UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-17690
Krupp Insured Mortgage Limited Partnership
Massachusetts 04-3021395
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
<TABLE>
BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31,
1996 1995
Participating Insured Mortgages ("PIMs")
<S> <C> <C>
(Note 2) $165,924,592 $190,325,305
Mortgage-Backed Securities ("MBS") (Note 3) 19,814,798 21,126,045
Total mortgage investments 185,739,390 211,451,350
Cash and cash equivalents 6,452,418 5,970,759
Interest receivable and other assets 1,471,969 2,113,378
Prepaid acquisition fees and expenses, net of
accumulated amortization of $7,145,237 and
$7,684,289, respectively 5,524,644 6,789,755
Prepaid participation servicing fees, net of
accumulated amortization of $2,296,232 and
$2,457,959, respectively 1,893,379 2,328,216
Total assets $201,081,800 $228,653,458
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 5,970 $ 14,758
Partners' equity (deficit):
Limited Partners 200,760,672 227,908,288
(14,956,896 Limited Partner interests
outstanding)
General Partners (192,836) (164,638)
Unrealized gain on MBS 507,994 895,050
Total Partners' equity 201,075,830 228,638,700
Total liabilities and Partners' equity $201,081,800 $228,653,458
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF INCOME
<CAPTION>
For the Three Months
Ended March 31,
1996 1995
Revenues:
Interest income - PIMs:
<S> <C> <C>
Base interest $3,497,868 $3,704,781
Participation interest (Note 2) 982,845 34,688
Interest income - MBS 400,890 464,029
Other interest income 168,505 72,932
Total revenues 5,050,108 4,276,430
Expenses:
Asset management fee to an affiliate 361,655 395,828
Expense reimbursements to affiliates 59,611 64,226
Amortization of prepaid fees and
expenses (Note 2) 1,699,948 495,779
General and administrative expenses 77,372 60,164
Total expenses 2,198,586 1,015,997
Net income $2,851,522 $3,260,433
Allocation of net income (Note 4):
Limited Partners $2,765,976 $3,162,620
Average net income per Limited Partner
interest (14,956,896 Limited Partner
interests outstanding) $ .18 $ .21
General Partners $ 85,546 $ 97,813
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1996 1995
Operating activities:
<S> <C> <C>
Net income $ 2,851,522 $ 3,260,433
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of prepaid fees and expenses 1,699,948 495,779
Shared appreciation income (982,845) -
Changes in assets and liabilities:
Decrease in interest receivable and
other assets 641,409 105,372
Decrease in liabilities (8,788) (7,146)
Net cash provided by operating activities 4,201,246 3,854,438
Investing activities:
Principal collections on PIMs including shared
appreciation income of $982,845 25,383,558 328,082
Principal collections on MBS 924,191 537,992
Net cash provided by investing activities 26,307,749 866,074
Financing activities:
Quarterly distributions (4,600,783) (4,598,871)
Special distributions (25,426,553) -
Net cash used for financing activities (30,027,336) (4,598,871)
Net increase in cash and cash equivalents 481,659 121,641
Cash and cash equivalents, beginning of period 5,970,759 5,064,654
Cash and cash equivalents, end of period $ 6,452,418 $ 5,186,295
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this report
on Form 10-Q pursuant to the Rules and Regulations of the Securities
and Exchange Commission. However, in the opinion of the General
Partners, Krupp Plus Corporation and Mortgage Services Partners
Limited Partnership, (collectively the "General Partners") of Krupp
Insured Mortgage Limited Partnership (the "Partnership"), the
disclosures contained in this report are adequate to make this
information presented not misleading. See Notes to Financial
Statements included in the Partnership's Form 10-K for the year ended
December 31, 1995 for additional information relevant to significant
accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited financial statements reflect all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Partnership's financial position as of March 31, 1996, and
its results of operations and cash flows for the three months ended
March 31, 1996 and 1995.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results which may be expected
for the full year. See Management's Discussion and Analysis of
Financial Condition and Results of Operations included in this
report.
2. PIMs
On February 16, 1996, the Partnership received a prepayment of the
Water View Apartments PIM. The Partnership received the outstanding
principal balance of $16,651,149 plus outstanding interest. The
Partnership did not receive any prepayment penalty or participation
income from this PIM. During 1995, the operating performance of
Water View Apartments declined due to insufficient levels of
occupancy and higher maintenance and repair expenses due to
vandalism. As a result, the borrower went into default on the
underlying loan. Normally, a loan like this would eventually be
recovered through an insurance claim process. However, the
Partnership was able to receive its insured proceeds on this loan
earlier than anticipated due to Bear Stearn s assumption of the co-
insurers portfolio. As a result of the prepayment, the Partnership
fully amortized the remaining prepaid fees and expenses associated
with this PIM.
