UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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
incorporation or organization) Identification No.)
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
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Beneficial Assignment Certificates
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 infor-
mation statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
[X]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's prospectus dated May 10, 1989, as supple-
mented July 7, 1989, January 8, 1990, February 9, 1990,
May 18, 1990, and October 24, 1990, as filed with the
Commission pursuant to Rules 424(b) and 424(c) of the
Securities Act of 1933, but only to the extent expressly
incorporated by reference in Parts I, II, III and IV.
Index to exhibits may be found on page 28
Page 1 of 103
<PAGE>
PART I
Item 1. Business.
General
Capital Mortgage Plus L.P. (the "Registrant") is a lim-
ited partnership which was formed under the laws of the
State of Delaware on November 23, 1988. The sole gen-
eral partner of the Registrant is CIP Associates, Inc.,
a Delaware corporation (the "General Partner"). The
General Partner manages and controls the affairs of the
Registrant. See Item 10, Directors and Executive Offi-
cers of the Registrant, below.
Investment Objectives
The Registrant's principal investment objectives are to:
(i) preserve and protect the Registrant's capital; (ii)
provide quarterly cash distributions of adjusted cash
from operations; and (iii) provide additional distribu-
tions from additional interest arising from participa-
tions in the annual cash flow of the developments and/or
the sale or refinancing of a development. There can be
no assurance that all of the objectives can be achieved.
The Registrant has originated federally insured and co-
insured first mortgage construction and permanent loans
("Mortgages") to finance multi-family residential rental
properties ("Developments") developed by unaffiliated
entities. All base interest and initially at least 90%
in the aggregate of the principal of the Mortgages in
which the Registrant invests are insured or coinsured by
the Department of Housing and Urban Development ("HUD")
and Related Mortgage Corporation ("RMC"), an affiliate
of the General Partner. The remaining 10% of the Regis-
trant's portfolio is comprised of uninsured non-interest
bearing equity loans made directly to the same develop-
ers as the Mortgages for, among other purposes, defrayal
of certain specific cash requirements of the properties.
The Registrant has made five mortgage loans in the ag-
gregate amount of $26,158,190 and five non-interest
bearing equity loans in the aggregate amount of
$3,062,135 in connection with five multi-family proj-
ects. The mortgage and equity loan relating to the Wil-
low Trace Apartments ("Willow Trace"), was repaid in
full on December 16, 1998.
The Registrant is engaged solely in the business of in-
vesting in Mortgages and equity loans; therefore, pres-
entation of industry segment information is not applica-
ble.
<TABLE>
Investments
The following table lists the mortgage loans and equity
loans as of February 28, 1999; it excludes the invest-
ment in Willow Trace which was repaid on December 16,
1998:
<CAPTION>
Original Interest
Mortgage Rate on Equity
Date of Loan Mortgage Loan
Project Location Investment Amount (2) Loan(1) Amount Term(7) Occupancy
<S> <C> <C> <C> <C> <C> <C> <C>
Mortenson Manor Ames, 8.43%-
Apartments (3) Iowa 8/31/90 $ 4,974,090 9.4% $ 577,885 40 years 100%
Windemere Wichita, 9.55%-
Apartments (4) Kansas 9/28/90 8,110,300 10.64% 736,550 40 years 96%
Fieldcrest III Dothan, 8.75%-
Apartments (5) Alabama 8/27/91 3,343,700 10.11% 383,300 40 years 90%
Holly Ridge II Gresham,
Apartments (6) Oregon 3/16/93 5,310,100 9.89% 684,400 40 years 98%
$21,738,190 $2,382,135
</TABLE>
(1) The minimum interest rate shown above includes in-
terest payable under the first mortgage note plus addi-
tional interest payable pursuant to the terms of a Lim-
ited Operating Guaranty agreement for Fieldcrest III
Apartments ("Fieldcrest") and the Additional Interest
Guaranty agreements for Mortenson Manor Apartments
("Mortenson"), Windemere Apartments ("Windemere") and
Holly Ridge II Apartments ("Holly Ridge").
(2) The Mortenson and Windemere mortgage loans are co-
insured by HUD and RMC. The Fieldcrest and Holly Ridge
mortgage loans are fully insured by HUD. As of February
28, 1999, all loan amounts have been disbursed.
(3) Default Interest payments of approximately $594,000
for the years ended December 31, 1993 to 1998 have not
been received and, as a result, the Registrant estab-
lished an allowance for uncollectability which equals
approximately $553,000 and $538,000 at December 31, 1998
and 1997, respectively.
(4) A Default Interest payment of approximately $64,000
for the period July 1998 to December 1998 is expected to
be received during the second quarter of 1999. Default
Interest payment of approximately $130,000 for the year
ended December 31, 1996 has not been received and as a
result, the Registrant established an allowance for un-
collectability which equals approximately $130,000 at
December 31, 1998.
(5) A Default Interest payment of approximately $47,500
for the period January 1998 to December 1998 is expected
to be received during the second quarter of 1999.
(6) A Guaranteed Interest payment of approximately
$44,000 for the period July 1998 to December 1998 is ex-
pected to be received during the second quarter of 1999.
(7) All loans have call provisions effective ten years
following final endorsement and a grace period. The
Registrant, in order to enforce such provisions, would
be required to terminate the mortgage insurance contract
with FHA (and/or the coinsurer) not later than the ac-
celerated payment date. Since the exercise of such op-
tion would be at the Registrant's discretion, it is in-
tended to be exercised only where the Registrant deter-
mines that the value of the Development has increased by
an amount which would justify accelerating payment in
full and assuming the risks of foreclosure if the mort-
gagor failed to make the accelerated payment. The Reg-
istrant presently expects to dispose of such loans
within 10 to 15 years after acquisition.
<TABLE>
Following is the interest income from mortgage loans as
a percentage of total revenues.
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Mortenson 13% 16% 16%
Windemere 24 31 31
Fieldcrest 13 13 12
Holly Ridge 17 21 21
Willow Trace 20 18 18
</TABLE>
Repayment of Mortgage Loan
On December 16, 1998, Willow Partners, Ltd. (the
"Owner"), the owner of Willow Trace Apartments ("Willow
Trace"), prepaid the outstanding FHA Co-Insured Mortgage
Loan (the "Mortgage Loan") and equity loan (the "Equity
Loan") in full. The Mortgage Loan and the Equity Loan
were secured by a mortgage on the Willow Trace property
and partnership interests in the Owner. The outstanding
debt repaid early to the Partnership totaled $5,372,859,
including the $4,275,984 outstanding balance of the
Mortgage Loan, the $680,000 Equity Loan, a $213,799 pre-
payment premium (which is included in other income on
the Statements of Income), and $203,076 of additional
interest due pursuant to the loan documents.
The prepayment of the Mortgage Loan and the Equity Loan
differs from what the General Partner had previously an-
ticipated. As disclosed in the Form 10-Q for the quar-
terly period ended September 30, 1998, the General Part-
ner anticipated that the Owner would refinance the Mort-
gage Loan with a third party lender and that the Owner
would convert the Equity Loan to a second mortgage loan
with participation in cash flow. However, the Owner
opted to prepay both the Mortgage Loan and the Equity
Loan in full.
The Partnership used a portion of the repayment proceeds
to pay current payables, including $344,000 of accrued
Partnership management fees owed to the General Partner,
and to replenish reserves. Of the balance of the repay-
ment proceeds, $4,499,817 ($2.45 per BAC) was distrib-
uted to the BACsholders and $45,453 was distributed to
the General Partner.
Competition
The Registrant's business is affected by competition to
the extent that the underlying properties from which it
is to derive interest and principal payments may be sub-
ject to competition from neighboring properties. In
particular, the receipt of additional interest and the
repayment of the equity loans, neither of which is in-
sured or guaranteed by government or quasi-government
agencies, is dependent upon the economic performance of
the underlying properties which could be adversely af-
fected by competitive conditions.
