UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
September 30, December 31,
1994 1993
Mortgage notes receivable, net of loan loss
reserve of $12,024,000 in 1994 and 1993
(Notes 2 and 3) $16,328,617 $16,346,355
Cash and cash equivalents 1,078,572 992,640
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$7,090,550 and $5,549,030, respectively
(Note 3) 250,117 25,880
Other interest receivable 2,658 2,613
Total assets $17,659,964 $17,367,488
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 16,604 $ 5,887
Partners' equity (Note 4) 17,643,360 17,361,601
Total liabilities and partners' equity $17,659,964 $17,367,488
The accompanying notes are an integral
part of the financial statements.
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Interest income:
Mortgage notes receivable
(Notes 2 and 3) $274,461 $218,389 $762,453 $679,909
Cash equivalents and short-term
investments 7,906 9,124 26,339 37,817
Total interest income 282,367 227,513 788,792 717,726
Expenses:
Expense reimbursements to affiliates 26,835 26,835 80,506 79,794
General and administrative 12,881 11,401 46,994 51,449
Total expenses 39,716 38,236 127,500 131,243
Net income $242,651 $189,277 $661,292 $586,483
Allocation of net income (Note 4):
Per Unit of Limited Partner
Interest (30,059 Units outstanding) $ 7.99 $ 6.23 $ 21.78 $ 19.32
General Partners $ 2,427 $ 1,893 $ 6,613 $ 5,865
The accompanying notes are an integral
part of the financial statements.
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
1994 1993
Operating activities:
Net income $ 661,292 $ 586,483
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in other interest receivable (45) (77,316)
Increase in accrued interest receivable
- mortgage notes (224,237) (70,770)
Increase (decrease) in liabilities 10,717 (4,298)
Net cash provided by operating activities 447,727 434,099
Investing activity:
Decrease (increase) in mortgage note receivable 17,738 (993,030)
Financing activity:
Distributions (379,533) (379,533)
Net increase (decrease) in cash and cash equivalents 85,932 (938,464)
Cash and cash equivalents, beginning of period 992,640 1,945,829
Cash and cash equivalents, end of period $1,078,572 $ 1,007,365
The accompanying notes are an integral
part of the financial statements.
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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, 1993 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, 1994, its results of operations for the three and
nine months ended September 30, 1994 and 1993, and cash flows for
the nine months ended September 30, 1994 and 1993.
The results of operations for the three and nine months ended
September 30, 1994 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.
Certain prior year balances have been reclassified to conform with
current year financial statement presentation.
(2)Krupp Equity Limited Partnership ("KELP")
Condensed financial statements of KELP are as follows:
CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
Property at cost (A) $ 30,603,690 $ 38,601,268
Accumulated depreciation (9,118,332) (10,404,344)
21,485,358 28,196,924
Other assets 998,898 534,682
Total assets $ 22,484,256 $ 28,731,606
Continued
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(2) Krupp Equity Limited Partners, Continued
LIABILITIES AND PARTNERS' DEFICIT
September 30, December 31,
1994 1993
Mortgage notes payable to KIMF $ 28,352,617 $ 28,370,355
Mortgage notes payable to third parties 7,441,293 10,824,303
Notes payable to an affiliate 300,000 300,000
Notes payable - 61,250
Due to affiliates 1,043,503 669,191
Accrued interest and penalties payable
to KIMF 7,260,657 5,574,900
Accrued interest to affiliates 267,058 249,412
Other liabilities 583,756 615,317
Total liabilities 45,248,884 46,664,728
Partners' deficit (22,764,628) (17,933,122)
Total liabilities and partners' deficit $ 22,484,256 $ 28,731,606
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Revenues $ 1,127,779 $1,104,949 $ 3,408,572 $ 3,899,555
Property operating expenses (624,826) (529,382) (1,864,330) (1,909,854)
Operating income 502,953 575,567 1,544,242 1,989,701
Depreciation and
amortization (319,230) (311,652) (953,472) (1,163,759)
Interest (1,056,147) (1,050,833) (3,115,703) (3,290,096)
Net loss before gain/(loss)
on sale of Shadow Valley
and NOC Mall (A) (872,424) (786,918) (2,524,933) (2,464,154)
Gain on sale of Shadow
Valley/(loss) on sale of
NOC Mall (2,306,573) 2,376,362 (2,306,573) 2,376,362
Net income (loss) $(3,178,997) $1,589,444 $(4,831,506) $ (87,792)
(A) On September 30, 1994, NOC Mall was sold to an unaffiliated
third party for $2,340,000. The proceeds were used to satisfy
the obligation to the first mortgage note holder. The release
by the Partnership of NOC Mall as collateral for the
Participating Notes does not constitute debt forgiveness.
