UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-15815
Krupp Insured Plus Limited Partnership
(Exact name of registrant as specified in its charter)
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)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Depositary Receipts representing
Units of Limited Partner Interests
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable.
Documents incorporated by reference: See Part IV Item 14.
The exhibit index is located on pages 9-13.
<PAGE>
PART I
ITEM 1. BUSINESS
On December 20, 1985, The Krupp Corporation and The Krupp Company
Limited Partnership-IV (the "General Partners") formed Krupp Insured Plus
Limited Partnership (the "Partnership"), a Massachusetts Limited
Partnership. The Partnership raised approximately $149 million through a
public offering of limited partner interests evidenced by units of
depositary receipts ("Units") and used the net proceeds primarily to
acquire participating insured mortgages ("PIMs") and mortgage backed
securities ("MBS"). The Partnership considers itself to be engaged in the
industry segment of investment in mortgages.
The Partnership's investments in PIMs consist of a securitized first
mortgage loan or a sole participation interest in a Department of Housing
and Urban Development ("HUD") insured first mortgage loan, and
participation interests in the current revenue stream of the mortgaged
property and any increase in the mortgaged property's value above certain
specified base levels. The Partnership provided the funds for the first
mortgage loan made to the borrower by acquiring either a securitized first
mortgage loan ("MBS"), originated under the lending programs of the
Federal National Mortgage Association ("FNMA") or Government National
Mortgage Association ("GNMA"), or a sole participation interest in a first
mortgage loan originated under the Federal Housing Administration ("FHA")
lending program (collectively the "insured mortgages"). The Partnership
received the participation interests in the mortgaged property as
additional consideration for providing the funds for the first mortgage
loan and accepting a below market interest rate on the insured mortgage,
which provided the borrower with a below market interest rate on the first
mortgage loan. The borrower conveyed the participation interests to the
Partnership through either a subordinated promissory note and mortgage or a
shared income and appreciation agreement. FNMA guarantees the principal
and interest payments for the FNMA MBS and GNMA guarantees the timely
payment of principal and interest for the GNMA MBS. HUD insures the first
mortgage loan underlying the GNMA MBS and any first mortgage loan
originated under the FHA lending program. The participation interests
conveyed to the Partnership by the borrower are neither insured nor
guaranteed.
The Partnership also acquired MBS backed by single-family or multi-
family mortgage loans issued or originated by GNMA, FNMA or the Federal
Home Loan Mortgage Corporation ("FHLMC"). FNMA and FHLMC guarantee the
principal and basic interest of these FNMA and FHLMC MBS, respectively.
GNMA guarantees the timely payment of principal and interest of GNMA MBS,
and HUD insures the pooled first mortgage loans underlying the GNMA MBS.
Although the Partnership will terminate no later than December 31, 2025
the Partnership anticipates realizing the value of the PIMs through
repayment as early as ten years from the closing dates of the permanent
loans. In addition, the Partnership expects to receive a significant
portion of the value of its MBS within a ten year holding period.
Therefore, dissolution of the Partnership should occur significantly prior
to December 31, 2025, the stated termination date of the Partnership.
The Partnership's investments are not subject to seasonal fluctuations.
However, the realization of the participation features of the PIMs are
subject to similar risks associated with equity real estate investments,
including: reliance on the owner's operating skills, ability to maintain
occupancy levels, control operating expenses, maintain the property and
provide adequate
<PAGE>
insurance coverage; adverse changes in general economic conditions, adverse
local conditions, and changes in governmental regulations, real estate
zoning laws, or tax laws; and other circumstances over which the
Partnership may have little or no control.
The requirements for compliance with federal, state and local
regulations to date have not adversely effected the Partnership's
operations and the Partnership anticipates no adverse effect in the future.
As of December 31, 1995, there were no personnel directly employed by
the Partnership.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership
is a party or to which any of its investments is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
There currently is no established trading market for the Units.
The number of investors holding Units as of December 31, 1995 was
approximately 7,100. One of the objectives of the Partnership is to
provide quarterly distributions of cash flow generated by its investments
in mortgages. The Partnership anticipates that future operations will
continue to generate cash available for distribution. Adjustments may be
made to the distribution rate in the future due to the realization and
payout of the existing mortgages.
During 1994, the Partnership made a special distribution consisting
primarily of principal collections on MBS. The Partnership may make
special distributions in the future if PIMs prepay or a sufficient amount
of cash is available from MBS and PIM principal collections.
<PAGE>
The Partnership made the following distributions, in quarterly
installments, and special distributions, to its Partners during the two
years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Amount Per Unit Amount Per Unit
Quarterly Distributions:
<S> <C> <C> <C> <C>
Limited Partners $9,000,119 $1.20 $ 9,554,686 $1.28
General Partners 187,157 192,551
9,187,276 9,747,237
Special Distributions:
Limited Partners - 7,950,105 $1.06
Total Distributions $9,187,276 $17,697,342
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding
the Partnership's financial position and operating results. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Financial
Statements and Supplementary Data, which are included in Item 7 and Item 8,
(Appendix A) of this report, respectively.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenues $ 7,097,154 $ 7,688,593 $ 7,698,364 $ 8,697,559 $ 9,616,484
Net income 5,247,543 5,682,819 5,642,527 5,413,709 7,719,518
Net income allocated to:
Limited Partners 5,090,117 5,512,334 5,473,251 5,251,298 7,487,932
Average Per Unit .68 .73 .73 .70 1.00
General Partners 157,426 170,485 169,276 162,411 231,586
Total assets at
December 31 93,784,033 96,561,305 108,566,470 117,967,380 131,567,597
Distributions to:
Limited Partners 9,000,119 9,554,686 9,873,378 10,509,149 10,650,140
Quarterly
Average per Unit 1.20 1.28 1.32 1.40 1.42
Special - 7,950,105 4,950,065 8,250,090 -
Average per Unit - 1.06 .66 1.10 -
General Partners 187,157 192,551 203,481 228,198 260,279
</TABLE>
<PAGE>
ITEM 7. 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 interest received on the
PIMs, MBS, cash and cash equivalents and the principal collections received
on the PIMs and MBS and 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.
During the last half of 1994 and the first nine months of 1995
prepayments on the Partnership's MBS portfolio decreased dramatically as
compared to the level of prepayments during 1993 and the beginning of 1994.
The high level of MBS prepayments during 1993 and early 1994 caused such an
increase in available cash that the Partnership made a special distribution
of $1.06 per Unit during 1994. Also during 1994, the Partnership adjusted
its distribution to $1.20 per Unit per year to reflect the anticipated cash
inflows that would be available to fund distributions in the near term.
During the year ended December 31, 1995, the Partnership received MBS
principal collections of approximately $1.8 million as compared to $5
million during 1994, reflecting a significantly lower level of prepayments.
To date, this decrease in MBS principal collections has not adversely
affected the Partnership's liquidity or its ability to maintain the current
distribution rate of $1.20 per Unit per year. However, as the portion of
distributions funded with principal collections on MBS and PIMs reduces the
asset base of the Partnership, future cash inflows will decrease.
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 do
not fully utilize the cash available for distribution and cash balances
increase, the General Partners may adjust the distribution rate or
distribute such funds through a special distribution.
During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from 25%
to 30%. During December 1995, the Partnership received its pro-rata share
of a $90,644 principal payment and will receive interest only payments on
the FNMA MBS at interest rates ranging from 6.25% to 8.775% per annum
through maturity. Also, the Partnership will receive its pro-rata share of
the $250,000 principal payments due on December 1 of each of the next four
years. As a result of the modification, the Royal Palm PIM will continue
to provide the Partnership with a competitive yield, potential
participation in future income and appreciation, and principal and interest
from the FNMA MBS will continue to be guaranteed by FNMA.
<PAGE>
For the first five years of the PIMs the borrowers are prohibited from
repaying. For the second five years, the borrower can repay the loans
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
FNMA, the Government National Mortgage Association ("GNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the 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 year
ended December 31, 1995 and the period from inception through December 31,
1995. 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.
<PAGE>
<TABLE>
(Amounts in thousands, except per Unit amounts)
<CAPTION>
Year Inception
Ended Through
12/31/95 12/31/95
<S> <C> <C>
Distributable Cash Flow:
Income for tax purposes $ 6,072 $ 67,096
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid fees and expenses 134 4,761
Amortization of MBS premiums - 284
Acquisition expenses paid from offering
proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $ 6,206 $ 73,125
Limited Partners Share of DCF $ 6,020 $ 70,931
Limited Partners Share of DCF per Unit $ .80 $ 9.46 (c)
General Partners Share of DCF $ 186 $ 2,194
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 549 $ 46,432
Principal collections on MBS 1,785 38,787
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 $ 2,334 $ 44,558
Cash available for distribution
(DCF plus Net Proceeds from Capital
Transactions) $ 8,540 $117,683
Distributions: (includes special distributions)
Limited Partners $ 9,000 (a) $114,837 (b)
Limited Partners Average per Unit $ 1.20 (a) $ 15.31 (b)(c)
General Partners 186 (a) 2,194 (b)
Total Distributions $ 9,186 $117,031
</TABLE>
(a) Represents all distributions paid in 1995 except the February 1995
distribution and includes an estimate of the distribution to be
paid in February 1996.
(b) Includes an estimate of the distribution to be paid in February
1996.
(c) Limited Partners average per Unit return of capital as of February
1996 is $5.85 [$15.31 - $9.46]. 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.
<PAGE>
Operations
The following discussion relates to the operation of the Partnership
during the years ended December 31, 1995, 1994 and 1993.
<TABLE>
(Amounts in thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest income on PIMs $ 4,471 $ 4,515 $ 4,350
Interest income on MBS 2,473 2,662 3,097
Other interest income 153 262 307
Partnership expenses (891) (1,048) (1,128)
Distributable Cash Flow 6,206 6,391 6,626
Participation income receivable - 265 -
Amortization of MBS premium - (15) (55)
Amortization of prepaid fees
and expenses (958) (958) (928)
Net income $ 5,248 $ 5,683 $ 5,643
</TABLE>
Net income decreased approximately $435,000 in 1995 as compared to 1994
due primarily to lower participation income accrued in 1995, interest
income on MBS, and interest income on cash and short-term investments. In
general, the income generated by the Partnership's invested assets will
decrease in the future as its investments in mortgages amortize and
principal proceeds are distributed to investors through quarterly or
special distributions. The decline in interest income on MBS from 1994 to
1995 decreased as compared to the decline from 1993 to 1994 due to a lower
rate of prepayments on the MBS portfolio during the last half of 1994 and
1995.
Net income for 1994 did not change significantly from 1993. Interest
income related to PIMs increased approximately $430,000 in 1994 as compared
to 1993 as a result of participation income recognized in 1994 and a
retroactive interest rate reduction in 1993 that lowered interest income on
PIMs in 1993. In November 1993, the Partnership entered into an agreement
with the borrower of the FHA PIM reducing the interest rate from 8.875% to
7.375% per annum retroactive to January 1, 1992, which reduced interest
income on PIMs in 1993. Interest income on MBS decreased approximately
$450,000 in 1994 as compared to 1993 due primarily to significant
prepayments of the underlying mortgages as a result of refinancings due to
lower interest rates. During 1994, the Partnership's expenses decreased
approximately $80,000 as compared to 1993 as a result of lower asset
management fees and expense reimbursements to affiliates. The asset
management fee will continue to decline as the asset base of the
Partnership decreases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as
to the directors and executive officers of The Krupp Corporation, which is
a General Partner of the Partnership and is a general partner of The Krupp
Company Limited Partnership-IV, the other General Partner of the
Partnership, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Vice President and Chief Accounting
Officer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for the more than $3 billion under management for institutional
and individual clients. Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science in Business Administration
from this institution and was elected trustee in 1990. Mr. Krupp is
Chairman of the Board and Director of Berkshire Realty Company, Inc. (NYSE-
BRI).
