH2RCJA== 0000832091-98-000004.txt : 19980505 0000832091-98-000004.hdr.sgml : 19980505 ACCESSION NUMBER: 0000832091-98-000004 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 III LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000832091 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 043007489 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17691 FILM NUMBER: 98609723 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE STREET 2: C/O KRUPP PLUS CORP CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVE 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 SECURITIESx 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 0-17691 Krupp Insured Plus-III Limited Partnership Massachusetts 04-3007489 (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 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-III LIMITED PARTNERSHIP BALANCE SHEETS ASSETS March 31, December 31, 1998 1997 Participating Insured Mortgages ("PIMs")(Note 2) $ 87,054,986 $104,165,895 Mortgage-Backed Securities and insured mortgages ("MBS")(Note 3) 28,602,151 29,220,457 Total mortgage investments 115,657,137 133,386,352 Cash and cash equivalents 9,622,468 35,473,221 Interest receivable and other assets 772,334 949,618 Prepaid acquisition expenses and fees, net of accumulated amortization of $5,261,806 and $5,921,472, respectively 2,291,327 2,902,255 Prepaid participation servicing fees, net of accumulated amortization of $1,462,683 and $1,680,937, respectively 731,191 934,014 Total assets $129,074,457 $173,645,460 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 24,749 $ 170,568 Partners' equity (deficit) (Note 4): Limited Partners 128,065,273 172,409,394 (12,770,261 Limited Partner interests outstanding) General Partners (134,855) (78,838) Unrealized gain on MBS 1,119,290 1,144,336 Total Partners' equity 129,049,708 173,474,892 Total liabilities and Partners' equity $129,074,457 $173,645,460
-2- The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-III LIMITED PARTNERSHIP STATEMENTS OF INCOME For the Three Months Ended March 31, 1998 1997 Revenue: Interest income - PIMs: Base interest $1,708,460 $2,662,964 Participation income 455,505 989,506 Interest income - MBS 549,735 647,518 Other interest income 204,486 59,965 Total revenues 2,918,186 4,359,953 Expense: Asset management fee to an affiliate 215,874 317,500 Expense reimbursements to affiliates 33,939 27,533 Amortization of prepaid expenses and fees 813,751 359,861 General and administrative 44,146 65,697 Total expenses 1,107,710 770,591 Net income $1,810,476 $3,589,362 Allocation of net income (Note 4): Limited Partners $1,756,162 $3,481,681 Average net income per Limited Partner interest (12,770,261 Limited Partner interests outstanding) $ .14 $ .27 General Partners $ 54,314 $ 107,681
-4- The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-III LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1998 1997 Operating activities: Net income $1,810,476 $3,589,362 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid expenses and fees 813,751 359,861 Prepayment penalty income (304,242) (679,193) Changes in assets and liabilities: Decrease in interest receivable and other assets 177,284 66,426 Decrease in liabilities (145,819) (15,223) Net cash provided by operating activities 2,351,450 3,321,233 Investing activities: Principal collections on PIMs including prepayment penalty income 17,415,151 1,064,596 Principal collections on MBS 593,260 454,468 Net cash provided by investing activities 18,008,411 1,519,064 Financing activities: Distributions (3,941,380)(3,925,054) Special Distributions (42,269,234) - Net cash used by financing activities (46,210,614)(3,925,054) Net (decrease) increase in cash and cash equivalents(25,850,753) 915,243 Cash and cash equivalents, beginning of period 35,473,221 4,666,597 Cash and cash equivalents, end of period $9,622,468 $5,581,840
-6- The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS-III 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, Krupp Plus Corporation and Mortgage Services Partners Limited Partnership, (collectively the "General Partners") of Krupp Insured Plus-III 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. 2. PIMs In January 1998, the Partnership made a $2.30 per unit special distribution with the prepayment proceeds of the Paddock Park II, Paddock Park Tallahassee and Paddock Jacksonville PIMs that were received during the fourth quarter of 1997. In January 1998, the Partnership received proceeds of the Fourth Ward Square and Meredith Square Apartment PIMs prepayments in the amounts of $7,067,690 and $4,688,895 respectively. In addition, during December 1997 the Partnership received $302,813 of minimum additional interest and shared interest income earned on property operations for these properties, a $422,001 prepayment penalty on Meredith Square and Shared Appreciation Interest of $697,500 on Fourth Ward Square. The Partnership distributed the capital transaction proceeds from these prepayments to investors through a special distribution on February 27, 1998 in the amount of $1.01 per limited partner interest. On February 17, 1998, the Partnership received a prepayment of the Rosewood Apartments PIM in the amount of $5,047,132 representing the outstanding principal balance. In addition, during January 1998 the Partnership received minimum additional interest and shared interest income of $151,263 and a prepayment penalty of $304,242. The partnership distributed the capital transaction proceeds from this prepayment to investors through a special distribution on April 13, 1998 in the amount of $.42 per limited partner interest. At March 31, 1998, the Partnership=s PIM portfolio has a fair value of $88,403,803 and gross unrealized gains and losses of $1,405,549 and $56,732 respectively. The PIM portfolio has maturities ranging from 1999 to 2032. At March 31, 1998 there are no insured mortgage loans within the Partnership s portfolio that are delinquent of principal or interest. -9- KRUPP INSURED PLUS-III LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued 3. MBS At March 31, 1997, the Partnership's MBS portfolio has an amortized cost of $27,482,861 and gross unrealized gains of $1,119,290. The Partnership's MBS have maturities ranging from 2010 to 2035. 