-----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, RqrYArQ4z7CiGV9HhkLMvo+tyf3iPPD+XwpEEA6eKaNl1GGWuijJr3QNc36U3Fxd hBY2QL9p2NFIwja0UzoCvg== 0000832091-98-000006.txt : 19980813 0000832091-98-000006.hdr.sgml : 19980813 ACCESSION NUMBER: 0000832091-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: 98683146 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 KRUPP INSURED PLUS III LIMITED PARTNERSHIP -4- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 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 0-17691 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 June 30, December 31, 1998 1997 Participating Insured Mortgages ("PIMs")(Note 2) $ 79,745,317 $104,165,895 Mortgage-Backed Securities and insured mortgages ("MBS")(Note 3) 17,948,730 29,220,457 ------------ ------------------ Total mortgage investments 97,694,047 133,386,352 Cash and cash equivalents 21,587,137 35,473,221 Interest receivable and other assets 693,972 949,618 Prepaid acquisition expenses and fees, net of accumulated amortization of $4,565,542 and $5,921,472, respectively 1,754,461 2,902,255 Prepaid participation servicing fees, net of accumulated amortization of $1,390,542 and $1,680,937, respectively 623,923 934,014 ------------------ ------------------ Total assets $122,353,540 $173,645,460 ============ ============ LIABILITIES AND PARTNERS' EQUITY Liabilities $ 15,668 $ 170,568 ------------ --------- Partners' equity (deficit) (Note 4): Limited Partners 121,856,762 172,409,394 (12,770,261 Limited Partner interests outstanding) General Partners (155,548) (78,838) Unrealized gain on MBS 636,658 1,144,336 ------------ ------------ Total Partners' equity 122,337,872 173,474,892 ------------- ----------- Total liabilities and Partners' equity $122,353,540 $173,645,460 ============ ============ The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-III LIMITED PARTNERSHIP STATEMENTS OF INCOME
For the Three Months For the Six Months Ended June 30, Ended June 30, 1998 1997 1998 1997 ------- ------- ------- ------ Revenues: Interest income - PIMs: Base interest $1,640,321 $2,540,033 $3,348,781 $5,202,997 Participation interest 113,032 138,683 568,537 1,128,189 Interest income - MBS 516,559 638,048 1,066,294 1,285,566 Interest income - othe 243,968 99,149 448,454 159,114 ---------- ------------ ---------- ---------- Total revenues 2,513,880 3,415,913 5,432,066 7,775,866 ---------- --------- ---------- -------------- Expenses: Asset management fee to an affiliate 195,069 305,746 410,943 623,246 Expense reimbursements to affiliates (28,124) 33,938 5,815 61,471 Amortization of prepaid expenses and fees 644,134 595,540 1,457,885 955,401 General and administrative 72,604 57,714 116,750 123,411 --------- ------------- --------- -------------- Total expenses 883,683 992,938 1,991,393 1,763,529 --------- ---------- --------- --------- Net income 1,630,197 2,422,975 3,440,673 6,012,337 Net unrealized gain (loss) on MBS (482,632) 631,626 (507,678) 397,381 ---------- --------- ---------- ---------- Total comprehensive income $1,147,565 $3,054,601 $2,923,995 $6,409,718 ========== ========== ========== ========== Allocation of net income (Note 4): Limited Partners $1,581,291 $2,350,285 $3,337,453 $5,831,966 ========== ========== ========== ========== Average net income per Limited Partner interest (12,770,261 Limited Partner interests outstanding) $ .12 $ .19 $ .26 $ .46 ========== ============== ========== =========== General Partners $ 48,906 $ 72,690 $ 103,220 $ 180,371 ========== ========== ========== ========== The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-III LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 1997 ---- ---- Operating activities: Net income $ 3,440,673 $ 6,012,337 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid expenses and fees 1,457,885 955,401 Prepayment penalties (315,942) (679,193) Changes in assets and liabilities: Decrease in interest receivable and other assets 255,646 119,933 Decrease in liabilities (154,900) (7,673) ---------------- -------------- Net cash provided by operating activities 4,683,362 6,400,805 ---------------- ---------- Investing activities: Principal collections on PIMs including prepayment penalties of $304,242 in 1998 and $679,193 in 1997, respectively 24,724,820 8,802,384 Principal collections on MBS including a prepayment penalty of $11,700 in 1998 10,775,749 876,051 ---------------- ----------- Net cash provided by investing activities 35,500,569 9,678,435 ---------------- ----------- Financing activities: Special distributions (47,632,702) (8,300,605) Quarterly distributions (6,437,313) (7,854,203) ----------------- ----------- Net cash used for financing activities (54,070,015) (16,154,808) ----------- ----------- Net increase (decrease) in cash and cash equivalents (13,886,084) (75,568) Cash and cash equivalents, beginning of period 35,473,221 4,666,597 ----------- ----------- Cash and cash equivalents, end of period $21,587,137 $ 4,591,029 =========== =========== 