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 THEx
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
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 INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
Mortgage notes receivable, net of loan loss
reserve of $16,524,000 (Notes 2 and 3) $6,988,733 $11,795,943
Cash and cash equivalents 775,201 1,260,798
Other investment (Note 5) 471,218 -
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$10,942,214 and $9,755,416, respectively
(Note 3) 105,983 112,304
Other assets 8,460 3,735
Total assets $8,349,595 $13,172,780
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 3,400 $ -
Accrued audit liability 12,600 12,952
Total liabilities 16,000 12,952
Partners' equity (deficit) (Note 4):
Limited Partners (30,059 Units outstanding) 8,549,863 13,327,834
General Partners (216,268) (168,006)
Total Partners' equity 8,333,595 13,159,828
Total liabilities and Partners' equity $8,349,595 $13,172,780
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Interest income:
Mortgage notes receivable
(Notes 2 and 3) $129,172 $219,745 $285,547 $538,459
Cash equivalents 28,738 16,566 45,857 30,453
Total interest income 157,910 236,311 331,404 568,912
Expenses:
Expense reimbursements
to affiliates (Note 6) 10,740 12,816 23,693 25,632
General and administrative 19,459 16,283 37,410 23,295
Total expenses 30,199 29,099 61,103 48,927
Net income $127,711 $207,212 $270,301 $519,985
Allocation of net income (Note 4):
Limited Partners $126,434 $205,140 $267,598 $514,785
Per Unit of Limited Partner
Interest (30,059 Units
outstanding) $ 4.20 $ 6.82 $ 8.90 $ 17.13
General Partners $ 1,277 $ 2,072 $ 2,703 $ 5,200
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
1996 1995
Operating activities:
Net income $ 270,301 $ 519,985
Adjustments to reconcile net income to
net cash provided by operating activities:
Decrease in accrued interest receivable-
mortgage notes 6,321 35,244
Decrease (increase) in other assets (4,725) 10,097
Increase in accounts payable 3,400 -
Decrease in accrued audit liability (352) (4,000)
Net cash provided by
operating activities 274,945 561,326
Investing activities:
Decrease in mortgage notes receivable 4,807,210 12,900
Increase in other investments (471,218) -
Net cash provided by investing
activities 4,335,992 12,900
Financing activity:
Distributions (5,096,534) (303,626)
Net increase (decrease) in cash and
cash equivalents (485,597) 270,600
Cash and cash equivalents, beginning of period 1,260,798 1,026,664
Cash and cash equivalents, end of period $ 775,201 $1,297,264
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 June 30, 1996 and its results of operations for the three and six
months ended June 30, 1996 and 1995 and cash flows for the six months
ended June 30, 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 and six months ended June 30,
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
June 30, December 31,
1996 1995
Property at cost $ 12,618,891 $ 30,960,353
Property valuation provision (5,000,000) (5,986,000)
Accumulated depreciation (3,679,131) (10,206,689)
3,939,760 14,767,664
Other assets 421,593 1,086,232
Total assets $ 4,361,353 $ 15,853,896
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable to the Partnership $ 28,305,692 $ 28,319,943
Mortgage notes payable (A) - 7,599,279
Notes payable to an affiliate 300,000 300,000
Accrued interest payable to affiliates 6,573,393 10,171,783
Due to affiliates 699,238 767,737
Other liabilities 446,032 633,691
Total liabilities 36,324,355 47,792,433
Partners' deficit (31,963,002) (31,938,537)
Total liabilities and Partners'
deficit $ 4,361,353 $ 15,853,896
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenue $ 435,270 $ 849,533 $ 1,202,363 $ 1,722,817
Property operating
expenses (183,791) (359,422) (566,610) (674,596)
Income before depreciation,
amortization and
interest 251,479 490,111 635,753 1,048,221
Depreciation and
amortization (A) (189,862) (79,472) (665,183) (158,196)
Interest expense (781,299) (923,162) (1,657,031) (1,839,468)
Loss before gain on sale
of properties (719,682) (512,523) (1,686,461) (949,443)
Gain on sale of
properties (A) 186,086 - 1,661,996 -
Net loss $(533,596) $(512,523) $ (24,465) $ (949,443)
(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.