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for more than $3.0 billion under management for institutional
and individual clients. Mr. Krupp attended the University of Pennsylvania
and Harvard University. Mr. Krupp serves as Chairman of the Board and
Trustee of Krupp Government Income Trust II and Krupp Government Income
Trust.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as President and a Director of
Berkshire Realty Company, Inc. (NYSE-BRI), and President and Trustee of
Krupp Government Income Trust and Krupp Government Income Trust II.
<PAGE>
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of Berkshire Mortgage Finance and Corporate Controller of The Berkshire
Group. Mr. Barrows has held several positions within The Berkshire Group
since joining the company in 1983 and is currently responsible for
accounting and financial reporting, treasury, tax, payroll and office
administrative activities. Prior to joining The Berkshire Group, he was an
audit supervisor for Coopers & Lybrand L.L.P. in Boston. He received a
B.S. degree from Boston College and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995 no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
7,499,999 outstanding Units. The only interests held by management or its
affiliates consist of its General Partner and Corporate Limited Partner
Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in Note F to the
Partnership's financial statements presented in Appendix A to this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - see Index to Financial Statements and
Schedule included under Item 8, Appendix A, on page F-2 of
this report.
2. Financial Statement Schedule - see Index to Financial
Statements and Schedule included under Item 8, Appendix A,
on page F-2 of this report. All other schedules are omitted
as they are not applicable, not required or the information
is provided in the Financial Statements or the Notes
thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
The following reflects all applicable Exhibits required under Item
601 of Regulation S-K:
(4) Instruments defining the rights of security holders
including indentures:
(4.1) Amended Agreement of Limited Partnership dated as of
June 27, 1986 [Exhibit A to Prospectus included in Amendment
No. 1 of Registrant's Registration Statement on Form S-11
dated July 2, 1986 (File No. 33-2520)].*
<PAGE>
(4.2) Subscription Agreement whereby a subscriber agrees to
purchase Units and adopts the provisions of the Amended
Agreement of Limited Partnership [Exhibit D to Prospectus
included in Amendment No. 1 of Registrant's Registration
Statement on Form S-11 dated July 2, 1986 (File No. 33-
2520)].*
(4.3) Eighth Amendment and Restatement of Certificate of Limited
Partnership filed with the Massachusetts Secretary of State
on February 6, 1987 [Exhibit 4.3 to Registrant's Report on
Form 10-K for the year ended December 31, 1986 (File No. 33-
2520)].*
(10) Material Contracts:
La Costa Apartments
(10.1) Prospectus for GNMA Pool No. 168416 (PL). [Exhibit 19.1 to
Registrant's Report on Form 10-Q for the quarter ended March
31, 1987 (File No. 33-2520)].*
(10.2) Shared Income and Appreciation Agreement, dated March 18,
1987 between International Plaza Associates, Ltd., A
Florida limited partnership, and DRG Funding Corporation, a
Delaware corporation. [Exhibit 19.2 to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1987 (File No.
33-2520)].*
(10.3) Multifamily Mortgage, Assignment of Rents and Security
Agreement, dated March 18, 1987 between International Plaza
Associates, Ltd., a Florida limited partnership, and DRG
Funding Corporation, a Delaware corporation. [Exhibit 19.3
to Registrant's Report on Form 10-Q for the quarter ended
March 31, 1987 (File No. 33-2520)].*
(10.4) Assignment of Mortgage, dated March 18, 1987, between DRG
Funding Corporation, a Delaware corporation, (Mortgagee) and
Krupp Insured Plus Limited Partnership, a Massachusetts
limited partnership, (Assignee). [Exhibit 19.4 to
Registrant's Report on Form 10-Q for the quarter ended March
31, 1987 (File No. 33-2520)].*
Mandalay Apartments
(10.5) Prospectus for GNMA Pool No. 228812 (PL). [Exhibit 1 to
Registrant's Report on Form 8-K dated August 11, 1987 (File
No. 0-15815)].*
(10.6) Shared Income and Appreciation Agreement, dated July 1,
1987, between First Florida Bank, N.A., as Trustee under
Trust No. 48-1990-00 and DRG Funding Corporation. [Exhibit
2 to Registrant's Report on Form 8-K dated August 11, 1987
(File No. 0-15815)].*
(10.7) Assignment of Mortgage, dated July 1, 1987, between DRG
Funding Corporation (as "Mortgagee") and Krupp Insured Plus
Limited Partnership (as "Assignee"). [Exhibit 3 to
Registrant's Report on Form 8-K dated August 11, 1987 (File
No. 0-15815)].*
<PAGE>
Greentree Apartments
(10.8) Prospectus for GNMA Pool No. 238744-(PL). [Exhibit 1 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.9) Mortgage Note, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 2 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No.0-15815)].*
(10.10) Mortgage, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 3 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.11) Shared Income and Appreciation Agreement, dated October 22,
1987, between Greentree Associates, Ltd. and DRG Funding
Corporation. [Exhibit 4 to Registrant's Report on Form 8-K
dated December 10, 1987 (File No. 0-15815)].*
(10.12) Assignment of Shared Income and Appreciation Agreement,
dated October 22, 1987, between DRG Funding Corporation and
Krupp Insured Plus Limited Partnership (as "Assignee").
[Exhibit 5 to Registrant's Report on Form 8-K dated December
10, 1987 (File No. 0-15815)].*
(10.13) Multifamily Mortgage, Assignment of Rents and Security
Agreement, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 6 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.14) Assignment of Mortgage (the Multifamily Mortgage, Assignment
of Rents and Security Agreement), dated November 23, 1987,
between DRG Funding Corporation (as "Mortgagee") and Krupp
Insured Plus Limited Partnership (as "Assignee"). [Exhibit
7 to Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
Pine Hills Apartments
(10.15) Prospectus for GNMA Pool No. 238825-(PL). [Exhibit 10.27 to
Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1987 (File No. 0-15815)].*
(10.16) Subordinated Promissory Note, dated November 20, 1987,
between Pine Hill Partners ("Maker" or "Mortgagor") and
York Associates, Inc., ("Holder" or "First-Mortgagee") as
assigned to Krupp Insured Plus Limited Partnership. [Exhibit
10.28 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No. 0-15815)].*
(10.17) Subordinated Multifamily Mortgage, Assignment of Rents and
Security Agreement, dated November 20, 1987, between Pine
Hill Partners ("Borrower") and York Associates, Inc.,
("Lender"). [Exhibit 10.29 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1987 (File No.
0-15815)].*
<PAGE>
(10.18) Assignment of Subordinated Mortgage, dated November 23, 1987
between York Associates, Inc., ("Assignor") and Krupp
Insured Plus Limited Partnership ("Assignee"). [Exhibit
10.30 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No. 0-15815)].*
(10.19) Modification to the loan and participation workout
agreement, dated March 31, 1992, by and between Krupp
Insured Plus Limited Partnership and Pine Hill Partners.
[Exhibit 10.19 to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1994 (File No. 0-15815)].*
Vista Montana
(10.20) Subordinated Promissory Note, dated March 31, 1988, between
VM Associates Limited Partnership, an Arizona Limited
Partnership and GMAC Mortgage Corporation of PA. [Exhibit
19.7 to Registrant's Report on Form 10-Q for the Quarter
Ended March 31, 1988 (File No. 0-15815)].*
(10.21) Subordinated Multi-family Deed of Trust, dated March 31,
1988, between VM Associates Limited Partnership, an Arizona
Limited Partnership, and GMAC Mortgage Corporation of PA
[Exhibit 19.8 to Registrant's Report on Form 10-Q for the
Quarter Ended March 31, 1988 (File No. 0-15815)].*
(10.22) Assignment of Subordinated Deed of Trust, dated March 31,
1988, between GMAC Mortgage Corporation of PA, and Krupp
Insured Plus-II Limited Partnership, a Massachusetts Limited
Partnership. [Exhibit 19.9 to Registrant's Report on Form
10-Q for the Quarter Ended March 31, 1988 (File No. 0-
15815)].*
(10.23) Assignment of Closing Documents, dated July 12, 1988 by and
between Krupp Insured Plus-II Limited Partnership ("KIP-
II"), a Massachusetts limited partnership, and Krupp Insured
Plus Limited Partnership ("KIP-I"), a Massachusetts limited
partnership. [Exhibit 19.10 to Registrant's Report on Form
10-Q for the Quarter Ended June 30, 1988 (File No. 0-
15815)].*
(10.24) Deed of Trust, dated March 31, 1988 between VM Associates
Limited Partnership, an Arizona limited partnership and
Transamerica Title Insurance Company, a California
corporation. [Exhibit 19.11 to Registrant's Report on Form
10-Q for the Quarter Ended September 30, 1988 (File No. 0-
15815)].*
(10.25) Deed of Trust Note, dated March 31, 1988, between VM
Associates Limited Partnership, an Arizona limited
partnership and GMAC Mortgage Corporation of PA, a
Pennsylvania corporation. [Exhibit 19.12 to Registrant's
Report on Form 10-Q for the Quarter Ended September 30, 1988
(File No. 0-15815)].*
(10.26) Assignment of Mortgage and Collateral Documents, dated March
31, 1988 by and between Krupp Insured Plus-II Limited
Partnership, a Massachusetts limited partnership and GMAC
Mortgage Corporation of PA, a Pennsylvania corporation.
[Exhibit 19.13 to Registrant's Report on Form 10-Q for the
Quarter Ended September 30, 1988 (File No. 0-15815)].*
<PAGE>
(10.27) Servicing Agreement, dated March 31, 1988 by and between
Krupp Insured Plus-II Limited Partnership, a Massachusetts
limited partnership and GMAC Mortgage Corporation of PA, a
Pennsylvania corporation. [Exhibit 19.14 to Registrant's
Report on Form 10-Q for the Quarter Ended September 30, 1988
(File No. 0-15815)].*
(10.28) Modification to the First mortgage loan and subordinated
Promissory Note, dated June 7, 1993, by and between Krupp
Insured Plus-II Limited Partnership and V.M. Associates
Limited Partnership. [Exhibit 10.28 to Registrant's Report
on Form 10-K for the Year Ended December 31, 1994 (File No.
0-15815)].*
(10.29) Assignment of interest from Krupp Insured Plus Limited
Partnership II to Krupp Insured Plus Limited Partnership,
dated February 6, 1995. [Exhibit 10.29 to Registrant's
Report on Form 10-K for the Year Ended December 31, 1994
(File No. 0-15815)].*
Royal Palm Place
(10.30) Supplement to Prospectus for FNMA Pool No. MB-109057.+
(10.31) Subordinated Multifamily Mortgage dated March 20, 1991
between Royal Palm Place, Ltd., a Florida limited
partnership (the "Mortgagor") and Krupp Insured Plus-III
Limited Partnership (the "Mortgagee"). [Exhibit 19.2 to
Registrant's Report on Form 10-Q for the Quarter Ended June
30, 1991 (File No. 0-15815)].*
(10.32) Amended and Restated Subordinated Promissory Note dated
December 1, 1995 between Royal Palm Place, Ltd., a Florida
limited partnership (the "Mortgagor") and Krupp Insured
Plus-III Limited Partnership (the "Holder").+
(10.33) Modification Agreement dated March 20, 1991 by and between
Royal Palm Place, Ltd., a Florida limited partnership and
Krupp Insured Plus-III Limited Partnership. [Exhibit 19.4 to
Registrant's Report on Form 10-Q for the Quarter Ended June
30, 1991 (File No. 0-15815)].*
(10.34) Participation Agreement dated March 20, 1991 between Krupp
Insured Plus-III Limited Partnership and Krupp Insured Plus
Limited Partnership. [Exhibit 19.1 to Registrant's Report
on Form 10-Q for the Quarter Ended September 30, 1991 (File
No. 0-15815)].*
* Incorporated by reference.
