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 March 31, 1996
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
March 31, December 31,
1996 1995
Mortgage notes receivable, net of loan loss
reserve of $16,524,000 (Notes 2 and 3) $11,788,906 $11,795,943
Cash and cash equivalents 649,385 1,260,798
Other investments 471,218 -
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$10,331,364 and $9,755,416, respectively
(Note 3) 133,008 112,304
Other assets 114,386 3,735
Total assets $13,156,903 $13,172,780
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 6,298 $ 12,952
Partners' equity (deficit) (Note 4):
Limited Partners (30,059 Units outstanding) 13,318,703 13,327,834
General Partners (168,098) (168,006)
Total Partners' equity 13,150,605 13,159,828
Total liabilities and Partners'
equity $13,156,903 $13,172,780
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1996 1995
Interest income:
Mortgage notes receivable (Notes 2 and 3) $156,375 $318,714
Cash equivalents 17,119 13,887
Total interest income 173,494 332,601
Expenses:
Expense reimbursements (Note 5) 12,953 12,816
General and administrative 17,951 7,012
Total expenses 30,904 19,828
Net income $142,590 $312,773
Allocation of net income (Note 4):
Limited Partners $141,164 $309,645
Per Unit of Limited Partner Interest
(30,059 Units Outstanding) $ 4.70 $ 10.30
General Partners $ 1,426 $ 3,128
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1996 1995
Operating activities:
Net income $ 142,590 $ 312,773
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accrued interest receivable -
mortgage notes (20,704) (63,564)
Increase in other assets (110,651) (5,538)
Increase (decrease) in liabilities (6,654) 144,313
Net cash provided by operating
activities 4,581 387,984
Investing activities:
Principal collections from mortgage
notes receivable 7,037 6,370
Increase in other investments (471,218) -
Net cash provided by (used in)
investing activities (464,181) 6,370
Financing activity:
Distributions (151,813) (151,813)
Net increase (decrease) in cash and
cash equivalents (611,413) 242,541
Cash and cash equivalents,
beginning of period 1,260,798 1,026,664
Cash and cash equivalents, end of period $ 649,385 $1,269,205
The accompanying notes are an integral
part of the financial statements.
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, 1995 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 March 31, 1996 and its results of operations and cash flows for
the three months ended March 31, 1996 and 1995. Certain prior year
balances have been reclassified to conform with current year
financial statement presentation.
The results of operations for the three months ended March 31, 1996
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) Krupp Equity Limited Partnership ("KELP")
Condensed financial statements of KELP are as follows:
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
Property at cost $24,093,587 $ 30,960,353
Property valuation provision (5,986,000) (5,986,000)
Accumulated depreciation (7,112,270) (10,206,689)
10,995,317 14,767,664
Other assets 1,215,564 1,086,232
Total assets $12,210,881 $ 15,853,896
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable to the
Partnership $ 28,312,906 $ 28,319,943
Mortgage notes payable (A) 2,927,947 7,599,279
Notes payable to an affiliate 300,000 300,000
Accrued interest payable to
affiliates 10,775,513 10,171,783
Due to affiliates 874,345 767,737
Other liabilities 449,573 633,691
Total liabilities 43,640,284 47,792,433
Partners' deficit (31,429,403) (31,938,537)
Total liabilities and Partners'
deficit $ 12,210,881 $ 15,853,896
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1996 1995
Revenues $ 767,093 $ 873,284
Property operating expenses (382,819) (315,174)
Income before depreciation,
amortization and interest 384,274 558,110
Depreciation and amortization (A) (475,321) (78,724)
Interest (875,732) (916,306)
Loss before gain on sale of
property (966,779) (436,920)
Gain on sale of property (A) 1,475,910 -
Net income (loss) $ 509,131 $(436,920)
(A) On March 5, 1996, KELP sold Village Green Apartments to an
unaffiliated third party for $5,200,000. The buyer assumed the
first mortgage note payable on the property of $4,633,989. On
April 29, 1996, KELP remitted available sale proceeds of
$585,959 to the Partnership.
(3) Provision for Credit Losses and Accrued Interest Reserves
The General Partners of the Partnership have recorded a cumulative
provision for credit losses of $16,524,000 on its mortgage notes
receivable. Additionally, the Partnership has recorded cumulative
provisions for uncollectible interest of $10,331,364 and $9,775,416
as of March 31, 1996 and December 31, 1995, respectively. These
cumulative provisions are booked against the carrying value of the
assets in order to reflect management's current estimates of the
underlying property values which, given the inherent uncertainty of
real estate valuation in the current market, could differ from the
ultimate value obtained upon sale of such properties.