Continued
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(3) Accrued Interest Reserves and Cash Flow Payments
For 1994, The Partnership has recorded additional reserves of
$1,541,520 for uncollectible interest on the mortgage notes
receivable. The current interest receivable of $250,117 due on the
Participating Notes will be collected in the fourth quarter. The
mortgage note and interest reserves are recorded annually based on
third party appraisals and management's current estimates of the
underlying property values
The Partnership has waived for 90 days the right to accelerate
payment of the Participating Notes and has received a payment equal
to cash flow net of operating and administrative expenses and first
mortgage obligations. This waiver is effective only with respect
to the payment due October 1, 1994, and KIMF reserves its rights to
take any action to which it is entitled in the event any future
event of default occurs. Since 1991, the management fee to an
affiliate has been subordinated to any and all indebtedness of
KELP. The General Partners of KELP have arranged for a waiver of
such fees since that time.
(4) Summary of Change in Partners' Equity
A summary of changes in partners' equity (deficit) for the nine
months ended September 30, 1994 is as follows:
Total
Limited General Partners'
Partners Partners Equity
Balance at December 31, 1993 $17,487,588 $(125,987) $17,361,601
Net income 654,679 6,613 661,292
Distributions (371,942) (7,591) (379,533)
Balance at September 30, 1994 $17,770,325 $(126,965) $17,643,360
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership has sufficient liquidity to meet its operating
needs. However, the Partnership's ability to pay distributions is
primarily dependent on KELP's interest payments on the Participating
Notes resulting from the cash flow of the underlying properties. The
Partnership currently pays distributions at a fluctuating rate based
on those interest payments. The General Partners do not foresee the
potential for any significant increases in cash flows from KELP because
of KELP's inability to reposition its retail properties to attract
higher paying tenants. The General Partners anticipate that these cash
flow payments will continue, but there is no assurance that KELP will
be able to continue payments in the future.
The NOC Mall mortgage matured on June 30, 1993. Prior to loan
maturity, KELP's management began negotiations with the lender to
restructure the terms of NOC Mall's mortgage note payable. Due to a
deterioration of operations over the past few years, there have been
insufficient funds available for the capital improvements needed to
maintain the property's competitiveness. As a result, KELP had reduced
its payment to the first mortgage note holder to cash flow payments
based upon the property's cash flow. KELP continued to make cash flow
payments as reported in the past while negotiating with the lender.
The negotiations resulted in an agreement with the lender to market
the property for sale, and on June 2, 1994, KELP entered into a
purchase and sale agreement with an unaffiliated third party.
NOC Mall was subsequently sold on September 30, 1994 for $2,340,000
and proceeds from the sale were used to satisfy the first mortgage note
payable. The release by the Partnership of NOC Mall as collateral for
the Participating Notes does not constitute debt forgiveness.
Distributable Cash from Operations
Distributable Cash From Operations, as defined by Section 5.01 of
the Partnership Agreement, is equivalent to the net income of the
Partnership, excluding the $80,000 receivable for the release of NOC
Mall as collateral to the participating notes.
KIMF's Results of Operations
Interest earned on cash equivalents and short-term investments for
the nine months ended September 30, 1994 has decreased due to the
purchase of the Northeast Plaza first mortgage note. This is more than
offset because the mortgage note purchased bears interest at 10% while
cash investments are yielding approximately 4% to 4.5%.
Mortgage interest income for the nine months ended September 30,
1994 as compared to the same period in 1993 is slightly higher. This
is primarily due to higher cash flow payments from the KELP properties.
In addition, the Partnership has recorded a receivable of approximately
$80,000 as consideration for the release of NOC Mall as collateral to
the Participating Notes. Mortgage interest income for 1993 also
included $75,000 received upon the sale of Shadow Valley.
Economic occupancy levels for both residential and commercial
properties owned by KELP remained fairly stable from 1993.
Continued
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KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
KELP's Results of Operations - Continued
The following table reflects the analysis of KELP's cash flow for the three
and nine months ended September 30, 1994 and 1993 (rounded to 1,000)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
Cash Flow from Properties
before mortgage debt service
and capital improvement
expenditures and reserves $ 561,000 $ 579,000 $ 1,736,000 $1,990,000
Mortgage debt service
exclusive of amounts
due to Partnership (360,000) (356,000) (1,075,000) (1,229,000)
Capital improvement
expenditures (31,000) (88,000) (52,000) (164,000)
Cash flow from properties
before mortgage debt service
to the Partnership 170,000 135,000 609,000 597,000
Mortgage debt service to the
Partnership (170,000) (135,000) (609,000) (597,000)
KELP general and administrative
expense (12,000) (15,000) (27,000) (44,000)
Cash Deficit (1) $ (12,000) $ (15,000) $ (27,000) $ (44,000)
(1) Cash deficit equals net loss before the gain or loss on sales plus
depreciation and amortization, and unpaid Participating Note interest
less mortgage principal payments, capital improvement expenditures
and capital improvement reserves.
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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
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SIGNATURES
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/Marianne Pritchard
Marianne Pritchard
Treasurer and Chief Accounting Officer
of The Krupp Corporation, a General
Partner.
DATE: November 4, 1994
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