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 September 30, 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
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Investments in loans (Note 2) $27,583,721 $27,874,623
Cash and cash equivalents 627,280 1,218,363
Accrued interest receivable (net of allowance of $285,000 and
$285,000, respectively) 553,420 392,511
Loan origination costs (net of accumulated amortization of
$112,653 and $95,115, respectively) 880,085 897,623
----------- -----------
Total assets $29,644,506 $30,383,120
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and other liabilities $ 3,549 $ 33,479
Due to general partner and affiliates (Note 3) 295,026 467,031
----------- -----------
Total liabilities 298,575 500,510
----------- -----------
Partners' capital (deficit):
Limited Partners (1,836,660 BACs issued and outstanding) 29,427,609 29,953,555
General Partner (81,678) (70,945)
----------- -----------
Total partners' capital 29,345,931 29,882,610
----------- -----------
Total liabilities and partners' capital $29,644,506 $30,383,120
=========== ===========
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- --------------------------
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Interest income:
Mortgage loans $598,113 $585,393 $1,825,737 $1,886,298
Temporary investments 8,441 13,607 31,767 51,041
Other income 563 513 1,689 1,439
-------- -------- ---------- ----------
Total revenues 607,117 599,513 1,859,193 1,938,778
-------- -------- ---------- ----------
Expenses
General and administrative 10,815 7,673 49,556 48,319
General and administrative-
related parties (Note 3) 63,247 55,766 173,757 181,150
Amortization 70,045 70,045 210,135 210,135
-------- -------- ---------- ----------
Total expenses 144,107 133,484 433,448 439,604
-------- -------- ---------- ----------
Net income $463,010 $466,029 $1,425,745 $1,499,174
======== ======== ========== ==========
Allocation of Net Income:
Limited Partners $453,750 $456,709 $1,397,230 $1,469,191
======== ======== ========== ==========
General Partner $ 9,260 $ 9,320 $ 28,515 $ 29,983
======== ======== ========== ==========
Net income per BAC $ .25 $ .25 $ .76 $ .80
======== ======== ========== ==========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Total Limited Partners General Partner
----------- ---------------- ---------------
<S> <C> <C> <C>
Partners' capital (deficit) - January 1, 1996 $29,882,610 $29,953,555 $ (70,945)
Net income 1,425,745 1,397,230 28,515
Distributions (1,962,424) (1,923,176) (39,248)
----------- ----------- ------------
Partners' capital (deficit) - September 30, 1996 $29,345,931 $29,427,609 $ (81,678)
=========== =========== ============
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,425,745 $1,499,174
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization expense 210,135 210,135
Amortization of interest rate buydown (1,089) (1,089)
Increase in accrued interest receivable (160,909) (86,019)
Decrease in accounts payable and other liabilities (29,930) (25,923)
(Decrease) increase in due to general partner and affiliates (172,005) 59,952
---------- ----------
Net cash provided by operating activities 1,271,947 1,656,230
---------- ----------
Cash flows from investing activities:
Increase in investment in loans 0 (430,578)
Receipt of principal on mortgage loans 99,394 93,433
---------- ----------
Net cash provided by (used in) investing activities 99,394 (337,145)
---------- ----------
Cash flows from financing activities:
Distributions to partners (1,962,424) (1,962,424)
---------- ----------
Net decrease in cash and cash equivalents (591,083) (643,339)
Cash and cash equivalents at beginning of period 1,218,363 1,877,953
---------- ----------
Cash and cash equivalents at end of period $ 627,280 $1,234,614
========== ==========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30,
1996, the results of operations for the three and nine months ended
September 30, 1996 and 1995 and cash flows for the nine months ended
September 30, 1996. However, the operating results for the nine months
ended September 30, 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.
