SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-36336
INTERVEST MORTGAGE ASSOCIATES L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3575243
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Rockefeller Plaza, New York, New York 10020-1903
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 757-7300
-----------------------------
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 .
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Results for the three months and nine months ended September 30, 1996 and 1995,
include, in the opinion ofmanagement, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results for such
interim periods. Results for the three months and nine months ended September
30, 1996 and 1995 are not necessarily indicative of the results for the full
years.
2
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INTERVEST MORTGAGE ASSOCIATES L.P.
BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
---- ----
(Unaudited)
Cash and cash equivalents $ 6,629,000 $ 6,566,000
Mortgages receivable, includes due from
affiliates $1,300,000 and $1,300,000 (Note C) 5,399,000 5,542,000
Other receivables 137,000 69,000
---------- ----------
TOTAL $12,165,000 $12,177,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Distributions payable (Note F) $ 1,991,000 $ 1,738,000
Escrow deposits payable 117,000 367,000
Deferred fee income 10,000 27,000
---------- ----------
TOTAL 2,118,000 2,132,000
Partners' Capital 10,047,000 10,045,000
---------- ----------
TOTAL $12,165,000 $12,177,000
=========== ===========
* * * * *
STATEMENT OF OPERATIONS
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
Revenue:
Interest income (Note G)
- Affiliates $ 33,000 $ 74,000 $165,000 $260,000
- Others 214,000 252,000 664,000 684,000
------- ------- ------- -------
247,000 326,000 829,000 944,000
Other income 55,000 76,000
------- ------- ------- -------
302,000 326,000 905,000 944,000
Expenses:
General and administrative 2,000 4,000
Other expenses
------- ------- ------- -------
NET INCOME $302,000 $326,000 $903,000 $940,000
======== ======== ======== ========
The accompanying notes to financial statemetns are an integral part hereof.
3
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<TABLE>
<CAPTION>
INTERVEST MORTGAGE ASSOCIATES L.P.
STATEMENTS OF CASH FLOW
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
(Unaudited)
Cash flows from operating activites:
<S> <C> <C>
Net income $ 903,000 $ 940,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of discount on mortgages receivable (10,000) (15,000)
Gain on early repayment of discounted mortgages (10,000)
(Increase) Decrease in other receivables (68,000) 46,000
(Decrease) increase in deferred fee income (17,000) 31,000
------- ------
Net cash provided by operating activities 808,000 992,000
------- -------
Cash flows from investing activities:
collection of mortgages receivable 1,026,000 3,879,000
Mortgages receivable acquired
Properties owned by others (873,000) (1,821,000)
(Decrease) Increase in escrow deposits payable (250,000) 306,000
-------- -------
Net cash (used in) provided by investing activities (97,000) 2,364,000
------- ---------
Cash flows from financing activities:
Partners' contributions to capital 2,000 4,000
Distributions to limited partners, net of increase
in distributions payable of $253,000 and $334,000 (650,000) (586,000)
-------- --------
Net cash (used in) financing activities (648,000) (582,000)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 63,000 2,774,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 6,566,000 3,726,000
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 6,629,000 $ 6,500,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
</TABLE>
4
<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Nine Month Periods Ended
September 30, 1996 and 1995)
(NOTE A) - Organization and Business:
- -------------------------------------
Intervest Mortgage Associates L.P., a Delaware limited partnership (the
"Partnership"), was formed for the primary purpose of investing in mortgages on
improved income-producing real properties. The Partnership will continue until
December 31, 1999, unless terminated sooner in accordance with the provisions of
the partnership agreement.
The special limited partners, Lowell S. Dansker and Lawrence G. Bergman each own
50% of the common stock of Intervest Funds Management Corporation, the General
Partner.
(NOTE B) - Significant Accounting Policies:
- -------------------------------------------
Cash Equivalents:
- -----------------
The Partnership considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
(NOTE C) - Mortgages Receivable:
- --------------------------------
Mortgages receivable consist of first mortgages on residential properties.
Interest rates on mortgages range from 9 1/2% to 16%. Certain mortgages have
been discounted utilizing rates ranging from 11% to 17%.
Annual maturities of mortgages receivable during the next five years are
summarized as follows:
Year Ending December 31,
1996............................................. $ 12,000
1997............................................. 179,000
1998............................................. 705,000
1999............................................. 3,104,000
2000............................................ 84,000
Thereafter until 2012........................... 1,421,000
---------
................................................ 5,505,000
Less unearned discount 106,000
-------
Total............................................. $ 5,399,000
===========
The Partnership evaluates its portfolio of mortgage loans on an individual
basis, comparing the amount at which the investment is carried to its estimated
net realized value. At September 30, 1996 and at December 31, 1995 no allowance
was required.
5
<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Nine Month Periods Ended
September 30, 1996 and 1995)
(NOTE D) - Duties and Obligations of the General Partner:
- ---------------------------------------------------------
As more fully described in the partnership agreement, the general partner has
agreed, among other things, to:
(1) Manage and control the business of the Partnership;
(2) Pay all operating expenses of the Partnership. Such expenses,
when incurred, are reflected in the financial statements of the
Partnership;
(3) Pay to the Partnership any shortfall with respect to cash
distributions due to unitholders.