Employees
The Registrant does not directly employ anyone. All
services are performed for the Registrant by its General
Partner and its affiliates. The General Partner re-
ceives compensation in connection with such activities
as set forth in Items 11 and 13. In addition, the Reg-
istrant reimburses the General Partner and certain of
its affiliates for expenses incurred in connection with
the performance by their employees of services for the
Registrant in accordance with the Partnership Agreement.
Item 2. Properties.
The Registrant does not own or lease any property.
Item 3. Legal Proceedings.
There are no material legal proceedings pending against
or involving the Registrant.
Item 4. Submission of Matters to a Vote of Security
Holders.
No matters were submitted to a vote of security holders
during the fiscal year covered by this report through
the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters.
As of December 31, 1998, the Registrant had issued and
outstanding 1,836,660 limited partnership interests
("Limited Partnership Interests"), each representing a
$20 capital contribution to the Registrant, for aggre-
gate gross proceeds of $36,733,200. All of the issued
and outstanding Limited Partnership Interests have been
issued to Related FI BUC$ Associates, Inc. (the "As-
signor Limited Partner"), which has issued Beneficial
Assignment Certificates ("BACs"). Each BAC represents
all of the economic and virtually all of the ownership
rights attributable to a Limited Partnership Interest
held by the Assignor Limited Partner. BACs may be con-
verted into Limited Partnership Interests at no cost to
the holder, but Limited Partnership Interests are not
convertible back into BACs. There is currently no es-
tablished public trading market for BACs and it is not
anticipated that BACs will be listed for trading on any
securities exchange or included for quotation on the
Nasdaq National Market.
All of the Registrant's general partnership interests,
representing an aggregate capital contribution of
$1,000, are held by the General Partner.
There are no material legal restrictions upon the Regis-
trant's present or future ability to make distributions
in accordance with the provisions of the Registrant's
Amended and Restated Agreement of Limited Partnership.
<TABLE>
Distribution Information
Cash distributions per BAC made to the limited partners
or BACs holders for the following quarters in 1998, 1997
and 1996 were as follows:
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
1998 .2466 .2493 .2521 2.7021
1997 .3452 .3490 .3529 .3529
1996 .3452 .3490 .3529 .3529
</TABLE>
Quarterly distributions are made 45 days following the
close of the calendar quarter.
A total of $7,164,677 was distributed to the limited
partners or BACs holders during the years 1998, 1997 and
1996. The Registrant utilized the original working
capital reserve, in the aggregate amount of $477,532,
for distributions from 1989 through 1991, which is con-
sidered to be a return of capital. An additional work-
ing capital reserve of approximately $2,800,000 was
formed from uninvested offering proceeds, a portion of
which was applied to pay a part of the 1998, 1997 and
1996 distributions (which is considered to be a return
of capital). Approximately $0, $800,000 and $897,000
paid to the limited partners or BACs holders in each of
the years ended December 31, 1998, 1997 and 1996, re-
spectively, represented a return of capital. A total of
$146,217 was distributed to the General Partner during
1998, 1997 and 1996.
The 1998 fourth quarter distribution which was paid on
February 14, 1999 has been funded primarily by the Wil-
low Trace repayment proceeds, $2.45 per BAC of which is
considered to be a return of capital. See Item 7, Man-
agement's Discussion and Analysis of Financial Condition
and Results of Operations, for a discussion of the ef-
fect of fee deferments and the expiration of the final
Guaranteed Rate Guaranty Period on the distributions.
<TABLE>
Item 6. Selected Financial Data.
The information set forth below presents selected finan-
cial data of the Registrant. Additional financial in-
formation is set forth in the audited financial state-
ments and footnotes thereto contained in Item 8 hereof.
<CAPTION>
Year ended December 31,
OPERATIONS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Interest income
Mortgage
loans $2,678,758 $2,471,273 $2,423,058 $2,448,891 $2,477,238
Temporary
investments 32,135 14,658 39,064 64,534 57,421
Other income 393,785 2,252 2,202 1,952 2,002
Total
revenues 3,104,678 2,488,183 2,464,324 2,515,377 2,536,661
Operating
expenses 567,549 584,796 598,701 574,172 579,336
Provision for bad
debts 144,977 96,079 157,138 0 285,000
Total
Expenses 712,526 680,875 755,839 574,172 864,336
Net
income $2,392,152 $1,807,308 $1,708,485 $1,941,205 $1,672,325
Net income per
BAC $ 1.28 $ 0.96 $ 0.91 $ 1.04 $ 0.89
<CAPTION>
December 31,
FINANCIAL POSITION 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Total
assets $28,561,927 $28,597,517 $29,292,812 $30,383,120 $30,973,591
CASH DISTRIBUTIONS
Distributions per
BAC $ 3.45 $ 1.40 $ 1.40 $ 1.40 $ 1.40
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations.
Capital Resources and Liquidity
Sources of Registrant funds included interest earned on
(1) investments in mortgage loans (see also Item 1,
Business) and (2) the working capital reserve.
During the year ended December 31, 1998, cash and cash
equivalents of the Registrant increased by approximately
$5,274,000 due to cash provided by operating activities
$2,225,000, collections of principal on mortgage and eq-
uity loans were approximately $5,112,000 and distribu-
tions paid to partners $2,063,000. Included in the ad-
justments to reconcile the net income to cash flow pro-
vided by operating activities is amortization of ap-
proximately $276,000.
Regular quarterly distributions in 1998 were reduced to
a level equal to 5% per annum, based on the original BAC
price. This reflects actual cash receipts of interest
payments and scheduled principal payments. Distribu-
tions for 1999 are anticipated to be at a level of 5%
per annum based on the original BAC price of $20 less
the $2.45 per BAC special distribution from disposition
proceeds (deemed a return of capital) as discussed be-
low. Subject to the future performance of the Regis-
trant's investments and results of operation, the Gen-
eral Partner anticipates that there will be sufficient
cash from operations generated to cover anticipated ex-
penses in 1999 and to fund future distributions, at
least at this reduced level. Distributions in 1997 and
prior years have been supplemented by a portion of work-
ing capital reserves.
On December 16, 1998, Willow Partners, Ltd. (the
"Owner"), the owner of Willow Trace Apartments ("Willow
Trace"), prepaid the outstanding FHA Co-Insured Mortgage
Loan (the "Mortgage Loan") and equity loan (the "Equity
Loan") in full. The Mortgage Loan and the Equity Loan
were secured by a mortgage on the Willow Trace property
and partnership interests in the Owner. The outstanding
debt repaid early to the Partnership totaled $5,372,859,
including the $4,275,984 outstanding balance of the
Mortgage Loan, the $680,000 Equity Loan, a $213,799 pre-
payment premium (which is included in other income on
the statements of income), and $203,076 of additional
interest due pursuant to the loan documents.
The prepayment of the Mortgage Loan and the Equity Loan
differs from what the General Partner had previously an-
ticipated. As disclosed in the Form 10-Q for the quar-
terly period ended September 30, 1998, the General Part-
ner anticipated that the Owner would refinance the Mort-
gage Loan with a third party lender and that the Owner
would convert the Equity Loan to a second mortgage loan
with participation in cash flow. However, the Owner
opted to prepay both the Mortgage Loan and the Equity
Loan in full.
The Partnership used a portion of the repayment proceeds
to pay current payables, including $344,000 of accrued
Partnership management fees owed to the General Partner,
and to replenish reserves. Of the balance of the repay-
ment proceeds, $4,499,817 ($2.45 per BAC) was distrib-
uted to the BACsholders and $45,453 was distributed to
the General Partner.
