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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-17690
Krupp Insured Mortgage Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-3021395
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Depositary
Receipts representing
Units of Limited
Partner Interests
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 information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable.
Documents incorporated by reference: See Part IV, Item 14
The exhibit index is located on pages 10-16.
PART I
This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
ITEM 1. BUSINESS
Krupp Insured Mortgage Limited Partnership (the "Partnership") is a
Massachusetts limited partnership which was formed on March 21, 1988. The
Partnership raised approximately $299 million through a public offering of
limited partner interests evidenced by units of depositary receipts
("Units"), and used the proceeds available for investment primarily to
acquire participating insured mortgages ("PIMs") and mortgage-backed
securities ("MBS"). The Partnership considers itself to be engaged only in
the industry segment of investment in mortgages.
The Partnership's investments in PIMs on multi-family residential
properties consist of a MBS or an insured mortgage loan (collectively, the
"insured mortgage") guaranteed or insured as to principal and basic
interest. These insured mortgages were issued or originated under or in
connection with the housing programs of the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA") or the
Department of Housing and Urban Development ("HUD"). PIMs provide the
Partnership with monthly payments of principal and basic interest and also
may provide for the Partnership participation in the current revenue stream
and in residual value, if any, from the sale or other realization of the
underlying property. The borrower conveys these rights to the Partnership
through a subordinated promissory note and mortgage. The participation
features are neither insured nor guaranteed.
The Partnership also acquired MBS collateralized by single-family
mortgage loans issued or originated by FNMA or the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC guarantee the principal and
basic interest of the Partnership's FNMA and FHLMC MBS, respectively.
Prior to May 23, 1995 the Partnership could reinvest or commit for
reinvestment principal proceeds or other realization of the mortgages in
new mortgages. In the future, proceeds received from prepayments or other
realizations of mortgage assets will be distributed by the Partnership to
investors through quarterly or possibly special distributions.
Although the Partnership will terminate no later than December 31, 2028,
the value of the PIMs may be realized by the Partnership through repayment
or sale as early as ten years from the dates of the closing of the
permanent loans and the Partnership may realize the value of all its other
investments within that time frame. Therefore, it is anticipated that
dissolution of the Partnership could occur significantly prior to December
31, 2028.
The Partnership's investments are not expected to be subject to seasonal
fluctuations. However, the future performance of the Partnership will
depend upon certain factors which cannot be predicted. In addition, any
ultimate realization of the participation features of the PIMs will be
subject to similar risks associated with equity real estate investments,
including: reliance on the owner's operating skills, ability to maintain
occupancy levels, control operating expenses, maintain the property and
provide adequate insurance coverage; adverse changes in general economic
conditions, adverse local conditions, and changes in governmental
regulations, real estate zoning laws, or tax laws; and other circumstances
over which the Partnership may have little or no control.
The requirements for compliance with federal, state and local
regulations to date have not had an adverse effect on the Partnership's
operations, and the Partnership anticipates no adverse effect in the
future.
As of December 31, 1996, there were no personnel directly employed by the
Partnership.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership
is a party or to which any of its securities is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There currently is no established trading market for the Units.
The number of investors holding Units as of December 31, 1996 was
approximately 15,200. One of the objectives of the Partnership is to
provide quarterly distributions of cash flow generated by its investments
in mortgages. The Partnership anticipates that future operations will
continue to generate cash available for distribution.
During 1996, the Partnership made a special distribution consisting
primarily of principal proceeds from the Water View and Tarnhill Apartments
PIM prepayments. The Partnership may make special distributions in the
future if PIMs prepay or a sufficient amount of cash is available from MBS
and PIM principal collections.
The Partnership made distributions to its Partners during the two years
ended December 31, 1996 as follows:
1996 1995
Amount Per Unit Amount Per Unit
Limited Partners $17,948,153 $1.20 $17,948,156 $1.20
General Partners 431,074 455,696
18,379,227 18,403,852
Special Distributions
Limited Partners 25,426,553 $1.70 - -
$43,805,780 $18,403,852
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding
the Partnership's financial position and operating results. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Financial
Statements and Supplementary Data, which are included in Items 7 and 8
(Appendix A) of this report, respectively.
Year Ended December 31,
1996 1995 1994 1993 1992
Total revenues $ 16,039,711 $ 17,325,924 $ 17,333,146 $ 18,870,977 $ 19,008,148
Net income 11,372,365 13,270,482 13,039,155 14,465,397 14,537,741
Net income allocated
to Partners:
Limited Partners 11,031,194 12,872,368 12,647,980 14,031,435 14,101,609
Average per Unit .74 .86 .85 .94 .94
General Partners 341,171 398,114 391,175 433,962 436,132
Total assets at
December 31 195,755,977 228,653,458 232,892,400 245,176,200 256,007,290
Quarterly distributions
to Partners:
Limited Partners 17,948,153 17,948,156 24,879,313 24,811,193 24,842,944
Average per Unit 1.20 1.20 1.66 1.66 1.66
General Partners 431,074 455,696 450,239 473,002 514,472
Special Distribution
Limited Partners 25,426,553 - - - -
Average Per Unit 1.70 - - - -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management s Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements including
those
concerning Management s expectations regarding the future financial
performance and future events. These forward-looking statements involve
significant risk and uncertainties, including those described herein.
Actual results may differ materially from those anticipated by such
forward-looking statements.
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are regular
quarterly distributions paid to investors of approximately $4.5 million.
Funds used for investor distributions are generated from interest income
received on the PIMs, MBS, cash and short-term investments, and the
principal collections received on the PIMs and MBS. The Partnership funds
a portion of the distribution from principal collections and, as a result,
the capital resources of the Partnership will continually decrease. As a
result of this decrease, the total cash inflows to the Partnership will
also decrease, which will result in periodic adjustments to the
distributions paid to investors.
The General Partners periodically review the distribution rate to determine
whether an adjustment to the distribution rate is necessary based on
projected future cash flows. In general, the General Partners try to set a
distribution rate that provides for level quarterly distributions of cash
available for distribution. To the extent quarterly distributions do not
fully utilize the cash available for distribution and cash balances
increase, the General Partners may adjust the distribution rate or
distribute such funds through a special distribution.
During February 1996, the Partnership received prepayments of the Water
View and Tarnhill Apartments PIMs. The Partnership received the
outstanding principal balances of these PIMs of approximately $16.7 million
and $7.5 million, respectively, and participation income from the Tarnhill
Apartments PIM of approximately $1.2 million. The participation income
from Tarnhill consisted of approximately $983,000 of Shared Appreciation
Interest and approximately $224,000 of Shared Income and Minimum Additional
Interest. The Partnership did not receive any prepayment penalty or
participation income related to the prepayment of the Water View Apartments
PIM. During 1995, the operating performance of Water View Apartments
declined due to insufficient levels of occupancy and higher maintenance and
repair expenses due to vandalism. As a result, the borrower went into
default on the underlying loan. Normally, a loan like this would
eventually be recovered through an insurance claim process. However, on
February 16, 1996, the
Partnership was able to receive its insured proceeds on this loan earlier
than anticipated due to Bear Stearn s purchase of the underlying insured
mortgage. As a result of the prepayment, the Partnership fully amortized
the remaining prepaid fees and expenses associated with this PIM.
The Partnership made a special distribution on March 15, 1996 to investors
in the amount of $1.70 per unit with the proceeds from the prepayments.
The Partnership will continue to pay distributions at the current
distribution rate of $.30 per unit per quarter. The General Partners will
continue to monitor the appropriateness of this distribution rate in the
future and will adjust it as necessary.