On February 29, 1996, the Partnership received a prepayment of the
Tarnhill PIM. The Partnership received the outstanding principal
balance of $7,483,000, Shared Appreciation Interest of $982,845 and
Minimum Additional and Shared Income Interest of $223,728. As a
result of the prepayment, the Partnership fully amortized the
remaining prepaid fees and expenses associated with this PIM.
On March 15, 1996, the Partnership made a special distribution of
$1.70 per Limited Partner interest with the proceeds from these
repayments.
At March 31, 1996, the Partnership s PIM portfolio has a fair value
of approximately $166,377,000 and gross unrealized gains and losses
of approximately $1,119,000 and $667,000, respectively. The
Partnership s PIMs have maturities ranging from 1999 to 2032.
<PAGE>
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
3. MBS
As of March 31, 1996, the Partnership s MBS portfolio has an
amortized cost of approximately $19,307,000 and gross unrealized
gains and losses of approximately $677,000 and $169,000,
respectively. The MBS portfolio has maturity dates ranging from 1999
to 2024.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended
March 31, 1996 is as follows:
<TABLE>
<CAPTION>
Total
Limited General Unrealized Partners'
Partners Partners Gain Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $227,908,288 $(164,638) $ 895,050 $228,638,700
Net income 2,765,976 85,546 - 2,851,522
Quarterly distributions (4,487,039) (113,744) - (4,600,783)
Special distributions (25,426,553) - - (25,426,553)
Decrease in unrealized gain
on MBS - - (387,056) (387,056)
Balance at March 31, 1996 $200,760,672 $(192,836) $ 507,994 $201,075,830
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are regular
quarterly distributions paid to investors of approximately $4.6 million.
Funds used for investor distributions are generated from interest income
received on the PIMs, MBS, cash and short-term investments, and the
principal collections received on the PIMs and MBS. The Partnership funds
a portion of the distribution from principal collections causing the
capital resources of the Partnership to 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 distributions
paid to investors.
The General Partners periodically review the distribution rate to determine
whether an adjustment to the distribution rate is necessary based on
projected future cash flows. In general, the General Partners try to set a
distribution rate that provides for level quarterly distributions of cash
available for distribution. To the extent quarterly distributions differ
from the cash available for distribution, the General Partners may adjust
the distribution rate or distribute funds through a special distribution.
The Partnership s invested assets decreased significantly during the first
quarter of 1996 as a result of the repayments of the Water View and
Tarnhill Apartments PIMs and the subsequent distribution of the proceeds to
investors. The Partnership received approximately $16.7 million from the
repayment of the Tarnhill Apartments PIM and approximately $8.7 million
from the repayment of Water View Apartments PIM. The Partnership used
these proceeds to make a special distribution to investors of $1.70 per
limited partner interest on March 15, 1996. The General Partners estimate
the Partnership can maintain the current quarterly distribution rate of
$.30 per limited partner interest through 1996. The General Partners will
continue to monitor the appropriateness of this distribution rate in the
future and will adjust it as necessary.
For the first five years of the PIMs the borrowers are prohibited from
prepaying. For the second five years, the borrowers can prepay the loans
and pay the greater of a prepayment penalty or all participation interest.
The participation features of the PIMs are neither insured nor guaranteed
and if repayment of a PIM results from an insurance claim the Partnership
would not receive any participation interest. The Partnership has the
option to call certain PIMs by accelerating their maturity if the loans are
not prepaid by the tenth year after permanent funding. The Partnership
will determine the merits of exercising the call option for each PIM as
economic conditions warrant. Such factors as the condition of the asset,
local market conditions, interest rates and available financing will have
an impact on this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by the
Federal National Mortgage Association ("FNMA"), the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") 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 represent interests 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.
<PAGE>
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 in Section 17 of the
Partnership Agreement and the source of cash distributions for the three
months ended March 31, 1996 and the period from inception through March 31,
1996. The General Partners provide certain of the information below to
meet requirements of the Partnership Agreement and because they believe
that it is an appropriate supplemental measure of operating performance.
