-----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, LoseUsNhn2wkYE4J09zSV55vzq+lCwpAHc3VRzpXy2R3TGwbIRIAlupBkx73xoDM 8U2Z10A2o7CTt1b1xvBNNg== 0000832091-00-000004.txt : 20000515 0000832091-00-000004.hdr.sgml : 20000515 ACCESSION NUMBER: 0000832091-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: 627665 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 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, 2000 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 (IRS employer identification no.) of incorporation or organization) One Beacon Street, Boston, Massachusetts 02108 (Address of principal executive offices) (Zip Code) (617) 523-0066 (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, 2000 1999 Participating Insured Mortgages ("PIMs")(Note 2) $ 34,713,067 $ 34,929,389 Mortgage-Backed Securities and insured mortgage ("MBS")(Note 3) 12,796,712 12,948,849 Total mortgage investments 47,509,779 47,878,238 Cash and cash equivalents (Note 2) 3,384,201 19,237,377 Interest receivable and other assets 333,662 645,696 Prepaid acquisition fees and expenses, net of accumulated amortization of $2,503,636 and $2,431,337, respectively 417,835 490,134 Prepaid participation servicing fees, net of accumulated amortization of $735,844 and $713,125, respectively 152,343 175,062 Total assets $ 51,797,820 $ 68,426,507 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 12,858 $ 19,548 Partners' equity (deficit) (Note 4): Limited Partners (12,770,261 Limited Partner interests outstanding) 51,990,985 68,593,209 General Partners (197,947) (187,219) Accumulated comprehensive income (8,076) 969 Total Partners' equity 51,784,962 68,406,959 Total liabilities and Partners' equity $ 51,797,820 $ 68,426,507
The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-III LIMITED PARTNERSHIP STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Three Months Ended March 31, 2000 1999 Revenues: Interest income - PIMs: Basic interest $ 671,341 $ 1,156,883 Interest income - MBS 251,014 288,604 Other Interest income 84,314 126,926 Total revenues 1,006,669 1,572,413 Expenses: Asset management fee to an affiliate 88,778 137,312 Expense reimbursements to affiliates 20,672 5,009 Amortization of prepaid fees and expenses 95,018 244,205 General and administrative 13,339 16,786 Total expenses 217,807 403,312 Net income 788,862 1,169,101 Comprehensive income: Net change in unrealized loss/gain on MBS (9,045) (19,064) Total comprehensive income $ 779,817 $ 1,150,037 Allocation of net income (Note 4): Limited Partners $ 765,196 $ 1,134,028 Average net income per Limited Partner interest (12,770,261 Limited Partner interests outstanding) $ .06 $ .09 General Partners $ 23,666 $ 35,073
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, 2000 1999 Operating activities: Net income $ 788,862 $ 1,169,101 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid fees and expenses 95,018 244,205 Changes in assets and liabilities: Decrease in interest receivable and other assets 312,034 82,981 (Decrease) increase in liabilities (6,690) 143,117 Net cash provided by operating activities 1,189,224 1,639,404 Investing activities: Principal collections on PIMs 216,322 11,135,262 Principal collections on MBS 143,092 647,923 Net cash provided by investing activities 359,414 11,783,185 Financing activities: Quarterly distributions (2,460,725) (2,481,622) Special distributions (14,941,089) (11,237,745) Net cash used for financing activities (17,401,814) (13,719,367) Net decrease in cash and cash equivalents (15,853,176) (296,778) Cash and cash equivalents, beginning of period 19,237,377 6,845,229 Cash and cash equivalents, end of period $ 3,384,201 $ 6,548,451 Non cash activities: Decrease in Fair Value of MBS $ (9,045) $ (19,064)
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, 1999 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, 2000 and its results of operations and cash flows for the three months ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 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 January 11, 2000, the Partnership paid a special distribution of $1.17 per Limited Partner interest representing principal proceeds and Shared Appreciation Interest received of $14,491,746 and $426,321, respectively from the Marina Shores Apartments PIM payoff in December of 1999. At March 31, 2000, the Partnership?s PIM portfolio has a fair market value of approximately $34,814,000 and gross unrealized gains of approximately $101,000. The PIM portfolio has maturities ranging from 2006 to 2031. 3. MBS At March 31, 2000, the Partnership's MBS portfolio has an amortized cost of $4,784,478 and gross unrealized gains and losses of $78,173, and $86,249, respectively. At March 31, 2000, the Partnership's insured mortgage loan has an amortized cost of $8,020,310. The portfolio has maturities ranging from 2016 to 2035. 4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended March 31, 2000 is as follows: Accumulated Total Limited General Comprehensive Partners' Partners Partners Income Equity Balance at December 31, 1999 $ 68,593,209 $ (187,219) $ 969 $ 68,406,959 Net income 765,196 23,666 - 788,862 Special distributions (14,941,089) - - (14,941,089) Quarterly distributions (2,426,331) (34,394) - (2,460,725) Change in unrealized gain on MBS - - (9,045) (9,045) Balance at March 31, 2000 $ 51,990,985 $ (197,947) $ (8,076) $ 51,784,962