During 1996, the owners of four properties in the portfolio informed the
Partnership of their intention to sell their properties, transactions that
may take place during 1997. The sale of Paddock Club and Southland Station
II would result in a principal repayment totaling approximately $15.2
million, the sale of Silver Springs Apartments would result in a principal
repayment of approximately $7.2 million, and the sale of The Patrician
would result in a principal repayment of approximately $ 8.0 million. In
addition to the repayment of the outstanding principal on the PIMs, the
Partnership would receive the greater of a 9% prepayment penalty or Shared
Appreciation Interest as well as any unpaid Minimum Additional Interest and
or Shared Income Interest. If these sales take place, the Partnership will
distribute the capital transaction proceeds from these prepayments to
investors through special distributions. The General Partners will be
reviewing the anticipated cash flows from the remaining investments to
determine whether the current distribution rate will be sustainable or if
an adjustment is necessary. If the General Partners determine the
distribution rates needs to be adjusted, the timing of the adjustment will
depend on when these PIMs prepay.
Many of the other properties in the portfolio had solid performances during
1996. Average occupancy at most of the properties exceeded 90%, and
moderate increases in market rental rates were achieved at many of the
properties. Ten properties generated sufficient operating cash to reach
the threshold for payment of participation interest to the Partnership
during 1996.
Two other properties experienced operating difficulties over the past year,
primarily due to the age of the assets and the challenges of a competitive
market. Remington Place Apartments incurred an operating deficit under its
workout plan during 1996 which was funded by advances from the borrower.
The deficit was caused in large part by increased expenses necessary to
operate the aging building and high turnover costs associated with leasing
older apartments. The Fort Washington, Maryland market is very
competitive, and residents value modern amenities. If cosmetic
improvements are not undertaken at the property, it is likely that
occupancy and rental rates will suffer. The Partnership and the borrower
are discussing a new workout plan which would bring new owner equity into
the property to complete some improvements in exchange for continued debt
service relief and a change in the participation features of the loan.
Rock Creek Springs, located in Silver Spring, Maryland, faced a very
similar situation. However, the borrower of the Rock Creek Springs PIM
defaulted on its debt service obligation during the third quarter of 1996.
FNMA, the guarantor of the MBS secured by the PIM, has been unable to
negotiate a workout plan with the borrower and exercised its option to
payoff the MBS in February 1997 and pursue a foreclosure.
For the first five years of the PIMs the borrowers are prohibited from
repaying.
For the second five years, the borrower can repay the loans incurring a
prepayment penalty. The Partnership has the option to call certain PIMs by
accelerating their maturity, if the loans are not prepaid by the tenth year
after permanent funding. The Partnership will determine the merits of
exercising the call option for each PIM as economic conditions warrant.
Such factors as the condition of the asset, local market conditions,
interest rates and available financing will have an impact on this
decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by the
Federal National Mortgage Association ("FNMA"), the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and the Department of Housing and Urban Development ("HUD") and
therefore the certainty of their cash flows and the risk of material loss
of the amounts invested depends on the creditworthiness of these entities.
FNMA is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs and
is wholly-owned by the twelve Federal Home Loan Banks. These obligations
are not guaranteed by the U.S. Government or the Federal Home Loan Bank
Board. GNMA guarantees the full and timely payment of principal and basic
interest on the securities it issues, which represent interests in pooled
mortgages insured by HUD. Obligations insured by HUD, an agency of the
U.S. Government, are backed by the full faith and credit of the U.S.
Government.
Distributable Cash Flow and Net Cash Proceeds from Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Cash
Proceeds from Capital Transactions as defined in Section 17 of the
Partnership Agreement and the source of cash distributions for the year
ended December 31, 1996 and the period from inception through December 31,
1996. The General Partners provide certain of the information below to
meet requirements of the Partnership Agreement and because they believe
that it is an appropriate supplemental measure of operating performance.
However, Distributable Cash Flow and Net Cash Proceeds from Capital
Transactions should not be considered by the reader as a substitute to net
income as an indicator of the Partnership's operating performance or to
cash flows as a measure of liquidity.
(Amounts in thousands, except per Unit amounts)
Year Inception
Ended Through
12/31/96 12/31/96
Distributable Cash Flow:
Income for tax purposes $11,375 $120,170
Items not requiring or (not providing)
the use of operating funds:
Shared Appreciation income (983) (983)
Participation income received but not
recognized for tax purposes 580 597
Amortization of prepaid fees and expenses 3,073 9,141
Remington Place interest rate reduction
collectible in the future (63) (253)
Acquisition expenses paid from
offering proceeds charged to operations - 184
Gain on sale of MBS - (417)
Total Distributable Cash Flow ("DCF") $13,982 $128,439
Limited Partners Share of DCF $13,563 $124,586
Distributable Cash Flow and Net Cash Proceeds from Capital Transactions, continued
Limited Partners Share of DCF per Unit $ .91 $ 8.33 (c)
General Partners Share of DCF $ 419 $ 3,853
Net Proceeds from Capital Transactions:
Prepayments and principal collections
on PIMs including shared
appreciation income $26,365 $ 32,408
Principal collections on MBS 3,299 60,176Principal collections on MBS
and PIMs reinvested - (14,537)
Gain on sale of MBS - 417
Total Net Proceeds from Capital Transactions $29,664 $ 78,464
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $43,646 $206,903
Distributions:
Limited Partners $43,375 (a) $200,128 (b)
Limited Partners Average per Unit $ 2.90 (a) $ 13.83 (b)(c)
General Partners $ 419 (a) $ 3,853 (b)
Total Distributions $43,794 $203,981
(a) Represents all distributions paid in 1996 except the February
1996 distribution and includes an estimate of the distribution
to be paid in February 1997.
(b) Includes estimate of the distribution to be paid in February
1997.
(c) Limited Partners average per Unit return of capital as of
February 1997 is $5.48 [$13.83 - $8.33]. Return of capital
represents that portion of distributions which is not funded
from DCF such as proceeds from the sale of assets and
substantially all of the principal collections received from
MBS and PIMs.
Operations
The following discussion relates to the operation of the Partnership
during the years ended December 31, 1996, 1995 and 1994.
(Amounts in thousands)
1996 1995 1994
Interest income on PIMs:
Base interest $ 12,953 $14,555 $14,646
Participation interest
received 773 677 441
Interest income on MBS 1,498 1,778 1,747
Other interest income 413 316 459
Partnership expenses (1,655) (2,073) (2,312)
Distributable Cash Flow 13,982 15,253 14,981
Shared appreciation income 983 - -
Accrued Participation income (580) - 40
Amortization of prepaid fees and
expenses (3,013) (1,983) (1,982)
Net income $11,372 $13,270 $13,039
Net income decreased during 1996 as compared to 1995 by approximately
$1,898,000 due primarily to a reduction in base interest in PIMS as a
result of the prepayments of the Water View and Tarnhill Apartments PIMs
and interest rate reductions on the Crosscreek Apartments and Remington
Place Apartments. Interest income on MBS decreased $280,000 in 1996 as
compared to 1995, because principal collections reduced the outstanding
principal balance of the Partnership s MBS investments. These items were
offset by an increase in participation income of $499,000 which was
primarily the result of receiving shared appreciation income from the
prepayment of the Tarnhill Apartments PIM of $983,000, net of a decrease in
shared income and minimal additional interest recorded in 1996 as compared
to 1995 of $484,000. Other interest income increased in 1996 as compared
to 1995 due to the short-term investment of the proceeds from the
prepayments until such funds were ultimately distributed to the investors.
Amortization expense increased for 1996 as compared to 1995 because the
Partnership fully amortized the remaining balances of prepaid fees and
expenses associated with the Water View and Tarnhill Apartments PIM.
Partnership expenses have decreased during each of the three years in the
period ended December 31, 1996, due primarily to lower asset management
fees, expense reimbursements to affiliates, and general and administrative
expenses.