(4) Summary of Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the three
months ended March 31, 1996 is as follows:
Total
Limited General Partners'
Partners Partners Equity
Balance at December 31, 1995 $13,327,834 $(168,006) $13,159,828
Net income 141,164 1,426 142,590
Distributions (150,295) (1,518) (151,813)
Balance at March 31, 1996 $13,318,703 $(168,098) $13,150,605
(5) Related Party Transactions
The Partnership reimburses affiliates of the General Partners for
certain expenses incurred in connection with the activities of the
Partnership, including: communications, bookkeeping and clerical
work necessary in maintaining relations with Limited Partners, and
accounting, tax and computer services necessary for the maintenance
of the books and records of the Partnership.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Currently, the Partnership has sufficient liquidity to meet its operating
needs. The most significant capital need is distributions to investors.
However, distributions are currently dependent on cash flow received from
KELP's interest payments on the Participating Notes based upon the cash
flow of the underlying properties.
KELP's properties have not generated cash flow sufficient to meet the terms
of their existing obligations. The retail centers have historically
suffered from an economic downturn in retail sales beginning in the late
1980's. Recently, the properties have maintained a consistent level of
operating cash flow. The partners of KELP have made cumulative capital
contributions of approximately $4,673,000 to cover prior operating
deficits and have arranged for certain short-term borrowings.
Additionally, the affiliated management agent has not received payment of
management fees since 1991. The General Partners of the Partnership have
not commenced foreclosure proceedings because, as described in Note 3, they
have determined that there are advantages to allowing KELP to continue to
own the properties.
On October 20, 1995, the partners of KELP refinanced the first mortgage
note payable of North Salado Shopping Center for $2,972,130. The terms of
the new mortgage require monthly principal and interest payments of $31,612
at a rate of 9.25% per annum. The new mortgage note matures November 15,
2009. The new mortgage may be prepaid without penalty until November 15,
1996, if the property is sold to an unaffiliated third party. Previously,
the mortgage note payable for North Salado required monthly payments of
$32,241, consisting of principal and interest at the rate of 10.625% per
annum.
On March 5, 1996, KELP sold Village Green Apartments to an unaffiliated
third party for $5,200,000. The buyer assumed the principal outstanding on
the first mortgage note payable on the property of $4,633,989. On April
29, 1996, KELP remitted to the Partnership the available sale proceeds, net
of closing costs, of $585,959.
The partners of KELP have entered into a purchase and sale agreement with
an unaffiliated buyer for North Salado Village Shopping Center. The
contracted price for the property is $7,350,000 and the sale is expected to
take place during the second quarter of 1996. At March 31, 1996, the
property is subject to first and second mortgages of $2,927,947 and
$7,513,000, respectively.
Operations
The increase in interest income earned for the three months ended March 31,
1996 as compared to the same period in 1995 is due to higher average cash
and cash equivalent balances available for investment commercial paper.
Mortgage interest income decreased due to lower cash flow payments from the
underlying KELP mortgages.
The increase in general and administrative expenses in the first quarter of
1996, as compared to the first quarter of 1995, is primarily due to an
increase in audit expenditures.
Distributable Cash from Operations
Distributable Cash from Operations, of approximately $143,000 and $313,000
at March 31, 1996 and 1995, respectively, as defined by Section 5.01 of the
Partnership Agreement, is equivalent to the net income of the Partnership.
KELP's Results of Operations
The following table presents an analysis of KELP'S cash deficit for the
three months ended March 31, 1996 and 1995:
For the Three Months
Ended March 31,
(Rounded to $1,000)
1996 1995
Cash flow from properties before
mortgage debt service and capital
improvement expenditures and reserves $ 421,000 $ 565,000
Mortgage debt service exclusive of
amounts due to the Partnership (204,000) (239,000)
Capital improvement expenditures (80,000) (25,000)
Contribution to capital improvement
reserve (4,000) (6,000)
Cash flow from properties before
mortgage debt service to the Partnership 133,000 295,000
Mortgage debt service to the Partnership (133,000) (295,000)
KELP general and administrative expenses (9,000) (14,000)
Cash Deficit $ (9,000) $ (14,000)
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
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 Institutional Mortgage Fund Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer of The Krupp
Corporation, a General Partner.
DATE: May 7, 1996