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 June 30, 1998, its results of operations for the three and six months ended June 30, 1998 and 1997, and its cash flows for the six months ended June 30, 1998 and 1997. The results of operations for the three and six months ended June 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. PIMs On June 15, 1998, the Partnership received a prepayment of the Sundance Apartments PIM in the amount of $7,187,778, representing the outstanding principal balance. The Partnership anticipates a third quarter special distribution of approximately $.57 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. In January 1998, the Partnership made a $2.30 per Unit special distribution with the prepayment proceeds of the Paddock Park II, Paddock Club Tallahassee and Paddock Club Jacksonville PIMs, which were received during the fourth quarter of 1997. In January 1998, the Partnership received proceeds from the Fourth Ward Square and Meredith Square Apartment PIM 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. continued KRUPP INSURED PLUS-III LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued 2. PIMs, continued At June 30, 1998, the Partnership=s PIM portfolio has a fair value of $80,786,813 and gross unrealized gains and losses of $1,098,228 and $56,732, respectively. The PIM portfolio has maturities ranging from 1999 to 2032. At June 30, 1998 there are no insured mortgage loans within the Partnership's portfolio that are delinquent with respect to principal or interest payments. 3. MBS On June 19, 1998, the Partnership received a prepayment of the Brookside MBS in the amount of $2,944,531, representing the outstanding principal balance and a prepayment penalty of $11,700. The Partnership anticipates a third quarter special distribution of approximately $.24 per Limited Partner interest. On April 24, 1998, the Partnership received a prepayment of the Regency Park MBS in the amount of $6,232,557, representing the outstanding principal balance. The Partnership anticipates a third quarter special distribution of approximately $.49 per limited partner interest. At June 30, 1998, the Partnership's MBS portfolio has an amortized cost of $17,312,072 and gross unrealized gains of $636,658. The Partnership's MBS have maturities ranging from 2010 to 2035. In June 1997, Statement of Financial Accounting Standards No. 130, 'Reporting Comprehensive Income' (FASB 130), was issued establishing standards for reporting and displaying comprehensive income and its components effective January 1, 1998. FASB 130 requires comprehensive income and its components, as recognized under accounting standards, to be displayed in a financial statement with the same prominence as other financial statements, if material. Accordingly, unrealized gains (losses) on the Partnership's available-for sale securities have been included in other comprehensive income. 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the six months ended June 30, 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 3,337,453 103,220 - 3,440,673 Special distributions (47,632,702) - - (47,632,702) Distributions (6,257,383) (179,930) - (6,437,313) Increase in unrealized gain on MBS - - (507,678) (507,678) ------------------ --------- -------- ------------- Balance at June 30, 1998 $121,856,762 $(155,548) $636,658 $122,337,872 ============ ========= ======== ============
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 The most significant demand on the Partnership's liquidity are quarterly distributions paid to investors of approximately $2.4 million. Funds used for investor distributions come from interest received on the PIMs, MBS, cash and cash equivalents net of operating expenses and principal collections received on the PIMs and MBS. The Partnership funds a portion of the 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 is necessary based on projected future cash flows. In general, the General Partners 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, and will be paying a fourth special distribution in the third quarter of 1998. 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. In July 1998, the Partnership will pay out a special distribution of $1.30 per Limited Partner interest relating to the payoffs of the Sundance Apartment PIM and the Regency Park and Brookside MBS. The General Partners have been informed by the borrower that the first mortgage loans underlying the PIMs on Woodbine, Ironwood and Winsdor Court may be prepaid prior to the end of the year as a result of refinancing. If any of these transactions take place, the Partnership would receive unpaid participation interest earned on prior years' operations and either its share of any interest in the value of the properties or a prepayment premium. 