SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18491
CAPITAL MORTGAGE PLUS L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3502020
--------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
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
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
----------- -----------
Investments in loans (Note 2) $27,778,295 $27,874,623
Cash and cash equivalents 976,972 1,218,363
Accrued interest receivable
(net of allowance of $285,000 and
$285,000, respectively) 461,286 392,511
Loan origination costs (net of
accumulated amortization $100,961
and $95,115, respectively) 891,777 897,623
----------- -----------
Total assets $30,108,330 $30,383,120
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and other liabilities $ 31,415 $ 33,479
Due to general partner and affiliates
(Note 3) 356,862 467,031
----------- -----------
Total liabilities 388,277 500,510
----------- -----------
Partners' capital (deficit):
Limited Partners (1,836,660 BACs issued
and outstanding) 29,794,249 29,953,555
General Partner (74,196) (70,945)
----------- -----------
Total partners' capital 29,720,053 29,882,610
----------- -----------
Total liabilities and partners' capital $30,108,330 $30,383,120
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1996 1995
----------- -----------
Revenues:
Interest income:
Mortgage loans $ 621,544 $ 633,931
Temporary investments 12,591 18,633
Other income 563 463
----------- -----------
Total revenues 634,698 653,027
----------- -----------
Expenses:
General and administrative 12,552 11,777
General and administrative-related
parties (Note 3) 53,266 60,512
Amortization 70,045 70,045
----------- -----------
Total expenses 135,863 142,334
----------- -----------
Net income $ 498,835 $ 510,693
=========== ===========
Allocation of Net Income:
Limited Partners $ 488,858 $ 500,479
=========== ===========
General Partner $ 9,977 $ 10,214
=========== ===========
Net income per BAC $ .27 $ .27
=========== ===========
See accompanying notes to financial statements
-3-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited General
Total Partners Partner
----------- ----------- ---------
Partners' capital (deficit) -
January 1, 1996 $29,882,610 $29,953,555 $ 70,945)
Net income 498,835 488,858 9,977
Distributions (661,392) (648,164) (13,228)
----------- ----------- ---------
Partners' capital (deficit) -
March 31, 1996 $29,720,053 $29,794,249 $(74,196)
=========== =========== =========
See accompanying notes to financial statements
-4-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1996 1995
----------- -----------
Cash flows from operating activities:
Net income $ 498,835 $ 510,693
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 70,045 70,045
Amortization of interest rate buydown (363) (363)
Increase in accrued interest receivable (68,775) (23,785)
Decrease in accounts payable and other
liabilities (2,064) (5,922)
(Decrease) increase in due to general
partner and affiliates (110,169) 16,301
---------- ----------
Net cash provided by operating activities 387,509 566,969
---------- ----------
Cash flows from investing activities:
Receipt of principal on mortgage loans 32,492 31,516
---------- ----------
Cash flows from financing activities:
Distributions to partners (661,392) (661,392)
---------- ----------
Net decrease in cash and cash equivalents (241,391) (62,907)
Cash and cash equivalents at beginning of period 1,218,363 1,877,953
---------- ----------
Cash and cash equivalents at end of period $ 976,972 $1,815,046
========== ==========
See accompanying notes to financial statements
-5-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 1 - General
The unaudited financial statements have been prepared on the same basis as
the audited financial statements included in the Partnership's Form 10-K for the
year ended December 31, 1995. In the opinion of the General Partner, the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position of the Partnership as of March 31, 1996 and the results of operations
and cash flows for the three months ended March 31, 1996 and 1995. However, the
operating results for the three months ended March 31, 1996 may not be
indicative of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1995.
On January 1, 1996, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". This standard requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
On January 1, 1996, the Partnership adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights". This standard eliminates the distinction between
rights to service mortgage loans for others that are acquired through loan
origination activities and those acquired through purchase transactions.
The adoption of these standards has not materially affected the Partnership's
reported earnings, financial condition or cash flows, because this is
essentially the same method utilized previously to measure and record asset
impairments or to record mortgage servicing rights.
Certain balances have been reclassified from prior year's to conform to the
current year's presentation.
NOTE 2 - Investments in Loans
The Partnership has funded five mortgage loans and originated five
noninterest bearing equity loans in the aggregate amount of $29,220,325.