+ Filed herein.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995 the
Partnership did not file any reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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,
on the 26th day of February, 1996.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
By: The Krupp Corporation,
a General Partner
By: /s/ George Krupp
George Krupp, Co-Chairman
(Principal Executive Officer) and
Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 26th day of February,
1996.
Signatures Title(s)
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner of the Registrant.
/s/ Robert A. Barrows Vice President and Chief Accounting
Robert A. Barrows Officer of The Krupp Corporation, a
General Partner of the Registrant.
<PAGE>
APPENDIX A
KRUPP INSURED PLUS LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1995
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Accountants F-3
Balance Sheets at December 31, 1995 and 1994 F-4
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-5
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1995, 1994 and 1993 F-6
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 F-7
Notes to Financial Statements F-8 - F-14
Schedule IV - Mortgage Loans on Real Estate F-15 - F-16
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Insured Plus Limited Partnership:
We have audited the financial statements and the financial statement
schedule of Krupp Insured Plus Limited Partnership (the "Partnership")
listed in the index on page F-2 of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
General Partners of the Partnership. Our responsibility is to express an
opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Krupp Insured
Plus Limited Partnership as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 27, 1996
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<CAPTION>
1995 1994
<S> <C> <C>
Participating Insured Mortgages
("PIMs") (Notes B, C and H) $ 59,289,135 $ 59,837,946
Mortgage-Backed Securities and insured
mortgage ("MBS") (Notes B, D and H) 29,026,838 29,648,678
Total mortgage investments 88,315,973 89,486,624
Cash and cash equivalents (Notes B and H) 2,394,592 2,931,523
Interest receivable and other assets 871,942 983,130
Prepaid acquisition fees and expenses, net of
accumulated amortization of $4,423,897 and
$3,658,625, respectively (Note B) 1,696,611 2,461,883
Prepaid participation servicing fees, net of
accumulated amortization of $1,895,084 and
$1,701,854, respectively (Note B) 504,915 698,145
Total assets $ 93,784,033 $ 96,561,305
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 14,454 $ 14,734
Partners' equity (deficit) (Notes A and E):
Limited Partners 92,779,548 96,689,550
(7,500,099 Limited Partner interests
outstanding)
General Partners (172,710) (142,979)
Unrealized gain on MBS (Note B) 1,162,741 -
Total Partners' equity 93,769,579 96,546,571
Total liabilities and Partners' equity $ 93,784,033 $ 96,561,305
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Interest income - PIMs
Base interest $4,470,937 $4,517,722 $4,349,745
Participation Income - 262,069 -
Interest income - MBS 2,472,826 2,647,031 3,097,129
Other interest income 153,391 261,771 251,490
Total revenues 7,097,154 7,688,593 7,698,364
Expenses:
Asset management fee to an
affiliate (Note F) 665,051 686,828 751,490
Expense reimbursements to affiliates
(Note F) 107,019 222,785 244,702
Amortization of prepaid expenses and
fees (Note B) 958,502 958,502 928,187
General and administrative expenses 119,039 137,659 131,458
Total expenses 1,849,611 2,005,774 2,055,837
Net income (Note G) $5,247,543 $5,682,819 $5,642,527
Allocation of net income (Note E):
Limited Partners $5,090,117 $5,512,334 $5,473,251
Average net income per Limited
Partner interest $ .68 $ .73 $ .73
(7,500,099 Limited Partner
interests outstanding)
General Partners $ 157,426 $ 170,485 $ 169,276
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Limited General Unrealized Partners'
Partners Partners Gain Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $118,032,199 $ (86,708) $ - $117,945,491
Net income 5,473,251 169,276 - 5,642,527
Quarterly distributions (9,873,378) (203,481) - (10,076,859)
Special distributions (4,950,065) - - (4,950,065)
Balance at December 31, 1993 108,682,007 (120,913) - 108,561,094
Net income 5,512,334 170,485 - 5,682,819
Quarterly distributions (9,554,686) (192,551) - (9,747,237)
Special distributions (7,950,105) - - (7,950,105)
Balance at December 31, 1994 96,689,550 (142,979) - 96,546,571
Net income 5,090,117 157,426 - 5,247,543
Quarterly distributions (Note E) (9,000,119) (187,157) - (9,187,276)
Unrealized gain on MBS - - 1,162,741 1,162,741
Balance at December 31, 1995 $ 92,779,548 $(172,710) $ 1,162,741 $ 93,769,579
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating activities:
Net income $ 5,247,543 $ 5,682,819 $ 5,642,527
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 958,502 958,502 928,187
Premium amortization on MBS - 14,986 55,441
Changes in assets and liabilities:
Decrease (increase) in interest receivable
and other assets 111,188 (285,736) 1,449,206
Increase (decrease) in liabilities (280) 9,358 (16,513)
Net cash provided by operating activities 6,316,953 6,379,929 8,058,848
Investing activities:
Principal collections on PIMs 548,811 484,586 407,385
Principal collections on MBS 1,784,581 4,988,553 9,688,312
Decrease in other investments - - 6,000,000
Investment in PIMs - - (68,757)
Investments in MBS - - (6,154,086)
Proceeds from insurance claims on PIMs - - 475,727
Net cash provided by investing activities 2,333,392 5,473,139 10,348,581
Financing activities:
Quarterly distributions (9,187,276) (9,747,237) (10,076,859)
Special distributions - (7,950,105) (4,950,065)
Net cash used for financing activities (9,187,276) (17,697,342) (15,026,924)
Net increase (decrease) in cash and cash
equivalents (536,931) (5,844,274) 3,380,505
Cash and cash equivalents, beginning
of period 2,931,523 8,775,797 5,395,292
Cash and cash equivalents, end of period $ 2,394,592 $ 2,931,523 $ 8,775,797
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Organization
Krupp Insured Plus Limited Partnership (the "Partnership") is a
Massachusetts Limited Partnership. The General Partners of the
Partnership are The Krupp Corporation and The Krupp Company Limited
Partnership-IV and the Corporate Limited Partner is Krupp Depositary
Corporation. The Partnership terminates on December 31, 2025, unless
terminated earlier upon the occurrence of certain events as set forth
in the Partnership Agreement.
The Partnership commenced the public offering of Units on July 7, 1986
and completed its public offering having sold 7,499,999 Units for
$149,489,830 net of purchase volume discounts of $510,150 as of
January 27, 1987.
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes which differ in certain respects from those used
for federal income tax purposes (Note G):
PIMs
The Partnership carries its investments in PIMs at amortized cost
as it has the ability and intention to hold these investments.
Basic interest is recognized at the stated rate of the Department
of Housing and Urban Development ("HUD") insured mortgage (less
the servicer's fee) or the stated coupon rate of the Government
National Mortgage Association ("GNMA") or Federal National
Mortgage Association ("FNMA") MBS. The Partnership recognizes
interest related to the participation features as earned and when
it deems these amounts as collectible.
MBS
At December 31, 1995, the Partnership in accordance with the
Financial Accounting Standards Board s Special Report on Statement
115, "Accounting for Certain Investments in Debt and Equity
Securities", reclassified its MBS portfolio from held-to-maturity
to available-for-sale. The Partnership carries its MBS at fair
market value and reflects any unrealized gains (losses) as a
separate component of Partners' Equity. Prior to December 31,
1995, the Partnership carried its MBS portfolio at amortized cost.
The Partnership amortizes purchase premiums or discounts over the
life of the underlying mortgages using the effective interest
method.
<PAGE>
Cash Equivalents
The Partnership includes all short-term investments with
maturities of three months or less from the date of acquisition in
cash and cash equivalents. The Partnership invests its cash
primarily in deposits and money market funds with a commercial
bank and has not experiencedany loss to date on its invested cash.
Prepaid Fees and Expenses
Prepaid fees and expenses represent prepaid acquisition expenses
and prepaid participation servicing fees paid for the acquisition
and servicing of PIMs. The Partnership amortizes the prepaid
acquisition fees and expenses using a method that approximates the
effective interest method over a period of ten to twelve years,
which represents the actual maturity or anticipated call date of
the underlying mortgage.
The Partnership amortizes the prepaid participation servicing fees
using a method that approximates the effective interest method
over a ten year period beginning from the acquisition of the GNMA
or FNMA MBS or final endorsement of the FHA loan.
Income Taxes
The Partnership is not liable for federal or state income taxes
because Partnership income is allocated to the partners for income
tax purposes. If the Partnership's tax returns are examined by
the Internal Revenue Service or state taxing authority and such an
examination results in a change in Partnership taxable income,
such change will be reported to the partners.
Estimates and Assumptions
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period.
Actual results could differ from those estimates.
C. PIMs
The Partnership has investments in six PIMs. The Partnership's PIMs
consist of (a) a GNMA or FNMA MBS representing the securitized first
mortgage loan on the underlying property or a sole participation
interest in a first mortgage loan originated under the FHA lending
program on the underlying property (collectively the "insured
mortgages"), and (b) participation interests in the revenue stream and
appreciation of the underlying property above specified base levels.
The borrower conveys these participation features to the Partnership
generally through a subordinated promissory note and mortgage (the
"Agreement"). The Partnership receives guaranteed monthly payments of
principal and
<PAGE>
interest on the GNMA and FNMA MBS and HUD insures the mortgage loan
underlying the GNMA MBS and the FHA mortgage loan. The Partnership
may receive interest related to its participation interests in the
underlying property, however, these amounts are neither insured nor
guaranteed.
Generally, the participation features consist of the following: (i)
"Minimum Additional Interest" which is at the rate of .5% per annum
calculated on the unpaid principal balance of the first mortgage on
the underlying property, (ii) "Shared Income Interest" which is 25% of
the monthly gross rental income generated by the underlying property
in excess of a specified base, but only to the extent that it exceeds
the amount of Minimum Additional Interest earned during such month,
(iii) "Shared Appreciation Interest" which is 25% of any increase in
the value of the underlying property in excess of a specified base.
Payment of participation interest from the operations of the property
is limited to 50% of net revenue or surplus cash as defined by FNMA or
HUD, respectively. The aggregate amount of Minimum Additional
Interest, Shared Income Interest and Shared Appreciation Interest
payable by the underlying borrower on the maturity date generally
cannot exceed 50% of any increase in Value of the property. However,
generally any net proceeds from a sale or refinancing of the property
will be available to satisfy any accrued but unpaid Shared Income or
Minimum Additional Interest.
Shared Appreciation Interest is payable when one of the following
occurs: (1) the sale of the underlying property to an unrelated third
party on a date which is later than five years from the date of the
Agreement, (2) the maturity date or accelerated maturity date of the
Agreement, or (3) prepayment of amounts due under the Agreement and
the insured mortgage.
The borrower usually cannot prepay the first mortgage loan during the
first five years and may prepay the first mortgage loan thereafter
subject to a 9% prepayment penalty in years six through nine, a 1%
prepayment penalty in year ten and no prepayment penalty thereafter.
Under the Agreement, the Partnership, upon giving twelve months
written notice, can accelerate the maturity date of the Agreement to a
date not earlier than ten years from the date of the Agreement for (a)
the payment of all participation interest due under the Agreement as
of the accelerated maturity date, or (b) the payment of all
participation interest due under the Agreement plus all amounts due on
the first mortgage note on the property.
During 1993, the Partnership received an insurance claim on the
following PIM and subsequently distributed the net proceeds to the
Unitholders of record on the date the net proceeds were received:
PIM Date Received Net Proceeds
Abbey Terrace March 12, 1993 $ 475,727
<PAGE>
The Partnership's PIMs consist of the following at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
Issuer Aggregate Range of Range of Investment Basis at
Original Number Interest Maturity December 31,
Principal of PIMs Rates Dates(a) 1995 1994
<S> <C> <C> <C> <C> <C> <C>
GNMA $42,450,020
(b)(c)(d) 4 7 - 8% 4/22-12/22 $39,754,953 $40,178,312
FHA 13,814,400
(e) 1 7.375% 12/33 13,696,501 13,757,653
FNMA 6,021,258
(f) 1 6.25%
(g) 4/06 5,837,681 5,901,981
$62,285,678 6 $59,289,135 $59,837,946
</TABLE>
(a) The range of maturity dates for PIMs issued by GNMA and FHA represent
the stated maturity date of the security or insured mortgage, however,
the Partnership anticipates realizing amounts due under these PIMs
well before these stated maturity dates.
