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, 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
September 30, December 31,
1996 1995
Mortgage notes receivable, net of loan loss
reserve of $16,524,000 (Notes 2 and 3) $ 6,981,336 $11,795,943
Cash and cash equivalents 1,236,306 1,260,798
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$11,616,195 and $9,755,416, respectively
(Note 3) 50,729 112,304
Other assets 2,506 3,735
Total assets $ 8,270,877
$13,172,780
LIABILITIES AND PARTNERS' EQUITY
Other liabilities $ 67,313 $ 12,952
Partners' equity (deficit) (Note 4):
Limited Partners (30,059 Units outstanding) 8,421,132 13,327,834
General Partners (217,568) (168,006)
Total Partners' equity 8,203,564 13,159,828
Total liabilities and Partners' equity $ 8,270,877 $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 For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Interest income:
Mortgage notes receivable
(Notes 2 and 3) $73,737 $124,791 $359,284 $663,250
Cash equivalents 16,793 19,455 62,650 49,908
Total interest income 90,530 144,246 421,934 713,158
Expenses:
Expense reimbursements to
affiliates (Note 5) 12,951 12,816 36,644 38,448
General and administrative 7,384 12,646 44,794 35,941
Total expenses 20,335 25,462 81,438 74,389
Net income $70,195 $118,784 $340,496 $638,769
Allocation of net income (Note 4):
Limited Partners $69,493 $117,596 $337,091 $632,381
Per Unit of Limited Partner
Interest (30,059 Units
outstanding) $ 2.31 $ 3.91 $ 11.21 $ 21.04
General Partners $ 702 $ 1,188 $ 3,405 $ 6,388
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
1996 1995
Operating activities:
Net income $ 340,496 $ 638,769
Adjustments to reconcile net income to
net cash provided by operating activities:
Decrease in accrued interest
receivable-mortgage notes 61,575 130,034
Decrease in other assets 1,229 10,409
Increase (decrease) in other liabilities 54,361 (2,846)
Net cash provided by operating
activities 457,661 776,366
Investing activity:
Decrease in mortgage notes receivable 4,814,607 19,596
Financing activity:
Distributions (5,296,760) (455,439)
Net increase (decrease) in cash and cash
equivalents (24,492) 340,523
Cash and cash equivalents, beginning of period 1,260,798 1,026,664
Cash and cash equivalents, end of period $ 1,236,306 $1,367,187
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
September 30, 1996, its results of operations for the three and nine
months ended September 30, 1996 and 1995, and cash flows for the nine
months ended September 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 nine months ended September
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
September 30, December 31,
1996 1995
Property at cost $ 12,702,534 $ 30,960,353
Property valuation provision (5,000,000) (5,986,000)
Accumulated depreciation (3,737,050) (10,206,689)
3,965,484 14,767,664
Other assets 323,805 1,086,232
Total assets $ 4,289,289 $ 15,853,896
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable to the Partnership $ 28,298,295 $ 28,319,943
Mortgage notes payable (A) - 7,599,279
Notes payable to an affiliate 300,000 300,000
Accrued interest payable to affiliates 7,199,212 10,171,783
Due to affiliates 667,463 767,737
Other liabilities 414,732 633,691
Total liabilities 36,879,702 47,792,433
Partners' deficit (32,590,413) (31,938,537)
Total liabilities and Partners'
deficit $ 4,289,289 $ 15,853,896
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Revenue $ 257,067 $ 870,535 $ 1,459,430 $ 2,593,352
Property operating
expenses (70,704) (353,794) (637,314) (1,028,390)
Income before depreciation,
amortization and
interest 186,363 516,741 822,116 1,564,962
Depreciation and
amortization (A) (58,966) (82,301) (724,149) (240,497)
Interest expense (754,808) (930,176) (2,411,839) (2,769,644)
Loss before gain on sale
of properties (627,411) (495,736) (2,313,872) (1,445,179)
Gain on sale of
properties (A) - - 1,661,996 -
Net loss $(627,411) $(496,736) $ (651,876) $(1,445,179)
(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. As of September 30, 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 $11,616,195 and $9,775,416 as of September 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 Change in Partners' Equity
A summary of changes in Partners' equity (deficit) for the nine months
ended September 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 337,091 3,405 340,496
Distributions (5,243,793) (52,967) (5,296,760)
Balance at
September 30, 1996 $ 8,421,132 $(217,568) $ 8,203,564
(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
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. Due to fluctuations in the cash flow payments
received from KELP and its effect on the Partnership's liquidity, the
Partnership may need to periodically adjust its distribution rate. Therefore,
sustaining the current distribution rate is mainly dependent upon the future
cash flow payments received from KELP.
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.
The Partnership made an additional distribution of $4,841,321, utilizing the
proceeds received from KELP from the sales of Village Green Apartments and
North Salado Village Shopping Center.
Operations
The decrease in interest income earned for the three and nine months ended
September 30, 1996, as compared to the three and nine months ended September
30, 1995, is a result of lower cash flow payments from the underlying KELP
mortgages. This decrease is partially offset by an increase in interest
income from higher average cash and cash equivalents available for investment.
General and administrative expense decreased for the three months ended
September 30, 1996, as compared to the same period in 1995, as a result of a
decrease in costs related to the preparation and mailing of reports to
investors.
For the nine months ended September 30, 1996, as compared to the nine months
ended September 30, 1995, general and administrative expense increased due to
an increase in audit expenditures, partially offset by a decrease in investor
related costs, as discussed above.
Distributable Cash from Operations
Distributable Cash from Operations, of approximately $70,000 and $119,000 for
the three months ended September 30, 1996 and 1995, respectively and $340,000
and $639,000 for the nine months ended September 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 nine months ended September 30, 1996 and 1995:
For the Three Months For the Nine Months
Ended September 30, Ended September 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 $165,000 $ 518,000 $833,000 $1,558,000
Mortgage debt service
exclusive of amounts
due to the Partnership (30,000) (239,000) (308,000) (716,000)
Capital improvement
expenditures (84,000) (172,000) (231,000) (242,000)
Contribution to capital
improvement reserve - (6,000) (4,000) (8,000)
Cash flow from properties
before mortgage debt
service to the Partnership 51,000 101,000 290,000 592,000
Mortgage debt service to the
Partnership (51,000) (101,000) (290,000) (592,000)
KELP general and
administrative expenses (17,000) (3,000) (32,000) (16,000)
Cash Deficit $(17,000) $ (3,000) $(32,000) $ (16,000)
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: November 14, 1996