Information relating to investments in mortgage loans and equity loans as of
March 31, 1996 is as follows:
-6-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 2 - Investment in Loans (continued)
<TABLE>
<CAPTION>
Amounts Advanced
Number ------------------------------------------------------------------
of Date of Final Total Investments Investments
Apartment Invest- Maturity Mortgage Equity Amounts in Loans at in Loans at
Property/Location Units ment Date Loans Loans Advanced 3/31/95(F) 12/31/95(F)
--------- ------- ----------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortenson Manor Apts./ 104 8/90 8/30 $ 4,974,090 $ 577,885 $ 5,551,975 $ 5,159,049 $ 5,179,892
Ames, IA
Windemere Apts./ 204 9/90 9/30 8,110,300 736,550 8,846,850 8,400,578 8,425,212
Wichita, KS
Fieldcrest III Apts./ 112 8/91 8/31 3,343,700 383,300 3,727,000 3,547,256 3,558,414
Dothan, AL
Holly Ridge II Apts./ 144 3/93 3/33 5,310,100 684,400 5,994,500 5,792,419 5,811,445
Gresham,OR
Willow Trace Apts./ 152 6/93 6/28 4,420,000 680,000 5,100,000 4,878,993 4,899.660
Tuscaloosa, AL
----------- ---------- ----------- ----------- -----------
Total $26,158,190 $3,062,135 $29,220,325 $27,778,295 $27,874,623
=========== ========== =========== =========== ============
<CAPTION>
Interest earned by the Partnership during 1996
----------------------------------------------------------------------
Non-contingent Contingent
--------------------------------- -------------------------
Base Default Annual Cash Flow
Construc- Interest Interest Yield Participation Total
tion Amount/ Amount/ Amount/ Amount/ Interest
Property/Location Rate(A) Rate(B) Rate(C) Rate(D) Rate(E) Earned
--------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mortenson Manor Apts./ 13.00% $ 77,149 $24,209 $ 0 $ 0 $101,358
Ames, IA 6.45% 1.98% 0.97% 30.00%
Windemere Apts./ 13.00% 158.791 32,313 0 0 191,104
Wichita, KS 7.95% 1.6% 1.09% 30.00%
Fieldcrest III Apts./ 10.18% 71,719 585 0 0 72,304
Dothan, AL 8.68% 0.07% 1.36% 30.00%
Holly Ridge II Apts./ 10.25% 107,313 21,901 N/A 0 129,214
Gresham,OR 8.25% 1.64% 25.00%
Willow Trace Apts./ N/A 90,457 14,183 N/A 22,924 127,564
Tuscaloosa, AL 8.37% 1.287% 30.00%
--------- --------- --------- -------- --------- ---------
$505,429 $93,191 $ 0 $22,924 $621,544
========= ========= ========= ======== ========= =========
</TABLE>
(A) The Partnership did not receive any construction interest during 1996, as
construction was completed prior to 1995 on all properties.
(B) Base interest on the mortgages is that amount that is insured/co-insured by
HUD and is being shown net of service fee.
(C) Default Interest is the minimum amount due over the base rate, and is not
contingent upon cash flow. This interest is secured by Partnership
interests. Fieldcrest's default rate was reduced during 11/95, as per the
Additional Interest documents, to 0.07% over the Base Rate.
(D) Annual Yield is the amount over the default rate and is contingent upon
property cash flow.
(E) Cash Flow Participation is the percent of cash flow due to the Partnership
after payment of the Annual Yield and is contingent upon property cash flow.
Willow Trace provided sufficient cash flow in 1995 to pay the Partnership a
participation during 1996.
(F) The Investments in Loans amount reflects the unpaid balance of the mortgage
loans and the unamortized balance of the equity loan.
-7-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 2 - Investments in Loans (continued)
Investments in loans January 1, 1996 $27,874,623
Additions:
Fieldcrest III discount amortization 363
Deductions:
Amortization of equity loans (64,199)
Collection of principal - Mortenson (8,804)
- Windemere (9,289)
- Fieldcrest III (3,131)
- Holly Ridge (4,768)
- Willow Trace (6,500)
-----------
Investments in loans March 31, 1996 $27,778,295
===========
The Mortenson and Windemere mortgage loans are co-insured by HUD and Related
Mortgage Corporation ("RMC"), an affiliate of the General Partner. The
Fieldcrest III, Holly Ridge and Willow Trace mortgage loans are insured by HUD.