(b) Includes a PIM with a prepayment penalty of 9% in year 6 through 7, 3%
in year 8 and 9, with no penalty thereafter.
(c) Includes a PIM having an original face value of $17,850,000 that was
purchased for $17,403,750 (a $446,250 discount). The prepayment
penalty for this PIM is 9% in year 6, declining by 1% each year
thereafter through year 9, with no penalty thereafter.
(d) On January 1, 1992, the Partnership entered into an agreement which
provided for a reduction in the permanent interest rate on a GNMA PIM
having an original face value of $4,900,000, which reduced the
interest rate from 8.5% to 7% for a period of four years. The
reduction in the permanent interest rate was granted in exchange for a
reduction of the Shared Appreciation Interest Base from $5,700,000 to
$4,900,000.
(e) On November 30, 1993, the Partnership entered into an agreement with
the underlying borrower of the FHA PIM for a permanent interest rate
reduction from 8.875% per annum to 7.375% per annum, retroactive to
January 1, 1992. In exchange for the interest rate reduction, the
Partnership received an increase in Shared Appreciation Income from
25% in excess of the base amount of $15,410,000 to 25% of the net
sales proceeds over the outstanding indebtedness ($13,696,501 as of
December 31, 1995). In the event of a refinancing, Shared
Appreciation Income is 25% of the appraised value over the outstanding
indebtedness. In addition, Shared Income Interest increased from 25%
of rental income in excess of the base amount of $175,000 to 25% of
all distributable surplus cash. On December 1, 1993, the underlying
first mortgage loan received final endorsement.
(f) The total PIM on the underlying property is $22,000,000 of which 73%
or $15,978,742 is held by Krupp Insured Plus III Limited Partnership.
(g) During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from
25% to 30%. During December 1995, the Partnership received its pro-
rata share of a $90,644 principal payment and will receive interest
only payments on the FNMA MBS at interest rates ranging from 6.25% to
8.775% per annum through maturity. Also, the Partnership will receive
its pro-rata share of the $250,000 principal payments due on December
1 of each of the next four years.
The underlying mortgages of the PIMs are collateralized by multi-family
apartment complexes located in five states. The apartment complexes range
in size from 103 to 386 units.
<PAGE>
D. MBS
At December 31, 1995, the Partnership's MBS portfolio has an amortized
cost of approximately $27,864,000 and gross unrealized gains of
approximately $1,163,000. At December 31, 1994, the Partnership s MBS
portfolio had a market value of approximately $29,177,000 and gross
unrealized gains and losses of approximately $119,000 and $591,000,
respectively. The MBS portfolio has maturities ranging from 2004 to
2033.
E. Partners' Equity
Profits and losses from Partnership operations and Distributable Cash
Flow are allocated 97% to the Unitholders and Corporate Limited
Partner (the "Limited Partners") and 3% to the General Partners.
Upon the occurrence of a capital transaction, as defined in the
Partnership Agreement, net cash proceeds will be distributed first, to
the Limited Partners until they have received a return of their total
invested capital, second, to the General Partners until they have
received a return of their total invested capital, third, 99% to the
Limited Partners and 1% to the General Partners until the Limited
Partners receive an amount equal to any deficiency in the 10%
cumulative return on their invested capital that exists through fiscal
years prior to the date of the capital transaction, fourth, to the class
of General Partners until they have received an amount equal to 4%
of all amounts of cash distributed under all capital transactions
and fifth, 96% to the Limited Partners and 4% to the General
Partners.
Profits arising from a capital transaction will be allocated in the
same manner as related cash distributions. Losses from a capital
transaction will be allocated 97% to the Limited Partners and 3% to
the General Partners.
During 1995, 1994 and 1993, the Partnership made quarterly
distributions totaling $1.20, $1.28 and $1.32 per Unit, respectively.
The Partnership made special distributions of $1.06 and $.66 per Unit
in 1994 and 1993, respectively.
As of December 31, 1995, the following cumulative partner contributions
and allocations have been made since inception of the Partnership:
<TABLE>
<CAPTION>
Corporate
Limited General
Unitholders Partner Partners Total
<S> <C> <C> <C> <C> <C>
Capital contributions $149,489,830 $ 2,000 $ 3,000 $149,494,830
Syndication costs (7,906,604) - - (7,906,604)
Quarterly distributions (91,436,031) (1,263) (2,148,347) (93,585,641)
Special distributions (21,149,978) (282) - (21,150,260)
Net income 63,781,016 860 1,972,637 65,754,513
Unrealized gains on MBS - - - 1,162,741
Balance at December 31, 1995 $ 92,778,233 $ 1,315 $ (172,710) $ 93,769,579
</TABLE>
<PAGE>
F. Related Party Transactions
Under the terms of the Partnership Agreement, the General Partners
receive an Asset Management Fee equal to .75% per annum of the value of
the Partnership's total invested assets payable quarterly. The General
Partners may also receive an incentive management fee in an amount equal
to .3% per annum on the Partnership's Total Invested Assets providing
the Unitholders receive a specified non-cumulative annual return on
their Invested Capital. Total fees payable to the General Partners for
asset management and incentive management fees shall not exceed 10% of
distributable cash flow over the life of the Partnership.
Additionally, the Partnership reimburses affiliates of the General
Partners for certain expenses incurred in connection with maintaining
the books and records of the Partnership and the preparation and mailing
of financial reports, tax information and other communications to
investors.
G. Federal Income Taxes
The reconciliation of the net income reported in the accompanying
statement of income with the net income reported in the Partnership's
1995 federal income tax return is as follows:
Net income from statement of operations $ 5,247,543
Plus: Book to tax difference for amortization of
prepaid expenses and fees 824,953
Net income for federal income tax purposes $ 6,072,496
The allocation of the 1995 net income for federal income tax purposes
is as follows:
Portfolio
Income
Unitholders $5,890,242
Corporate Limited Partner 79
General Partners 182,175
$6,072,496
For the years Ended December 31, 1995, 1994 and 1993 the average per
unit net income to the Unitholders for federal income tax purposes was
$.79, $.81 and $.83, respectively.
H. Fair Value Disclosures of Financial Instruments
The Partnership used the following methods and assumptions to estimate
the fair value of each class of financial instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short
maturity of those instruments.
<PAGE>
MBS
The Partnership estimated the fair value of MBS based on quoted
market prices.
PIMs
There is no established trading market for these investments.
Management estimates the fair value of the PIMs using quoted market
prices of MBS having the same stated coupon rate and the estimated
value of the participation features. Management estimates the fair
value of the participation features using the estimated fair value
of the underlying properties. Management does not include in the
estimated fair value of the participation features any fair value
estimate arising from appreciation of the properties, because
Management does not believe it can predict the time of realization
of the appreciation feature with any certainty. Based on the
estimated fair value determined using these methods and
assumptions, the Partnership's investments in PIMs had gross
unrealized gains and losses of approximately $1,628,000 and
$148,000 at December 31, 1995, respectively, and unrealized losses
of approximately $4,867,000 at December 31, 1994.
At December 31, 1995 and 1994, the Partnership estimates fair value
of its financial instruments as follows:
<TABLE>
<CAPTION>
(Rounded to $1,000)
1995 1994
<S> <C> <C>
Cash and cash equivalents $ 2,395 $ 2,932
MBS 29,027 29,177
PIMs 60,769 54,971
$92,191 $87,080
</TABLE>
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
<CAPTION>
PIMs (a)(b) Interest Maturity Normal Original Current Carrying
Rate Date(d) Monthly Face Amount Face Amount Amount at
(c) Maturity Payment 12/31/95
(e)(f) (j)
<S> <C> <C> <C> <C> <C> <C>
GNMA
La Costa Apts.
Miami, FL 7.5% 4/15/22 $ 74,500 $11,050,000 $10,294,142 $10,294,142
Mandalay Apts.
Clearwater Beach, FL 7.25% 8/15/22 117,200 17,850,000 16,634,032 16,218,181
Greentree Apts.
Hoover, AL 8% 11/15/22 64,600 9,096,270 8,587,974 8,587,974
Pine Hills Apts.
Howell, MI 7%
(h) 12/15/22 36,600 4,900,000 4,654,656 4,654,656
42,896,270 40,170,804 39,754,953
FHA
Vista Montana Apts.
Val Vista Lakes, AZ 7.375%
(i) 12/1/33 86,000 13,814,400 13,696,501 13,696,501
FNMA
Royal Palm Place (g)
Kendall, FL 6.25%
(k) 4/1/06 (k) 6,021,258 5,837,681 5,837,681
$62,731,928 $59,704,986 $59,289,135
</TABLE>
(a) The Participating Insured Mortgages ("PIMs") consist of either a
mortgage-backed security ("MBS") issued and guaranteed by the Federal
National Mortgage Association ("FNMA"), a securitized mortgage loan
insured by the Department of Housing and Urban Development ("HUD")
issued and guaranteed as to the timely payment of principal and
interest by the Government National Mortgage Association ("GNMA") or a
first mortgage issued by the Federal Housing Authority ("FHA") and
insured by HUD, and a subordinated promissory note and mortgage or
shared income and appreciation agreement with the underlying borrower
that conveys participation interests in the revenue stream and
appreciation of the underlying property above certain base levels.
(b) The GNMA MBS, FNMA MBS and FHA mortgage loans may not be prepaid
during the first five years and may generally be prepaid subject to a
9% prepayment penalty in years six through nine, a 1% prepayment
penalty in year ten and no prepayment penalty after year ten.
(c) Represents only the stated interest rate of the GNMA or FNMA MBS or
the stated interest rate of the FHA mortgage loan less the servicing
fee. In addition, the Partnership may receive participation interest,
consisting of (i) Minimum Additional Interest based on a percentage of
the unpaid principal balance of the first mortgage on the property,
(ii) Shared Income Interest based on a percentage of monthly gross
income generated by the underlying property in excess of a specified
base amount (but only to the intent it exceeds the amount of Minimum
Additional Interest received during such month) and (iii) Shared
Appreciation Interest based on a percentage of any increase in the
value of the underlying property in excess of a specified base value.
Minimum Additional Interest is at a rate of .5% per annum calculated
on the unpaid principal balance of the first mortgage note. Shared
Income Interest is generally based on 25% of the monthly gross rental
income generated by the underlying property in excess of a specified
base, but only to the extent it exceeds the amount of Minimum
Additional Interest earned during the month. Shared Appreciation
Interest is generally based on 25% of any increase in the value of the
project over the base value.
<PAGE>
(d) The Partnership's GNMA MBS and FHA mortgage loan have call provisions,
which allow the Partnership to accelerate their respective maturity
dates to as early as ten years from the date of the loan.
(e) The normal monthly payment consisting of principal and interest is
payable monthly at level amounts over the term of the GNMA MBS and the
FHA direct mortgages.
(f) The normal monthly payment consisting of principal and interest for
FNMA MBS is payable at level amounts based on a 35-year amortization.
All unpaid principal and accrued interest is due at maturity.
(g) The total PIM on the underlying property is $22,000,000 of which
72.63% or $15,978,742 is held by Krupp Insured Plus-III Limited
Partnership. The Partnership's share of the principal balance due at
maturity for the Royal Palm PIM is approximately $5,564,000.
