UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the fiscal year ended December 31, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- ACT OF 1934
Commission File Number 0-18491
CAPITAL MORTGAGE PLUS L.P.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3502020
- ------------------------------------------------- -------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- ------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Assignment Certificates
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
----- -----
The approximate aggregate book value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of June 30, 2004 was
$17,309,645, based on Limited Partner equity as of such date.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's prospectus dated May 10, 1989, as supplemented July 7, 1989,
January 8, 1990, February 9, 1990, May 18, 1990, and October 24, 1990, as filed
with the Commission pursuant to Rules 424(b) and 424(c) of the Securities Act of
1933, but only to the extent expressly incorporated by reference in Parts I, II,
III and IV.
Index to exhibits may be found on page 22
Page 1 of 27
PART I
Item 1. Business.
General
- -------
Capital Mortgage Plus L.P. (the "Registrant") is a limited partnership formed
under the laws of the State of Delaware on November 23, 1988. The sole general
partner of the Registrant is CIP Associates, Inc., a Delaware corporation (the
"General Partner"). The General Partner manages and controls the affairs of the
Registrant. On November 17, 2003, CharterMac acquired Related Capital Company
which is the indirect parent of RCC Manager LLC, the sole shareholder of the
General Partner. Pursuant to the acquisition, CharterMac acquired controlling
interests in the General Partner. This acquisition did not affect the Registrant
or its day-to-day operations. See Item 10, Directors and Executive Officers of
the Registrant, below.
Investment Objectives
- ---------------------
The Registrant's principal investment objectives are to: (i) preserve and
protect the Registrant's capital; (ii) provide quarterly cash distributions of
adjusted cash from operations; and (iii) provide additional distributions from
additional interest arising from participations in the annual cash flow of the
developments and/or the sale or refinancing of a development. There can be no
assurance that all of the objectives can be achieved.
The Registrant originated federally insured and co-insured first mortgage
construction and permanent loans ("Mortgages") to finance multi-family
residential rental properties ("Developments" and each a "Development")
developed by unaffiliated entities. All base interest and initially at least 90%
in the aggregate of the principal of the Mortgages in which the Registrant
invests are insured or coinsured by the Department of Housing and Urban
Development ("HUD") and Related Mortgage Corporation ("RMC"). The remaining 10%
of the Registrant's portfolio is comprised of uninsured non-interest bearing
equity loans ("Equity Loans") secured by the assignment of the debtor's
interests in the Development made directly to the same developers as the
Mortgages for, among other purposes, defrayal of certain specific cash
requirements of the Developments. The Registrant made five Mortgages in the
aggregate amount of $26,158,190 and five Equity Loans in the aggregate amount of
$3,062,135 in connection with five Developments. The Registrant is a closed-end
Company that made its last mortgage investment in March 1993 and does not expect
to make any additional investments. As of December 31, 2004, the Registrant
continued to hold two of its original five investments with the other three
investment having been previously paid as follows:
Original
Mortgage
Date of Date Loan Equity Loan
Project Location Investments Repaid Amount (2) Amount (10)
- --------------------------------- ------------------- -------------- ------------ ------------- -------------
Mortenson Manor Apartments (3) Ames, Iowa 8/31/90 10/31/02 $ 4,974,090 $ 577,885
Holly Ridge II Apartments (6) Gresham, Oregon 3/16/93 12/29/04 5,310,100 684,400
Willow Trace Apartments (7) Tuscaloosa, Alabama 6/18/93 12/16/98 4,420,000 680,000
------------- ------------
$ 14,704,190 $ 1,942,285
============= ============
The Registrant has no present expectation as to when it may dispose of its two
remaining Mortgages and Equity Loans.
The Registrant is engaged solely in the business of investing in Mortgages and
Equity Loans; therefore, presentation of industry segment information is not
applicable.
For detailed financial information pertaining to the Registrant, see Item 8,
Financial Statements and Supplementary Data, below.
Investments
- -----------
The following table lists the Registrant's Mortgages and Equity Loans as of
February 28, 2005.