Net income increased slightly during 1995 as compared to 1994 due
primarily to an increase in participation income and lower expense
reimbursements to affiliates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as
to the directors and executive officers of Krupp Plus Corporation which is
a General Partner of the Partnership and is the general partner of Mortgage
Services Partners Limited Partnership which is the other General Partner of
the Partnership, is as follows:
Position with
Name and Age Krupp Plus Corporation
Douglas Krupp (50) Co-Chairman of the Board
George Krupp (52) Co-Chairman of the Board
Laurence Gerber (40) President
Peter F. Donovan (43) Senior Vice President
Robert A. Barrows (39) Treasurer and Chief
Accounting Officer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for the more than $3 billion under management for institutional
and individual clients. Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science in Business Administration
from this institution and was elected trustee in 1990. Mr. Krupp is
Chairman of the Board and Director of Berkshire Realty Company, Inc. (NYSE-
BRI). Mr. Krupp also serves as Chairman of the Board and Trustee of Krupp
Government Income Trust II and as Chairman of the Board and Trustee of
Krupp Government Income Trust.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire
Group. Established in 1969 as the Krupp Companies, this real estate-based
firm expanded over the years within its areas of expertise including
investment program sponsorship, property and asset management, mortgage
banking and healthcare facility ownership. Today, The Berkshire Group is
an integrated real estate, mortgage and healthcare company which is
headquartered in Boston with regional offices throughout the country. A
staff of 3,400 are responsible for more than $3 billion under management
for institutional and individual clients. Mr. Krupp attended the
University of Pennsylvania and Harvard University.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as President and a Director of
Berkshire Realty Company, Inc. (NYSE-BRI) and President and Trustee of
Krupp Government Income Trust and Krupp Government Income Trust II.
Peter F. Donovan is President of Berkshire Mortgage Finance and
directs the underwriting, servicing and asset management of a $3.9 billion
multi-family loan portfolio. Previously, he was Senior Vice President of
Berkshire Mortgage Finance and was responsible for all participating
mortgage originations. Before joining the firm in 1984, he was Second Vice
President, Real Estate Finance for Continental Illinois National Bank &
Trust, where he managed a $300 million construction loan portfolio of
commercial properties. Mr. Donovan received a B.A. from Trinity College
and an M.B.A. degree from Northwestern University.
Robert A. Barrows is Senior Vice President and Chief Financial
Officer of Berkshire Mortgage Finance and The Berkshire Group. Mr. Barrows
has held several positions within The Berkshire Group since joining the
company in 1983 and is currently responsible for accounting and financial
reporting, treasury, tax, payroll and office administrative activities.
Prior to joining The Berkshire Group, he was an audit supervisor for
Coopers & Lybrand L.L.P. in Boston. He received a B.S. degree from Boston
College and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1996, no person of record owned or was known by
the General Partners to own beneficially more than 5% of the Partnership's
14,956,796 outstanding Units. The only interests held by management or its
affiliates consist of its General Partner and Corporate Limited Partner
Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in Note F to the
Partnership's Financial Statements presented in Appendix A to this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements - see Index to Financial Statements and
Schedule included under Item 8, Appendix A, on page F-2 of
this report.
2. Financial Statement Schedule - see Index to Financial
Statements and Schedule included under Item 8, Appendix A,
on page F-2 of this report. All other schedules are omitted
as they are not applicable, not required or the information
is provided in the Financial Statements or the Notes
thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
The following reflects all applicable Exhibits required under Item
601 of Regulation S-K:
(4) Instruments defining the rights of security holders including
indentures:
(4.1) Agreement of Limited Partnership dated as of July
19, 1988 [Exhibit A included in Amendment No. 1 of
Registrant's Registration Statement on Form S-11
dated July 20, 1988 (File No. 33-21201)].*
(4.2) Subscription Agreement whereby a subscriber agrees
to purchase Units and adopts the provisions of the
Agreement of Limited Partnership [Exhibit D
included in Amendment No. 1 of Registrant's
Registration Statement on Form S-11 dated July 20,
1988 (File No. 33-21201)].*
(4.3) Copy of First Amended and Restated Certificate of
Limited Partnership filed with the Massachusetts
Secretary of State on July 1, 1988. [Exhibit 4.4
to Amendment No. 1 of Registrant's Registration
Statement on Form S-11 dated July 20, 1988 (File
No. 33-21201)].*
(10) Material Contracts:
(10.1) Form of agreement between the Partnership and
Krupp Mortgage Corporation [Exhibit 10.2 to
Registrant's Registration Statement on Form S-11
dated April 20, 1988 (File No. 33-21201)].*
Richmond Park Apartments
(10.2) Prospectus for GNMA Pool No. 260865 (PL) [Exhibit
1 to Registrant's report on Form 8-K dated August
30, 1989 (File No. 0-17690)].*
(10.3) Subordinated Multifamily Open-End Mortgage
(including Subordinated Promissory Note) dated
July 14, 1989 between Carl Milstein, Trustee,
Irwin Obstgarten, Al Simmon and Krupp Insured
Plus-II Limited Partnership. [Exhibit 2 to
Registrant's report on Form 8-K dated August 30,
1989 (File No. 0-17690)].*
(10.4) Participation Agreement dated July 31, 1989
between Krupp Insured Mortgage Limited Partnership
and Krupp Insured Plus-II Limited Partnership
[Exhibit 3 to Registrant's report on Form 8-K
dated August 30, 1989 (File No. 0-17690)].*
Saratoga Apartments
(10.5) Prospectus for GNMA Pool No. 280643 (PL) [Exhibit
4 to Registrant's report on Form 8-K dated August
30, 1989 (File No. 0-17690)].*
(10.6) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated July 27, 1989
between American National Bank and Trust Company
of Chicago, as Trustee and Krupp Insured Mortgage
Limited Partnership. [Exhibit 5 to Registrant's
report on Form 8-K dated August 30, 1989 (File No.
0-17690)].*
(10.7) Participation Agreement dated July 31, 1989
between Krupp Insured Plus-II Limited Partnership
and Krupp Insured Mortgage Limited Partnership
[Exhibit 6 to Registrant's report on Form 8-K
dated August 30, 1989 (File No. 0-17690)].*
Valley Manor Apartments
(10.8) Prospectus for GNMA Pool No. 272541 (PL) [Exhibit
7 to Registrant's report on Form 8-K dated August
30, 1989 (File No. 0-17690)].*
(10.9) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated June 28, 1989
between New Valley Manor Associates and Krupp
Insured Mortgage Limited Partnership [Exhibit 8 to
Registrant's report on Form 8-K dated August 30,
1989 (File No. 0-17690)].*
Hampton Ridge Apartments
(10.10) Supplement to Prospectus dated September 1, 1989
for FNMA Pool No. MX-073001 [Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
(10.11) Subordinated Multifamily Mortgage dated August 23,
1989 between Hampton Ridge Limited Partnership and
Krupp Insured Mortgage Limited Partnership
[Exhibit 10.12 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1989 (File No. 0-17690)].*
(10.12) Subordinated Promissory Note dated August 23, 1989
between Hampton Ridge Limited Partnership and
Krupp Insured Mortgage Limited Partnership
[Exhibit 10.13 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1989 (File No. 0-17690)].*
Remington Place Apartments
(10.13) Prospectus to GNMA Pool No. 280644(PL) [Exhibit
10.14 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989 (File
No. 0-17690)].*
(10.14) Subordinated Promissory Note dated September 21,
1989 between Brinkley Towers Associates Limited
Partnership and Krupp Insured Mortgage Limited
Partnership [Exhibit 10.15 to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989 (File No. 0-17690)].*
(10.15) Subordinated Multifamily Deed of Trust dated
September 21, 1989 between Brinkley Towers
Associates Limited Partnership and Krupp Insured
Mortgage Limited Partnership [Exhibit 10.16 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
(10.16) Workout Agreement and Subordinated Promissory Note
Modification Agreement for the interest rate
reduction dated December 23, 1993 by and between
Berkshire Mortgage Finance Corporation, Krupp
Insured Mortgage Limited Partnership and Brinkly
Towers Associates Limited Partnership. [Exhibit
10.16 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (File
No. 0-17690)].*
Silver Springs Apartments
(10.17) Supplement to Prospectus dated November 1, 1989
for FNMA Pool No. MX-073007 [Exhibit 10.17 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
(10.18) Subordinated Multifamily Mortgage dated November
3, 1989 between Silver Springs Corporation and
Krupp Insured Mortgage Limited Partnership
[Exhibit 10.18 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1989 (File No. 0-17690)].*
(10.19) Subordinated Promissory Note dated November 3,
1989 between Silver Springs Corporation and Krupp
Insured Mortgage Limited Partnership [Exhibit
10.19 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989 (File
No. 0-17690)].*
The Patrician
(10.20) Supplement to Prospectus dated November 1, 1989
for FNMA Pool No MX-073008 [Exhibit 10.20 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
(10.21) Subordinated Multifamily Deed of Trust (including
Subordinated Promissory Note) dated November 8,
1989 between Henry Bookspan as Trustee for The H.