A distribution of approximately $2,022,000 made to the
limited partners or BACs holders during the year ended
December 31, 1998, was made from adjusted cash flow from
operations. A distribution of approximately $2,571,000
made to the limited partners or BACs holders during the
year ended December 31, 1997, was 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. Approximately $41,000 and 52,000 was
distributed to the General Partner for each of the years
ended December 31, 1998 and 1997, respectively.
Management is not aware of any trends or events, commit-
ments 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 Registrant's invest-
ments in mortgage loans are insured or co-insured by HUD
and a private mortgage lender (which is an affiliate of
the General Partner). The Registrant's investments in
uninsured non-interest bearing equity loans (which rep-
resent approximately 10% of the Registrant's portfolio)
are secured by a Registrant 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. How-
ever, the geographic diversification of the portfolio
may not protect against a general downturn in the na-
tional economy.
Results of Operations
1998 vs. 1997
Results of operations for the years ended December 31,
1998 and 1997 consisted primarily of interest income of
$2,679,000 and $2,471,000, respectively, earned from in-
vestments in mortgage loans.
Interest income from mortgage loans increased approxi-
mately $207,000 for the year ended December 31, 1998 as
compared to 1997 primarily due to the receipt of addi-
tional interest due to the repayment of Willow Trace in
1998.
Temporary investments increased approximately $17,000
for the year ended December 31, 1998 as compared to 1997
primarily due to higher cash and cash equivalents bal-
ances in 1998.
Other income increased approximately $392,000 for the
year ended December 31, 1998 as compared to 1997 primar-
ily due to the gain realized from the repayment of the
Willow Trace Mortgage Loan and Equity Loan in 1998.
Total expenses, excluding general and administrative and
provision for bad debt, remained fairly consistent with
an increase of approximately 2% for the year ended De-
cember 31, 1998 as compared to 1997.
General and administrative expenses decreased approxi-
mately $26,000 for the year ended December 31, 1998 as
compared to 1997 primarily due to a decrease in legal
and insurance expenses.
A provision for bad debts of approximately $145,000 and
$96,000 was charged for the years ending December 31,
1998 and 1997, respectively, representing the 1995-1998
Guaranteed Interest due from Mortenson and the 1996
Guaranteed Interest due from Windemere.
Results of Operations
1997 vs. 1996
Results of operations for the years ended December 31,
1997 and 1996 consisted primarily of interest income of
approximately $2,471,000 and $2,423,000, respectively,
earned from investments in mortgage loans.
Interest income from mortgage loans increased approxi-
mately $48,000 for the year ended December 31, 1997 as
compared to 1996 primarily due to the receipt of an an-
nual yield payment from Fieldcrest in 1997.
Interest income from temporary investments decreased ap-
proximately $24,000 primarily due to lower cash and cash
equivalents balances.
Total expenses, excluding provision for bad debts, re-
mained fairly constant with a decrease of approximately
2% for the year ended December 31, 1997 as compared to
1996.
A provision for bad debts of approximately $96,000 and
$157,000 was charged for the year ending December 31,
1997 and 1996, respectively, representing the 1995-1997
Guaranteed Interest due from Mortenson.
Recent Financial Accounting Standards
The Financial Accounting Standards Board has recently
issued several new accounting pronouncements. Statement
No. 128, "Earnings per Share" establishes standards for
computing and presenting earnings per share. Statement
No. 129, "Disclosure of Information about Capital Struc-
ture" establishes standards for disclosing information
about an entity's capital structure. The adoption of
these standards in 1997 has not materially affected the
Company's reported operating results, per share amounts,
financial position or cash flows.
In June 1997, SFAS No. 130, Reporting Comprehensive In-
come, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS
No. 130 establishes standards for reporting and display-
ing comprehensive income and its components in a finan-
cial statement that is displayed with the same promi-
nence as other financial statements. Reclassification
of financial statements for earlier periods, provided
for comparative purposes, is required. The statement
also requires the accumulated balance of other compre-
hensive income to be displayed separately from retained
earnings and additional paid-in capital in the equity
section of the statement of financial position.
SFAS No. 131 establishes standards for reporting infor-
mation about operating segments in annual and interim
financial statements. Operating segments are defined as
components of an enterprise about which separate finan-
cial information is available that is evaluated regu-
larly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
Categories required to be reported as well as reconciled
to the financial statements are segment profit or loss,
certain specific revenue and expense items, and segment
assets. SFAS No. 130 and No. 131 are effective for fis-
cal years beginning after December 15, 1997.
SFAS No. 130 is disclosure related only and therefore
will have no impact on the Company's financial position
or results of operations and SFAS No. 131 does not ap-
ply.
In February 1998, FASB issued SFAS No. 132, "Employees'
Disclosures about Pension and Other Postretirement Bene-
fits" ("SFAS No. 132"), which revises employers' disclo-
sures about pension and other postretirement benefit
plans. SFAS No. 132 does not change the measurement or
recognition of those plans. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1997. The
Partnership does not directly have any employees and
SFAS No. 132 is disclosure related only and therefore
will have no impact on the Partnership's financial posi-
tion or results of operations.
In June 1998, FASB issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities" ("SFAS No. 133"),
which establishes accounting and reporting standards for
derivative instruments, including certain derivative in-
struments embedded in other contracts, (collectively re-
ferred to as derivatives) and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Part-
nership does not expect the adoption of this statement
to have a significant impact on the Partnership's finan-
cial position or results of operations.
In October 1998, FASB issued SFAS No. 134, "Accounting
for Mortgage-Backed Securities Retained after the Secu-
ritization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise" ("SFAS No. 134"), which amends SFAS
No. 65 to require that after the securitization of mort-
gage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-
backed securities or other retained interests based on
its ability and intent to sell or hold those invest-
ments. SFAS No. 134 conforms the subsequent accounting
for securities retained after the securitization of
mortgage loans by a mortgage banking enterprise with the
subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage
banking enterprise. SFAS No. 134 is effective for all
fiscal quarters beginning after December 15, 1998. The
Partnership does not expect the adoption of this state-
ment to have a significant impact on the Partnership's
financial position or results of operations.
Year 2000 Compliance
The Partnership utilizes the computer services of an af-
filiate of the General Partner. The affiliate of the
General Partner has upgraded its computer information
systems to be year 2000 compliant and beyond. The Year
2000 compliance issue concerns the inability of a com-
puterized system to accurately record dates after 1999.
The affiliate of the General Partner recently underwent
a conversion of its financial systems applications and
upgraded all of its non-compliant in-house software and
hardware inventory. The work stations that experienced
problems from the testing process were corrected with an
upgrade patch. The costs incurred by the Partnership
are not being charged to the Partnership. The most
likely worst case scenario that the General Partner
faces is that computer operations will be suspended for
a few days to a week at January 1, 2000. The Partner-
ship contingency plan is to have a complete backup done
on December 31, 1999 and both electronic and printed re-
ports generated for all critical data up to and includ-
ing December 31, 1999.
In regard to third parties, the General Partner is in
the process of evaluating the potential adverse impact
that could result from the failure of material service
providers to be Year 2000 compliant. A detailed survey
and assessment was sent to material third parties in the
fourth quarter of 1998. The Partnership has received
assurances from a majority of its third parties with
which it interacts that they have addressed the Year
2000 issues and is evaluating these assurances for their
adequacy and accuracy. In cases where the Partnership
has not received assurances from third parties, it is
initiating further mail and/or phone correspondence.
The Partnership relies heavily on third parties and is
vulnerable to the failures of third parties to address
their year 2000 issues. There can be no assurance given
that the third parties will adequately address their is-
sues.
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk.