Original Interest
Mortgage Rate on Equity
Date of Loan Mortgage Loan Final Occu-
Project Location Investment Amount (2) Loan (1) Amount Endorsement Term (4) pancy
- ------------- --------------- ------------ ------------ ----------- ----------- ----------- ---------- --------
Windemere 9.62% -
Apartments (3) Wichita, Kansas 9/28/1990 $ 8,110,300 10.70% $ 736,550 7/92 40 years 97%
Fieldcrest III 8.75% -
Apartments Dothan, Alabama 8/27/1991 3,343,700 10.11% 383,300 11/92 40 years 90%
----------- ----------
$11,454,000 $1,119,850
=========== ==========
(1) The minimum interest rate shown above includes interest payable under the
first mortgage note plus additional interest payable pursuant to the terms of a
Limited Operating Guaranty agreement for Fieldcrest III Apartments
("Fieldcrest") and the Additional Interest Guaranty agreements for Windemere
Apartments ("Windemere").
(2) The Windemere Mortgage is co-insured by HUD and RMC. The Fieldcrest Mortgage
is fully insured by HUD. As of February 28, 2005, all loan amounts under the
Mortgages have been disbursed.
2
(3) Default interest payments in the aggregate amount of approximately $713,000
for the years ended December 31, 1999 through 2004 and $130,000 for the year
ended December 31, 1996 have not been received and as a result, the Registrant
established an allowance for uncollectability for a portion of the unpaid
default interest payments which equals approximately $843,000 and $720,000 at
December 31, 2004 and 2003, respectively.
(4) All Mortgages and Equity Loans have call provisions effective ten years
following final endorsement and a grace period. The Registrant, in order to
enforce such provisions, would be required to terminate the mortgage insurance
contract with FHA (and/or the coinsurer) with respect to each of the Mortgages
not later than the accelerated payment date. Since the exercise of such option
would be at the Registrant's discretion, it is intended to be exercised only
where the Registrant determines that the value of the Development has increased
by an amount which would justify accelerating payment in full and assuming the
risks of foreclosure if the mortgagor failed to make the accelerated payment.
The following is the interest income from Mortgages as a percentage of
Registrant's total revenues for the prior three fiscal years.
2004 2003 2002
------------------ ------------------ ------------------
Mortenson* 0% 0% 34%
Windemere 28 49 25
Fieldcrest 11 19 9
Holly Ridge** 40 31 16
* Repaid in full on October 31, 2002 ** Repaid in full on December 29, 2004.
Repayment of Mortgage Loans
- ---------------------------
Holly Ridge
- -----------
On December 29, 2004, HR II Associates, the owner of Holly Ridge, prepaid the
outstanding Mortgage and Equity Loan in full. The Mortgage and the Equity Loan
were secured by a mortgage on the Holly Ridge property and partnership interests
in HR II Associates. The outstanding debt repaid early to the Registrant totaled
$6,421,915, including the $5,034,666 outstanding balance of the Mortgage Loan,
the $684,400 Equity Loan and $702,849 of additional interest due pursuant to the
loan documents.
The proceeds from the repayment of the Holly Ridge Mortgage and Equity Loan on
December 29, 2004 were included as part of the regular quarterly distributions
which aggregated approximately $6,834,000 and $71,000 made to the limited
partners or BACs holders and the General Partner, respectively, during the three
months ended March 31, 2005.
Mortenson
- ---------
On October 31, 2002, Mortenson II Associates L.P. (the "Owner"), the owner of
Mortenson, prepaid the outstanding Mortgage and Equity Loan in full. The
Mortgage and the Equity Loan were secured by a mortgage on the Mortenson
property and partnership interests in the Owner. The outstanding debt repaid
early to the Registrant totaled $5,934,739, including the $4,543,011 outstanding
balance of the Mortgage Loan, the $577,885 Equity Loan and $813,843 of
additional interest due pursuant to the loan documents.
The proceeds from the repayment of the Mortenson Mortgage and Equity Loan on
October 31, 2002 were included as part of the regular quarterly distributions
which aggregated approximately $6,832,000 and $71,000 made to the limited
partners or BACs holders and the General Partner, respectively, during the three
months ended March 31, 2003.
Competition
- -----------
The Registrant's business is affected by competition to the extent that the
underlying Developments from which its borrowers derive interest and principal
payments may be subject to competition from neighboring properties. In
particular, the receipt of additional interest and the repayment of the Equity
Loans, neither of which is insured or guaranteed by government or
quasi-government agencies, are dependent upon the economic performance of the
underlying Developments which could be adversely affected by competitive
conditions.
Employees
- ---------
The Registrant does not directly employ anyone. All services are performed for
the Registrant by its General Partner and that entity's affiliates. The General
Partner receives compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Registrant reimburses the General Partner and
certain of its affiliates for expenses incurred in connection with the
performance by their employees of services for the Registrant in accordance with
the Partnership Agreement.