Bookspan Family Trust [Exhibit 10.21 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
Southland Station II Apartments
(10.22) Prospectus for GNMA Pool No. 280645(CS) and
280646(PL) [Exhibit 10.22 to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989 (File No. 0-17690)].*
(10.23) Subordinated Multifamily Deed to Secure Debt dated
September 27, 1989 between Southland Station,
Phase II, A Limited Partnership and Krupp Insured
Mortgage Limited Partnership [Exhibit 10.23 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
17690)].*
(10.24) Subordinated Promissory Note dated September 27,
1989 between Southland Station, Phase II, A
Limited Partnership and Krupp Insured Mortgage
Limited Partnership [Exhibit 10.24 to Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (File No. 0-17690)].*
(10.25) Amended Supplement to Prospectus for Government
National Association Pool Number 280645 and
280646. [Exhibit 19.4 to Registrant's report on
Form 10-Q for the quarter ended September 30, 1991
(File No. 0-17690)].*
Cross Creek Apartments
(10.26) Prospectus for GNMA Pool No. 280650(CS) and
280651(PL) [Exhibit 10.25 to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989 (File No. 0-17690)].*
(10.27) Subordinated Multifamily Deed of Trust dated
November 30, 1989 between Cross Creek Associates
and Krupp Insured Mortgage Limited Partnership
[Exhibit 10.26 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1989 (File No. 0-17690)].*
(10.28) Subordinated Promissory Note dated November 30,
1989 between Cross Creek Associates and Krupp
Insured Mortgage Limited Partnership [Exhibit
10.27 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989 (File
No. 0-17690)].*
(10.29) Workout Structure/Loan and Participation
Modification Dated January 29, 1994 by and between
Krupp Insured Mortgage Limited Partnership, Krupp
Mortgage Corporation and Cross Creek Associates
[Exhibit 10.29 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994 (File No. 0-17690)].*
Paddock Club Apartments
(10.30) Prospectus for GNMA Pool No. 280967(CS) and
280968(PL) [Exhibit 10.28 to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989 (File No. 0-17690)].*
(10.31) Subordinated Multifamily Mortgage dated November
28, 1989 (including Subordinated Promissory Note)
between Paddock Club Lakeland, Phase II, a limited
partnership and Krupp Insured Mortgage Limited
Partnership [Exhibit 10.29 to Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989 (File No. 0-17690)].*
Wildflower Apartments
(10.32) Prospectus for GNMA Pool No. 280652(PL) [Exhibit
10.30 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989 (File
No. 0-17690)].*
(10.33) Subordinated Multifamily Deed of Trust dated
December 12, 1989 (including Subordinated
Promissory Note) between Lincoln Wildflower
Limited Partnership and Krupp Insured Mortgage
Limited Partnership [Exhibit 10.31 to Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (File No. 0-17690)].*
Brookside Apartments
(10.34) Supplement to Prospectus dated November 1, 1989
for Federal National Mortgage Association Pool
Number MX-073009 [Exhibit 19.1 to Registrant's
report on Form 10-Q for the quarter ended March
31, 1990 (File No. 0-17690)].*
(10.35) Subordinated Multifamily Deed of Trust dated
January 30, 1990 between Brookside Manzanita and
Krupp Insured Mortgage Limited Partnership
[Exhibit 19.2 to Registrant's report on Form 10-Q
for the quarter ended March 31, 1990 (File No. 0-
17690)].*
(10.36) Subordinated Promissory Note dated January 30,
1990 between Brookside Manzanita and Krupp Insured
Mortgage Limited Partnership [Exhibit 19.3 to
Registrant's report on Form 10-Q for the quarter
ended March 31, 1990 (File No. 0-17690)].*
Bell Station Apartments
(10.37) Supplement to Prospectus dated April 1, 1990 for
Federal National Mortgage Association Pool Number
MX-073011 [Exhibit 19.4 to Registrant's report on
Form 10-Q for the quarter ended June 30, 1990
(File No. 0-17690)].*
(10.38) Subordinated Multifamily Mortgage dated March 28,
1990 between Bell Station Associates, L.P. and
Krupp Insured Mortgage Limited Partnership
[Exhibit 19.4 to Registrant's report on Form 10-Q
for the quarter ended March 31, 1990 (File No. 0-
17690)].*
(10.39) Subordinated Promissory Note dated March 28, 1990
between Bell Station Associates, L.P. and Krupp
Insured Mortgage Limited Partnership [Exhibit 19.5
to Registrant's report on Form 10-Q for the
quarter ended March 31, 1990 (File No. 0-17690)].*
The Enclave Apartments
(10.40) Supplement to Prospectus dated April 1, 1990 for
Federal National Mortgage Association Pool Number
MX-073013 [Exhibit 19.1 to Registrant's report on
Form 10-Q for the quarter ended June 30, 1990
(File No. 0-17690)].*
(10.41) Subordinated Multifamily Open-End Mortgage dated
April 26, 1990 between Beavercreek Associates and
Krupp Insured Mortgage Limited Partnership
[Exhibit 19.2 to Registrant's report on Form 10-Q
for the quarter ended June 30, 1990 (File No. 0-
17690)].*
(10.42) Subordinated Promissory Note dated April 26, 1990
between Beavercreek Associates and Krupp Insured
Mortgage Limited Partnership [Exhibit 19.3 to
Registrant's report on Form 10-Q for the quarter
ended June 30, 1990 (File No. 0-17690)].*
Creekside Apartments
(10.43) Subordinated Promissory Note dated June 28, 1990
between Creekside Associates Limited Partnership
and Krupp Insured Mortgage Limited Partnership
[Exhibit 19.6 to Registrant's report on Form 10-Q
for the quarter ended June 30, 1990 (File No. 0-
17690)].*
(10.44) Subordinated Multifamily Deed of Trust dated June
28, 1990 between Creekside Associates Limited
Partnership and Krupp Insured Mortgage Limited
Partnership [Exhibit 19.7 to Registrant's report
on Form 10-Q for the quarter ended June 30, 1990
(File No. 0-17690)].*
(10.45) Participation Agreement dated June 28, 1990
between Krupp Mortgage Corporation and Krupp
Insured Mortgage Limited Partnership [Exhibit 19.1
to Registrant's report on Form 10-Q for the
quarter ended September 30, 1990 (File No. 0-
17690)].*
Salishan Apartments
(10.46) Supplement to Prospectus dated July 1, 1990 for
Federal National Mortgage Association Pool Number
MX-073017 [Exhibit 19.2 to Registrant's report on
Form 10-Q for the quarter ended September 30, 1990
(File No. 0-17690)].*
(10.47) Subordinated Promissory Note dated June 20, 1990
between Dale A. Williams and D.R. Salishan (the
"Mortgagor") and Krupp Insured Mortgage Limited
Partnership (the "Holder") [Exhibit 19.3 to
Registrant's report on Form 10-Q for the quarter
ended September 30, 1990 (File No. 0-17690)].*
(10.48) Subordinated Multifamily Deed of Trust dated June
20, 1990 between Dale A. Williams and D.R.