Not Applicable
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Page
(a) 1. Financial Statements
Independent Auditors' Report 12
Statements of Financial Condition as of
December 31, 1998 and 1997 13
Statements of Income for the years ended
December 31, 1998, 1997 and 1996 14
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1998, 1997 and 1996 15
Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 16
Notes to Financial Statements 17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the General Partner of
Capital Mortgage Plus L.P.
We audited the accompanying statements of financial con-
dition of Capital Mortgage Plus L.P. (a Delaware limited
partnership) as of December 31, 1998 and 1997 and the
related statements of income, changes in partners' capi-
tal (deficit) and cash flows for each of the three years
ended December 31, 1998. These financial statements are
the responsibility of the General Partner. Our respon-
sibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally ac-
cepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable as-
surance 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 Partner, as
well as evaluating the overall financial statement pres-
entation. We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the fi-
nancial position of Capital Mortgage Plus L.P. as of De-
cember 31, 1998 and 1997, and the results of its opera-
tions and its cash flows for each of the three years
ended December 31, 1998 in conformity with generally ac-
cepted accounting principles.
Bethesda, Maryland REZNICK, FEDDER & SILVERMAN
January 22, 1999
<PAGE>
<TABLE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Investments in
mortgage loans
(Note 3) $22,031,917 $27,085,493
Cash and cash
equivalents 5,491,915 217,902
Accrued interest
receivable
(net of
allowance
of $683,194
and $538,217,
respectively) 344,034 443,267
Loan origination costs
(net of accumulated
amortization of
$139,888 and $141,883,
respectively) 694,061 850,855
Total Assets $28,561,927 $28,597,517
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable
and other
liabilities $ 20,674 $ 46,446
Due to general
partner and
affiliates
(Note 4) 61,592 400,298
Total
liabilities 82,266 446,744
Partners' capital (deficit):
Limited Partners
(1,836,660 BACs issued
and outstanding)
(Note 1) 28,578,664 28,256,354
General Partner (99,003) (105,581)
Total partners'
capital 28,479,661 28,150,773
Total Liabilities
and Partners'
Capital $28,561,927 $28,597,517
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF INCOME
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans
(Note 3) $2,678,758 $2,471,273 $2,423,058
Temporary
investments 32,135 14,658 39,064
Other income 393,785 2,252 2,202
Total revenues 3,104,678 2,488,183 2,464,324
Expenses:
General and
administrative 61,918 88,408 81,012
General and administrative-
related parties
(Note 4) 228,185 216,208 237,509
Provision for bad
debts 144,977 96,079 157,138
Amortization 277,446 280,180 280,180
Total expenses 712,526 680,875 755,839
Net
income $2,392,152 $1,807,308 $1,708,485
Net income per
BAC $ 1.28 $ 0.96 $ 0.91
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' capital (deficit) -
January 1,
1996 $29,882,610 $29,953,555 $ (70,945)
Net income 1,708,485 1,674,315 34,170
Distributions (2,623,815) (2,571,339) (52,476)
Partners' capital (deficit) -
December 31,
1996 28,967,280 29,056,531 (89,251)
Net income 1,807,308 1,771,162 36,146
Distributions (2,623,815) (2,571,339) (52,476)
Partners' capital (deficit) -
December 31,
1997 28,150,773 28,256,354 (105,581)
Net income 2,392,152 2,344,309 47,843
Distributions (2,063,264) (2,021,999) (41,265)
Partners' capital (deficit) -
December 31,
1998 $28,479,661 $28,578,664 $ (99,003)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $2,392,152 $1,807,308 $1,708,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad
debts 144,977 96,079 157,138
Gain on recovery
of amortized
portion of Willow
Trace Equity
Loan (311,742) 0 0
Writeoff of unamortized
portion of Willow Trace
Loan costs 133,859 0 0
Amortization 277,446 280,180 280,180
Amortization of interest rate
buydown (1,452) (1,452) (1,452)
Changes in operating assets and liabilities:
Increase in other
assets (45,744) (173,683) (130,290)
(Decrease) increase in accounts payable
and other
liabilities (25,772) 18,743 (5,775)
(Decrease) increase
in due to
general partner
and
affiliates (338,706) 102,470 (169,203)
Total
adjustments (167,134) 322,337 130,598
Net cash provided by
operating
activities 2,225,018 2,129,645 1,839,083
Cash flows from
investing
activities:
Receipt of principal
on mortgage
loans 4,432,259 144,612 133,829
Receipt of principal
on equity
loan 680,000 0 0
Net cash provided by
investing
activities 5,112,259 144,612 133,829
Cash flows from
financing
activities:
Distributions to
partners (2,063,264) (2,623,815) (2,623,815)
Net cash used in
financing
activities (2,063,264) (2,623,815) (2,623,815)
Net increase (decrease)
in cash and cash
equivalents 5,274,013 (349,558) (650,903)
Cash and cash
equivalents at beginning of
year 217,902 567,460 1,218,363
Cash and cash
equivalents at end of
year $5,491,915 $ 217,902 $ 567,460
See Accompanying Notes to Consolidated Financial State-
ments.
</TABLE>
<PAGE>
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 1 - General
Capital Mortgage Plus L.P., a Delaware limited partner-
ship (the "Partnership") commenced a public offering
(the "Offering") on May 10, 1989 of 5,000,000
($100,000,000) Beneficial Assignment Certificates
("BACs") representing assignments of limited partnership
interests. The BACs represent an assignment of all of
the economic and virtually all of the ownership rights
attributable to the limited partnership interests in the
Partnership. The BACs holders have virtually the same
rights and, for all practical purposes, are limited
partners of the Partnership.
Pursuant to the Offering, the Partnership received
$36,733,200 of gross proceeds from the BACs holders rep-
resenting 1,836,660 BACs. The final close of the Offer-
ing occurred on May 23, 1991 and no further issuance of
BACs is anticipated.
The Partnership was organized on November 23, 1988 and
will continue until December 31, 2041 unless terminated
sooner under the provisions of its Partnership Agree-
ment.
The general partner of the Partnership is CIP Associ-
ates, Inc., a Delaware corporation (the "General Part-
ner"). Related FI BUC$ Associates, Inc. is the Assignor
Limited Partner of the Partnership. CIP Associates,
Inc. and Related FI BUC$ Associates, Inc. are under sub-
stantially common ownership.
The Partnership was formed to invest in insured or guar-
anteed mortgage investments. The Partnership has in-
vested in first mortgage construction and permanent
loans ("Mortgages") to finance multifamily residential
rental properties ("Developments") developed by unaf-
filiated entities. After an initial period, a substan-
tial portion of the Mortgages is expected to provide for
additional interest based on the annual cash flow from
the Developments and the proceeds of prepayments, sales
or other dispositions. All base interest and initially
at least 90% of the principal of the Mortgages is in-
sured or coinsured by the Department of Housing and Ur-
ban Development ("HUD") and a private mortgage lender
(which is an affiliate of the General Partner). The
Partnership has also invested in uninsured equity loans
made directly to developers of developments on which the
Partnership holds a first mortgage.
Net income and distributions from operations of the
Partnership are allocated 2% to the General Partner and
98% to the limited partners, until the limited partners
have received an 11% per annum non-cumulative non-
compounded return on their adjusted contributions as de-
fined in the Amended and Restated Agreement of Limited
Partnership. Thereafter, net income and distributions
will be allocated 90% to the limited partners and 10% to
the General Partner. Distributions of disposition pro-
ceeds are allocated 1% to the General Partner and 99% to
the limited partners until each limited partner has re-
ceived an amount equal to his original contribution plus
an amount which, when added to all prior distributions
equals a 7% per annum cumulative non-compounded return
on his adjusted contribution; then 2% and 98% of dispo-
sition proceeds, until each limited partner has received
an amount which, when added to all prior distributions
equals an 11% per annum cumulative non-compounded return
on his adjusted contribution; and thereafter 10% to the
General Partner and 90% to the limited partners.