Company Filings
- ---------------
The Registrant files with the Securities and Exchange Commission (the "SEC") the
Registrant's annual reports on Form 10-K, quarterly reports on From 10-Q and
current reports on From 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The
Registrant will provide paper copies of its filings free of charge upon request.
The public may read and copy any materials the Registrant files with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
3
Item 2. Properties.
The Registrant does not own or lease any property.
Item 3. Legal Proceedings.
There are no material legal proceedings pending against or involving the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.
As of December 31, 2004, the Registrant had issued and outstanding 1,836,660
limited partnership interests ("Limited Partnership Interests"). All of the
issued and outstanding Limited Partnership Interests are issued to Related FI
BUC$ Associates, Inc. (the "Assignor Limited Partner"), which has issued
Beneficial Assignment Certificates ("BACs"). Each BAC represents all of the
economic and virtually all of the material ownership rights attributable to a
Limited Partnership Interest held by the Assignor Limited Partner. BACs may be
converted into Limited Partnership Interests at no cost to the holder, but
Limited Partnership Interests are not convertible back into BACs. There is
currently no established public trading market for BACs and it is not
anticipated that BACs will be listed for trading on any securities exchange or
included for quotation on the Nasdaq National Market.
The Registrant has 3,431 registered holders of an aggregate of 1,836,660 BACs,
as of March 3, 2005.
All of the Registrant's general partnership interests, representing an aggregate
capital contribution of $1,000, are held by the General Partner.
There are no material legal restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Registrant's Amended and Restated Agreement of Limited Partnership.
Distribution Information
- ------------------------
Accrued cash distributions per BAC made to the limited partners or BACs holders
for the following quarters in 2004, 2003 and 2002, which are paid in subsequent
quarters, were as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
-------------- ------------- ------------- ------------- ------------
2004 $.1271 $.1285 $.1299 $3.7206 $4.1061
2003 .1271 .1285 .1299 .1299 .5154
2002 .2164 .2188 .2212 3.7200 4.3764
Quarterly distributions are generally made 45 days following the close of the
calendar quarter.
A total of $10,099,080 was distributed to the limited partners or BACs holders
during the years 2004, 2003 and 2002. The Registrant utilized the original
working capital reserve, in the aggregate amount of $477,532, for distributions
from 1989 through 1991, which was considered to be a return of capital. An
additional working capital reserve of approximately $2,800,000 was established
from uninvested offering proceeds, a portion of which was applied to pay a part
of the 2004, 2003 and 2002 distributions (which was considered to be a return of
capital). Approximately $0, $5,921,000 and $0 paid to the limited partners or
BACs holders in each of the years ended December 31, 2004, 2003 and 2002,
respectively, represented a return of capital. A total of $138,142 was
distributed to the General Partner during 2004, 2003 and 2002.
The 2004 fourth quarter distribution, which was paid on February 14, 2005, was
funded primarily by the Holly Ridge repayment proceeds, $3.63 per BAC of which
is considered to be a return of capital.
The Registrant does not have an equity compensation plan.
The Registrant has not sold securities within the past three years which were
not registered under the Securities Act of 1933.
The Registrant has not repurchased any securities in the fourth quarter of the
fiscal year ended December 31, 2004.
4
Item 6. Selected Financial Data
The information set forth below presents selected financial data of the
Registrant. Additional financial information is set forth in the audited
financial statements and footnotes thereto contained in Item 8 hereof.
Year ended December 31,
------------------------------------------------------------------------
OPERATIONS 2004 2003 2002 2001 2000
- --------------- ------------ ------------ ------------ ------------ ------------
Interest income -
Mortgage loans $ 2,018,754 $ 1,469,540 $ 2,490,705 $ 1,944,183 $ 1,994,946
Temporary investments 6,337 13,230 26,244 36,909 45,335
Other income 544,507 2,782 451,800 3,302 3,352
------------ ------------ ------------ ------------ ------------
Total revenues 2,569,598 1,485,552 2,968,749 1,984,394 2,043,633
------------ ------------ ------------ ------------ ------------
Operating expenses 378,142 362,056 506,531 482,697 501,529
Provision for bad debts 83,788 141,748 146,388 262,062 175,493
------------ ------------ ------------ ------------ ------------
Total Expenses 461,930 503,804 652,919 744,759 677,022
------------ ------------ ------------ ------------ ------------
Net income $ 2,107,668 $ 981,748 $ 2,315,830 $ 1,239,635 $ 1,366,611
============ ============ ============ ============ ============
Net income per BAC $ 1.12 $ 0.52 $ 1.24 $ 0.66 $ 0.73
============ ============ ============ ============ ============
December 31,
------------------------------------------------------------------------
FINANCIAL POSITION 2004 2003 2002 2001 2000
- ----------------------- ------------ ------------ ------------ ------------ ------------
Total assets $ 18,275,802 $ 17,130,807 $ 23,814,436 $ 23,159,100 $ 23,535,982
============ ============ ============ ============ ============
CASH DISTRIBUTIONS
- -----------------------
Net income per BAC $ 4.11* $ 0.52 $ 4.38 $ 0.88 $ 0.88
============ ============ ============ ============ ============
* Includes $3.72 which was distributed on February 14, 2005.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Capital Resources and Liquidity
- -------------------------------
Sources of Registrant funds included interest earned on (1) investments in
Mortgages and Equity Loans (see also Item 1, Business) and (2) the working
capital reserve.