Salishan (the "Borrower") and Krupp Insured
Mortgage Limited Partnership (the "Lender")
[Exhibit 19.4 to Registrant's report on Form 10-Q
for the quarter ended September 30, 1990 (File No.
0-17690)].*
Rock Creek Apartments
(10.49) Supplement to Prospectus dated August 1, 1990 for
Federal National Mortgage Association Pool Number
MX-073018 [Exhibit 19.5 to Registrant's report on
Form 10-Q for the quarter ended September 30, 1990
(File No. 0-17690)].*
(10.50) Subordinated Promissory Note dated July 12, 1990
between Potomac Springs Limited Partnership (the
"Mortgagor") and Krupp Insured Mortgage Limited
Partnership (the "Holder") [Exhibit 19.6 to
Registrant's report on Form 10-Q for the quarter
ended September 30, 1990 (File No. 0-17690)].*
(10.51) Subordinated Multifamily Deed of Trust dated July
12, 1990 between Potomac Springs Limited
Partnership (the "Borrower") and Krupp Insured
Mortgage Limited Partnership (the "Lender")
[Exhibit 19.7 to Registrant's report on Form 10-Q
for the quarter ended September 30, 1990 (File No.
0-17690)].*
Marina Shores Apartments
(10.52) Participation Agreement dated June 29, 1990 by and
between Krupp Insured Plus-III Limited Partnership
and Krupp Insured Mortgage Limited Partnership
[Exhibit 19.9 to Registrant's report on Form 10-Q
for the quarter ended September 30, 1990 (File No.
0-17690)].*
Deering Place
(10.53) Subordinated promissory note dated February 7,
1991 between Deering Place on Colony Apartments,
Limited Partnership (the "Mortgagor") and Krupp
Insured Mortgage Limited Partnership (the
"Holder"). [Exhibit 19.1 to Registrant's report on
Form 10-Q for the quarter ended March 31, 1991
(File No. 0-17690.].*
(10.54) Subordinated Multifamily Deed of Trust dated
February 7, 1991 between Deering Place on Colony
Apartments, Limited Partnership (the "Borrower")
and Krupp Insured Mortgage Limited Partnership
(the "Lender"). [Exhibit 19.2 to Registrant's
report on Form 10-Q for the quarter ended March
31, 1991 (File No. 0-17690.].*
(10.55) Supplement to Prospectus dated November 1, 1990
for Federal National Mortgage Association Pool
Number MX-073022. [Exhibit 19.3 to Registrant's
report on Form 10-Q for the quarter ended March
31, 1991 (File No. 0-17690.].*
Pope Building
(10.56) Subordinated Promissory Note dated May 30, 1991
between Pope Building Associates Limited
Partnership (the "Mortgagor") and Krupp Insured
Mortgage Limited Partnership (the "Holder")
[Exhibit 19.1 to Registrant's report on Form 10-Q
for the quarter ended September 30, 1991 (File No.
0-17690)].*
(10.57) Subordinated Multi-family Mortgage dated May 31,
1991 between American National Bank and Trust
Company of Chicago (the "Borrower") and Krupp
Insured Limited Partnership (the "Mortgagee").
[Exhibit 19.2 to Registrant's report on Form 10-Q
for the quarter ended September 30, 1991 (File No.
0-17690)].*
(10.58) Supplement to Prospectus for Government National
Mortgage Association Pool Number 280842. [Exhibit
19.3 to Registrant's report on Form 10-Q for the
quarter ended September 30, 1991 (File No. 0-
17690)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996,
the Partnership did not file any reports on Form 8-K.
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,
on the 24rd day of February, 1997.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
By: Krupp Plus Corporation, a General
Partner
By: /s/ Douglas Krupp
Douglas Krupp, Co-Chairman (Principal Executive
Officer) and Director of Krupp Plus Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 24rd day of February,
1996.
Signatures Title(s)
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of Krupp Plus Corporation, a
General Partner
/s/ George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of Krupp Plus Corporation, a
General Partner
/s/Laurence Gerber President of Krupp Plus Corporation, a
Laurence Gerber General Partner
/s/ Peter F. Donovan Senior Vice President of Krupp Plus Corpor-
Peter F. Donovan ation, a General Partner
/s/ Robert A. Barrows Treasurer and Chief Accounting Officer of
Krupp Robert A. Barrows Plus Corporation, a General Partner
APPENDIX A
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Accountants F-3
Balance Sheets at December 31, 1996 and 1995 F-4
Statements of Income for the Years Ended December 31, 1996,
1995 and 1994 F-5
Statements of Changes in Partners' Equity for the Years Ended
December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994 F-7
Notes to Financial Statements F-8 - F-14
Schedule IV - Mortgage Loans on Real Estate F-15 - F-18
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Insured Mortgage Limited Partnership:
We have audited the financial statements and the financial statement
schedule of Krupp Insured Mortgage Limited Partnership (the "Partnership")
listed in the index on page F-2 of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
General Partners of the Partnership. Our responsibility is to express an
opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance 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 Partners of
the Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Krupp Insured
Mortgage Limited Partnership as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Boston, Massachusetts
January 30, 1997
except as to the information
presented in Note K for
which the date is
February 25, 1997
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Participating Insured Mortgages ("PIMs")
(Notes B, C, H and I) $164,942,921 $190,325,305
Mortgage-Backed Securities ("MBS")
(Notes B, D, H and H) 17,358,307 21,126,045
Total mortgage investments 182,301,228 211,451,350
Cash and cash equivalents (Notes B and H) 6,057,077 5,970,759
Interest receivable and other assets 1,292,834 2,113,378
Prepaid acquisition fees and expenses,
net of accumulated amortization of $8,125,626 and
$7,684,289, respectively (Note B) 4,544,255 6,789,755
Prepaid participation servicing fees, net of
accumulated amortization of $2,629,028 and
$2,457,959, respectively (Note B) 1,560,583 2,328,216
Total assets $195,755,977 $228,653,458
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 18,973 $ 14,758
Partners' equity (deficit) (Notes A and E):
Limited Partners 195,564,776 227,908,288
(14,956,896 Limited Partner interests outstanding)
General Partners (254,541) (164,638)
Unrealized gain on MBS (Note B) 426,769 895,050
Total Partners' equity 195,737,004 228,638,700
Total liabilities and Partners' equity $195,755,977 $228,653,458
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenues (Note B):
Interest income - PIMs (Note C):
Base interest $12,952,992 $14,554,706 $14,645,749
Participation interest 1,176,169 677,349 481,135
Interest income - MBS (Note D) 1,497,760 1,778,121 1,747,073
Other interest income 412,790 315,748 459,189
Total revenues 16,039,711 17,325,924 17,333,146
Expenses:
Asset management fee to an
affiliate (Note F) 1,311,377 1,595,037 1,602,012 Expense reimbursements to affiliates
(Note F) 156,784 230,648 484,141
Amortization of prepaid fees and expenses
(Note B) 3,013,133 1,983,112 1,982,112
General and administrative 186,052 246,645 225,726
Total expenses 4,667,346 4,055,442 4,293,991
Net income (Note G) $11,372,365 $13,270,482 $13,039,155
Allocation of net income (Note E):
Limited Partners $11,031,194 $12,872,368 $12,647,980
Average net income per Limited Partner
interests $ .74 $ .86 $ .85 (14,956,896 Limited Partner interests
outstanding)
General Partners $ 341,171 $ 398,114 $ 391,175
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
Total
Limited General Unrealized Partners'
Partners Partners Gains Equity
Balance at December 31, 1993 $245,215,409 $ (47,992) $ - $245,167,417
Net income 12,647,980 391,175 - 13,039,155
Distributions (24,879,313) (450,239) - (25,329,552)
Balance at December 31, 1994 232,984,076 (107,056) - 232,877,020
Net income 12,872,368 398,114 - 13,270,482
Distributions (17,948,156) (455,696) - (18,403,852)
Unrealized gain on MBS - - 895,050 895,050
Balance at December 31, 1995 227,908,288 (164,638) 895,050 228,638,700
Net income 11,031,194 341,171 - 11,372,365
Quarterly distributions (17,948,153) (431,074) - (18,379,227)
Special Distributions (25,426,553) - - (25,426,553)
Change in unrealized
gain on MBS - - (468,281) (468,281)
Balance at December 31, 1996 $195,564,776 $(254,541) $ 426,769 $195,737,004
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Operating activities:
Net income $11,372,365 $ 13,270,482 $ 13,039,155
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of prepaid expenses, fees
and organization costs 3,013,133 1,983,112 1,982,112