On May 16, 1996, KELP sold North Salado Village Shopping Center
to an unaffiliated third party for $7,350,000. After satisfying
the first mortgage note payable of $2,920,405 and closing costs,
KELP remitted available sales proceeds of $4,207,000 to the
Partnership on June 6, 1996.
(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. During the first six months of 1996, total proceeds of
$4,792,959, resulting from the sales of Village Green Apartments and
North Salado Village, have been applied against the Partnership's
outstanding mortgage note receivable balance.
Additionally, the Partnership has recorded cumulative provisions for
uncollectible interest of $10,942,214 and $9,775,416 as of June 30,
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 six months
ended June 30, 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 267,598 2,703 270,301
Distributions:
Operations (300,590) (3,036) (303,626)
Capital transactions (4,744,979) (47,929) (4,792,908)
Balance at June 30, 1996 $ 8,549,863 $(216,268) $ 8,333,595
(5) Other Investment
At June 30, 1996, the Partnership held an investment in commercial
paper maturing within one year. The cost approximates the market
value.
(6) 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
This 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
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, they have determined that
there are advantages to allowing KELP to continue to own the properties.
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.
On May 16, 1996, KELP sold North Salado Village Shopping Center to an
unaffiliated third party for $7,350,000. The outstanding first mortgage
note payable on the property of $2,920,405 was paid at the closing. On
June 6, 1996, KELP remitted to the Partnership sales proceeds, net of
closing costs, of $4,207,000.
In June 1996, the Partnership made a special capital distribution of
$4,792,908, based on the proceeds received from KELP for the sales of
Village Green Apartments and North Salado Village Shopping Center. In
accordance with the Partnership Agreement, the distribution was allocated
99% to the Limited Partners and 1% to the General Partners.
Operations
The decrease in interest income earned for the three and six months ended
June 30, 1996, as compared to the three and six months ended June 30, 1995,
is a result of lower cash flow payments from the underlying KELP mortgages,
partially offset by an increase in interest income from higher average cash
and cash equivalents available for investment.
The increase in general and administrative expenses for the three and six
months ended June 30, 1996, as compared to the same periods in 1995, is
primarily due to an increase in audit expenditures.
Distributable Cash from Operations
Distributable Cash from Operations, of approximately $128,000 and $207,000
for the three months ended June 30, 1996 and 1995, respectively and
$270,000 and $520,000 for the six months ended June 30, 1996 and 1995,
respectively, as defined by Section 5.01 of the Partnership Agreement, is
equivalent to net income of the Partnership.
KELP's Results of Operations
The following table presents an analysis of KELP's cash deficit for the
three and six months ended June 30, 1996 and 1995:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Rounded to $1,000) (Rounded to $1,000)
1996 1995 1996 1995
Cash flow from properties
before mortgage debt
service and capital
improvement expenditures
and reserves $ 247,000 $ 475,000 $ 668,000 $1,040,000
Mortgage debt service
exclusive of amounts
due to the Partnership (74,000) (238,000) (278,000) (477,000)
Capital improvement
expenditures (67,000) (45,000) (147,000) (70,000)
Release of (contribution to)
capital improvement
reserve - 4,000 (4,000) (2,000)
Cash flow from properties
before mortgage debt
service to the Partnership 106,000 196,000 239,000 491,000
Mortgage debt service to the
Partnership (106,000) (196,000) (239,000) (491,000)
KELP general and
administrative expenses (6,000) (7,000) (15,000) (13,000)
Cash Deficit $ (6,000) $ (7,000) $ (15,000) $ (13,000)
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: August , 1996