During the year ended December 31, 2004, cash and cash equivalents of the
Registrant increased by approximately $1,588,000 due to collections of principal
on Mortgages and Equity Loans $824,000 and cash provided by operating activities
$1,731,000 which exceeded distributions paid to partners and BACs holders
($966,000). Included in the adjustments to reconcile the net income to cash flow
used in operating activities is amortization of approximately $72,000.
Subject to the future performance of the Registrant's investments and results of
operations, the General Partner anticipates that there will be sufficient cash
from operations generated to cover anticipated expenses in 2005 and to fund
future distributions of $.36 per BAC per annum paid quarterly.
On December 29, 2004, HR II Associates, the owner of Holly Ridge, prepaid the
outstanding Mortgage Loan and Equity Loan in full. The Mortgage and the Equity
Loan were secured by a mortgage on the Holly Ridge property and partnership
interests in HR II Associates. The outstanding debt repaid early to the
Registrant totaled $6,421,915, including the $5,034,666 outstanding balance of
the Mortgage, the $684,400 Equity Loan and $702,849 of additional interest due
pursuant to the loan documents. The repayment proceeds were included in a cash
distribution and were considered a return of capital made during the first
quarter of 2005 of $6,667,076 ($3.63 per BAC) to the BACsholders and $67,344 to
the General Partner.
On October 31, 2002, Mortenson II Associates L.P. (the "Owner"), the owner of
Mortenson, prepaid the outstanding Mortgage Loan and Equity Loan in full. The
Mortgage and the Equity Loan were secured by a mortgage on the Mortenson
property and partnership interests in the Owner. The outstanding debt repaid
early to the Registrant totaled $5,934,739, including the $4,543,011 outstanding
balance of the Mortgage, the $577,885 Equity Loan and $813,843 of additional
interest due pursuant to the loan documents. The repayment proceeds were
included in a cash distribution and were considered a return of capital made
during the first quarter of 2003 of $6,593,609 ($3.59 per BAC) to the
BACsholders and $66,602 to the General Partner.
5
Regular quarterly cash distributions, which on an annual basis totaled
approximately $946,844 and $946,956 (other than the distribution of Mortgage and
Equity Loans repayment proceeds), were made to the limited partners or BACs
holders during the years ended December 31, 2004 and 2003, respectively. Such
distributions were made from adjusted cash flow from operations and, to a lesser
extent, from working capital reserves which is considered to be a return of
capital. Approximately $19,323 and $86,000 was distributed to the General
Partner in each of the years ended December 31, 2004 and 2003, respectively.
Management is not aware of any trends or events, commitments or uncertainties
that will impact liquidity in a material way. Management believes the only
impact would be from laws that have not yet been adopted. All base interest and
the principal of the Registrant's investments in Mortgages are insured or
co-insured by HUD and additionally one Mortgage is coinsured by a private
mortgage lender. The Registrant's investments in uninsured non-interest bearing
Equity Loans (which represent approximately 10% of the Registrant's portfolio
when originated) are secured by a Registrant interest in two properties. Due to
the prepayment of three of the Registrant's original investments in Mortgages
and Equity Loans, the portfolio is not diversified by location around the United
States. Thus, the Registrant may not be protected against a general downturn in
the national economy.
Inflation
- ---------
In the last three fiscal years, there has been no material impact from inflation
or changing prices on revenues or on income from continuing operations.
Off Balance Sheet Arrangements
- ------------------------------
The Registrant does not have any off-balance sheet arrangements.
