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,
1998
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
11.
<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>
March 31, December 31,
1998 1997
Mortgage notes receivable, net of loan loss
reserve of $0 and $15,851,013, respectively
<S> <C> <C>
(Notes 3 and 4) $ 2,790,388$ 7,614,449
Cash and cash equivalents (Note 2) 5,825,345 1,110,110
Accrued interest receivable - mortgage notes,
net of reserve for uncollectible interest of
$0 and $14,638,760, respectively
(Notes 3 and 4) - 83,585
Other assets 7,119 4,375
Total assets $ 8,622,852$ 8,812,519
LIABILITIES AND PARTNERS' EQUITY
Due to affiliates (Note 6) $ 266,716$ -
Other liabilities 8,967 25,200
Total liabilities 275,683 25,200
Partners' equity (deficit) (Note 5):
Limited Partners (30,059 Units outstanding)8,563,302 8,999,051
General Partners (216,133) (211,732)
Total Partners' equity 8,347,169 8,787,319
Total liabilities and Partners' equity $ 8,622,852$ 8,812,519
</TABLE>
The accompanying notes are an integral
part of the financial statements.<PAGE>
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
Interest income:
<S> <C> <C>
Mortgage notes receivable (Notes 3 and 4)$ - $153,751
Cash equivalents 39,632 14,723
Other income 2,951 -
Total income 42,583 168,474
Expenses:
Expense reimbursements (Note 6) - 7,427
General and administrative 25,556 21,598
Bad debt expense-mortgage notes
receivable (Note 4) 305,364 -
Total expenses 330,920 29,025
Net income (loss) $(288,337) $139,449
Allocation of net income (loss) (Note 5):
Limited Partners (30,059 Units outstanding)$(285,454)$138,055
Limited Partner Interest Per Unit $ (9.50)$ 4.59
General Partners $ (2,883) $ 1,394
The accompanying notes are an integral
part of the financial statements.<PAGE>
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1998 1997
Operating activities:
Net income (loss) $ (288,337)$ 139,449
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Changes in assets and liabilities:
Decrease (increase) in accrued interest
receivable - mortgage notes 83,585 (15,849)
Decrease in due from affiliates - 15,091
Increase in due to affiliates 266,716 -
Decrease (increase) in other assets (2,744) 47
Decrease in other liabilities (16,233) (12,509)
Net cash provided by operating
activities 42,987 126,229
Investing activities:
Decrease in mortgage notes receivable 45,365 -
Principal collections from mortgage
notes receivable 4,778,696 7,774
Net cash provided by investing
activities 4,824,061 7,774
Financing activity:
Distributions (151,813) (151,813)
Net increase (decrease) in cash and cash
equivalents 4,715,235 (17,810)
Cash and cash equivalents, beginning of period1,110,110 1,112,524
Cash and cash equivalents, end of period $ 5,825,345 $1,094,714
</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, 1997 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, 1998 and
its results of operations and cash flows for
the three months ended March 31, 1998 and
1997.
The results of operations for the three months
ended March 31, 1998 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>
March 31, December 31,
1998 1997
<S> <C> <C>
Cash and money market accounts $ 5,528,311 $ 316,218
Commercial paper 297,034 793,892
$ 5,825,345 $ 1,110,110
</TABLE>
(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 ("Agreements"). Pursuant to
the Agreements, the mortgage notes receivables
are cross collateralized by the KELP
properties. 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
March 31, December 31,
1998 1997
Real estate assets:
<S> <C> <C>
Real estate, at cost {A} $ - $ 12,810,945
Property valuation provision {B} - (3,995,696)
Accumulated depreciation {A} - (4,036,553)
Total real estate assets - 4,778,696
Other assets 422,151 258,748
Total assets $ 422,151 $ 5,037,444
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable to the
Partnership {A}{C} $ - $ 28,258,421
Notes payable to an affiliate {C} - 300,000
Accrued interest payable to
affiliates {A}{C} - 10,290,445
Due to affiliates {C} - 670,367
Other liabilities {D} 376,926 315,202
Total liabilities 376,926 39,834,435
Partners' equity (deficit) 45,225 34,796,991)
Total liabilities and Partners'
equity (deficit) $ 422,151 $ 5,037,444
KRUPP EQUITY LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1998 1997
Revenue {A} $ 102,854 $ 266,965
Property operating expenses {C} (353,233) (127,414)
Depreciation and amortization {A} - (58,831)
Interest {A} - (738,536)
Loss before gain on sale of properties
and extinguishment of debt (250,379) (657,816)
Gain:
Sale of properties {A} 171,625 -
Extinguishment of debt {C} 34,920,970 -
Net income (loss) $34,842,216 $ (657,816)
</TABLE>
Continued
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(3)Krupp Equity Limited Partnership ("KELP"),
Continued
A}Pursuant to its disposition strategy, KELP
sold its remaining properties on January 30,
1998 to unaffiliated third parties. KELP's
properties were included in a package with
twelve other properties owned by affiliates of
KELP's General Partner. The total selling
price of the fourteen properties was
$138,000,000, of which KELP received
$5,027,200 for the sale of its properties,
less its share of closing costs. KELP used
the net sales proceeds of $4,778,696 to pay
down the mortgage notes payable to the
Partnership. For financial reporting
purposes, KELP realized a gain of $171,625 on
the sale. The gain was calculated as the
difference between the properties' selling
prices less net book value of the properties
and closing costs.