Shared appreciation income (982,845) - -
Changes in assets and liabilities:
Decrease (increase) in interest
receivable and other assets 820,544 164,254 (94,492)
Increase (decrease) in liabilities 4,215 (622) 6,597
Net cash provided by operating activities 14,227,412 15,417,226 14,933,372
Investing activities:
Principal collections on PIMs including
shared appreciation income of $982,845
in 1996 26,365,229 1,328,482 1,213,385
Principal collections on MBS 3,299,457 2,564,249 5,665,348
Investments in MBS - - (4,861,358)
Net cash provided by investing
activities 29,664,686 3,892,731 2,017,375
Financing activities:
Quarterly distributions (18,379,227) (18,403,852) (25,329,552)
Special distributions (25,426,553) - -
Net cash used for financing
activities (43,805,780) (18,403,852) (25,329,552)
Net increase (decrease) in cash and cash
equivalents 86,318 906,105 (8,378,805)
Cash and cash equivalents, beginning of year 5,970,759 5,064,654 13,443,459
Cash and cash equivalents, end of year $ 6,057,077 $ 5,970,759 $ 5,064,654
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Organization
Krupp Insured Mortgage Limited Partnership (the "Partnership") was
formed on March 21, 1988 by filing a Certificate of Limited
Partnership in The Commonwealth of Massachusetts. The Partnership
issued all of the General Partner Interests to two General Partners
in exchange for capital contributions aggregating $3,000. Krupp
Plus Corporation and Mortgage Services Partners Limited Partnership
are the General Partners of the Partnership and Krupp Depositary
Corporation is the Corporate Limited Partner. Except under certain
limited circumstances upon termination of the Partnership, the
General Partners are not required to make any additional capital
contributions. The Partnership terminates on December 31, 2028,
unless terminated earlier upon the occurrence of certain events as
set forth in the Partnership Agreement.
The Partnership commenced the public offering of Units on July 22,
1988 and completed its public offering on May 23, 1990 having sold
14,956,796 Units for $298,678,321 net of purchase volume discounts
of $457,599.
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those
used for federal income tax purposes (see Note G):
PIMs
The Partnership carries its investments in PIMs at amortized
cost as it has the ability and intention to hold these
investments. Basic interest is recognized based on the
stated rate of the Department of Housing and Urban
Development ("HUD") insured mortgage (less the servicer's
fee) or the stated coupon rate of the Government National
Mortgage Association ("GNMA") or Federal National Mortgage
Association ("FNMA") MBS. The Trust recognizes interest
related to the participation features as earned and when it
deems these amounts collectible.
MBS
At December 31, 1995, the Partnership in accordance with the
Financial Accounting Standards Board s Special Report on
Statement 115, "Accounting for Certain Investments in Debt
and Equity Securities", reclassified its MBS portfolio from
held-to-maturity to available-for-sale. The Partnership
carries its MBS at fair market value and reflects any
unrealized gains (losses) as a separate component of
Partners' Equity. Prior to December 31, 1995, the
Partnership carried its MBS portfolio at amortized cost. The
Partnership amortizes purchase premiums or discounts over the
life of the underlying mortgages using the effective interest
method.
Cash and Cash Equivalents
The Partnership includes all short-term investments with
maturities of three months or less from the date of
acquisition in cash and cash equivalents. The Partnership
invests its cash primarily in deposits and money market funds
with a commercial bank and has not experienced any loss to
date on its invested cash.
Prepaid Fees and Expenses
Prepaid fees and expenses represent prepaid acquisition fees,
expenses and prepaid participation servicing fees paid for
the acquisition and servicing of PIMs. The Partnership
amortizes prepaid acquisition fees and expenses using a
method that approximates the effective interest method over a
period of ten to twelve years, which represents the actual
maturity or anticipated call date of the underlying mortgage.
Acquisition expenses incurred on potential acquisitions which
were not consummated were charged to operations.
The Partnership amortizes prepaid participation servicing
fees using a method that approximates the effective interest
method over a ten-year period beginning at final endorsement
of the loan if a Department of Housing and Urban Development
("HUD") loan and at closing if a FNMA loan.
Income Taxes
The Partnership is not liable for federal or state income
taxes as Partnership income is allocated to the partners for
income tax purposes. In the event that the Partnership's tax
returns are examined by the Internal Revenue Service or state
taxing authority and the examination results in a change in
Partnership taxable income, such change will be reported to
the partners.
Estimates and Assumptions
The preparation of financial statements in accordance with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities, contingent assets and
liabilities and revenues and expenses during the period.
Actual results could differ from those estimates.
C. PIMs
The Partnership has investments in 20 PIMs. The Partnership's PIMs
consist of (a) a GNMA or FNMA MBS representing the securitized first
mortgage loan on the underlying property or a sole participation
interest in the mortgage loan originated under HUD's FHA lending
program (collectively the "insured mortgages"), and (b)
participation interests in the revenue stream and appreciation of
the underlying property above specified base levels. The borrower
conveys these participation features to the Partnership generally
through a subordinated promissory note and mortgage (the
"Agreement").
The Partnership receives guaranteed monthly payments of principal
and interest on the GNMA and FNMA MBS, and HUD insures the FHA
mortgage loan and the mortgage loan underlying the GNMA MBS. The
borrower usually cannot prepay the first mortgage loan during the
first five years and may prepay the first mortgage loan thereafter
subject to a 9% prepayment penalty in years six through nine, a 1%
prepayment penalty in year ten and no prepayment penalty thereafter.
The Partnership may receive interest related to its participation
interests in the underlying property, however, these amounts are
neither insured nor guaranteed.
Generally, the participation features consist of the following: (i)
"Minimum Additional Interest" which is at the rate of .5% per annum
calculated on the unpaid principal balance of the first mortgage on
the underlying property, (ii) "Shared Income Interest" which is 25%
of the monthly gross rental income generated by the underlying
property in excess of a specified base, but only to the extent that
it exceeds the amount of Minimum Additional Interest earned during
such month, (iii) "Shared Appreciation Interest" which is 25% of
any increase in the value of the underlying property in excess of a
specified base. Payment of participation interest from the
operations of the property is limited in any year to 50% of net
revenue or surplus cash as defined by FNMA or HUD, respectively.
The aggregate amount of Minimum Additional Interest, Shared Income
Interest and Shared Appreciation Interest payable by the underlying
borrower on the maturity date generally cannot exceed 50% of any
increase in value of the property. However, generally any net
proceeds from the sale or refinancing of the property will be
available to satisfy any accrued but unpaid Shared Income or Minimum
Additional Interest.
Shared Appreciation Interest is payable when one of the following
occurs: (1) the sale of the underlying property to an unrelated
third party on a date which is later than five years from the date
of the Agreement, (2) the maturity date or accelerated maturity date
of the Agreement, or (3) prepayment of amounts due under the
Agreement and the insured mortgage.
Under the Agreement, the Partnership, upon giving twelve months
written notice, can accelerate the maturity date of the Agreement to
a date not earlier than ten years from the date of the Agreement for
(a) the payment of all participation interest due under the
Agreement as of the accelerated maturity date, or (b) the payment of
all participation interest due under the Agreement plus all amounts
due on the first mortgage note on the property.