(h) On January 1, 1992, the Partnership entered into an agreement which
provided for a reduction in the permanent interest rate from 8% to 7%
per annum for a period of four years. The reduction in the permanent
interest rate was granted in exchange for a reduction of the Shared
Appreciation Interest Base from $5,700,000 to $4,900,000.
(i) On November 30, 1993, the Partnership entered into an agreement with
the underlying borrower for a permanent interest rate reduction from
8.75% per annum to 7.375% per annum retroactive to January 1, 1992.
In exchange for the interest rate reduction, the Partnership received
an increase in Shared Appreciation Income from 25% in excess of the
base amount of $15,410,000 to 25% of the net sales proceeds over the
outstanding indebtedness ($13,696,501 at December 31, 1995). In the
event of a refinancing, Shared Appreciation Income is 25% of the
appraised value over the outstanding indebtedness. In addition,
Shared Income Interest increased from 25% of rental income in excess
of the base amount of $175,000 to 25% of all distributable surplus
cash.
(j) The aggregate cost of PIMs for federal income tax purposes is
$59,289,135.
(k) During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from
25% to 30%. During December 1995, the Partnership received its pro-
rata share of a $90,644 principal payment and will receive interest
only payments on the FNMA MBS at interest rates ranging from 6.25% to
8.775% per annum through maturity. Also, the Partnership will receive
its pro-rata share of the $250,000 principal payments due on December
1 of each of the next four years.
<PAGE>
A reconciliation of the carrying value of Mortgages for each of the three
years in the period ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $ 59,837,946 $ 60,322,532 $61,136,887
Additions during period:
Investments in PIMs - - 68,757
Deductions during period:
Proceeds from insurance
claims - - (475,727)
Principal collections (548,811) (484,586) (407,385)
Balance at end of period $ 59,289,135 $ 59,837,946 $60,322,532
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Balance
Sheet and Statement of Income and is qualified in its entirety by reference to
such financial statements
</LEGEND>
<CIK> 0000786622
<NAME> KRUPP INSURED PLUS LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,394,592
<SECURITIES> 88,315,973<F1>
<RECEIVABLES> 871,942
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,201,526<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,784,033
<CURRENT-LIABILITIES> 14,454
<BONDS> 0
<COMMON> 92,606,838<F3>
0
0
<OTHER-SE> 1,162,741
<TOTAL-LIABILITY-AND-EQUITY> 93,784,033
<SALES> 0
<TOTAL-REVENUES> 7,097,154<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,849,611<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,247,543
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,247,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,247,543
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes the following investments: Participating Insured Mortgages ("PIMs")
$59,289,135 and & Mortgage-Backed Securities ("MBS") $29,026,838
<F2>Includes the following prepaid acquisition fees & expenses of $1,696,611 net of
accumulated amortization of $4,423,897 and prepaid participating servicing of
$504,915 net of accumulated amortization of $1,895,084
<F3>Represents total equity of General Partners & Limited Partners of $(172,710)
and $92,779,584
<F4>Represents interest income on investments in mortgages and cash
<F5>Includes $958,502 of amortization related to prepaid fees & expenses
<F6>Net income allocated $157,426 to the General Partners & $5,090,117 to the
Limited Partners. Average net income per unit of Limited Partners interest is
$.68 on 7,500,099 units outstanding.
</FN>
</TABLE>
altman
development
corporation
VIA FACSIMILE-& FEDERAL EXPRESS
December 14, 1995
Krupp Insured Plus - III Limited Partnership
c/o Krupp Mortgage Corporation
Harbor Plaza
470 Atlantic Avenue
Boston, Mass. 02210
Attention: Ms. Peggy DeMuth
Re: Royal Palm Place, Ltd.
Dear Peggy:
Attached is a signed executed copy of the Amended and Restated
Subordinated
Promissory Note with Exhibits A and B for Royal Palm Place dated
December 1, 1995.
If you have any questions, please call me at your earliest convenience.
Sincerely,
ROYAL PALM PLACE, LTD.
By: ALTMAN DEVELOPMENT CORPORATION
General Partner
By:
Joel L. Altman, President
cc to Jeffrey Deutch
cc to George L. Dave
Attachments
2201 corporate blvd., n.w., suite 200, boca raton, florida 33431 (407)
997-8661
<PAGE>
AMENDED AND RESTATED
SUBORDINATED PROMISSORY NOTE
FOR VALUE RECEIVED, ROYAL PALM PLACE, LTD., a Florida limited
partnership, having an address at c/o Altman Development Corporation,
2201 Corporate Blvd., Suite 200, Boca Raton, Florida 33431 (hereinafter
referred to as the "Maker" or the "Mortgagor") has made and executed
this Amended and Restated Subordinated Promissory Note (the "Amended and
Restated Subordinated Note") payable to KRUPP INSURED PLUS - III LIMITED
PARTNERSHIP, or order, with offices c/o Berkshire Mortgage Finance
Corporation, Harbor Plaza, 470 Atlantic Avenue, Boston, Massachusetts
02110 (hereinafter, together with its and their successors and assigns,
referred to as the "Holder").
RECITALS
<PAGE>
A. The Maker previously executed a Subordinated Promissory
Note dated March 20, 1991, made payable to Holder which Subordinated
Promissory Note was modified by a Modification Agreement dated March 20,
1991 (hereinafter, collectively referred to as the "Original Subordinate
Note".) This Amended and Restated Subordinate Note amends and restates
the Original Subordinate Note. All accrued but unpaid interest under the
Original Subordinate Note shall be payable as provided herein.
B. The Maker has obtained from First Interstate Commercial
Mortgage Company, a Delaware corporation (hereinafter, together with its
successors and assigns, referred to as the "First Mortgagee") a loan in
the original principal amount of Twenty-Two Million and No/100 Dollars
($22,000,000) (the "First Mortgage Loan") which First Mortgage Loan was
assigned to the Federal National Mortgage Association with respect to
Royal Palm Place Apartments, a 377-unit housing project (the "Project")
located in the City of Kendall, Florida, upon certain real property more
particularly described in Exhibit "A" to the Subordinated Mortgage
(hereinafter defined) securing this Amended and Restated Subordinated
Note.
C. The First Mortgage Loan is evidenced by a certain
Multifamily Note (the "First Mortgage Note") from the Maker to the First
Mortgagee, which First Mortgage Note was modified on December 1, 1995,
and is secured by a certain mortgage (the "First Mortgage").
D. The First Mortgage Loan was funded through the sale to the
Holder of a mortgage backed security (the "Project MBS"). The interest
rate on the First Mortgage Loan and the Project MBS were below
prevailing interest rates for comparable loans and securities and the
lower interest rates inured to the benefit of the Maker. The Holder was
unwilling to acquire the Project MBS unless the Maker agreed to enter
into the Original Subordinated Note.
E. The Holder has entered into a Participation Agreement with
Krupp Insured Plus - I Limited Partnership whereby the Holder
transferred, assigned and conveyed a 27.3693546% interest in the Project
MBS and the Original Subordinated Note.
NOW, THEREFORE, in consideration of the foregoing and one
dollar and other good and valuable consideration in hand paid, the
receipt and sufficiency of which-is hereby acknowledged, subject to the
requirements specified in Paragraph 3 hereof, the Maker promises to pay
to Holder or order on April 1, 2006 (the "Maturity Date"), if not sooner
paid, as provided below, all those sums as more particularly described
herein.
1. Payment of Additional Interest. The Maker covenants and agrees to pay
the Holder from the date hereof "Additional Interest" which shall mean
and include the greater of "Minimum Additional Interest" or "Shared
Income Interest" as defined below in subparagraphs A and B, and in
addition, "Shared Appreciation Interest" as defined in Subparagraph C.
A. Minimum Additional Interest. "Minimum Additional Interest"
shall mean and include interest from April 1, 1993, at the rate of
one-half percent (.5%) per annum calculated on the unpaid principal
balance of the First Mortgage Note. Minimum Additional Interest shall be
deemed earned beginning April 1, 1993 and on the first day of each month
thereafter, and shall accrue and be payable in cash annually commencing
on the first day of January 1996, and on the first day of each
succeeding January of each calendar year thereafter ("Annual Payment
Date") until the entire balance of the First Mortgage Note has been paid
subject to the provisions of Paragraph 3.A. and the limitations
described below in this Paragraph 1. Any owed but unpaid amounts shall
be accrued and paid upon any future annual installment or pursuant to
Paragraph 1.F.
B. Shared Income Interest. "Shared Income Interest" shall mean
and include thirty percent (30%) of "Gross Rental Income", as defined
below, actually received by the Maker during the annual period of
calculation in excess of $3,275,004 (the "Annual Base Income") during
the first calendar year and each-succeeding calendar year thereafter.
For purposes of this Amended and Restated Subordinated Note, "Gross
Rental Income" shall include all cash, notes or other things of value
and any and all other consideration, direct or indirect, laundry income,
parking income, and all other income from whatever source received in
connection with the ownership and operation of the Project, except for:
(a) proceeds of refinancing; (b) casualty insurance, flood insurance,
condemnation proceeds; and (c) capital contributions to the Maker. Such
Shared Income Interest shall be deemed earned beginning on the first day
of the first calendar month-following the execution of this Amended and
Restated Subordinated Note and on the first day of each month
thereafter, and shall accrue and be payable in arrears in cash annually
on each Annual Payment Date thereafter so long as this Amended and
Restated Subordinated Note is outstanding, subject to the provisions of
Paragraph 3.A. and the limitations described below in this Paragraph 1.
Any owed but unpaid amounts shall be accrued and paid upon any future
annual installment or pursuant to Paragraph 1.F.
Notwithstanding the foregoing obligation of the Maker to pay
the greater of Minimum Additional Interest or Shared Income Interest,
with respect to the any Annual period, the Maker shall not pay more than
the lesser of:
(i) Thirty percent (30%) of Gross Rental Income actually received by The
Maker with respect to such annual period, less the Annual Base Income
in-such annual period; or
(ii) Fifty percent (50%) of the Project's net income ("Net Income").
"Net Income" shall mean Gross Rental Income for the applicable period
less payments for ordinary and necessary operating expenses, taxes,
deposits to a reserve for replacement escrow and debt service applicable
to the modified First Mortgage Note as described below. Debt service for
the purpose of calculating Net Income shall consist of the following:
interest-only payments paid in accordance with the modified
First Mortgage Note for such applicable period; and
in any applicable period in which a paydown of principal of the
First Mortgage Loan occurs in accordance with the terms of the modified
First Mortgage Note, an amount equal to the principal amortization for
such period that would have been paid under the original terms of the
First Mortgage Note had it not been modified. An amortization schedule
following the original terms of the First Mortgage Note is attached as
Exhibit B.
Furthermore, Gross Rental Income shall not be reduced by any payments
for expenses, replacement or capital items which are reimbursed through
a reserve for replacement escrow held by the First Mortgagee.
Any owed but unpaid amounts shall be accrued and paid upon any future
annual installment or pursuant to Paragraph 1.F.
C. Shared Appreciation Interest. "Shared Appreciation
Interest" shall mean and include thirty percent (30%) of the excess of
the "Value", as defined below, over the "Base Value", as defined below,
of the Project until the first to occur of (i) a "Sale of the Project",
as defined below, to an unrelated third party or parties; (ii) the
Maturity Date determined in accordance with the terms of this Amended
and Restated Subordinated Note; or (iii) prepayment of this Amended and
Restated Subordinated Note in accordance with its term.
The "Value" of the Project shall equal all consideration paid
in connection with the Sale of the Project, including the stated
purchase price, cash, notes, any indebtedness assumed and/or to which
the Project is then subject, interest on any deferred portion of the
purchase price and the value of any and all other consideration, direct
or indirect, and whether paid to the Maker or to any other period or
party, but excluding to the extent paid by Maker, the following: (i)
prorations and reasonable selling expenses, including reasonable
independent
third party broker's commissions, (ii) title searches, (iii) survey
costs, and (iv) recording costs, escrowed charges and transfer taxes.