(4) Repurchase each year, on a noncumulative basis, a maximum of 10%
of units outstanding as of January 1 of each year if requested by
the unitholders, and
(5) Maintain a net worth of at least 10% of the adjusted contribution
of the unitholders, but in no event less than $500,000. At
September 30, 1996, and December 31, 1995, the financial
statements of the general partner showed a net worth of
$1,009,000 and $1,085,000, respectively, including notes
receivable from stockholders of $1,000,000 at September 30, 1996
and at December 31, 1995, respectively.
(NOTE E) - Allocation of Income, Losses and Distributions:
- ----------------------------------------------------------
The unitholders are generally entitled to a return on their investment equal to
2% above the prime rate of Chase Manhattan Bank (subject to a minimum rate of 9
1/2% and a maximum rate of 15% per annum).
As more fully described in the partnership agreement, income, losses and
distributions are to be allocated as follows:
(1) Net income and operating cash distributions, first to unitholders
in an amount equal to their investment return and then to the
general partner (99%) and special limited partners (1%).
(2) Net loss, other than from a disposition, as defined, 99% to the
general partner and 1% to the special limited partners.
(3) Net loss from a disposition, to unitholders to the extent of
their positive capital account balances and then to the general
partner and special limited partners.
(4) Disposition proceeds will generally be distributed to unitholders
until each has received an amount equal to his original invested
capital and then to the general partner and special limited
partners.
6
<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Nine Month Periods Ended
September 30, 1996 and 1995)
(NOTE F) - Distribution Accrual Plan:
- -------------------------------------
Under the partnership agreement, unitholders can elect to have the Partnership
retain distributions they are entitled to receive. Such retained amounts will
earn interest at Chase Manhattan Bank's prime rate, compounded monthly, with a
floor of 9 1/2% and a ceiling of 15%.
(NOTE G) - Related Parties:
- ---------------------------
Under the terms of the partnership agreement, the Partnership will invest in
mortgages on improved income-producing real properties owned by either
unaffiliated or affiliated borrowers. If the property owner is an affiliated
entity certain conditions must be met before the investment can be made by the
Partnership.
(NOTE H) - Income Taxes:
- ------------------------
The Partnership will not be required to provide for, or pay, any federal income
taxes. Income tax liabilities and/or benefits that arise from its operations
will be passed directly to the individual partners. The Partnership may be
subject to state and local taxes in jurisdictions in which it operates.
(NOTE I) - Unit Repurchase Rights:
- ----------------------------------
Beginning January 1, 1999, or at an earlier date, in the event the Partnership
is to be terminated, the general partner will have the right to purchase all
Units from the unitholders.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Liquidity and Capital Resources:
The Partnership is engaged in the real estate business, including the
origination and purchase of real estate mortgage loans, consisting of first
mortgages, junior mortgages, wraparound mortgages and interim mortgage loans.
The Partnership's current investment policy emphasizes the investment in
mortgage loans on income producing properties. The majority of the Partnership's
loans are expected to mature within approximately five years.
The Partnership's liquidity is managed to ensure that sufficient funds are
available to preserve and protect the Partnership's capital and to provide for
monthly distributions to unitholders at a floating annual rate based on their
adjusted capital contributions equal to two percentage points over the prime
rate of Chase Manhattan Bank, New York with a minimum rate of 9 1/2% and a
maximum of 15%.
Results of Operations:
The interest income for three months and for nine months ended September 30,
1996 was lower by $79,000 and $115,000, respectively, as compared to same
periods a year ago. The decrease resulted from a decrease in mortgages
receivable.
Since the Partnership is engaged in the real estate business, its results of
operations are affected by general economic trends in real estate markets, as
well as by trends in the general economy and the movement of interest rates.
Since the properties underlying the Partnership's mortgages are concentrated in
the New York City area, the economic condition in that area can also have an
impact on the Partnership's operations.
The rental housing market in New York City remains stable and the Partnership
expects that such properties will continue to appreciate in value with little or
no reduction in occupancy rates. The Partnership's mortgage portfolio is
composed predominantly of mortgages on multi-family residential properties, most
of which are subject to applicable rent control and rent stabilization statutes
and regulations. In both cases, any increases in rent are subject to specific
limitations. As such, properties of the nature of those constituting the most
significant portion of the Partnership's mortgage portfolio are not affected by
the general movement of real estate values in the same manner as other
income-producing properties.
Competition:
The Company competes for acceptable investments with real estate investment
trusts, commercial banks, insurance companies, savings and loan associations,
pension funds and mortgage banking firms, many of which have greater resources
with which to compete for desirable mortgage loans.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
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 8K
Reports on Form 8K - None
Exhibits - The following exhibit is filed herewith
Exhibit 27 - Financial Data Schedule
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.
INTERVEST MORTGAGE ASSOCIATES L.P.
(Registrant)
By: INTERVEST FUNDS MANAGEMENT CORPORATION
General Partner
Dated: October 30, 1996 Lowell S. Dansker /S/
---------------------
Lowell S. Dansker:
President, Co-Chairman, Treasurer and
Director of Intervest Funds
Management Corporation
(Principal Executive and Accounting Officer)
Dated: October 30, 1996 Lawrence G. Bergman /S/
-----------------------
Lawrence G. Bergman,
Executive Vice President, Co- Chairman,
Secretary and Director of Intervest Funds
Management Corporation
(Principal Operating Officer)
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,629
<SECURITIES> 0
<RECEIVABLES> 5,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,165
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,165
<SALES> 0
<TOTAL-REVENUES> 905
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 903
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 903
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