The distributions per BAC were $3.45, $1.40 and $1.40
for 1998, 1997 and 1996. The 1998, 1997 and 1996 dis-
tributions were made from adjusted cash flow from opera-
tions (and, in particular the fourth quarter 1998 dis-
tribution which was paid on February 14, 1999 from the
repayment of Willow Trace loan, $2.45 per BAC of which
is considered to be a return of capital) and to a lesser
extent were supplemented from working capital reserves,
which was considered to be a return of capital.
NOTE 2 - Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained
on the accrual basis of accounting in accordance with
generally accepted accounting principles ("GAAP").
The preparation of financial statements in conformity
with GAAP requires the General Partner to make estimates
and assumptions that affect the reported amounts of as-
sets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues
and expenses during the reporting period. Significant
estimates are made when accounting for the allowance for
the interest receivable. Actual results could differ
from those estimates.
Acquisition expenses incurred for the investment of
mortgage loans have been capitalized and are included in
loan origination costs, which are being amortized over
the average expected lives of the respective mortgages
when acquired and written off when the loan is repaid.
The equity loans are considered to be premiums paid to
obtain the mortgage loans and are being amortized over
the average expected lives of the respective mortgages.
Interest rate buydowns are being amortized as an adjust-
ment to the effective interest rate over the average ex-
pected lives of the respective mortgages.
b) Cash and Cash Equivalents
Cash and cash equivalents include temporary investments
with original maturity dates of less than 3 months when
acquired and are carried at cost plus accrued interest,
which approximates market.
c) Income Taxes
The Partnership is not required to provide for, or pay,
any federal income taxes. Income tax attributes that
arise from its operation are passed directly to the in-
dividual partners. The Partnership may be subject to
state and local taxes in jurisdictions in which it oper-
ates.
d) New Pronouncements
The Financial Accounting Standards Board has recently
issued several new accounting pronouncements. Statement
No. 128, "Earnings per Share" establishes standards for
computing and presenting earnings per share. Statement
No. 129, "Disclosure of Information about Capital Struc-
ture" establishes standards for disclosing information
about an entity's capital structure. The adoption of
these standards in 1997 has not materially affected the
Company's reported operating results, per share amounts,
financial position or cash flows.
In June 1997, SFAS No. 130, Reporting Comprehensive In-
come, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, were issued. SFAS
No. 130 establishes standards for reporting and display-
ing comprehensive income and its components in a finan-
cial statement that is displayed with the same promi-
nence as other financial statements. Reclassification
of financial statements for earlier periods, provided
for comparative purposes, is required. The statement
also requires the accumulated balance of other compre-
hensive income to be displayed separately from retained
earnings and additional paid-in capital in the equity
section of the statement of financial position.
SFAS No. 131 establishes standards for reporting infor-
mation about operating segments in annual and interim
financial statements. Operating segments are defined as
components of an enterprise about which separate finan-
cial information is available that is evaluated regu-
larly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
Categories required to be reported as well as reconciled
to the financial statements are segment profit or loss,
certain specific revenue and expense items, and segment
assets. SFAS No. 130 and No. 131 are effective for fis-
cal years beginning after December 15, 1997.
SFAS No. 130 is disclosure related only and therefore
will have no impact on the Company's financial position
or results of operations and SFAS No. 131 does not ap-
ply.
In February 1998, FASB issued SFAS No. 132, "Employees'
Disclosures about Pension and Other Postretirement Bene-
fits" ("SFAS No. 132"), which revises employers' disclo-
sures about pension and other postretirement benefit
plans. SFAS No. 132 does not change the measurement or
recognition of those plans. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1998. The
Partnership does not directly have any employees and
SFAS No. 132 is disclosure related only and therefore
will have no impact on the Partnership's financial posi-
tion or results of operations.
In June 1998, FASB issued SFAS No. 133, "Accounting for
Derivatives and Hedging Activities" ("SFAS No. 133"),
which establishes accounting and reporting standards for
derivative instruments, including certain derivative in-
struments embedded in other contracts, (collectively re-
ferred to as derivatives) and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Part-
nership does not expect the adoption of this statement
to have a significant impact on the Partnership's finan-
cial position or results of operations.
In October 1998, FASB issued SFAS No. 134, "Accounting
for Mortgage-Backed Securities Retained after the Secu-
ritization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise" ("SFAS No. 134"), which amends SFAS
No. 65 to require that after the securitization of mort-
gage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-
backed securities or other retained interests based on
its ability and intent to sell or hold those invest-
ments. SFAS No. 134 conforms the subsequent accounting
for securities retained after the securitization of
mortgage loans by a mortgage banking enterprise with the
subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage
banking enterprise. SFAS No. 134 is effective for all
fiscal quarters beginning after December 15, 1997. The
Partnership does not expect the adoption of this state-
ment to have a significant impact on the Partnership's
financial position or results of operations.
<TABLE>
Note 3 - Investments in Loans
The Partnership has funded five mortgage loans and
originated five noninterest bearing equity loans the ag-
gregate amount of $29,220,325, one of which was repaid
on December 16, 1998.
Information relating to investments in mortgage loans
and equity loans as of December 31, 1998 and 1997 is as
follows:
<CAPTION>
No. of
Apart Date of Final
Property/ -ment Invest- Maturity
Location Units ment Date
<S> <C> <C> <C>
Mortenson 104 8/90 8/30
Manor
Apts./
Ames, IA
Windemere 204 9/90 9/30
Apts./
Wichita, KS
Fieldcrest III 112 8/91 8/31
Apts./
Dothan, AL
Holly Ridge II 144 3/93 3/33
Apts./
Gresham, OR
Willow Trace 152 6/93 (F)
Apts./
Tuscaloosa, AL
Amounts Advanced
Invest- Invest-
ments ments
Total in in
Property/ Mortgage Equity Amounts Loans at Loans at
Location Loans Loans Advanced 12/31/98 12/31/97
(E) (E)
<S> <C> <C> <C> <C> <C>
Mortenson
Manor $4,974,090 $577,885 $5,551,975 $4,919,828 $5,009,020
Apts./
Ames, IA
Windemere
Apts./ 8,110,300 736,550 8,846,850 8,116,356 8,222,672
Wichita, KS
Fieldcrest III
Apts./ 3,343,700 383,300 3,727,000 3,419,612 3,467,130
Dothan, AL
Holly Ridge II
Apts./ 5,310,100 684,400 5,994,500 5,576,121 5,656,344
Gresham, OR
Willow Trace
Apts./ 4,420,000 680,000 5,100,000 0 4,730,327
Tuscaloosa, AL
Total $26,158,190 $3,062,135 $29,220,325 $22,031,917 $27,085,493
Interest earned by the Partnership during 1998
Non-contingent Contingent
Cash Flow
Base Default Annual Partici-
Interest Interest Yield pation Total
Property/ Amount/ Amount/ Amount/ Amount/ Interest
Location Rate (A) Rate (B) Rate (C) Rate (D) Earned
<S> <C> <C> <C> <C> <C>
Mortenson $ 302,809 $95,531 $ 0 $ 0 $ 398,340
Manor 6.45% 1.98% 0.97% 30.00%
Apts./
Ames, IA
Windemere 627,402 128,022 0 0 755,424
Apts./ 7.95% 1.60% 1.08% 30.00%
Wichita, KS
Fieldcrest III 283,992 47,559 45,318 11,491 388,360
Apts./ 8.68% 0.07% 1.36% 30.00%
Dothan, AL
Holly Ridge II 425,167 87,726 N/A 0 512,893
Apts./ 8.125% 1.00% 0.64% 30.00%
Gresham, OR
Willow Trace 342,208 54,790 N/A 226,743 623,741
Apts./ 8.37% 1.287% 30.00%
Tuscaloosa, AL
Total $ 1,981,578 $413,628 $45,318 $ 238,234 $2,678,758
</TABLE
(A) Base interest on the Mortgages is that amount that
is insured/co-insured by HUD and is being shown net of
service fee.