On February 16, 1996, the Partnership received a prepayment of the
Water View Apartments PIM. The Partnership received the outstanding
principal balance of $16,651,149 plus outstanding interest. The
Partnership did not receive any prepayment penalty or participation
income from this PIM. During 1995, the operating performance of
Water View Apartments declined due to insufficient levels of
occupancy and higher maintenance and repair expenses due to
vandalism. As a result, the borrower went into default on the
underlying loan. Normally, a loan like this would eventually be
recovered through an insurance claim process. However, the
Partnership was able to receive its insured proceeds on this loan
earlier than anticipated due to Bear Stearn s assumption of the
underlying insured mortgage. As a result of the prepayment, the
Partnership fully amortized the remaining prepaid fees and expenses
associated with this PIM.
On February 29, 1996, the Partnership received a prepayment of the
Tarnhill PIM. The Partnership received the outstanding principal
balance of $7,483,000, Shared Appreciation Interest of $982,845 and
Minimum Additional and Shared Income Interest of $223,728. As a
result of the prepayment, the Partnership fully amortized the
remaining prepaid fees and expenses associated with this PIM.
The Partnership's PIMs consisted of the following at December 31, 1996
and 1995:
Aggregate Permanent Maturity
Original Number Interest Date Investment Basis
Issuer Principal of PIMs Rate Range Range at December 31,
1996 1995
GNMA $ 87,152,504
(a) 10
(b) 7.5%-8.25% 2024 to 2032 $ 83,779,526 $101,080,035
FNMA 76,289,943 9 7.25%-7.75% 1999 to 2001 72,971,368 73,593,074
FHA 8,354,500 1 8.305% 2031 8,192,027 15,652,196
$171,796,947 20 $164,942,921 $190,325,305
(a) Includes three PIMs - Richmond Park, Saratoga, and Marina Shores -
in which the Partnership holds 38%, 50% and 29% of the total PIM,
respectively. The remaining portion is held by an affiliate of the
Partnership.
(b) The Partnership had twelve GNMA PIMs as of December 31, 1995.
During February 1996, the Partnership received payoffs of the Water
View and Tarnhill Apartments PIMs.
The underlying mortgages of the PIMs are collateralized by multi-family
apartment complexes located in 13 states. The apartment complexes range in
size from 92 to 736 units.
D. MBS
At December 31, 1996, the Partnership's MBS portfolio has an amortized
cost of $16,931,538 and gross unrealized gains and losses of $566,669
and $139,900, respectively. At December 31, 1995, the Partnership's MBS
portfolio has an amortized cost of $20,230,995 and gross unrealized
gains of $895,050. The MBS portfolio has maturity dates ranging from
1999 to 2024.
E. Partners' Equity
Profits from Partnership operations and Distributable Cash Flow are
allocated 97% to the Unitholders and Corporate Limited Partner (the
"Limited Partners") and 3% to the General Partners.
Upon the occurrence of a capital transaction, as defined in the
Partnership Agreement, net cash proceeds and profits from the capital
transaction will be distributed first, to the Limited Partners until
they have received a return of their total invested capital, second, to
the General Partners until they have received a return of their total
invested capital, third, 99% to the Limited Partners and 1% to the
General Partners until the Limited Partners receive an amount equal to
any deficiency in the 11% cumulative return on their invested capital that
exists through fiscal years prior
to the date of the capital transaction, fourth, to the class of General
Partners until they have received an amount equal to 4% of all amounts
of cash distributed under all capital transactions and fifth, 96% to the
Limited Partners and 4% to the General Partners. Losses from a capital
transaction will be allocated 97% to the Limited Partners and 3% to the
General Partners.
As of December 31, 1996, the following cumulative partner contributions
and allocations have been made since inception of the Partnership:
Corporate
Limited General Unrealized
Unitholders Partners Partners Gain Total
Capital
contributions $298,678,321 $ 2,000 $ 3,000 $ - $298,683,321
Syndication costs (20,431,915) - - - (20,431,915)
Quarterly
Distributions (170,212,855) (1,252) (3,751,058) - (173,965,165)
Special
Distributions (25,426,383) (170) - - (25,426,553)
Net income 112,956,235 795 3,493,517 - 116,450,547
Unrealized
gain on MBS - - - 426,769 426,769
Balance,
December 31, 1996 $195,563,403 $ 1,373 $ (254,541) $ 426,769 $195,737,004
F. Related Party Transactions
Under the terms of the Partnership Agreement, the General
Partners or their affiliates receive an Asset Management Fee
equal to .75% per annum of the value of the Partnership's
invested assets payable quarterly. The General Partners may
also receive an incentive management fee in an amount equal
to .3% per annum on the Partnership's Total Invested Assets
providing the Unitholders receive a specified non-cumulative
annual return on their Invested Capital. Total fees payable
to the General Partners as asset management or incentive
management fees shall not exceed 9.05% of distributable cash
flow over the life of the Partnership.
Additionally, the Partnership reimburses affiliates of the
General Partners for certain expenses incurred in connection
with maintaining the books and records of the Partnership and
the preparation and mailing of financial reports, tax
information and other communications to investors.
G. Federal Income Taxes
The reconciliation of the net income reported in the
accompanying statement of income with the income reported in
the Partnership's 1996 federal income tax return is as
follows:
Net income per statement of income $11,372,365
Book to tax difference for timing of PIM
income 62,832
Book to tax difference for amortization of
prepaid expenses and fees (60,209)
Net income for federal income tax purposes $11,374,988
The allocation of the 1996 net income for federal income tax purposes
is as follows:
Portfolio
Income
Unitholders $11,033,665
Corporate Limited Partner 74
General Partners 341,249
$11,374,988
For the years ended December 31, 1996, 1995 and 1994 the average
per unit income to the Unitholders for federal income tax
purposes was $.76, $.93 and $.91, respectively.
H. Fair Value Disclosure of Financial Instruments
The Partnership uses the following methods and assumptions to estimate
the fair value of each class of financial instruments:
Cash and cash equivalents
The carrying amount approximates fair value due to the short
maturity of those instruments.
MBS
The Partnership estimates the fair value of MBS based on quoted
market prices.
PIMs
There is no established trading market for these investments.
Management estimates the fair value of the PIMs using quoted market
prices of MBS having the same stated coupon rate. Management does
not include any participation income in the Partnership s estimated
fair value arising from appreciation of the properties, because
Management does not believe it can predict the time of realization
of the feature with any certainty. Based on the estimated fair
value determined using these methods and assumptions, the Trust's
investments in PIMs had gross unrealized gains and losses of
approximately $1,506,000 and $372,000, respectively at December 31,
1996, respectively, and gross unrealized gains of approximately
$5,245,000 at December 31, 1995.
At December 31, 1996 and 1995, the estimated fair values of the
Partnership's financial instruments are as follows:
(Amounts in thousands)
1996 1995
Cash and cash equivalents $ 6,057 $ 5,971
MBS 17,358 21,126
PIMs 166,077 195,570
$189,492 $222,667
I. Subsequent Events
On February 25, 1997, the Partnership received a repayment of the Rock
Creek Apartments PIM. The Partnership received the outstanding
principal balance of $11,139,968 plus outstanding interest. The
Partnership did not receive any prepayment penalty or participation
income from this PIM.
KRUPP INSURED MORTGAGE LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
Normal Carrying
Monthly Original Amount at
Interest Maturity Payment Face Current Face 12/31/96
PIMs (a) Rate (b) Date (k) (l)(m)(n) Amount Amount (r)
GNMA
Cross Creek Apts.
Richmond, VA 6.75%
(o) 4/15/31 $ 68,900 $ 9,647,610 $ 9,496,962 $ 9,496,962
Marina Shores Apts.