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 demands on the Partnership's liquidity are the regular quarterly distributions paid to investors, which are approximately $2.4 million each quarter. Funds for the investor distributions come from the monthly principal and basic interest payments received on the PIMs and MBS, the principal prepayments of the PIMs and MBS, and interest earned on the Partnership's cash and cash equivalents. 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 that quarterly distributions do not fully utilize the cash available for distributions and cash balances increase, the General Partners may adjust the distribution rate or distribute such funds through a special distribution. The portion of distributions attributable to the principal collections reduces the capital resources of the Partnership. As the capital resources decrease, the total cash flows to the Partnership also will decrease and over time will result in periodic adjustments to the distributions paid to investors. Based on current projections, the General Partners believe the Partnership will need to adjust the current distribution rate beginning with the August 2000 distribution. The General Partners will determine the new rate during the second quarter of 2000. In addition to providing insured or guaranteed monthly principal and basic interest payments, the Partnership's PIM investments also may provide additional income through its participation feature in the underlying properties if they operate successfully. The Partnership may receive a share in any operating cash flow that exceeds debt service obligations and capital needs or a share in any appreciation in value when the properties are sold or refinanced. However, this participation is neither guaranteed nor insured, and it is dependent upon whether property operations or its terminal value meet certain criteria. On January 11, 2000, the Partnership paid a special distribution of $1.17 per Limited Partner interest from the principal proceeds and Shared Appreciation Interest in the amounts of $14,491,746 and $426,321, respectively from the Marina Shores Apartments PIM payoff in December of 1999. The Partnership's only remaining PIM investments are the MBS backed by the first mortgage loans on Casa Marina, Harbor Club and Royal Palm Place. Presently, the General Partners do not expect any of these properties to pay the Partnership any participation interest during 2000. Casa Marina, located in North Miami, is a forty- year old property where the costs of maintenance, repairs and replacements have escalated as the property has aged. Occupancy generally hovers in the 90% range, and the property generates sufficient cash flow for adequate maintenance but not enough to provide for major capital improvements or any participation interest. The Borrower has informed the Partnership that the property will be marketed for sale during 2000. Harbor Club operates successfully in Ann Arbor, Michigan, which is a very competitive market with many newer apartment properties. Although Harbor Club has maintained occupancy rates in the mid 90% range for the past two years, most cash flow generated by the property is used for capital replacements and improvements that help it maintain its strong market position. Royal Palm Place operates under a long-term restructure program. As an on going result of the Partnership's 1995 agreement to modify the payment terms of the Royal Palm Place PIM, the Partnership will receive basic interest only payments on the Fannie Mae MBS at the rate of 7.875% per annum during 2000. Thereafter, the interest rate will range from 7.875% to 8.775% per annum through the maturity of the first mortgage in 2006. The Partnership also received its pro rata share of the January 2000, $250,000 principal payment. During the first five years, borrowers are prohibited from prepaying the mortgage loans underlying the PIMs. During the second five years, borrowers may prepay the loans by incurring a prepayment premium. The Partnership has the option to call certain PIMs by accelerating their maturity if they 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, the