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 June 30,
1997
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
The total number of pages in this document is
12.
<PAGE>
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
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
Mortgage notes receivable, net of loan loss
<S> <C> <C>
reserve of $16,524,000 (Notes 3 and 4)$ 6,958,010 $ 6,973,754
Cash and cash equivalents (Note 2) 1,100,166 1,112,524
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$13,391,566 and $12,225,634, respectively
(Note 4) 128,736 115,272
Due from affiliates (Note 6) - 16,250
Other assets 4,244 1,672
Total assets $ 8,191,156 $ 8,219,472
LIABILITIES AND PARTNERS' EQUITY
Liabilities 17,504 25,274
Partners' equity (deficit) (Note 5):
Limited Partners (30,059 Units outstanding)8,391,520 8,411,861
General Partners (217,868) (217,663)
Total Partners' equity 8,173,652 8,194,198
Total liabilities and Partners' equity $ 8,191,156 $ 8,219,472
</TABLE>
The accompanying notes are an integral
part of the financial statements.
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Interest income:
Mortgage notes receivable
<S> <C> <C> <C> <C>
(Notes 3 and 4) $151,169 $129,172 $304,920 $285,547
Cash equivalents (Note 2) 15,363 28,738 30,086 45,857
Total revenue 166,532 157,910 335,006 331,404
Expenses:
Expense reimbursements
(Note 6) 9,156 10,740 16,583 23,693
General and administrative 13,745 19,459 35,343 37,410
Total expenses 22,901 30,199 51,926 61,103
Net income $143,631 $127,711 $283,080 $270,301
Allocation of net income
(Note 5):
Limited Partners (30,059
Units outstanding) $142,194 $126,434 $280,249 $267,598
Per Unit of Limited Partner$ 4.73 $ 4.20 $ 9.32 $ 8.90
General Partners $ 1,437 $ 1,277 $ 2,831 $ 2,703
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
Operating activities:
<S> <C> <C>
Net income $ 283,080 $ 270,301
Adjustments to reconcile net income to
net cash provided by operating activities:
Changes in assets and liabilities:
Decrease (increase) in accrued interest
receivable-mortgage notes (13,464) 6,321
Decrease in due from affiliates 16,250 1,081
Increase in other assets (2,572) (5,806)
Increase (decrease) in liabilities (7,770) 3,048
Net cash provided by operating
activities 275,524 274,945
Investing activities:
Principal collections from mortgage
notes receivable 15,744 -
Decrease in mortgage notes receivable - 4,807,210
Increase in other investments - (471,218)
Net cash provided by investing
activities 15,744 4,335,992
Financing activity:
Distributions (303,626) (5,096,534)
Net decrease in cash and cash equivalents (12,358) (485,597)
Cash and cash equivalents, beginning of period 1,112,524 1,260,798
Cash and cash equivalents, end of period $ 1,100,166 $ 775,201
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
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, 1996 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, 1997 and its
results of operations for the three and six
months ended June 30, 1997 and 1996 and cash
flows for the six months ended June 30, 1997
and 1996. 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, 1997 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)Cash and Cash Equivalents
Cash and cash equivalents consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Cash and money market accounts $ 306,843 $ 316,317
Commercial paper 793,323 796,207
$1,100,166 $ 1,112,524
</TABLE>
At June 30, 1997, commercial paper represents
corporate issues complying with Section 3.04
of the Partnership Agreement maturing in the
third quarter of 1997. At June 30, 1997, the
carrying value of the Partnership's investment
in commercial paper approximates fair value.
(3)Krupp Equity Limited Partnership ("KELP")
The Partnership made loans to KELP, an
affiliate of the Partnership, as provided
under the Master Loan Agreement and Collateral
Pledge Agreement. The purpose of KELP is to
acquire, manage, operate and sell real estate
and personal property; and to borrow funds
from the Partnership and other sources to
finance the acquisition, management and
operation of real estate and personal property
related thereto. Condensed financial
statements of KELP are as follows:
Continued
<PAGE>
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(3) Krupp Equity Limited Partnership ("KELP") - Continued
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1997 1996
Real estate assets:
<S> <C> <C>
Real estate, at cost $ 12,730,151 $ 12,716,122
Property valuation provision (5,000,000) (5,000,000)
Accumulated depreciation (3,911,653) (3,795,870)
Total real estate assets 3,818,498 3,920,252
Other assets 339,187 305,538
Total assets $ 4,157,685 $ 4,225,790
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable to the Partnership$ 28,274,969 $28,290,713
Notes payable to an affiliate 300,000 300,000
Accrued interest payable to an
affiliate (A) 9,073,836 7,880,286
Due to affiliates 703,414 666,702
Other liabilities 424,199 386,780
Total liabilities 38,776,418 37,524,481
Partners' deficit (34,618,733)(33,298,691)
Total liabilities and Partners'
deficit $ 4,157,685 $ 4,225,790
</TABLE>
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue (A)(B) $ 638,551 $ 435,270 $ 905,516 $1,202,363
Property operating
expenses (126,619) (183,791) (254,033) (566,610)
Depreciation and
amortization (A)(B) (235,882) (189,862) (294,713) (665,183)
Interest (B) (1,049,007) (781,299)(1,787,543)(1,657,031)
Loss before gain on sale
of properties and gain
on extinguishment of
debtv (772,957) (719,682) (1,430,773)(1,686,461)
Gain on sale of
properties (A) - 186,086 - 1,661,996
Gain on extinguishment
of debt (B) 108,711 - 108,711 -
Net loss $ (664,246)$(533,596) $(1,322,062)$(24,465)
</TABLE>
Continued
<PAGE>
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(3)Krupp Equity Limited Partnership ("KELP") -
Continued
(A)On March 5, 1996, KELP sold Village Green
Apartments to an unaffiliated third party for
$5,200,000. On May 16, 1996, KELP sold North
Salado to an unaffiliated third party for
$7,350,000. KELP remitted available sale
proceeds of $4,792,959 to the Partnership.