(B) 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.
(C) Annual Yield is the amount over the default rate
and is contingent upon property cash flow.
(D) 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,
Willow Trace and Holly Ridge provided sufficient cash
flow in 1996 to pay the Partnership a participation dur-
ing 1997. Fieldcrest and Willow Trace provided suffi-
cient cash flow in 1997 to pay the Partnership a par-
ticipation during 1998. Willow Trace provided suffi-
cient cash flow in 1997 and 1998 to pay the Partnership
a participation in 1998.
(E) The Investments in Loans amount reflects the unpaid
balance of the Mortgages and the unamortized balance of
the equity loans in the amounts of $21,078,025 and
$953,892 at December 31, 1998 and $25,508,832 and
$1,576,661, respectively, at December 31, 1997.
(F) On December 16, 1998, Willow Partners, Ltd. (the
"Owner"), the owner of Willow Trace Apartments ("Willow
Trace"), prepaid the outstanding FHA Co-Insured Mortgage
Loan (the "Mortgage Loan") and equity loan (the "Equity
Loan") in full. The Mortgage Loan and the Equity Loan
were secured by a mortgage on the Willow Trace property
and partnership interests in the Owner. The outstanding
debt repaid early to the Partnership totaled $5,372,859,
including the $4,275,984 outstanding balance of the
Mortgage Loan, the $680,000 Equity Loan, a $213,799 pre-
payment premium and $203,076 of additional interest due
pursuant to the loan documents.
Total interest earned on the schedule of investment in
loans does not include the gain on the recovery of the
amortized portion of the Willow Trace Equity Loan of
$311,742, the writeoff of the unamortized portion of the
Willow Trace Loan costs of $133,859 and the $213,799
prepayment premium, all of which are included in other
income on the Statements of Income.
</TABLE>
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Investment in loans
January 1, $27,085,493 $27,485,450
Additions:
Fieldcrest III discount
amortization 1,452 1,452
1,452 1,452
Deductions:
Amortization of equity
loans (254,511) (256,796)
Collection of principal -Mortgages
-Mortenson (41,034) (38,478)
-Windemere (44,937) (41,485)
-Fieldcrest III (15,410) (14,123)
-Holly Ridge (23,190) (21,360)
-Willow Trace (4,307,688) (29,167)
Collection of principal-Equity loan
-Willow Trace* (368,258) 0
(5,055,028) (401,409)
Investment in loans
December 31, $22,031,917 $27,085,493
*This is the unamortized portion of the equity loan and
the balance of the $680,000 repaid is included in other
income on the Statements of Income.
</TABLE>
The Mortenson Manor and Windemere Mortgages are co-
insured by HUD and Related Mortgage Corporation ("RMC"),
an affiliate of the General Partner. The Fieldcrest III
and Holly Ridge Mortgages are insured by HUD. Willow
Trace was insured by HUD.
In addition to the interest rate during the post-
construction periods, the Partnership will be entitled
to payment of 30% of cash flow remaining after payment
of the permanent loan interest and accrued interest, if
any, and certain amounts from sale or refinancing pro-
ceeds.
The equity loans are non-interest bearing and are se-
cured by the assignment of the owner/developers' inter-
ests 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 Mortgages. These premiums are being amor-
tized over the average expected lives of the respective
Mortgages.
The Fieldcrest general partner paid $17,440 to the Part-
nership as an interest rate buydown during the construc-
tion period. For financial reporting purposes, the fee
is treated as an adjustment to the effective interest
rate on the Mortgage.
At December 31, 1998, all of the loans due to the Part-
nership are current with respect to their FHA mortgage
obligations. Mortenson has not paid its default inter-
est of approximately $151,000 , $96,000 and $85,000 for
the years ended December 31, 1998, 1997 and 1996, re-
spectively. During the first quarter of 1998 and 1997,
the Partnership received default interest of approxi-
mately $40,000 and $25,000, representing partial payment
for 1997 and 1996, respectively. Windmere has not paid
its default interest of approximately $130,000 for the
year ended December 31, 1996. As a result, an allowance
for uncollectability relating to the default interest
amounted to approximately $683,194 and $538,217 at De-
cember 31, 1998 and 1997, respectively.
The operations of Mortenson have not been able to sup-
port 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 rede-
fined 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 cal-
culation of participation percentages. Mortenson also
agreed to defer the management fee payable up to the De-
fault Rate. Pursuant to this modification agreement,
default interest for both 1998 and 1997 of approximately
$151,000, has been accrued and approximately $56,000 for
1997 has been reserved.
<TABLE>
NOTE 4 - Related Parties
The costs incurred to related parties for the years
ended December 31, 1998, 1997 and 1996 were as follows:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Partnership
management
fees
(a) $146,391 $153,065 $153,065
Expense
reimbursement
(b) 81,794 63,143 84,444
Total general and
administrative-
related
parties $228,185 $216,208 $237,509
</TABLE>
(a) A Partnership management fee for managing the af-
fairs of the Partnership equal to .5% per annum of in-
vested assets is payable out of cash flow to the General
Partner. The fourth quarter 1998 partnership management
fee was calculated on the reduced asset base due to the
repayment of the Willow Trace Mortgage Loan and Equity
Loan on December 16, 1998. During the years ended De-
cember 31, 1998, 1997 and 1996, payments of $344,000,
$114,799 and $267,864 were made, respectively. As of
December 31, 1998 and 1997, a balance of $32,000 and
$305,822, 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, regis-
ter, transfer and assignment functions, asset manage-
ment, investor communications, printing services and
other administrative services. The amount of reimburse-
ment from the Partnership is limited by the provisions
of the Partnership Agreement. An affiliate of the Gen-
eral Partner performs assets monitoring for the Partner-
ship. These services include site visits and evalua-
tions of the performance of the properties securing the
loans. During the years ended December 31, 1998, 1997
and 1996, payments of $146,332, $1,062 and $138,849 were
made, respectively, relating to these costs. As of De-
cember 31, 1998 and 1997, the General Partner and its
affiliates were due $30,000 and $94,476, respectively.
RMC is a co-insurer on the Mortenson and Windemere Mort-
gages in which the Partnership has invested. RMC is en-
titled to a mortgage insurance premium which is paid by
the mortgagors.
NOTE 5 - Fair Value of Financial Instruments
Financial Accounting Standards Board SFAS No. 107, "Dis-
closures about Fair Value of Financial Instruments" re-
quires that the estimated fair value of financial in-
struments, as defined by SFAS No. 107, be disclosed.
Financial instruments are defined as cash, evidence of
an ownership interest in an entity or a contract which
creates obligations and rights to exchange cash and/or
other financial instruments. SFAS No. 107 also requires
disclosures of the methods and significant assumptions
used to estimate the fair value of financial instru-
ments.
Considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily in-
dicative of the amounts that the Partnership could real-
ize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value
amounts.
The following methods/assumptions were used to estimate
the fair value of each class of financial instrument:
Cash and Cash Equivalents
Fair value is determined to be the carrying value be-
cause they mature in three months or less and do not
represent unanticipated credit concerns.
Investments in Loans
At December 31, 1998, the estimated carrying value of
the mortgage loans approximated fair value. The esti-
mated fair values at December 31, 1998 were based on in-
ternal valuations of the four properties collateralizing
these loans. Fair value estimates are made at a spe-
cific point in time, based on relevant market informa-
tion and information about the financial instrument
which sets forth the terms of a loan. This estimate is
subjective in nature and involves uncertainties and mat-
ters of significant judgment. Changes in assumptions
could significantly affect estimates. Due to the prop-
erty-specific nature of the loans and the lack of a
ready market for such investments, this fair value esti-
mate does not necessarily represent the amount which the
Partnership could realize upon a current sale of its in-
vestments.
