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, 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 0-15815
Krupp Insured Plus Limited Partnership
Massachusetts 04-2915281
(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 INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
Participating Insured Mortgages ("PIMs") $ 59,162,011 $ 59,289,135
(Note 2)
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 3) 28,374,427 29,026,838
Total mortgage investments 87,536,438 88,315,973
Cash and cash equivalents 2,183,412 2,394,592
Interest receivable and other assets 854,960 871,942
Prepaid acquisition fees and expenses, net of
accumulated amortization of $4,615,215 and
$4,423,897, respectively 1,505,293 1,696,611
Prepaid participation servicing fees, net of
accumulated amortization of $1,943,391 and
$1,895,084, respectively 456,608 504,915
Total assets $ 92,536,711 $ 93,784,033
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 5,221 $ 14,454
Partners' equity (deficit):
Limited Partners 91,764,909 92,779,548
(7,500,099 Limited Partner interests
outstanding)
General Partners (180,224) (172,710)
Unrealized gain on MBS 946,805 1,162,741
Total Partners' equity 92,531,490 93,769,579
Total liabilities and Partners' equity $ 92,536,711 $ 93,784,033
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the Three Months
Ended March 31,
1996 1995
Revenues:
Interest income - PIMs $1,108,558 $1,123,249
Interest income - MBS 591,094 632,007
Other interest income 30,931 41,301
Total revenues 1,730,583 1,796,557
Expenses:
Asset management fee to an affiliate 162,502 165,544
Expense reimbursements to affiliates 27,752 29,555
Amortization of prepaid fees and expenses 239,625 239,625
General and administrative 27,105 17,735
Total expenses 456,984 452,459
Net income $1,273,599 $1,344,098
Allocation of net income (Note 4):
Limited Partners $1,235,391 $1,303,775
Average net income per Limited Partner
interest (7,500,099 Limited Partners
interests outstanding) $ .16 $ .17
General Partners $ 38,208 $ 40,323
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1996 1995
Operating activities:
Net income $ 1,273,599 $ 1,344,098
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 239,625 239,625
Premium amortization MBS 870 1,435
Changes in assets and liabilities:
Decrease in interest receivable and
other assets 16,982 74,823
Decrease in liabilities (9,233) (6,833)
Net cash provided by operating activities 1,521,843 1,653,148
Investing activities:
Principal collections on MBS 435,605 438,439
Principal collections on PIMs 127,124 127,184
Net cash provided by investing activities 562,729 565,623
Financing activity:
Quarterly distributions (2,295,752) (2,296,728)
Net decrease in cash and cash equivalents (211,180) (77,957)
Cash and cash equivalents, beginning of period 2,394,592 2,931,523
Cash and cash equivalents, end of period $ 2,183,412 $ 2,853,566
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS 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, The
Krupp Corporation and The Krupp Company Limited Partnership-IV
(collectively the "General Partners"), of Krupp Insured Plus 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, 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
(consisting of only normal recurring accruals) 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.
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. PIMs
At March 31, 1996, the Partnership's PIMs have a fair value of
approximately $58,767,000 and gross unrealized gains and losses of
approximately $482,000 and $877,000, respectively. The PIMs have
maturities ranging from 2006 to 2033.
3. MBS
At March 31, 1996, the Partnership's MBS portfolio has an amortized cost
of approximately $27,427,000 and gross unrealized gains of approximately
$947,000 with maturities from 2004 to 2033.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended March
31, 1996 is as follows:
Total
Limited General Unrealized Partners'
Partners Partners Gain Equity
Balance at December 31, 1995 $ 92,779,548 $(172,710) $1,162,741 $ 93,769,579
Net income 1,235,391 38,208 - 1,273,599
Quarterly distributions (2,250,030) (45,722) - (2,295,752)
Decrease in unrealized gain
on MBS - - (215,936) (215,936)
Balance at March 31, 1996 $ 91,764,909 $(180,224) $ 946,805 $ 92,531,490
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are regular
quarterly distributions paid to investors of approximately $2.3 million.
Funds used for investor distributions come from (i)interest received on the
PIMs, MBS, cash and cash equivalents, (ii) the principal collections received
on the PIMs and MBS and (iii) cash reserves. The Partnership funds a portion
of the distribution from principal collections and as a result the capital
resources of the Partnership will continually decrease. As a result of this
decrease, the total cash inflows to the Partnership will also decrease which
will result in periodic adjustments to the quarterly distributions paid to
investors.
The General Partners periodically review the distribution rate to
determine whether an adjustment to the distribution rate is necessary based
on projected future cash flows. 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 quarterly distributions differ from
cash available for distribution, the General Partners may adjust the
distribution rate or distribute funds through a special distribution.