The sale of KELP's properties is considered
cause for dissolution of KELP, as defined by
KELP's Partnership Agreement. Accordingly,
KELP's General Partner expects to liquidate
KELP in 1998.
As a result of the sale of KELP's properties,
certain notes totaling $2,790,388, pledged to
the Partnership under a Collateral Pledge
Agreement, were paid by the original General
Partners of KELP to the Partnership,
subsequent to March 31, 1998 (see Note 7).
{B}In accordance with Financial Accounting
Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", at December
31, 1997, KELP recorded a cumulative property
valuation provision of $3,995,696 based on the
selling prices of the properties less
estimated costs to sell.
{C}At March 31, 1998, KELP was released from
$34,920,970 of obligations with respect to the
mortgage notes and accrued interest payable to
an affiliate of $33,585,515, a demand note and
accrued interest payable to an affiliate of
$661,070 and expense reimbursements to an
affiliate of $674,385. KELP recorded a gain
on extinguishment of debt which was equivalent
to the releases.
{D}KELP was named in a lawsuit filed during
1996, in which the plaintiff has stated a
claim for a brokerage commission in the amount
of $260,000 as a result of the sale of Village
Green Apartments. In 1993, the plaintiff
fortuitously found a party interested in
purchasing Village Green Apartments from the
defendant, however, no purchase was ultimately
negotiated, as the prospective purchaser would
not meet KELP's asking price. In October,
1995, negotiations were rekindled and KELP
entered into a purchase and sale agreement and
consummated the sale in March, 1996. The
plaintiffs have filed suit seeking a full
commission, $260,000, calculated as 5% of the
selling price, related to the sale. The
plaintiffs did not have a written brokerage
agreement and were not the procuring cause of
the ultimate sale of the property, however
they did introduce the parties to the ultimate
transaction. The outcome of this litigation
cannot be presently determined, however the
Partnership has recorded a provision of
$260,000 at March 31, 1998.
Continued
KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED
PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(4)Bad Debt Expense, Provision for Credit
Losses and Accrued Interest Reserves
At March 31, 1998, the General Partners of the
Partnership recognized bad debt expense on its
mortgage notes receivable of $305,364, based
on the difference between the net sales
proceeds received from the sale of KELP's
properties and the carrying values of the
loans.
At December 31, 1997, the General Partners of
the Partnership had cumulative provisions for
credit losses of $15,851,013 recorded on its
mortgage notes receivable and $14,638,760
recorded as uncollectible interest on accrued
interest receivable. These cumulative
provisions were recorded against the carrying
value of the assets in order to reflect
management's estimates of the underlying
property values.
(5)Summary of Changes in Partners' Equity
A summary of changes in Partners' equity
(deficit) for the three months ended March 31,
1998 is as follows:
Limited General Partners'
Partners Partners Equity
Balance at December 31, 1997
$ 8,999,051 $(211,732)$ 8,787,319
Net loss (285,454) (2,883) (288,337)
Distributions (150,295)(1,518) (151,813)
Balance at March 31, 1998
$ 8,563,302 $(216,133) $ 8,347,169
(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 to affiliates consisted of expense
reimbursements of $266,716 at March 31, 1998.