Virginia Beach, VA 8.00%
(c)(h)(i) 5/15/32 43,100 6,200,300 6,103,675 6,103,675
Paddock Club Apts.
Lakeland, FL 8.00%
(c)(h)(i) 8/15/31 71,000 10,208,400 9,990,701 9,990,701
Pope Building Apts.
Chicago, IL 8.00%
(c)(f)(g) 6/15/26 23,800 3,349,600 3,235,409 3,235,409
Remington Place
Apts.
Fort Washington, MD 7.00%
(d)(f)
(g)(p) 10/15/24 89,000 13,200,000 12,499,504 12,499,504
Richmond Park Apts.
Richmond Heights,
OH 7.50%
(c)(f)(g) 8/15/24 67,400 10,000,000 9,453,067 9,453,067
Saratoga Apts.
Rolling Meadow, IL 7.875%
(c)(f)(g) 8/15/24 47,300 6,750,000 6,408,214 6,408,214
Southland Station
II Apts.
Warner Robins, GA 8.25%
(c)(h)(i) 2/15/31 38,600 5,398,562 5,279,280 5,279,280
Valley Manor Apts.
Dover Township, PA 8.00%
(c)(h)(i) 7/15/24 34,000 4,798,032 4,559,591 4,559,591
Wildflower Apts.
Las Vegas, NV 7.75%
(c)(j) 1/15/25 122,000 17,600,000 16,753,123 16,753,123
87,152,504 83,779,526 83,779,526
FNMA
Bell Station Apts.
Montgomery, AL 7.50%
(c)(h)(i) 4/1/00 35,700 5,300,000 5,069,319 5,069,319
(q)
Brookside Apts.
Carmichael, CA 7.50%
(c)(f)(g) 2/1/00 33,000
(q) 4,900,000 4,679,755 4,679,755
Deering Place Apts.
Charlotte, NC 7.50%
(e)(h)(i) 3/1/01 25,800
(q) 3,825,000 3,687,160 3,687,160
Hampton Ridge Apts.
Rockford, IL 7.50%
(e)(f)(g) 9/1/99 65,000
(q) 9,600,000 9,133,513 9,133,513
The Patrician
University City, CA 7.25%
(c)(f)(g) 12/1/99 56,000
(q) 8,500,000 8,084,564 8,084,564
Rock Creek Apts.
Silver Spring, MD 7.50%
(c)(f)(g) 8/1/00 78,400
(q) 11,621,400 11,147,987 11,147,987
Salishan Apts.
Sacramento, CA 7.50%
(c)(f)(g) 7/1/00 106,000
(q) 15,743,543 15,097,536 15,097,536
Silver Springs Apts.
Wichita, KS 7.75%
(c)(f)(g) 12/1/99 53,000
(q) 7,600,000 7,265,484 7,265,484
The Enclave Apts.
Beavercreek, OH 7.50%
(c)(f)(i) 5/1/00 62,000
(q) 9,200,000 8,806,050 8,806,050
76,289,943 72,971,368 72,971,368
FHA
Creekside Apts.
Portland, OR 8.305%
(c)(f)(g) 11/1/31 61,600 8,354,500 8,192,027 8,192,027
Total $171,796,947 $164,942,921 $164,942,921
(a) The Participating Insured Mortgages ("PIMs") consist of either a
mortgage-backed security ("MBS") issued and guaranteed by the Federal
National Mortgage Association ("FNMA"), an MBS issued and guaranteed
by the Government National Mortgage Association ("GNMA") or a sole
participation interest in a first mortgage loan insured by the United
States Department of Housing and Urban Development ("HUD") and a
subordinated promissory note and mortgage or shared income and
appreciation agreement with the underlying Borrower that conveys
participation interests in the revenue stream and appreciation of the
underlying property above certain specified base levels.
(b) Represents the permanent interest rate of the GNMA or FNMA MBS or the
HUD-insured first mortgage less the servicers fee. The Partnership
may also receive additional interest which consists of (I) Minimum
Additional Interest based on a percentage of the unpaid principal
balance of the first mortgage on the property, (ii) Shared Income
Interest based on a percentage of monthly gross income generated by
the underlying property in excess of a specified base amount (but only
to the extent it exceeds the amount of Minimum Additional Interest
received during such month), (iii) Shared Appreciation Interest based
on a percentage of any increase in the value of the underlying
property in excess of a specified base value.
(c) Minimum additional interest is at a rate of .5% per annum calculated
on the unpaid principal balance of the first mortgage note.
(d) Minimum additional interest is at a rate of 1% per annum calculated on
the unpaid principal balance of the first mortgage note.
(e) Minimum additional interest is at a rate of .75% per annum calculated
on the unpaid principal balance of the first mortgage note.
(f) Shared income interest is based on 25% of monthly gross rental income
over a specified base amount.
(g) Shared appreciation interest is based on 25% of any increase in the
value of the project over the specified base value.
(h) Shared income interest is based on 30% of monthly gross rental income
over a specified base amount.
(i) Shared appreciation interest is based on 30% of any increase in the
value of the project over the specified base value.
(j) Shared income interest is based on 35% of monthly gross rental income
over a specified base amount and shared appreciation interest is based
on 35% of any increase in the value of the project over the specified
base value.
(k) The Partnership's GNMA MBS and HUD direct mortgages have call
provisions, which allow the Partnership to accelerate their respective
maturity date.
(l) The normal monthly payment consisting of principal and interest is
payable monthly at level amounts over the term of the GNMA MBS and the
HUD direct mortgages.
(m) PIMs generally may not be prepaid during the first five years and may
be prepaid subject to a 9% prepayment penalty in years six through
nine, a 1% prepayment penalty in year ten and no prepayment penalty
after year ten.
(n) The normal monthly payment consisting of principal and interest for a
FNMA PIM is payable at level amounts based on a 35-year amortization.
All unpaid principal and accrued interest is due at the end of year
ten.
(o) The Partnership agreed to reduce the permanent loan rate to 5.75% per
annum effective March 1, 1992, with periodic increases in the interest
rate through March 1, 1998 when it will reach the original permanent
rate of 8.25% per annum. As consideration for this interest rate
reduction, the Partnership will receive 25% of the available net cash
flow, will increase the Shared Appreciation Interest rate from 30% to
50% and will decrease the base value used for this calculation from
$10,615,000 to $9,650,000. Previously, Minimum Additional Interest
was at a rate of .5% per annum and Shared Income Interest was based on
30% gross rental income over a specified base amount.
(p) The Partnership agreed to reduce the permanent loan rate to 6.75% per
annum from January 1, 1994 through December 31, 1995, with an increase
then to 7.0% per annum beginning January 1, 1996 through December 31,
1996 and thereafter 7.5% per annum until maturity. This
was done in exchange for a lower Shared Appreciation base value of
$13,200,000 from $15,450,000 and an obligation from the borrower to
repay the interest not paid under the interest rate reduction upon the
sale of the property or the maturity or prepayment of subordinated
promissory note.
(q) The approximate principal balance due at maturity for each PIM,
respectively, is as follows:
PIM Amount
Bell Station Apartments $ 4,897,000
Brookside Apartments $ 4,527,000
Deering Place Apartments $ 3,534,000
Hampton Ridge Apartments $ 8,870,000
The Patrician $ 7,822,000
Rock Creek Apartments $10,738,000
Salishan Apartments $14,546,000
Silver Springs Apartments $ 7,049,000
The Enclave Apartments $ 8,500,000
(r) The aggregate cost of PIMs for federal income tax purposes is
$164,942,921.
A reconciliation of the carrying value of PIMs for each of the three years
in the period ended December 31, 1996 is as follows:
1996 1995 1994
Balance at beginning of period $190,325,305 $191,653,787 $192,867,172
Deductions during period:
Prepayments and
principal collections (25,382,384) (1,328,482) (1,213,385)
Balance at end of period $164,942,921 $190,325,305 $191,653,787