Based on current projections, the General Partners believe the Partnership
can maintain the current distribution rate through 1996. However, in the
event of PIM prepayments the Partnership would be required to distribute any
proceeds from the prepayments as a special distribution which may cause an
adjustment to the distribution rate to reflect the anticipated future cash
inflows from the remaining mortgage investments.
In the first quarter of 1996, the borrower of the Mandalay Apartments PIM
approached the Partnership about refinancing the property and repaying the PIM
including all participation interest due. The General Partners believe any
refinancing would most likely occur in the second half of 1996. Additionally,
the borrower of the Greentree Apartments PIM and the Partnership are currently
discussing the future sale of the property. These discussions are
preliminary and there is no pending sale at this time. In the event of a
sale or refinancing of these PIMs or any other PIM, the Partnership would
distribute the proceeds to investors as a special distribution and adjust the
distribution rate as necessary to reflect the anticipated cash inflows from
the remaining mortgage investments.
For the first five years of the PIMs the borrowers are prohibited from
prepaying. For the second five years, the borrower can prepay the loan
incurring a prepayment penalty. The Partnership has the option to call
certain PIMs by accelerating their maturity if the loans 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,
interest rates and available financing will have an impact on this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by
the Federal National Mortgage Association ("FNMA"), the Government National
Mortgage Association ("GNMA"), 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.
FNMA 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. These obligations are not
guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA
guarantees the full and timely payment of principal and basic interest on the
securities it issues, which represents interest in pooled mortgages insured
by HUD. Obligations insured by HUD, an agency of the U.S. Government, are
backed by the full faith and credit of the U.S. Government.
Distributable Cash Flow and Net Cash Proceeds From Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Cash
Proceeds from Capital Transactions, as defined by Section 17 of the
Partnership Agreement, and the source of cash distributions for the three
months ended March 31, 1996 and the period from inception through March 31,
1996. The General Partners provide certain of the information below to meet
requirements of the Partnership Agreement and because they believe that it is
an appropriate supplemental measure of operating performance. However,
Distributable Cash Flow and Net Cash Proceeds from Capital Transactions should
not be considered by the reader as a substitute to net income as an indicator
of the Partnership's operating performance or to cash flows as a measure of
liquidity. (Amounts in thousands, except per Unit amounts).
Three Months Ended Inception through
March 31, 1996 March 31, 1996
Distributable Cash Flow:
Income for tax purposes $ 1,479 $ 68,575
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid expenses
and organization costs 34 4,795
Amortization of MBS premiums 1 285
Acquisition expenses paid from
offering proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $ 1,514 $ 74,639
Limited Partners Share of DCF $ 1,469 $ 72,400
Limited Partners Share of DCF per
Limited Partner interest ("Unit") $ .19 $ 9.65
General Partners Share of DCF $ 45 $ 2,239
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 127 $ 46,559
Principal collections on MBS 436 39,223
Insurance claim proceeds and
principal collections on PIMs and
MBS reinvested in PIMs and MBS - (40,775)
Gain on sale of MBS - 114
Total Net Proceeds from Capital
Transactions $ 563 $ 45,121
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $ 2,077 $119,760
Distributable Cash Flow and Net Cash Proceeds From Capital Transactions,
Continued
Three Months Ended Inception through
March 31, 1996 March 31, 1996
Distributions: (includes special
distributions)
Limited Partners $2,250 (a) $117,087 (a)
Limited Partners Average per Unit $ .30 (a) $ 15.61 (a)(b)
General Partners 45 (a) 2,239 (a)
Total Distributions $2,295 $119,326
(a) Includes an estimate of the May 1996 distribution.
(b) Limited Partners average per Unit return of capital as of May 1996 is $5.96
[$15.61 - $9.65]. Return of capital represents that portion of
distributions which is not funded from DCF such as proceeds from the sale of
assets and substantially all of the principal collections received from MBS
and PIMs.
Operations
The following discussion relates to the operations of the Partnership during
the three months ended March 31, 1996 and 1995.
(Amounts in thousands)
1996 1995
Interest income on PIMs $ 1,109 $ 1,123
Interest income on MBS 592 632
Other interest income 31 41
Partnership expenses (218) (212)
Distributable Cash Flow 1,514 1,584
Amortization of prepaid fees and
expenses (240) (240)
Net income $ 1,274 $1,344
Net income decreased during the first three months of 1996 as compared to
the first three months of 1995 due primarily to lower interest income on MBS.
Interest income on MBS will continue to decline as principal collections
reduce the outstanding balance of the MBS portfolio. The Partnership funds
a portion of distributions with MBS and PIM principal collections which
reduces the invested assets generating income for the Partnership. As the
invested assets decline so will interest income on MBS, base interest income
on PIMs and other interest income.
KRUPP INSURED PLUS 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 Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief
Accounting Officer of The
Krupp Corporation, a General
Partner of the Registrant.
DATE: April 23, 1996