However, Distributable Cash Flow and Net Cash Proceeds from Capital
Transactions should not be considered by the reader as a substitute to net
income as an indicator of the Partnership's operating performance or to
cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
(Amounts in thousands, except per Unit amounts)
Three Months Ended Inception through
March 31, 1996 March 31, 1996
Distributable Cash Flow:
<S> <C> <C>
Income for tax purposes $ 2,621 $111,416
Items not requiring or (not providing)
the use of operating funds:
Shared appreciation income (983) (983)
Participation income received but
not recognized for tax purposes - 17
Amortization of prepaid fees and
expenses 2,328 8,396
Remington Place interest rate
reduction collectible in the future (16) (206)
Acquisition expenses paid from
offering proceeds charged to
operations - 184
Gain on sale of MBS - (417)
Total Distributable Cash Flow
("DCF") $ 3,950 $118,407
Limited Partners Share of DCF $ 3,831 $114,854
Limited Partners Share of DCF
per Limited Partner interest ( Unit ) $ .26 $ 7.68 (b)
General Partners Share of DCF $ 119 $ 3,553
Net Proceeds from Capital Transactions:
Principal collection on PIMs including
shared appreciation income 25,384 31,427
Principal collections on MBS 925 57,802
Principal collections on
MBS and PIMs reinvested - (14,537)
Gain on sale of MBS - 417
Total Net Proceeds from Capital
Transactions $26,309 $ 75,109
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $30,279 $193,536
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Distributable Cash Flow and Net Cash Proceeds from Capital
Transactions,Continued
Distributions: (includes special
distribution)
<S> <C> <C>
Limited Partners $29,914 (a) $186,667 (a)
Limited Partners Average per Unit $ 2.00 (a) $ 12.48 (a)(b)
General Partners $ 119 (a) $ 3,553 (a)
Total Distributions $30,033 $190,220
</TABLE>
(a) Includes an estimate of the distribution to be paid in May 1996.
(b) Limited Partners average per Unit return of capital as of May
1996 is $4.80 [$12.48 - $7.68]. Return of capital represents
that portion of distributions which is not funded from DCF such
as proceeds from the sale of assets and substantially all of the
principal collections received from MBS and PIMs.
Operations
The following discussion relates to the operations of the Partnership
during the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
(Amounts in thousands)
1996 1995
Interest income on PIMs:
<S> <C> <C>
Base interest $3,498 $3,705
Shared Income and Minimum Additional
interest 381 35
Interest income on MBS 401 464
Other interest income 169 73
Partnership expenses (499) (521)
Distributable Cash Flow 3,950 3,756
Decrease in accrued participation income (381) -
Shared appreciation income 983 -
Amortization of prepaid fees and
expenses (1,700) (496)
Net income $2,852 $3,260
</TABLE>
During the first quarter of 1996 net income decreased approximately
$408,000 as compared to the first quarter of 1995 due primarily to the
repayments of the Water View Apartments and Tarnhill Apartments PIMs. As a
result of the repayments, base interest income on PIMs decreased and
amortization expense, other interest income, and participation interest
(including shared appreciation income) increased during the first quarter
of 1996 as compared to the first quarter of 1995. Amortization expense
increased $1.2 million, because the Partnership fully amortized the
remaining balance of the prepaid fees and expenses associated with these
PIMs. The significant increase in participation interest income resulted
from shared appreciation income of approximately $983,000 received from the
repayment of the Tarnhill Apartments PIM. Other interest income increased
due to the short-term investment of the proceeds from the repayments until
such funds were ultimately distributed to the investors.
As a result of the special distribution made with the proceeds from the
repayments, the Partnership now has less invested assets to generate income
in the future. In general, the Partnership s base interest income on PIMs
and MBS will decline as principal collections reduce the outstanding
balance of these investments and other interest income will decline as the
principal collections are used to fund quarterly and special distributions.
<PAGE>
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Krupp Insured Mortgage Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer of
Krupp Plus Corporation, a General Partner
DATE: April 24, 1996
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-3-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,452,418
<SECURITIES> 185,739,390<F1>
<RECEIVABLES> 1,471,969
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,418,023<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 201,081,800
<CURRENT-LIABILITIES> 5,970
<BONDS> 0
0
0
<COMMON> 200,567,836<F3>
<OTHER-SE> 507,994<F4>
<TOTAL-LIABILITY-AND-EQUITY> 201,081,800
<SALES> 0
<TOTAL-REVENUES> 5,050,108<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,198,586<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,851,522
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,851,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,851,522
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $165,924,592 and
mortgage-backed securities ("MBS") of $19,814,798.
<F2>Includes prepaid acquisition fees and expenses of $12,669,881 net of
accumulated amortization of $7,145,237 and prepaid participation servicing fees
of $4,189,611 net of accumulated amortization of $2,296,232.
<F3>
Represents total equity of General and Limited Partners. General Partners
deficit of ($192,836) and Limited Partners equity of $200,760,672.
<F4>Unrealized gain on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $1,699,948 of amortization of prepaid fees and expenses.
<F7>Net income allocated $85,546 to General Partners and $2,765,976 to the Limited
Partners. Average net income per Limited Partner interest is $.18 on
14,956,896 Limited Partner interests outstanding.
</FN>
</TABLE>