NOTE 6 - Subsequent Event
On February 14, 1999, a distribution of $4,962,756 and
$54,900 was paid to BAC holders and the General Partner,
respectively, representing the 1998 fourth quarter dis-
tributions.
<PAGE>
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Regis-
trant.
The Registrant has no directors or executive officers.
The Registrant's affairs are managed and controlled by
the General Partner. The General Partner was organized
in Delaware in November 1988. The executive officers
and director of the General Partner have held their po-
sitions as indicated below. Certain information con-
cerning the director and executive officers of the Gen-
eral Partner is set forth below.
The Registrant, the General Partner and its directors
and executive officers, and any BACs holder holding more
than ten percent of the Registrant's BACs are required
to report their initial ownership of such BACs and any
subsequent changes in that ownership to the Securities
and Exchange Commission on Forms 3, 4 and 5. Such ex-
ecutive officers, directors (and ten percent holders)
are required by Securities and Exchange Commission regu-
lators to furnish the Registrant with copies of all
Forms 3, 4 or 5 they file. The Registrant is not aware
of any BACs holders who own more than ten percent of the
BACs. All of these filing requirements were satisfied
by the officers and directors of the General Partner on
a timely basis. In making these disclosures, the Regis-
trant has relied solely on written representations of
the General Partner's directors and executive officers
or copies of the reports they have filed with the Secu-
rities and Exchange Commission during and with respect
to its most recent fiscal year.
CIP Associates Inc.
Name Position Position Held Since
J. Michael Fried President and Director 1988
Stephen M. Ross Director 1988
Stuart J. Boesky Senior Vice President 1988
Alan P. Hirmes Senior Vice President 1988
Glenn F. Hopps Treasurer 1998
Teresa Wicelinski Secretary 1998
J. MICHAEL FRIED, 54, is President and a Director of the
General Partner. Mr. Fried is President, a Director and
a principal shareholder of Related Capital Company
("Capital"), an affiliate of the General Partner, a real
estate finance and acquisition affiliate of the General
Partner. In that capacity, he is the chief executive
officer of Capital, and is responsible for initiating
and directing all of Capital's syndication, finance, ac-
quisition and investor reporting activities. Mr. Fried
practiced corporate law in New York City with the law
firm of Proskauer Rose Goetz & Mendelsohn from 1974 un-
til he joined Capital in 1979. Mr. Fried graduated from
Brooklyn Law School with a Juris Doctor degree, magna
cum laude; from Long Island University Graduate School
with a Master of Science degree in Psychology; and from
Michigan State University with a Bachelor of Arts degree
in History.
STEPHEN M. ROSS, 58, is a Director of the General Part-
ner. Mr. Ross is President of The Related Companies,
L.P. He graduated from The University of Michigan with
a Bachelor of Business Administration degree and from
Wayne State School of Law. Mr. Ross then received a
Master of Law degree in taxation from New York Univer-
sity School of Law. He joined the accounting firm of
Coopers & Lybrand in Detroit as a tax specialist and
later moved to New York, where he worked for two large
Wall Street investment banking firms in their real es-
tate and corporate finance departments. Mr. Ross formed
The Related Companies, Inc. ("Related") in 1972, to de-
velop, manage, finance and acquire subsidized and con-
ventional apartment developments. To date, Related has
developed multi-family properties totaling in excess of
25,000 units, all of which it manages.
STUART J. BOESKY, 42 is a Vice President of the General
Partner. Mr. Boesky practiced real estate and tax law
in New York City with the law firm of Shipley & Roth-
stein from 1984 until February 1986 when he joined Capi-
tal where he presently serves as Managing Director.
From 1983 to 1984 Mr. Boesky practiced law with the Bos-
ton law firm of Kaye, Fialkow Richard & Rothstein (which
subsequently merged with Strook & Strook & Lavan) and
from 1978 to 1980 was a consultant specializing in real
estate at the accounting firm of Laventhol & Horwath.
Mr. Boesky graduated from Michigan State University with
a Bachelor of Arts degree and from Wayne State School of
Law with a Juris Doctor degree. He then received a Mas-
ter of Law degree in Taxation from Boston University
School of Law.
ALAN P. HIRMES, 44, is a Vice President of the General
Partner. Mr. Hirmes has been a Certified Public Ac-
countant in New York since 1978. Prior to joining Capi-
tal in October 1983, Mr. Hirmes was employed by Weiner &
Co., certified public accountants. Mr. Hirmes is also a
Managing Director of Capital. Mr. Hirmes graduated from
Hofstra University with a Bachelor of Arts degree.
GLENN F. HOPPS, 35, joined Related in December, 1990,
and prior to that date was employed by Marks Shron &
Company and Weissbarth, Altman and Michaelson, certified
public accountants. Mr. Hopps graduated from New York
State University at Albany with a Bachelor of Science
Degree in Accounting.
TERESA WICELINSKI, 33, joined Related in June 1992, and
prior to that date was employed by Friedman, Alprin &
Green, certified public accountants. Ms. Wicelinski
graduated from Pace University with a Bachelor of Arts
Degree in Accounting.
There are no family relationships between the foregoing
directors or executive officers.
Item 11. Executive Compensation.
The Registrant has no officers or directors. The Regis-
trant does not pay or accrue any fees, salaries or other
forms of compensation to directors or officers of the
General Partner for their services. Certain directors
and officers of the General Partner receive compensation
from the General Partner and its affiliates for services
performed for various affiliated entities which may in-
clude services performed for the Registrant. Such com-
pensation may be based in part on the performance of the
Registrant; however, the General Partner believes that
any compensation attributable to services performed for
the Registrant is immaterial. See also Note 4-Related
Parties, in Notes to the Financial Statements, included
in Item 8 above.
Item 12. Security Ownership of Certain Beneficial Own-
ers and Management.
As of March 3, 1999, no person was known by the Regis-
trant to be the beneficial owner of more than five per-
cent of the Limited Partnership Interests and/or BACs;
and neither the General Partner nor any director or of-
ficer of the General Partner owns any Limited Partner-
ship Interests or BACs.
As of March 3, 1999, the directors and officers of the
General Partner as a group own, in the aggregate, 95.2%
of the common stock of CIP Associates Inc.
Item 13. Certain Relationships and Related Transac-
tions.
The Registrant has and will continue to have certain re-
lationships with the General Partner and its affiliates,
as discussed in Item 11 Executive Compensation. How-
ever, there have been no direct financial transactions
between the Registrant and the directors and officers of
the General Partner. See Note 4-Related Parties, in
Notes to the Financial Statements, included in Item 8
above.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
Sequen
tial
Page
(a) 1. Financial Statements
Independent Auditors' Report 12
Statements of Financial Condition as of
December 31, 1998 and 1997 13
Statements of Income for the years ended
December 31, 1998, 1997 and 1996 14
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1998, 1997 and 1996 15
Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 16
Notes to Financial Statements 17
(a) 2. Financial Statement Schedules
All schedules have been omitted because
they are not required or because the re-
quired information is contained in the fi-
nancial statements or notes hereto.
(a) 3. Exhibits
(3A) The Registrant's Amended and Restated
Agreement of Limited Partnership, incorpo-
rated by reference to Exhibit A to the
Registrant's Prospectus, dated May 10,
1989 (the "Prospectus"), filed pursuant to
Rule 424(b) under the Securities Act of
1933, File No. 33-26690.