The equity loans are non-interest bearing and are secured by the assignment
of the owner/developers' interests in the projects. The equity loans are not
insured by HUD or any other party and, for financial statement reporting
purposes, are considered to be premiums paid to obtain the mortgage loans. These
premiums are being amortized over the average expected lives of the respective
mortgages.
All loans have call provisions effective ten years following final
endorsement and a grace period. The Partnership presently expects to dispose of
such loans within 10 to 15 years after acquisition.
At March 31, 1996, all of the loans due to the Partnership are current (when
taking into account the modification agreement discussed below). Mortenson has
not paid its default interest of approximately $165,000 for each of the years
ended December 31, 1994 and 1993. As a result, an allowance in the amount of
$285,000 was established at December 31, 1994 relating to the default interest.
During May 1995, the property paid approximately $45,000 of the default interest
for 1994, which was not included in the allowance at December 31, 1994.
The operations of Mortensen have not been able to support the payment of the
required interest. Accordingly, effective January 1, 1995 the Partnership
entered into a modification agreement whereby the annual yield was modified to a
cumulative yield of 9.4% per annum from the Permanent Loan Date and the Default
Rate was defined as 8.43% per annum. The modification agreement also provided
that pre-1995 accrued interest not accrue further interest on and after January
1, 1995, and shall be paid solely out of Capital Proceeds prior to the
calculation of participation percentages. Mortensen also agreed to defer the
management fee payable up to the Default Rate. Pursuant to this modification
agreement, default interest for the three months ended March 31, 1996 and the
year ended December 31, 1995 in the amounts of approximately $24,000 and
$98,000, respectively, have been accrued.
-8-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 3 - Related Parties
The costs incurred to related parties for the three months ended March 31,
1996 and 1995 were as follows:
Three Months Ended
March 31,
--------------------------
1996 1995
------- -------
Partnership management fees (a) $38,266 $38,266
Expense reimbursement (b) 15,000 22,246
------- -------
$53,266 $60,512
======= =======
(a) A Partnership management fee for managing the affairs of the Partnership
equal to .5% per annum of invested assets is payable out of cash flow to the
General Partner. As of March 31, 1996 and December 31, 1995, a balance of
$267,556 and $383,355, respectively, was due to the General Partner for these
fees.
(b) The General Partner and its affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management, register, transfer and assignment functions, asset management,
investor communications, printing services and other administrative services.
The amount of reimbursement from the Partnership is limited by the provisions of
the Partnership Agreement. An affiliate of the General Partner performs assets
monitoring for the Partnership. These services include site visits and
evaluations of the performance of the properties securing the loans. As of March
31, 1996 and December 31, 1995, the General Partner and its affiliates were due
$89,306 and $84,676, respectively, relating to these costs.
RMC is a co-insurer on the Mortenson and Windemere mortgage loans in which
the Partnership has invested. RMC is entitled to a mortgage insurance premium
which is paid by the mortgagors.
NOTE 4 - Subsequent Event
It is anticipated that during May 1996, a distribution of $634,015 and
$12,939 will to be paid to BACholders and the General Partner, respectively,
representing the 1996 first quarter distribution.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Capital Resources and Liquidity
The Partnership received $36,733,200 in gross proceeds from the sale of BACs
pursuant to twenty-one investor closings during the period July 28, 1989 through
May 23, 1991, resulting in net proceeds of approximately $32,031,000 available
for investment, after payment of sales commissions, offering and organization
expenses, loan origination fees and establishment of a working capital reserve.
As of March 31, 1996, $29,220,325 of the net proceeds available for investment
have been used to fund five mortgage loans and five noninterest bearing equity
loans. The remaining proceeds of the Offering of approximately $2,800,000 were
temporarily invested and are being utilized as a working capital reserve. No
further issuance of BACs is anticipated.
Other sources of Partnership funds included interest earned on (1)
investments in mortgage loans, and (2) net offering proceeds which were invested
in money market instruments pending investment of mortgage loans.
During the three months ended March 31, 1996, Partnership cash and cash
equivalents decreased by approximately $241,000. Cash provided by operating
activities and collections of principal were approximately $388,000 and $32,000,
respectively, and distributions paid to partners approximated $661,000. Included
in the adjustments to reconcile the net income to cash flow from operations is
amortization of approximately $70,000.