(7)Subsequent Event
On May 12, 1998, the original General Partners
of KELP remitted $2,790,388, to the
Partnership, as per the Collateral Pledge
Agreement discussed in Note 3.<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
Pursuant to its disposition strategy, on
January 30, 1998 the General Partner of KELP
sold KELP's remaining properties to
unaffiliated third parties. KELP's properties
were included in a package with twelve other
properties owned by affiliates of KELP's
General Partner. The total selling price of
the fourteen properties was $138,000,000, of
which KELP received $5,027,200 for the sale of
its properties, less its share of the closing
costs. KELP used the net proceeds from the
sale to pay down the mortgage notes payable to
the Partnership (see Note 3). The sale of
KELP's properties is considered cause for
Dissolution of KELP, as defined by KELP's
Partnership Agreement. Accordingly, KELP's
General Partner expects to liquidate KELP in
1998.
As a result of the sale of KELP's properties,
certain notes totaling $2,790,388, issued by
the original General Partners of KELP, which
had been pledged to the Partnership under a
Collateral Pledge Agreement, were paid by the
original General Partners of KELP subsequent
to year-end (see Note 7).
The sale of KELP's properties and the
subsequent pay down of the Partnership's
mortgage notes receivable, together represent
an Event Causing Dissolution, as defined by
the Partnership Agreement.
The Partnership anticipates making a special
distribution of $225 per Unit in the second
quarter of 1998, based upon approximately 80%
of the proceeds of the sale and estimated
liquidation value of remaining Partnership
assets. Once all necessary reserves and
contingent liabilities are funded, the
remaining proceeds will be distributed. All
Partnership affairs are expected to be
completed by year-end.
Operations
Net income, net of bad debt expense from
mortgage notes receivable, decreased for the
three months ended March 31, 1998 when
compared to the same period in 1997, as total
revenue decreased and total expenses remained
relatively stable.
Total revenue decreased during the three
months ended March 31, 1998, as compared to
the three months ended March 31, 1997, due to
a decrease in interest income on mortgage
notes receivable as a result of the sale of
KELP's properties (see Note 3). This decrease
was partially offset by an increase in
interest income earned on cash equivalents as
a result of higher cash and cash equivalent
balances available for investment. KELP's net
sales proceeds of $4,778,696 were used to pay
down the mortgage notes payable to the
Partnership.
Total expenses, net of bad debt expense from
mortgage notes receivable, remained relatively
stable when comparing the first three months
of 1998 to the first three months of 1997.
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
(a)Exhibits
Response: None
(b)Reports on Form 8-K
Date Event Reported Financial Statements
Filed
January 30, 1998 Disposition of properties Pro
Forma Balance Sheet at September 30, 1997.
Pro Forma Statements of Income (Loss) for the
nine months ended September 30, 1997 and for
the year ended December 31, 1996.
<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.
DATE: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Krupp Institutional
Mortgage Fund Ltd. Partnership Financial Statements for the three months ended
March 31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,825,345
<SECURITIES> 0
<RECEIVABLES> 2,793,278<F1><F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,229
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,622,852
<CURRENT-LIABILITIES> 275,683
<BONDS> 0
0
0
<COMMON> 8,347,169<F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,622,852
<SALES> 0
<TOTAL-REVENUES> 42,583
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 330,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (288,337)<F4>
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<FN>
<F1>Includes all receivables on the Balance Sheet.
<F2>KELP sold its remaining properties on January 30, 1998 to unaffiliated third
parties with twelve other properties for a total selling price of $138,000,000,
of which KELP received $5,027,200 for the sale of its properties, less its
share of closing costs. KELP used the net sales proceeds of $4,778,696 to pay
down the mortgage notes payable to the Partnership. As a result of the sale of
KELP's properties, certain notes totaling $2,790,388, pledged to the
Partnership under a Collateral Plege Agreement, were paid by the original
General Partners of KELP to the Partnership on May 12, 1998.
<F3>Represents Limited Partners equity of $8,563,302 and General Partners deficit
of ($216,133), respectively.
<F4>Net (loss) allocated ($2,883) to the General Partners and ($285,454) to the
Limited Partners. Average net loss per Unit of Limited Partners interest is
($9.50) on 30,059 Units outstanding.
</FN>
</TABLE>