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 $172,409,394 $(78,838) $1,144,336 $173,474,892 Net income 1,756,162 54,314 - 1,810,476 Special Distributions(42,269,234) - - (42,269,234) Distributions (3,831,049) (110,331) - (3,941,380) Decrease in unrealized gain on MBS - - (25,046) (25,046) Balance at March 31, 1998 $128,065,273 $(134,855) $1,119,290 $129,049,708 -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 demand on the Partnership's liquidity are quarterly distributions paid to investors. Effective with the May 1998 distribution the quarterly distribution will be $.19 per unit or approximately $2.4 million per quarter. Funds used for investor distributions come from interest received on the PIMs,MBS, cash and cash equivalents net of operating expenses,and certain principal collections received on the PIMs and MBS. The Partnership funds a portion of the quarterly distributions from principal collections causing the capital resources of the Partnership to continually decrease. As the capital resources 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 the cash available for distribution the General Partners may adjust the distribution rate or distribute funds through a special distribution. Since the beginning of 1998, the Partnership has paid three special distributions. During January, the Partnership paid out $2.30 per Limited Partner interest, which represented the principal proceeds and prepayment penalties received in the fourth quarter of 1997 from the three Paddock property PIMs. During February, the Partnership paid out $1.01 per Limited Partner interest,which represented the principal proceeds from Fourth Ward Square and Meredith Square PIMs, the prepayment penalty from Meredith Square and the Shared Appreciation Interest from Fourth Ward Square. During April, the Partnership paid out $.42 per Limited Partner interest,which represented the principal proceeds and prepayment penalty received from the Rosewood PIM. The General Partners estimate that the Partnership can maintain the quarterly distribution rate of $.19 per limited partner interest for the near future. However, in the event of further 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. 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 financing 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 Federal Home Loan Mortgage Corporation (FHLMC), the Government National Mortgage Association (GNMA) and the 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 represent interests 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 $4 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 decreased approximately $1,779,000 for the three months ended March 31, 1998 as compared to the same period in 1997, due primarily to lower interest income on PIMS and higher amortization expenses, both of which are related to prepayments. This was offset by an increase in other interest income due to the Partnership having higher short-term investment balances as a result of PIM prepayments that occurred in the fourth quarter of 1997 and the first quarter of 1988. PIM interest income was lower due to the prepayments of the Meredith Square, Fourth Ward Square and Rosewood Apartment PIM s during the first quarter of 1998 and the prepayments of the Paces Arbor, Paces Forest, Paddock Park II, Paddock Park Tallahassee and Paddock Jacksonville PIMs during 1997. Amortization expense increased approximately $454,000 as a result of the PIM prepayments that occurred in 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. -12- KRUPP INSURED PLUS-III 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 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-III Limited Partnership (Registrant) BY: /s/Robert A. Barrows Robert A. Barrows Treasurer and Chief Accounting Officer of Krupp Plus Corporation, a General Partner. 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. 0000832091 KRUPP INSURED PLUS-III LIMITED PARTNERSHIP 3-MOS MAR-31-1998 MAR-31-1998 9,622,468 115,657,137 772,334 0 0 3,022,518 0 0 129,074,457 24,749 0 0 0 127,930,418 1,119,290 129,074,457 0 2,918,186 0 0 1,107,710 0 0 1,810,476 0 1,810,476 0 0 0 1,810,476 0 0 Includes Participating Insured Mortgages ("PIMs") of $87,054,986 and Mortgage-Backed Securities ("MBS") of $28,602,151. Includes prepaid acquisition fees and expenses of $7,553,133 net of accumulated amortization of $5,261,806 and prepaid participation servicing fees of $2,193,874 net of accumulated amortization of $1,462,683. Represents total equity of General Partners and Limited Partners. General Partenrs deficit of ($134,855) and Limited Partners equity of $128,065,273. Unrealized gain on MBS. Represents interest income on investments in mortages and cash. Includes $814,751 of amortization of prepaid fees and expenses. Net income allocated $54,314 to the General Partners and $1,756,162 to the Limited Partners. Avergage net income per Limited Partner interest is $.14 on 12,770,261 Limited Partner interests outstanding.
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