(3B) The Registrant's Certificate of Limited
Partnership, as amended, incorporated by
reference to Exhibits 3B and 3C to the
Registrant's Registration Statement on
Form S-11, File No. 33-26690, dated Janu-
ary 24, 1989 and to Exhibit 3D to Amend-
ment No. 1 to such Registration Statement
dated April 28, 1989
(3C) Amendment No. 1, dated July 7, 1989, to
the Registrant's Amended and Restated
Agreement of Limited Partnership
(10A) Mortgage Note, dated August 31, 1990, with
respect to Mortenson Manor Apartments in
Ames, Iowa, in the principal amount of
$4,974,900 (incorporated by reference to
Exhibit 10(a) in the Registrant's Current
Report on Form 8-K dated August 31, 1990)
(10B) Equity Loan Note dated August 31, 1990,
with respect to Mortenson Manor Apartments
in Ames, Iowa, in the principal amount of
$577,885 (incorporated by reference to Ex-
hibit 10(b) in the Registrant's Current
Report on Form 8-K dated August 31, 1990)
(10C) Subordinated Promissory Note, dated August
31, 1990 with respect to Mortenson Manor
Partnership (incorporated by reference to
Exhibit 10(c) in the Registrant's Current
Report on Form 8-K dated August 31, 1990)
(10D) Mortgage Note, dated September 27, 1990,
with respect to Windemere Apartments in
Wichita, Kansas, in the principal amount
of $8,110,300 (incorporated by reference
to Exhibit 10(a) in the Registrant's Form
8 Amendment dated October 30, 1990 to Cur-
rent Report on Form 8-K dated September
28, 1990)
(10E) Equity Loan Note, dated September 27,
1990, with respect to Windemere Apartments
in Wichita, Kansas, in the principal
amount of $736,500 (incorporated by refer-
ence in Exhibit 10(b) in the Registrant's
Form 8 Amendment dated October 30, 1990 to
Current Report on Form 8-K dated September
28, 1990)
(10F) Subordinated Promissory Note, dated Sep-
tember 27, 1990 with respect to Windemere
Development, Inc. (incorporated by refer-
ence to Exhibit 10(c) in the Registrant's
Form 8 Amendment dated October 30, 1990 to
Current Report on Form 8-K dated September
28, 1990)
(10G) Mortgage Note, dated August 23, 1991, with
respect to Fieldcrest III Apartments in
Dothan, Alabama, in the principal amount
of $3,450,200 (incorporated by reference
to Exhibit 10(a) in the Registrant's Cur-
rent Report on Form 8-K dated August 27,
1991)
(10H) Equity Loan Note, dated August 27, 1991,
with respect to Fieldcrest III Apartments
in Dothan, Alabama, in the principal
amount of $383,300 (incorporated by refer-
ence to Exhibit 10(b) in the Registrant's
Current Report on Form 8-K dated August
27, 1991)
(10I) Subordinated Promissory Note, dated August
27, 1991 with respect to Fieldcrest III
Apartments (incorporated by reference to
Exhibit 10(c) in the Registrant's Current
Report on Form 8-K dated August 27, 1991)
(10J) Mortgage Note, dated March 1, 1993, with
respect to Holly Ridge Apartments in
Gresham, Oregon, in the principal amount
of $5,310,000 (incorporated by reference
to Exhibit 10(a) in the Registrant's Cur-
rent Report on Form 8-K dated March 16,
1993)
(10K) Equity Loan dated March 16, 1993, with re-
spect to Holly Ridge Apartments in
Gresham, Oregon, in the principal amount
of $684,000 (incorporated by reference to
Exhibit 10(b) in the Registrant's Current
Report on Form 8-K dated March 16, 1993)
(10L) Subordinated Promissory Note, dated March
16, 1993, with respect to Holly Ridge
Apartments in Gresham, Oregon (incorpo-
rated by reference to Exhibit 10(c) in the
Registrant's Current Report on Form 8-K
dated March 16, 1993)
(10M) Mortgage Note, dated June 18, 1993, with
respect to Willow Trace Apartments in Tus-
caloosa, Alabama, in the principal amount
of $4,420,000 (incorporated by reference
to Exhibit (10M) in the Registrant's Form
10-K for the fiscal year ended December
31, 1993)
(10N) Equity Loan dated June 18, 1993, with re-
spect to Willow Trace Apartments in Tusca-
loosa, Alabama, in the principal amount of
$680,000 (incorporated by reference to Ex-
hibit (10N) in the Registrant's Form 10-K
for the fiscal year ended December 31,
1993)
(10O) Subordinated Promissory Note, dated June
18, 1993, with respect to Willow Trace
Apartments in Tuscaloosa, Alabama (incor-
porated by reference to Exhibit (10O) in
the Registrant's Form 10-K for the fiscal
year ended December 31, 1993)
(10P) Modification Agreement, dated January 1,
1995, with respect to Mortenson Manor
Apartments in Ames, Iowa (incorporated by
reference to Exhibit (10P) in the Regis-
trant's Form 10-K for the fiscal year
ended December 31, 1995)
(10Q) Guaranty made for the benefit of the Reg-
istrant, dated January 1, 1995, with re-
spect to the Modification Agreement re-
garding Mortenson Manor Apartments (incor-
porated by reference to Exhibit (10Q) in
the Registrant's Form 10-K for the fiscal
year ended December 31, 1995)
27 Financial Data Schedule (filed herewith) 35
99. Additional Exhibits
(99A) The Financial Statements of Windemere De-
velopment, Inc., which owns and operates
an apartment complex known as Windemere at
Tallgrass located in Wichita, Kansas, as
required by Staff Accounting Bulletin No. 71 36
(99B) The Financial Statements of Mortenson II,
which owns and operates an apartment com-
plex known as Mortenson Manor located in
Ames, Iowa, as required by Staff Account-
ing Bulletin No 71. 64
(99C) The Financial statements of HR II Associ-
ates, which owns and operates an apartment
complex known as Holly Ridge located in
Gresham, Oregon, as required by Staff Ac-
counting Bulletin No 71. 94
(b) Reports on Form 8-K
No reports on Form 8-K were filed during
the last quarter of the period covered by
this report.
<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.
CAPITAL MORTGAGE PLUS L.P.
(Registrant)
By: CIP ASSOCIATES, INC.
General Partner
Date: April 5, 1999
By: /s/ J. Michael Fried
J. Michael Fried
President and Director
(Principal Executive Officer)
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, this report has been signed by
the following persons on behalf of the registrant and in
the capacities and on the dates indicated:
Signature Title Date
President
(principal executive officer)
/s/ J. Michael Fried and Director of CIP Associates, Inc.
J. Michael Fried (the General Partner of the Regis-
trant) April 5, 1999
Senior Vice President (principal
/s/ Alan P. Hirmes financial officer) of CIP Associates, Inc.
Alan P. Hirmes (the General Partner of the Regis-
trant) April 5, 1999
Treasurer (principal accounting
/s/ Glenn F. Hopps officer) of CIP Associates, Inc.
Glenn F. Hopps (the General Partner of the Regis-
trant) April 5, 1999
/s/ Stephen M. Ross Director of CIP Associates, Inc.
Stephen M. Ross (the General Partner of the Regis-
trant) April 5, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information ex-
tracted from the financial statements for Capital Mort-
gage Plus L.P. and is qualified in its entirety by ref-
erence to such financial statements
</LEGEND>
<CIK> 0000845875
<NAME> Capital Mortgage Plus L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,491,915
<SECURITIES> 0
<RECEIVABLES> 22,431,054
<ALLOWANCES> 694,061
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,561,927
<CURRENT-LIABILITIES> 82,266
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,479,661
<TOTAL-LIABILITY-AND-EQUITY> 28,561,927
<SALES> 0
<TOTAL-REVENUES> 3,104,678
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 637,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,392,152
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,392,152
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 0
</TABLE>