The term "Base Value" shall mean $23,200,000 less all eminent
domain or
condemnation awards, or damages and casualty insurance proceeds received
by the Maker prior to the Maturity Date which are not applied to the
restoration of the Project. Base Value may not be less than the original
principal balance of the First Mortgage.
The term "Sale of the Project" shall mean any sale, transfer,
conveyance,
assignment, exchange, liquidation or other disposition to an unrelated
third party for value of substantially all of the Project or
substantially all of the interests in the Mortgagor entity. Unless the
Holder hereof gives written approval, any sale to a "Related Party" or
"Affiliate" shall not be Sale of the Project. A "Related Party"
includes, without limitation, any spouse, brother, sister, parent, child
or grandchild of the Maker or principal of the Maker. An "Affiliate"
means, as to the Maker, any individual or entity (i) that directly or
indirectly controls or is controlled by or is under common control with
the Maker, (ii) that is an officer of, partner in or trustee, or with
respect to which the Maker serves in a similar capacity, or (iii) that
is the beneficial owner, directly or indirectly, of 10% or more of any
class of equity securities of the Maker or of which the Maker is an
officer, partner or trustee, or with respect to which the Maker serves
in a similar capacity, or (iii) that is the beneficial owner, directly
or indirectly, of 10% or more of any class of equity securities of the
Maker or of which the Maker is directly or indirectly the owner of 10%
or more of any class of equity securities.
If there has been no Sale of the Project, the Value of the
Project shall be
determined by an appraisal of the Project, prepared within sixty (60)
days prior to the Maturity Date or the date of voluntary prepayment of
this Amended and Restated Subordinated Note by the Maker. The appraisal
shall be prepared by a qualified M.A.I. appraiser selected by Holder.
The determination of appraised value shall be based, in part,
upon the assumption that the rental income from or with respect to the
Project is based on the then prevailing market rates for comparable
rental space in the same vicinity as the Project even if the actual rent
then being paid by lessees thereon is less. The appraisal shall specify
the Value of the Project assuming that the said First Mortgage Loan may
not be assumed;
The purpose of appraisal of the Project shall be to estimate
the market value of the fee simple interest, as- unencumbered of the
Project at current occupancy as of the date of the appraisal. The
definition of market value is the highest price in terms of money which
a property will bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller, each acting
prudently, knowledgeably and assuming the price is not affected by undue
stimulus. The determination of market value shall be based, in part,
upon the assumption that the rental income from or with respect to the
Project is based on the then prevailing market rates, for comparable
rental space in the same vicinity as the Project, even if the actual
rent then being paid by lessees thereon is less. The determination of
market value shall be based, in part, upon a determination by the
appraiser of the Project's highest and best use, which may include the
value of the Project assuming conversion to condominium or cooperative
ownership, provided, however, that it can be proven that there exists a
viable market for condominium or cooperative conversions in the area
where the Project is located and taking into account an allowance for
reasonable costs incurred in connection with such conversion.
In the event the Maker does not agree with the appraisal, the
Maker must notify the Holder within three business days after receipt
thereof, and it may arrange for another appraisal of the project by a
qualified MAI appraiser, which appraisal must be completed within sixty
(60) days of receipt of the first appraisal.
In the event the Holder does not agree with the appraisal
which is obtained by the Maker, and the Holder and the Maker is unable
to agree upon the Value, the Holder must notify the Maker within three
(3) business days after the receipt thereof, and the Holder may arrange
for another appraisal of the Project by a qualified MAI appraiser to be
selected jointly by the two appraisers who made the prior appraisals,
which appraisal must be completed within thirty (30) days. The Value
established pursuant to this third appraisal shall be binding upon the
Maker and the Holder
The cost of the first appraisal shall be borne by the Maker. The
cost of all
subsequent appraisals shall be shared equally by Holder and the Maker.
D. Shared Appreciation Interest under subparagraph C shall be
deemed earned and shall be payable (i) on the date of Sale of the
Project; (ii) on the Maturity Date; or (iii) upon a prepayment of this
Amended and Restated Subordinated Note, whichever first occurs, and
further, such Shared Appreciation Interest is payable only to the extent
that it exceeds any prepayment premium paid under Paragraph 4.
E. Notwithstanding the foregoing, in the event of default by
Maker under this Amended and Restated Subordinated Note or the
Subordinated Mortgage securing this Amended and Restated Subordinated
Note, and upon Holder's election, in its sole discretion, to accelerate
all amounts due hereunder-and under the Subordinated-Mortgage, Holder
shall obtain-the appraisal, described in Subparagraph C, within one
hundred twenty (120) days after Holder's election so to accelerate, and
the Shared Appreciation Interest, if any, due Holder as a result of such
appraisal shall be due and payable within ten (10) days after a copy of
the completed appraisal is delivered to Maker
F. Notwithstanding the provisions contained in Paragraph l(c)
above providing for the payments of Additional Interest, upon the
earliest to occur of (i) the date of Sale of the Project; (ii) the
prepayment of this Amended and Restated Subordinated Note; or (iii) the
Maturity Date, Maker expressly understands and agrees to pay to the
Holder the aggregate amount of all accrued and unpaid Additional
Interest payable hereunder, provided that the aggregate amount of
Additional Interest shall not exceed fifty percent (50%) of any
difference between the Value and the Base Value of the Project (the
Value and the Base Value of the
Project to be calculated for purposes of this Paragraph 1.F. in the same
manner as provided in Paragraph 1 .C.).
2. Payment of First Mortgage Loan.
The Maker covenants and agrees to pay all sums due or required
to be paid under the terms of the First Mortgage Note and the First
Mortgage prior to making any payments due hereunder.
3. Additional Requirements.
A. So long as the First Mortgage Note is held in trust in
connection with the Project MBS, the Maker shall have no right or
obligation to make any payments or prepayments hereunder from the income
from the Project unless at the time of such payment or prepayment, the
income generated by the Project is sufficient to pay in a timely manner
the Project's necessary and reasonable expenses, reserves for
replacement and all other amounts due and payable under the First
Mortgage Note and the First Mortgage. Nothing contained herein is
intended to relieve or modify the obligations of Maker to pay any and
all sums due on or under the terms of the First Mortgage Note and the
First Mortgage. Any Additional Interest or other sums not paid in any
year because of the restrictions imposed by this subparagraph A shall
continue to accrue without interest thereon and shall be paid in
subsequent years as provided above. All such unpaid sums shall be added
to the amount of accrued Additional Interest payable under Paragraph 1.
B. Nothing in this Amended and Restated Subordinated Note is
intended to alter or conflict with the terms, conditions, and provisions
of the First Mortgage Note or the First Mortgage. In the event of any
conflict or inconsistency between the terms of this Amended and Restated
Subordinated Note-or the Subordinated Mortgage-and the terms of the
First Mortgage Note or the First Mortgage, the provisions of the First
Mortgage Note or the First Mortgage shall control, and the terms of this
Amended and Restated Subordinated Note or the Subordinated Mortgage
shall be deemed amended so as not to conflict with or alter such First
Mortgage Note or First Mortgage, so long as the First Mortgage has not
been released.
C. In the event of a monetary default or pending default under
any of the terms of the First Mortgage Note and/or the First Mortgage,
as reasonably determined by the First Mortgagee, no payments will be
made or accepted under this Amended and Restated Subordinated Note or
under the Subordinated Mortgage without the First Mortgagee's prior
written consent
D. This Amended and Restated Subordinated Note shall not be
modified or amended without the First Mortgagee's prior written consent.
E. In the event that the Holder receives any payment or other
distribution of any kind from the Maker or from any other source
whatsoever with respect to the subordinated debt evidenced hereby, other
than as permitted under this Amended and Restated Subordinated Note or
under the Subordinated Mortgage, such payment or other distribution
shall be received in trust for the First Mortgagee and promptly turned
over to the First Mortgagee.
F. Any default or breach hereunder also shall constitute a
breach and default under the First Mortgage Note and the First Mortgage,
and upon the occurrence thereof, the First Mortgagee shall have the
right to exercise any of the remedies to which it is entitled under the
First Mortgage Note and the First Mortgage.
G. This Amended and Restated Subordinated Note shall not be
negotiated, assigned or otherwise transferred without the prior written
approval of the First Mortgagee.
H. The Holder shall not, without the prior written approval
of the First Mortgagee, commence or join with any other creditor in
commencing any bankruptcy, reorganization or insolvency proceedings with
respect to the Maker.
I. In the event of a condemnation which results in a payment
by the condemning body for any portion of the Project, or in the event
any proceeds are received from any casualty loss covered by insurance,
such condemnation proceeds or casualty loss proceeds shall be paid only
to the First Mortgagee, and only upon the full satisfaction of the First
Mortgage Note and the First Mortgage, shall the Holder receive payment
from the remainder-of such proceeds.
J. In the event of a default hereunder, the Holder agrees
that it shall not, without the prior written consent of the First
Mortgagee, commence foreclosure proceedings or any other proceedings to
enforce collection or-enforce its lien evidenced by the
Subordinated-Mortgage.
4. Prepayment. This Amended and Restated Subordinated Note may not be
prepaid, in whole or in part, for a term of one (1) year from the date
hereof. After one (1) year, the Maker shall have the right to prepay
this Amended and Restated Subordinated Note in whole, provided that the
First Mortgage Note is also prepaid in whole, as follows: if the Maker
prepays this Amended and Restated Subordinated Note during the second
through the ninth year, the Maker shall pay to Holder a prepayment
penalty equal to nine percent (9%) of the unpaid principal amount of the
First Mortgage Note as of the day immediately preceding the prepayment
date of the First Mortgage Note; and if the Maker prepays during the
tenth year, the Maker shall pay a prepayment penalty equal to one
percent (1 %) of the unpaid principal amount of the First Mortgage Note
as of the day immediately preceding the prepayment date of the First
Mortgage Note. On the date of a prepayment in whole, the Maker shall pay
to the Holder all Additional Interest to be paid hereon. Any prepayment
shall be made only after not less than ninety (90) days nor more than
one hundred eighty (180) days prior written notice from the Maker to the
Holder and to the First Mortgagee of Maker's intention to prepay.
Notwithstanding anything contained herein to the contrary, in the event
that the Maker prepays the First Mortgage Note, the Maker shall be
required to also prepay this Amended and Restated Subordinated Note,
together with the prepayment penalties set forth herein.
Notwithstanding-anything herein contained to the contrary,
there shall be no prepayment premium due as a result of the application
of (i) insurance proceeds; (ii) condemnation proceeds; (iii) the funds
held with regard to the Achievement Escrow, as defined in the First
Mortgage loan documents, or any paydowns of the outstanding principal
balance of the First Mortgage Loan scheduled under the modified First
Mortgage Note.
Notwithstanding anything to the contrary regarding the
payment of Additional Interest and the 9% penalty upon prepayment of the
Amended and Restated Subordinated Note as provided above (the "KIP"
Penalty"), the Maker shall pay to Holder as follows:
a. For purposes of this Paragraph 4, fifty percent (50%) of
the difference between the Value and the Base Value of the Project upon
the earliest to occur of (i) the date of Sale of the Project; (ii) the
prepayment of the Amended and Restated Subordinated Note; or (iii) the
Maturity Date, shall be referred to as the Maximum Additional Interest
Payment.
b. In the event that the KIP Penalty is equal to or exceeds
the Maximum Additional Interest Payment, no accrued and unpaid
Additional Interest will be owed to Holder.
c. In the event the KIP Penalty is less than the Maximum
Additional Interest Payment, the aggregate amount of any accrued and
unpaid Additional Interest is payable only to the extent that the sum of
such accrued and unpaid Additional Interest and the KIP Penalty does not
exceed the Maximum Additional Interest Payment.
d. Upon the earliest to occur of (i) the date of Sale of the
Project; (ii) the
prepayment of the Amended and Restated Subordinated Note; or
(iii) the Maturity Date, if prepayment penalty is due from Maker to
First Mortgagee Holder under the First Mortgage Loan (the "First
Mortgage Penalty"), Holder agrees to pay to First Mortgagee, on behalf
of Maker, (i) fifty percent (50%) of the First Mortgage Penalty, and
(ii) if any, the amount of which the KIP Penalty received rom Maker by
Holder exceeds the Maximum Additional Interest Amount, but not in
excess of the First Mortgage Penalty. An example is attached as Exhibit
"A".