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 September 30, 1996 is as follows:
-6-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 2 - Investments in Loans (continued)
<TABLE>
<CAPTION>
Amounts Advanced
-------------------------------------------------------------------------
Number of Date of Final Total Investments Investments
Apartment Invest- Maturity Mortgage Amounts in Loans at in Loans at
Property/Location Units ment Date Loans Equity Loans Advanced 9/30/96 (F) 12/31/95 (F)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortenson Manor 104 8/90 8/30 $4,974,090 $ 577,885 $ 5,551,975 $ 5,116,933 $ 5,179,892
Apts./
Ames, IA
Windemere Apts./ 204 9/90 9/30 8,110,300 736,550 8,846,850 8,350,744 8,425,212
Wichita, KS
Fieldcrest III 112 8/91 8/31 3,343,700 383,300 3,727,000 3,524,730 3,558,414
Apts./
Dothan, AL
Holly Ridge II 144 3/93 3/33 5,310,100 684,400 5,994,500 5,754,067 5,811,445
Apts./
Gresham, OR
Willow Trace 152 6/93 6/28 4,420,000 680,000 5,100,000 4,837,247 4,899,660
Apts./
Tuscaloosa, AL
--------------------------------------------------------------------------
Total $26,158,190 $3,062,135 $29,220,325 $27,583,721 $27,874,623
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
Interest earned by the Partnership during 1996
--------------------------------------------------------------------------------
Non-contingent Contingent
--------------------------------------------------------------------------------
Default Annual Cash Flow
Construc- Base 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 13.00% $ 231,019 $ 72,757 $ 0 $ 0 $ 303,776
Apts./ 6.45% 1.98% 0.97% 30.0%
Ames, IA
Windemere Apts./ 13.00% 475,809 97,179 0 0 572,988
Wichita, KS 7.95% 1.60% 1.09% 30.00%
Fieldcrest III 10.18% 214,948 1,759 0 8,216 224,923
Apts./ 8.68% 0.07% 1.36% 30.00%
Dothan, AL
Holly Ridge II 10.25% 321,642 65,884 N/A 0 387,526
Apts./ 8.25% 1.64% 25.00%
Gresham, OR
Willow Trace N/A 270,957 42,643 N/A 22,924 336,524
Apts./ 8.37% 1.287% 30.00%
Tuscaloosa, AL
--------------------------------------------------------------------
Total $1,514,375 $280,222 $ 0 $31,140 $1,825,737
====================================================================
</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. Fieldcrest and 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 loans.
-7-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 2 - Investments in Loans (continued)
Investments in loans at January 1, 1996 $27,874,623
Additions:
Fieldcrest III discount amortization 1,089
Deductions:
Amortization of equity loans (192,597)
Collection of principal - Mortenson (26,842)
- Windemere (28,434)
- Fieldcrest III (9,602)
- Holly Ridge (14,603)
- Willow Trace (19,913)
-----------
Investments in loans at September 30, 1996 $27,583,721
===========
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 September 30, 1996, all of the loans due to the Partnership are
current (when taking into account the modification agreement discussed
below). Mortenson has not fully 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 nine months ended September 30, 1996 and the year ended
December 31, 1995 in the amounts of approximately $73,000 and $98,000,
respectively, have been accrued.
-8-
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 3 - Related Parties
The costs incurred to related parties for the three and nine months
ended September 30, 1996 and 1995 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
1996 1995 1996 1995
------- ------- -------- --------
Partnership management
fees (a) $38,266 $38,266 $114,799 $114,799
Expense reimbursement (b) 24,981 17,500 58,958 66,351
------- ------- -------- --------
$63,247 $55,766 $173,757 $181,150
======= ======= ======== ========
(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 September 30, 1996 and December 31,
1995, a balance of $267,556 and $382,355, 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 September 30, 1996 and December 31,
1995, the General Partner and its affiliates were due $27,470 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 November 1996, a distribution of
$648,164 and $13,228 will to be paid to BACholders and the General Partner,
respectively, representing the 1996 third 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 September 30, 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 nine months ended September 30, 1996, Partnership cash
and cash equivalents decreased by approximately $591,000. Cash provided by
operating activities and collections of principal were approximately
$1,272,000 and $99,000, respectively, and distributions paid to partners
approximated $1,962,000. Included in the adjustments to reconcile the net
income to cash flow from operations is amortization of approximately
$210,000.
In addition, the General Partner has allowed the accrual without
payment of the partnership management fee 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 approximately $1,923,000 made to the limited
partners or BACs holders for each of the nine months ended September 30,
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 approximately $39,000 was distributed to the
General Partner during each of the nine months ended September 30, 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, one of
which expired in 1996 and one of which will expire during 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. However, the geographic
diversification of the portfolio may not protect against a general downturn
in the national economy.
-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 and Nine Months Ended September 30, 1996
Compared with Three and Nine Months Ended September 30, 1995
- - ------------------------------------------------------------
Results of operations for the three and nine months ended September
30, 1996 and 1995 consisted primarily of interest income of approximately
$598,000 and $585,000 and approximately $1,826,000 and $1,886,000,
respectively, earned from investments in mortgage loans.
Interest income from temporary investments decreased approximately
$5,000 and $19,000 for the three and nine months ended September 30, 1996,
as compared to the same periods in 1995 primarily due to lower cash and cash
equivalents balances.
General and administrative expenses-related parties increased by
approximately $7,000 for the three months ended September 30, 1996 as
compared to the same period in 1995 primarily due to an under-accrual of
expense reimbursements to the General Partner at June 30, 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: November 13, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: November 13, 1996 By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer
(Principal 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 627,280
<SECURITIES> 0
<RECEIVABLES> 28,137,141
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 880,085
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,644,506
<CURRENT-LIABILITIES> 298,575
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,345,931
<TOTAL-LIABILITY-AND-EQUITY> 29,644,506
<SALES> 0
<TOTAL-REVENUES> 1,859,193
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 433,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,425,745
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,425,745
<EPS-PRIMARY> .76
<EPS-DILUTED> 0
</TABLE>