interest rate environment and availability of financing will affect those decisions. Results of Operations The following discussion relates to the operation of the Partnership during the three months ended March 31, 2000 and 1999. Net income decreased by approximately $380,000 during the three months ended March 31, 2000 as compared to the same period ending 1999, due primarily to lower basic interest on PIMs, lower interest income on MBS and lower other interest income in the amounts of approximately $486,000, $38,000 and $43,000, respectively. This was partially offset by decreases in amortization and partnership expenses of approximately $149,000 and $36,000 respectively. The significant decrease in basic interest on PIMs was caused by the prepayments of the Marina Shores, Windsor Court and Mill Ponds Apartment PIMs in 1999. The decrease in MBS interest income was due to the on-going prepayment of the Partnership's single-family MBS. The decrease in other interest income was due to the Partnership having lower average short-term investment balances during the three months ended March 31, 2000 when compared to the corresponding period in 1999. The decrease in amortization for the first three months in 2000 as compared to the same period in 1999 was a result of the Partnership fully amortizing the costs associated with the PIMs that were prepaid in 1999. The decrease in partnership expenses was primarily due to lower asset management fees which was due to a reduction of the asset base occurring from the prepayments mentioned above. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Assessment of Credit Risk The Partnership's investments in mortgages are guaranteed or insured by the Government National Mortgage Association ("GNMA"), Fannie Mae, 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. 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. 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. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. Obligations insured by HUD, an agency of the U.S. Government, are backed by the full faith and credit of the U.S. Government. At March 31, 2000 the Partnership includes in cash and cash equivalents approximately $3.0 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. Interest Rate Risk The Partnership's primary market risk exposure is to interest rate risk, which can be defined as the exposure of the Partnership's net income, comprehensive income or financial condition to adverse movements in interest rates. At March 31, 2000, the Partnerships PIMs and MBS comprise the majority of the Partnership's assets. As such decreases in interest rates may accelerate the prepayment of the Partnership's investments. The Partnership does not utilize any derivatives or other instruments to manage this risk as the Partnership plans to hold all of its investments to expected maturity. The Partnership monitors prepayments and considers prepayment trends, as well as distribution requirements of the Partnership, when setting regular distribution policy. For MBS, the Partnership forecasts prepayments based on trends in similar securities as reported by statistical reporting entities such as Bloomberg. For PIMs, the Partnership incorporates prepayment assumptions into planning as individual properties notify the Partnership of the intent to prepay or as they mature. 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 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 Insured Plus-III Limited Partnership (Registrant) BY: Robert A. Barrows Treasurer and Chief Accounting Officer of Krupp Plus Corporation, a General Partner. DATE: April 28, 2000 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 3-MOS Dec-31-2000 Mar-31-2000 3,384,201 47,509,779 333,662 0 0 570,178 0 0 51,797,820 12,858 0 0 0 51,793,038 (8,076) 51,797,820 0 1,006,669 0 0 217,807 0 0 788,862 0 788,862 0 0 0 788,862 0 0 Includes Participating Insured Mortgages ("PIMs") of $34,713,067 and Mortgage-Backed Securities ("MBS") of $12,796,712. Includes prepaid acquisition fees and expenses of $2,921,471 net of accumulated amortization of $2,503,636 and prepaid participation servicing fees of $888,187 net of accumulated amortization of $735,844. Represents total equity of General Partners and Limited Partners. General Partners deficit of ($197,947) and Limited Partners equity of $51,990,985. Unrealized gain on MBS. Represents interest income on investments in mortgages and cash. Includes $95,018 of amortization of prepaid fees and expenses. Net income allocated $23,666 to the General Partners and $765,196 to the Limited Partners. Average net income per Limited Partner interest is $.06 on 12,770,261 Limited Partner interests outstanding.
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