For KELP's financial reporting purposes, sales
proceeds paid to KIMF of $4,792,959 were
applied against accrued interest in 1996.
(B) On May 13, 1997, KELP acquired all of the
beneficial interests in four Delaware business
trusts and a 99% member interest in a limited
liability company (collectively referred to as
the "Entities") for an aggregate purchase
price of $32,025,603. KELP acquired the
Entities for cash of $3,309,761, subject to
their outstanding mortgage balances as of May
13, 1997, totaling $28,715,842. KELP obtained
the cash used in the exchange through the
proceeds of a loan made by KCLP III ("KCLP III
Note"), its general partner and limited
partner. Each of the Entities acquired owns
real property, which is net leased to a
national retail franchise. On June 23, 1997,
KELP admitted KGP-II Inc. as a limited
partner. Subsequently, on June 30, 1997, KELP
distributed its interests in the Entities to
KCLP III in full satisfaction of the KCLP III
Note and in exchange for its entire
partnership interest in KELP. The promissory
notes due KIMF from KCLP III, which total
$2,767,388 and are pledged as collateral on
the participating promissory notes
("Participating Notes"), remain as an
obligation of KCLP III.
The above transactions had no effect on KELP's
net loss and there was no positive or negative
cash flow which resulted from the operations
of the Entities. Accordingly, the transaction
had no impact on KELP's ability to make the
required quarterly cash flow payment to KIMF,
the holder of its Participating Notes, or its
ability to meet other obligations with respect
to the Participating Notes.
(4)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 June 30, 1997 and December
31, 1996. Additionally, the Partnership has
recorded cumulative provisions for
uncollectible interest of $13,391,566 and
$12,225,634 as of June 30, 1997 and December
31, 1996, respectively. These cumulative
provisions are recorded 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.
Continued
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(5) Summary of Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the six
months ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Total
Limited General Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1996 $8,411,861 $(217,663) $8,194,198
Net income 280,249 2,831 283,080
Distributions (300,590) (3,036) (303,626)
Balance at June 30, 1997 $ 8,391,520 $(217,868)$8,173,652
</TABLE>
(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.
Due from affiliates consisted of expense reimbursements of
$16,250 at December 31, 1996.
<PAGE>
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. Distributions are dependent on
cash flow received from KELP's interest
payments on the Participating Notes, which are
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. Recently, the remaining
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, due to the
depressed state of the real estate market,
KELP would be unable to dispose of its
properties at other than unattractive prices.
Thus, the General Partners believed that it
was in the Partnership's best interest to
continue to permit KELP to hold the properties
and attempt to increase cash flows and
selectively sell the properties, as market
values recover.
Operations
Total revenue slightly increased for three and
six months ended June 30, 1997, as compared to
the three and six months ended June 30, 1996,
as a result of the increase in interest income
on mortgage notes due to higher cash flow
interest payments received from KELP's
properties. This increase is partially offset
by a decrease in interest income attributable
to lower average cash and cash equivalents
available for investment.
Total expenses decreased for the three and six
months ended June 30, 1997, as compared to the
same periods in 1996, due to a decrease in
expense reimbursements. The decrease in
expense reimbursements is due to decreased
costs incurred in connection with the
preparation and mailing of reports and other
investor communications.
Distributable Cash from Operations
Distributable Cash from Operations, of
approximately $144,000 and $128,000 for the
three months ended June 30, 1997 and 1996,
respectively and $283,000 and $270,000 for the
six months ended June 30, 1997 and 1996,
respectively, as defined by Section 5.01 of
the Partnership Agreement, is equivalent to
net income of the Partnership.
Continued
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED
PARTNERSHIP
KELP Operations
Net loss, after giving effect to the sales of
Village Green Apartments and North Salado
Shopping Center and the acquisition and
distribution of the Entities (as described in
Note 3), remained stable for the three and six
months ended June 30, 1997, when compared to
the same periods in 1996, as total revenue and
total expenses remained relatively constant.
<PAGE>
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
<PAGE>
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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief Accounting
Officer of The Krupp Corporation,
a General Partner.
<PAGE>
DATE: August 14, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp
Institutional Mortgage Fund L.P. Financial Statements for the six months
ended June 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> 12-31-97
<PERIOD-END> 06-30-97
<CASH> 1,100,166
<SECURITIES> 0
<RECEIVABLES> 23,482,010
<ALLOWANCES> (16,524,000)
<INVENTORY> 0
<CURRENT-ASSETS> 132,980<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,191,156
<CURRENT-LIABILITIES> 17,504
<BONDS> 0
0
0
<COMMON> 8,173,652<F2>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,191,156
<SALES> 0
<TOTAL-REVENUES> 335,006
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 51,926
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 283,080
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Other Assets
<F2>Includes Limited Partners Equity of $8,391,520, general partners deficit
of ($217,868).
</FN>
</TABLE>