5. Late Payment. If the Maker fails to make any payment of any amounts
payable
under this Amended and Restated Subordinated Note or the Subordinated
Mortgage on or before the fifteenth (15th) day of the month during which
such payment is due, the Holder may, at its option, impose a late charge
upon the Maker not to exceed four cents ($0.04) on each dollar so
delinquent.
6. General Provisions.
A. It is the intention and agreement of the parties that the
Additional Interest payable hereunder be an additional charge for the
principal sum advanced by the Holder with respect to the First Mortgage
Note. Such Additional Interest shall not constitute an additional
principal sum due under this Amended and Restated Subordinated Note or
the First Mortgage Note.
B. Amounts payable under this Amended and Restated
Subordinated Note shall be payable at the offices of Holder, or at such
other place as the Holder may designate in writing.
C. This Amended and Restated Subordinated Note and the
indebtedness evidenced hereby is secured by a Subordinated Mortgage or
Deed of Trust of even date herewith (the "Subordinated Mortgage")
executed by the Maker in favor of the Holder hereof, which covers that
certain real property and improvements thereon being more particularly
described in the Subordinated Mortgage. The Subordinated Mortgage is
subordinate and subject to the First Mortgage.
D. It is not intended hereby to charge interest at a rate in
excess of the maximum lawful rate of interest permitted to be charged
the Maker under the laws of the State in which the Project is located or
the laws of any other jurisdiction which may be deemed to govern the
terms of this Amended and Restated Subordinated Note. The First
Mortgagee has agreed to receive interest with respect to the First
Mortgage Loan at a rate which is lower than the prevailing market rate
of interest at-the time of such loan. The Holder's agreement to charge
and receive such interest with respect to the First Mortgage Loan is in
consideration of the Maker's agreement to pay Additional Interest as
provided hereinabove. Accordingly, the Additional Interest received
hereunder should be deemed to be spread and applied to the outstanding
balance of this Amended and Restated Subordinated Note plus the
outstanding balance of the First Mortgage Note, from time to time, over
the entire term that both notes, or either of them, are outstanding. If,
nevertheless, interest in excess of such maximum lawful rate shall be
paid hereunder, then the rate imposed hereunder shall be reduced to such
maximum lawful rate, and if from the circumstance, the Holder hereof
shall ever receive as interest an amount which would exceed the highest
lawful rate, such amount as would be deemed excessive interest shall be
refunded to the Borrower.
E. All financial statements and calculations with respect to
the Property as required in this Amended and Restated Subordinated Note
and Subordinated Mortgage shall be prepared according to the accrual
method of accounting in accordance with generally accepted accounting
procedures applied on a consistent basis from year to year. Holder must
approve any accruals which are not normal and customary in the rental
apartment business. Examples of normal and customary accruals include
items such as taxes, insurance, replacement reserves or normal trade
payables which relate to a particular period but are not paid in that
period.
F. It is expressly agreed that if the Maker is in default under
this Amended and Restated Subordinated Note in the payment of any sums
when due, or if the Maker is in default in the performance of any
covenant or condition of the Subordinated Mortgage, or any other
agreement evidencing or securing the repayment of the indebtedness,
which default is not cured within the applicable grace period, if any,
permitted in the Subordinated Mortgage, or such other agreement, then,
and in any of such events, the Holder may declare all sums due and
payable under this Amended and Restated Subordinated Note, subject to
the restrictions of Paragraph 3.J. above.
The failure of the Holder to exercise its option for
acceleration of maturity,
foreclosure, or either, following any default as aforesaid or to
exercise any other option granted to it hereunder or under the
Subordinated Mortgage or the acceptance by the Holder of partial
payments or partial performance, shall not constitute a waiver of any
such default or option but such rights of the Holder shall remain
continuously in force. Acceleration of maturity or other rights granted
to the Holder hereunder, once claimed hereunder by the Holder, may at
its option be rescinded or extended by written notice to that effect.
The tender and acceptance of partial payment or partial performance
alone shall not in any way affect or rescind an acceleration of maturity
by the Holder.
If any sum payable under this Amended and Restated
Subordinated Note is not paid within ten (10) days of the date when due,
whether by maturity or acceleration, the Maker agrees to pay all costs
of collection, including but not limited to, court costs and reasonable
attorney's fees, whether or not suit is filed thereon.
G. The Maker, and any endorsers hereof, jointly and
severally: (i) waive
presentment, protest and demand, notice of protest, notice of dishonor
and nonpayment of this Amended and Restated Subordinated Note, and every
other notice of any kind respecting this Amended and Restated
Subordinated Note except as set forth in this Amended and Restated
Subordinated Note and the Subordinated Mortgage; and (ii) to the extent
not prohibited by law, waive the benefit of any law or rule of law
intended for its advantage or protection which would enable its release
or discharge from liability hereon, in whole or in part, for any reason
other than full and complete payment of all amounts due hereunder.
H. The Maker hereby represents and warrants that: (i) it is a
business or commercial organization; (ii) the loan evidenced hereby was
made and transacted solely for the purpose of carrying on an investment
in real estate; and (iii) the proceeds of the loan are not to be used in
whole or in part for personal, family or household purposes.
I. In the event that any one or more of the provisions
contained herein are, for any reason, held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Amended
and Restated Subordinated Note and this Amended and Restated
Subordinated Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein
J. This Amended and Restated Subordinated Note may not be
changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or
discharge is sought and subject to the provisions of Paragraph 3.D.
above.
K. All notices given pursuant to this Amended and Restated
Subordinated Note shall be in writing and shall be hand delivered or
mailed, registered U.S. Mail, return receipt requested to the parties at
the addresses specified below or to such other addresses as may be
specified by a party upon notice in compliance with this paragraph.
Maker: Royal Palm Place, Ltd.
c/o Altman Development Corporation
2201 Corporate Blvd.
Suite 200
Boca Raton, FL 33431
Holder: Krupp Insured Plus - III-Limited-Partnership
c/o Krupp Mortgage Corporation
Harbor Plaza
470 Atlantic Avenue
Boston, Massachusetts 02210
First Federal National Mortgage Association
Mortgagee: 950 East Paces Ferry Road
Suite 1900
Atlanta, GA 30326-1161
Attn: Vice President
Multifamily Activities
Servicer: GMAC Mortgage Corporation
101 S. Hanley Road, Suite 1300
St. Louis. MO 63105
L. This Amended and Restated Subordinated Note shall be given
effect and construed by application of the laws of the State in which
the Project is located.
M. It is expressly understood and agreed that neither the
Maker nor any partner, officer, director or stockholder of Maker, as the
case may be, shall have any personal liability for payment of any sums
due hereunder, and the Holder agrees to seek recourse solely against the
real estate and other security granted to the Holder under the
Subordinated Mortgage and any instrument further securing this Amended
and Restated Subordinated Note, including, without limitation, the
rents, issues and profits of the Project received by the Maker after
default herein or the Subordinated Mortgage or any instrument further
securing this Amended and Restated Subordinated Note (subject to the
provisions of Paragraph 3 of this Amended and Restated Subordinated
Note).
N. Notwithstanding the foregoing, the Maker, any partner,
officer, director or stockholder of Maker shall be subject to personal
liability to the extent of receipt by them of proceeds of insurance on
the Project, proceeds on account of condemnation thereof, or rents and
issues and profits of the Project (including, without limitation, the
proceeds of any sale of the Project) which Maker has not applied to
payment of this Amended and Restated Subordinated Note as and when
required by the terms of the Amended and Restated Subordinated Note.
WITNESS the signature and seal of the Maker hereof this 1st day of
December, 1995.
WITNESS: MAKER:
ROYAL PALM PLACE, LTD., a
Florida Limited Partnership
By: Altman Development
Corporation,
a Florida corporation
This Amended and Restated Subordinated Note is secured by a
Subordinated Mortgage dated March 20, 1991 on the property located in
the City of Kendall, County of Dade described therein from the Maker to
the Holder.
EXHIBIT "A"
EXHIBIT FOR PURPOSES OF PARAGRAPH 4d TO THE
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
Value of Project $27,000,000
Base Value of Project $23,200,000
difference $3,800,000
Maximum Additional Interest Payment = 50% of
or, $1,900,000 $3,800,000
Outstanding First Mortgage Loan balance $21,400,000
First Mortgage Penalty $415,588
(@ 1.942% in the 7th year
of the First Mortgage Loan)
KIP Penalty $1,926,000
( @ 9% in the 7th year of the
First Mortgage Loan)
So:
KIP Penalty $1,926,000
Less Maximum Additional Interest Payment $1,900,000
Excess $26,000
Plus KIP's 50% of First Mortgage Penalty $207,794
Amount paid by KIP to First Mortgage Lender $233,794
Amount paid by Royal Palm Place, Ltd. to $181,794
First Mortgage Lender
1. All capitalized terms used above are as defined in the
Amended and Restated Subordinated Promissory Note.
2. Both the Value and the Outstanding First Mortgage
Loan balance are assumed.
3. A Sale or prepayment date of May 1, 1997 is assumed.
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MORTGAGE-BACKED SECURITIES PROGRAM
SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 1, 1994
$ 21,329,259.000
ISSUE DATE DECEMBER 1, 1995
SECURITY DESCRIPTION FNAR 06.2500 MB109057
6.2500 PERCENT PASS-THROUGH RATE
FANNIE MAE POOL NUMBER MB-109057
CUSIP 313637B25
PRINCIPAL AND INTEREST PAYABLE ON THE 25TH OF
EACH MONTH
BEGINNING JANUARY 25, l996
POOL STATISTICS (AS OF ISSUE DATE)
NUMBER OF MORTGAGE LOANS 1
AVERAGE OUTSTANDING BALANCE 21,329,259.07
MATURITY DATE 04/01/2006
WEIGHTED AVG REMAINING TERM 124
HIGHEST ANNUAL INTEREST RATE 6.5000
LOWEST ANNUAL INTEREST RATE 6.5000
WEIGHTED AVG ANNUAL INT RATE 6.5000
%UPB W/ INTRST ONLY FIRST DISTRIB 0.00
GEOGRAPHIC DISTRIBUTION OF SECURITY PROPERTIES
FLORIDA 1 21,329,259.07
THE DATE OF THIS SUPPLEMENT IS DECEMBER l, 1995
SUPPLEMENT TO PROSPECTUS REFERRED TO IN POOL
STATISTICS ATTACHED HERETO
FEDERAL NATIONAL MORTGAGE ASSOCIATION
GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES
(ADJUSTABLE-RATE MULTIFAMILY BALLOON MORTGAGE LOAN)
PRINCIPAL AND INTEREST
PAYABLE ON THE 25TH DAY OF EACH MONTH
BEGINNING IN THE MONTH FOLLOWING THE ISSUE DATE
THE CERTIFICATES, TOGETHER WITH INTEREST THEREON, ARE NOT
GUARANTEED BY THE UNITED STATES. THE OBLIGATIONS OF THE FEDERAL NATIONAL
MORTGAGE ASSOCIATION UNDER ITS GUARANTY OF THE CERTIFICATES ARE
OBLIGATIONS SOLELY OF THE CORPORATION AND DO NOT CONSTITUTE AN
OBLIGATION OF THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY THEREOF
OTHER THAN THE CORPORATION. THE CERTIFICATES ARE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ARE
"EXEMPTED SECURITIES" WITHIN THE MEANING OF THE SECURITIES EXCHANGE ACT
OF 1934.