In addition, the General Partner has allowed the accrual without payment of
the partnership management fee and certain reimbursements through 1992 in an
aggregate amount equal to approximately $268,000. Since 1992, substantially all
partnership management fees and expense reimbursements have been paid. In future
years, a portion of the working capital reserve may be used to pay accrued and
unpaid fees and/or distributions in the event that cash generated from
operations is not sufficient to maintain current distribution levels and repay
such fees. Distributions in 1996 and prior years have been supplemented by a
portion of working capital reserves.
The Partnership anticipates that cash generated from operations and invested
in temporary investments, including the working capital reserve, will be
sufficient to cover anticipated expenses in 1996.
Distributions of $648,164 made to the limited partners or BACs holders for
each of the three months ended March 31, 1996 and 1995 were made from adjusted
cash flow from operations and, to a lesser extent, from working capital
reserves, which is considered to be a return of capital. A total of $13,228 was
distributed to the General Partner during each of the three months ended March
31, 1996 and 1995.
The level of future distributions will depend on results of operations.
Furthermore, the expiration of the Guaranteed Rate Guaranty Periods, two of
which expired in 1993, one of which expired in 1995, and two of which will
expire during 1996 and 1997 may have an adverse affect on future distributions
if contingent interest is not realized on the mortgage loans.
Management is not aware of any trends or events, commitments or uncertainties
that will impact liquidity in a material way. Management believes the only
impact would be from laws that have not yet been adopted. All base interest and
the principal of the Partnership's investments in mortgage loans are insured or
co-insured by HUD and a private mortgage lender (which is an affiliate of the
General Partner). The Partnership's investments in uninsured non-interest
bearing equity loans (which represent approximately 10% of the Partnership's
portfolio) are secured by a Partnership interest in properties which are
diversified by location so that if one area of the country is experiencing
downturns in the economy, the remaining properties may be experiencing upswings.
-10-
<PAGE>
Results of Operations
On January 1, 1996, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". This standard requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
On January 1, 1996, the Partnership adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights". This standard eliminates the distinction between
rights to service mortgage loans for others that are acquired through loan
origination activities and those acquired through purchase transactions.
The adoption of these standards has not materially affected the Partnership's
reported earnings, financial condition or cash flows, because this is
essentially the same method utilized previously to measure and record asset
impairments or to record mortgage servicing rights.
Three Months Ended March 31, 1996
Compared with Three Months Ended March 31, 1995
Results of operations for the three months ended March 31, 1996 and 1995
consisted primarily of interest income of approximately $622,000 and $634,000,
respectively, earned from investments in mortgage loans.
Interest income on mortgage loans remained fairly constant for the three
months ended March 31, 1996 as compared to the three months ended March 31,
1995. Interest income from temporary investments decreased approximately $6,000
for 1996 as compared to 1995 primarily due to lower cash and cash equivalents
balances.
General and administrative expenses-related parties decreased by
approximately $7,000 for the three months ended March 31, 1996 as compared to
the three months ended March 31, 1995 primarily due to lower expense
reimbursements to the General Partner in 1996.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending against or
involving the Partnership.
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Security Holders -- None
Item 5. Other Information -- None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K -- No reports on Form 8-K were filed during
the quarter.
-12-
<PAGE>
SIGNATURES
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.
CAPITAL MORTGAGE PLUS L.P.
By: CIP Associates, Inc.
General Partner
Date: May 14, 1996 By: /s/Alan P. Hirmes
-----------------
Alan Hirmes
Vice President
Date: May 14, 1996 By: /s/Lawrence J. Lipton
---------------------
Lawrence J. Lipton
Treasurer
(Principal Financial and
Accounting Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Capital Mortgage Plus L.P. and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<CIK> 0000845875
<NAME> Capital Mortgage Plus L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 976,972
<SECURITIES> 0
<RECEIVABLES> 28,239,581
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 891,777
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,108,330
<CURRENT-LIABILITIES> 388,277
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,720,053
<TOTAL-LIABILITY-AND-EQUITY> 30,108,330
<SALES> 0
<TOTAL-REVENUES> 634,698
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 135,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 498,835
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 498,835
<EPS-PRIMARY> .27
<EPS-DILUTED> 0
</TABLE>
