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 March 31, 1998
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.
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(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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INTERVEST MORTGAGE ASSOCIATES L. P.
BALANCE SHEETS
ASSETS
------
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(Unaudited)
Cash and cash equivalents $ 2,852,000 $ 2,087,000
Mortgages receivable, includes due from
affiliates $1,300,000 (Note C) 10,100,000 10,682,000
Other receivables 175,000 183,000
----------- -----------
TOTAL $13,127,000 $12,952,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Distributions payable (Note F) $ 2,468,000 $ 2,366,000
Escrow deposits payable 292,000 295,000
Deferred fee income 28,000 42,000
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TOTAL 2,788,000 2,703,000
Partners' Capital 10,339,000 10,249,000
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TOTAL $13,127,000 $12,952,000
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STATEMENTS OF OPERATIONS
Three Months Ended
--------------------------
MARCH 31,
1998 1997
------------ ------------
(Unaudited)
Revenue:
Interest income
- Affiliates $ 34,000 $ 33,000
- Others 374,000 255,000
-------- ---------
408,000 288,000
Other income 1,000 20,000
-------- ---------
409,000 308,000
Expenses:
General and administrative 2,000 2,000
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NET INCOME $407,000 $ 306,000
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The accompanying notes to financial
statements are an integral part hereof.
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INTERVEST MORTGAGE ASSOCIATES L. P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1998 1997
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(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $407,000 $306,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of discount on mortgages receivable (25,000) (7,000)
Gain on early repayment of discounted mortgages (1,000)
Decrease (increase) in other receivables 8,000 (1,000)
(Decrease) increase in deferred fee income (14,000) 12,000
------------ ------------
Net cash provided by operating activities 375,000 310,000
------------ ------------
Cash flows from investing activities:
Collection of mortgages receivable 608,000 1,450,000
Mortgages receivable acquired
Properties owned by others (985,000)
(Decrease) increase in escrow deposits payable (3,000) 1,000
------------ ------------
Net cash provided by investing activities 605,000 466,000
------------ ------------
Cash flows from financing activities:
Partners' contributions to capital 2,000 2,000
Distributions to limited partners, net of increase
in distributions payable of $102,000 and $18,000 (217,000) (288,000)
------------ ------------
Net cash (used in) financing activities (215,000) (286,000)
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INCREASE IN CASH AND CASH EQUIVALENTS 765,000 490,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 2,087,000 5,730,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $2,852,000 $6,220,000
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part hereof.
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INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 1998 and 1997)
(NOTE B) - Significant Accounting Policies: (contd.)
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(4) Allowance for losses:
---------------------
An allowance for loss related to loans that are impaired is based on discounted
cash flows using the loan's initial effective interest rate or the fair value of
the collateral. Management's periodic evaluation of the need for, or adequacy
of, the allowance is based on the Company's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that my affect the
borrower's ability to repay (including the timing of future payments), the
estimated value of the underlying collateral and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on any
impaired loans that may be susceptible to significant change.
(NOTE C) - Mortgages Receivable:
--------------------------------
Mortgages receivable consist of first mortgages on residential properties.
Interest rates on mortgages range from 10% to 15%. Certain mortgages have been
discounted utilizing rates ranging from 11% to 16 3/4%.
During the first quarter of 1998, mortgages were paid in full prior to their
maturity date. This resulted in the recognition of a gain, which represents the
balance of the unamortized discount applicable to these mortgages.
Annual maturities of mortgages receivable during the next five years are
summarized as follows:
Year Ending December 31, March 31, 1998
------------------------ --------------
1998..................... $ 4,334,000
1999..................... 3,941,000
2000..................... 512,000
2001..................... 84,000
2002..................... 88,000
Thereafter until 2012.... 1,250,000
---------
......................... 10,209,000
Less unearned discount (109,000)
---------
Total $ 10,100,000
============
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 March 31, 1998 and at December 31, 1997 no allowance was
required.
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INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 1998 and 1997)
(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 March 31,
1998, and December 31, 1997, the financial statements of the general
partner showed a net worth of $1,333,000 and $1,256,000, respectively,
including notes receivable from stockholders of $1,000,000 at March
31, 1998 and at December 31, 1997, respectively.
(NOTE E) - Allocation of Income, Losses and Distributions:
- ----------------------------------------------------------
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 (equal to 2% above prime
rate of Chase Manhattan Bank, subject to a minimum rate of 9 1/2% and
a maximum rate of 15% per annum) 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.
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INTERVEST MORTGAGE ASSOCIATES L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 1998 and 1997)
(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.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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Liquidity and Capital Resources:
The Partnership is engaged in the real estate business, including the
originating 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 rate of 15%.
Results of Operations:
For the three months ended March 31, 1998, interest income was $408,000 as
compared to $288,000 for the same period a year ago. The increase of $120,000
resulted mainly from an increase in the average mortgages receivable balance for
the three months ended March 31, 1998 to $10,310,000 compared to $6,423,000
during the 1997 period.
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.
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PART II - OTHER INFORMATION
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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 8-K
(a) Exhibits - the following exhibit is filed herewith
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during this quarter
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: May 6, 1998 Lowell S. Dansker /S/
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Lowell S. Dansker: President, Co-Chairman,
Treasurer and Director of Intervest Funds
Management Corporation (Principal Executive
and Accounting Officer)
Dated: May 6, 1998 Lawrence G. Bergman /S/
--------------------------------------------
Lawrence G. Bergman, Executive Vice
President, Co-Chairman, Secretary and
Director of Intervest Funds Management
Corporation (Principal Operating Officer)
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