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 Fannie Mae, the Federal Home Loan Mortgage Corporation (AFHLMC@), the Government National Mortgage Association (AGNMA@) and the Department of Housing and Urban Development (AHUD@) 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. Fannie Mae 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. Operations The following discussion relates to the operations of the Partnership during the three and six months ended June 30, 1998 and 1997: Net income decreased for the three months ended June 30, 1998, as compared to same period in 1997 by approximately by $793,000. This decrease was due to lower base interest, interest income on MBS and higher amortization of prepaid fees and expenses of $900,000, $121,000, and $49,000, respectively. This was offset by an increase in other interest income of $145,000 and decreases in asset management fees and expense reimbursements of approximately $111,000 and $62,000, respectively. The decrease in base interest was due to the prepayments during the first quarter of 1998 of Meredith Square, Fourth Ward Square and the Rosewood Apartment PIMs, the three Paddock PIMs in the fourth quarter of 1997 and the two Paces PIMs during the second quarter of 1997. The decrease in MBS interest income was primarily due to the prepayment of the Regency Park MBS in April of 1998. The increase in other interest income was due to the Partnership having higher average short-term investment balances during the three months ended June 30, 1998 when compared to the corresponding period in 1997. The increase in amortization of prepaid fees and expenses is a result of the Partnership fully amortizing the remaining balances of prepaid fees and expenses associated with the Regency Park MBS, and Rosewood and Sundance Apartment PIMs. The above-mentioned payoffs also caused the decline in asset management fees. Net income decreased approximately $2,571,000 for the six months ended June 30, 1998 as compared to the same period in 1997, due primarily to lower base interest, participation income and interest income on MBS of approximately $1,854,000, $560,000 and $219,000, respectively and higher amortization expense of $502,000. This was offset by an increase in other interest income of $289,000 and lower asset management fees and expense reimbursements of approximately $212,000, and $56,000, respectively. The decrease in base interest was due to the prepayments during the first quarter of 1998 of Meredith Square, Fourth Ward Square and the Rosewood Apartment PIMs; the three Paddock PIMs in the fourth quarter of 1997 and the two Paces PIMs during the second quarter of 1997. The Partnership received prepayment penalties of approximately $316,000 from the Rosewood PIM and Brookside MBS prepayments in 1998 and approximately $679,000 from the two Paces PIMs in 1997. In addition, the Partnership received SII of approximately $253,000 from two PIMs as compared to $449,000 from seven PIMs in 1997. The increase in other interest income was due to the Partnership having higher average short-term investment balances during the six months ended June 30, 1998 when compared to the corresponding period in 1997. The increase in amortization of prepaid fees and expenses is due to the Partnership fully amortizing the remaining costs associated with the Regency Park MBS, Rosewood and Sundance Apartment PIMs. The general and administrative expense decrease was primarily due to lower transfer agent costs of approximately $26,000 for the six months ended June 30, 1998 as compared to the same period in 1997. The Partnership funds a portion of distributions with MBS and PIM principal collections, which reduce the invested assets generating interest income for the Partnership. As the invested assets decline so will interest income on MBS, base interest income on PIMs and other interest income. 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 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: August 5, 1998 EX-27 2 FDS --
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 6-MOS Jun-30-1998 Jun-30-1998 21,587,137 97,694,047 693,972 0 0 2,378,384 0 0 122,353,540 15,668 0 0 0 121,701,214 636,658 122,353,540 0 5,432,066 0 0 1,991,393 0 0 3,440,673 0 3,440,673 0 0 0 3,440,673 0 0 Includes Participating Insured Mortgages ("PIMs") of $79,745,317 and Mortgage-Backed Securities ("MBS") of $17,948,730. Includes prepaid acquisition fees and expenses of $6,320,003 net of accumulated amortization of $4,565,542 and prepaid participation servicing fees of $2,014,465 net of accumulated amortization of $1,390,542. Represents total equity of General Partners and Limited Partners. General Partners deficit of ($155,548) and Limited Partners equity of $121,856,762. Unrealized gain on MBS. Represents interest income on investments in mortgages and cash. Includes $1,457,885 of amortization of prepaid fees and expenses. Net income allocated $103,220 to the General Partners and $3,337,453 to the Limited Partners. Average net income per Limited Partner interest is $.26 on 12,770,261 Limited Partner interests outstanding.
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