Each Certificate offered hereby, and by the Prospectus {the
"Prospectus"1 to which this is a supplement (which Prospectus is
referred to in the Pool Statistics attached hereto), evidences a
fractional undivided interest in a pool (the "Pool"1 containing a
conventional, adjustable-rate balloon mortgage loan (the "Mortgage
Loan"1 formed and held in trust by the Federal National Mortgage
Association (the "Corporation"1, a corporation organized and existing
under the laws of the United States. The Mortgage Loan was purchased by
the Corporation for resale to Certificate holders by issuance of the
Certificates, and they and the underlying Mortgage Loan are more
particularly described herein.
The Certificates are issued pursuant to the terms of the Trust Indenture
dated as of July 1, 1984, as amended, executed by the Corporation acting
in its corporate capacity and in its capacity as Trustee, as
supplemented by an Issue Supplement dated as of the Issue Date set forth
in the Pool Statistics attached hereto. The Corporation has certain
contractual servicing responsibilities with respect to the Pool. In
addition, the Corporation is obligated to distribute scheduled monthly
installments of principal and interest (adjusted to the Accrual Rate) as
further described herein, to the Certificate holders, whether or not
received. The Corporation is also obligated to distribute to Certificate
holders the full principal balance of the Mortgage Loan upon
foreclosure, whether or not such principal balance is actually
recovered.
The Pool Statistics attached hereto contain statistical information
respecting the Pool, including a prefix to the Pool Number that
identifies the specific type of Mortgage Loan in the Pool. The Schedule
of Mortgage Loan Information attached hereto contains additional
Mortgage Loan information, including the maturity date, amortization
term and prepayment characteristics of the Mortgage Loan in the Pool.
The Corporation currently intends, but has not committed, to publish
certain updated information about the Mortgage Loan periodically with
Bloomberg L.P., or another similar information service. Such information
is in addition to any information provided in the Bond Buyer.
The Schedule of Loan Information sets forth the Debt Service Coverage
Ratio as of the Issue Date for the Mortgage Loan. The "Debt Service
Coverage Ratio" for the Mortgage Loan is the ratio of (a) the Net
Operating Income estimated by the Corporation to be generated by the
related Mortgaged Property for the 12-month period following the Issue
Date to (b) the product of the amount of the Monthly Payment in effect
at the Issue Date, multiplied by 12. "Net Operating Income" is the
estimated revenue derived from the use and operation of a Mortgaged
Property (consisting primarily of estimated market rental rates and
laundry facilities, if any) less the estimated operating expenses (such
as utilities, general administrative expenses, management fees,
advertising, repairs and maintenance) and less the estimated fixed
expenses (such as insurance and real estate taxes), all calculated in
accordance with the Corporation's Multifamily Delegated Underwriting and
Servicing Guide (the "DUS Guide"). The Schedule of Loan Information also
sets forth the Debt Service Coverage Ratio at the maximum interest rate
of 9.40% of the Mortgage Loan, which was equal to the ratio of (a) the
current Net Operating Income to (b) the Monthly Payment at the projected
unpaid principal balance of the Mortgage Loan when the maximum interest
rate goes into effect, multiplied by 12.
CHARACTERISTICS OF THE MORTGAGE LOAN
The Mortgage Loan has been originated by a mortgage lender (the
"Lender"). The promissory note that evidences the Mortgage Loan (the
"Mortgage Note") is secured by a security instrument (the "Mortgage") on
a multifamily residential property consisting of five or more dwelling
units (the "Mortgaged Property").
Interest Rate and Payments
The Mortgage Loan provides for a monthly payment in an amount sufficient
to pay all interest accruing on such Mortgage Loan. The Mortgage Loan
also provides that, on December 1, 1996, December 1, 1997, December 1,
1998 and December 1, 1999, the borrower shall make a principal payment
of $250,000 in addition to any accrued interest due and payable. Such
principal payment shall be distributed to Certificate holders on the
next Distribution Date. The interest rate that accrues on the Mortgage
Loan prior to December 1, 1996 is 6.50%. Since the Corporation's
servicing and guaranty fee prior to December 1, 1996 will be .250%, the
Accrual Rate for the Mortgage Loan will be 6.25% for each distribution
through December 1996. Thereafter, the rate at which interest will
accrue on the Mortgage Loan will not vary in response to a specified
index (notwithstanding the terms of the Prospectus), but shall change in
accordance with the schedule set forth below. The Corporation's
servicing and guaranty fee and the Accrual Rate for the Mortgage Loan
will also change as described below.
Mortgage Interest Servicing and
Rate Change Date Mortgage Interest Rate Guaranty Fee Accrual Rate
12-1-96 7.00% .500% 6.500%
12-1-97 7.50 .500 7.000
12-1-98 8.00 .625 7.375
12-1-99 8.50 .625 7.875
12-1-00 9.00 .625 8.375
12-1-01 9.40 .625 8.775
12-1-04 9.40 .875 8.525
The Mortgage Loan will mature on the maturity date indicated on the Pool
Statistics information attached to this Supplement. All unpaid principal
will be payable as a balloon payment due on the stated maturity date of
the Mortgage Note together with accrued interest.
Prepayment
The borrower may prepay the Mortgage Loan in whole, but not in part, at
any time without penalty. Furthermore, early recovery of Mortgage Loan
principal, in whole or in part, could occur- on account of receipt
of-casualty insurance proceeds or a condemnation award affecting the
Mortgaged Property. Any casualty proceeds will be applied to restoration
or repair of the Mortgaged Property and not to reduce Mortgage Loan
principal, if there is then no Mortgage Loan default and the Corporation
determines that: (i) there are sufficient funds to achieve restoration
of the Mortgaged Property to a satisfactory condition, (ii} rental
income after
restoration will be sufficient to meet all project obligations, and
(iii} restoration will be completed prior to the earlier of the maturity
date of such Mortgage Loan, or within one year of the event of casualty.
Prepayment or early recovery of principal of the Mortgage Loan may
affect a Certificate holder's yield on its investment in Certificates.
In addition, a partial early recovery of principal may affect the
monthly payment amount distributable to Certificate holders. Fannie Mae
guarantees the payment of principal and interest when due, but makes no
representation or guaranty as to the occurrence or non-occurrence or an
early prepayment of principal of a Mortgage Loan Mortgage Loan
Documents; Subordinate Financing
The Mortgage Note and Mortgage are executed on FNMA/FHLMC Uniform
Instruments for multifamily loans made in the state in which the
Mortgaged Property is located (as amended by an Addendum and a Rider}.
Because the borrower's covenants (breach of which could result in
Mortgage Loan default and early distribution of principal to Certificate
holders} are the covenants provided for by such standard forms, they are
typical of those contained in loans secured by multifamily rental
properties.
The loan documents also provide that any breach of the terms of any
subordinate financing, which remains uncured after any applicable cure
period, is a default on the Mortgage Loan pursuant to which the
Corporation would have the right, but not the obligation, to declare the
entire principal balance of the Mortgage Loan immediately due and
payable. The borrower has entered into subordinate financing with Krupp
Insured Plus III Limited Partnership, which is secured by a junior lien
on the Mortgaged Property. The subordinate note provides that, so long
as the Mortgage Loan is in the Pool, the borrower may not make payments
on the subordinate note (or prepay the subordinate note) unless income
from the Mortgaged Property is then sufficient to pay all amounts due
under the Mortgage Loan, to pay the Mortgaged Property's necessary and
reasonable expenses, and to fund reserves required by the Mortgage Loan.
Certificate holders have no right to any payments due on the subordinate
note. The subordinate note has no stated principal amount and its
payments are characterized as (i} "Additional Interest" equal to the
greater of "Minimum Additional Interest" and "Shared Income Interest,"
and (iii)} "Shared Appreciation Interest." "Minimum Additional Interest"
is interest at the annual rate of .5% (50 basis points) of the
outstanding balance of the Mortgage Loan accruing during each calendar
year. "Shared Income Interest" per month is 30% of the Mortgaged
Property's "Gross Rental Income" for such month(as defined in the
subordinate note). Additional Interest is due on January 1 of each year,
but the amount payable on each payment date may not exceed the lesser of
30% of the Gross Rental Income actually received in the prior year and
50% of the Mortgaged Properties "Net Income" (as defined in the
subordinate note) for such annual period. Any amount due but not payable
currently is deferred for payment on a later annual date. If not earlier
paid, all deferred Additional Interest is due and payable, together with
"Shared Appreciation Interest," when the Mortgaged Property is sold,
when the subordinate loan is prepaid, or on the maturity date of the
subordinate loan (which is the same as the maturity date of the Mortgage
Loan}; provided that the amount then due shall not exceed 50% of the
amount by which the value of the Mortgaged Property at the time of such
event, determined by sale or appraisal, exceeds such value when the
Mortgage Loan was made (as set forth in the subordinate note), with
adjustment to such original value for the amount of any insurance
proceeds or condemnation award insofar as not applied to restoration of
the Mortgaged Property. "Shared Appreciation Interest" is 30% of such
excess. The subordinate note may not be prepaid unless the Mortgage Loan
is prepaid at the-same time, and the subordinate-note-must-be-prepaid U
the Mortgage Loan is prepaid.
The subordinate note provides that in the event of any conflicts or
inconsistency between the terms of the subordinate financing and the
terms of the Mortgage Loan, the terms of the latter shall control.
Without consent of the Corporation as holder of the Mortgage Note, li)
the subordinate note may not be modified or amended, and may not be
negotiated, assigned, or otherwise transferred; (ii} if the Mortgage
Loan is in default, no payments may be made on the subordinate note; and
(iii) the holder of the subordinate note may not enforce its lien on the
Mortgaged Property, commence proceedings to collect sums owed, or
commence (or join in commencing} any bankruptcy, reorganization or
insolvency proceedings with respect to the borrower.
Assumption and Further Encumbrance
The Mortgage Loan is assumable by a new mortgagor in the case of certain
transfers of the related Mortgaged Property. As to such transfers, and
certain sales or transfers of interests in the mortgagor, the
Corporation's general policy described in the Prospectus requiring
acceleration in the event of certain transfers of the Mortgaged Property
is inapplicable. Among the permitted transfers are any for which a 156
transfer fee is paid and for which the transferee executes an assumption
agreement, if the transferee meets those standards as to
creditworthiness and management ability customarily applied by the
Corporation for approval of borrowers for loans secured by similar
properties. No portion of any such transfer fee will be distributed to
Certificate holders.
FEDERAL TAX ASPECTS
Certain federal income tax consequences of the ownership of Certificates
are described in the Prospectus. The rulings described in the Prospectus
under "Certain Federal Income Tax Consequences" and identified as
Paragraphs 1, 2 and 3 do not apply to a mortgage loan to the extent that
its principal amount exceeds the value of the real property securing it.
The definition of "real property" is based on state law for purposes of
the rulings described in Paragraphs 1 and 2, and on federal income tax
law for purposes of the ruling described in Paragraph 3. Relying on the
Lender's representations of its compliance with requirements of the OUS
Guide concerning property appraisals and loan-to-value ratios, the
Corporation believes that the fair market value of the real property
securing the Mortgage Loan exceeds the Issue Date principal balance of
such Mortgage Loan. The principal security for the Mortgage Loan is a
first lien on real property consisting of a multifamily rental property.
However, the Mortgage Loan is also secured by a security interest in
related tangible personal property (e 9., equipment and furniture}
and-in related intangible personal property such as rents and revenues,
insurance proceeds, condemnation awards or settlements, contract rights,
deposits, permits, accounts, licenses, and so forth.
This Prospectus Supplement does not contain complete information
regarding this offering and should be read only in conjunction with the
Prospectus that it supplements.
The date of this Prospectus Supplement is the Issue
Date.
<PAGE>