Contractual Obligations
- -----------------------
The Registrant does not have long-term debt obligations, capital lease
obligations, operating lease obligations, purchase obligations or other
long-term liabilities reflected on the Registrant's balance sheet under GAAP.
Critical Accounting Policies
- ----------------------------
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which requires Registrant to
make certain estimates and assumptions. A summary of significant accounting
policies is disclosed in Note 2 to the financial statements which are included
in Registrant's annual report on Form 10-K for the year ended December 31, 2004.
The following section is a summary of certain aspects of those accounting
policies that may require subjective or complex judgments and are most important
to the portrayal of Registrant's financial condition and results of operations.
Registrant believes that there is a low probability that the use of different
estimates or assumptions in making these judgments would result in materially
different amounts being reported in the financial statements.
o Interest income on the mortgage loans consist of contingent and
non-contingent interest as defined in the mortgage notes and other
additional interest agreements. Non-contingent interest consists of base
and default interest, which is recognized as earned. Contingent interest
is based on the development's cash flows and is recognized when received.
o If the interest receivable exceeds the estimated value derived by
management, Registrant adjusts the allowance account to reflect its
estimated fair value.
o The Equity Loans are considered to be premiums paid to obtain the
Mortgages and are amortized over the average expected lives of the
respective Mortgages.
Recent Accounting Pronouncements
- --------------------------------
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 was applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than December 15, 2003.
The Registrant has not created any variable interest entities after January 31,
2003. In December 2003, the FASB redeliberated certain proposed modifications
and revised FIN 46 ("FIN 46 (R)"). The revised provisions were applicable no
later than the first reporting period ending after March 15, 2004. The adoption
of FIN 46 and FIN 46 (R) does not have a material impact on the Registrant's
financial reporting and disclosure.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changed the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally was effective for all
financial instruments entered into or modified after May 31, 2003, and was
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Registrant has evaluated SFAS No. 150 and determined that it
does not have an impact on the Registrant's financial reporting and disclosures.
6
Results of Operations
- ---------------------
2004 vs. 2003
- -------------
Results of operations for the years ended December 31, 2004 and 2003, consisted
primarily of interest income of $2,019,000 and $1,470,000, respectively, earned
from investments in Mortgages, which was higher in 2004 due to additional
interest earned as a result of the sale of Holly Ridge.
Interest income from temporary investments decreased approximately $7,000 for
the year ended December 31, 2004 as compared to 2003, primarily due to proceeds
from the sale of Mortenson earning interest in 2003.
Other income increased approximately $542,000 for the year ended December 31,
2004 as compared to 2003, primarily due to the gain realized from the repayment
of the Holly Ridge Mortgage Loan and Equity Loan in 2004.
General and administrative-related parties increased approximately $42,000 for
the year ended December 31, 2004 as compared to 2003, primarily due to increased
expense reimbursements due to the General Partner for asset monitoring and
overhead.
Amortization expenses decreased approximately $27,000 for the year ended
December 31, 2004 as compared to 2003, due to the Fieldcrest equity loan
becoming fully amortized in 2003.
A provision for bad debts of approximately $84,000 and $142,000 was charged for
the years ended December 2004 and 2003, respectively, representing the 2003
Guaranteed Interest due from Holly Ridge and the 2004 and 2003 Guaranteed
Interest due from Windemere.
2003 vs. 2002
- -------------
Results of operations for the years ended December 31, 2003 and 2002, consisted
primarily of interest income of $1,470,000 and $2,491,000, respectively, earned
from investments in Mortgages, which was lower in 2003 due to the repayment of
the Mortenson Mortgage and Equity Loan in 2002.
Interest income from temporary investments decreased approximately $13,000 for
the year ended December 31, 2003 as compared to 2002, primarily due to lower
cash and cash equivalents balances in 2003 as well as lower interest rates in
2003.
Other income decreased approximately $449,000 for the year ended December 31,
2003 as compared to 2002, primarily due to the gain realized from the repayment
of the Mortenson Mortgage Loan and Equity Loan in 2002.
General and administrative-related parties decreased approximately $27,000 for
the year ended December 31, 2003 as compared to 2002, primarily due to a
decrease in the Partnership management fee, which was calculated on the reduced
asset base due to the repayment of the Mortenson Mortgage and Equity Loan on
October 31, 2002.
Amortization expenses decreased approximately $111,000 for the year ended
December 31, 2003 as compared to 2002, due to the repayment of the Mortenson
Mortgage and Equity Loan on October 31, 2002 and the Windemere Equity Loan
becoming fully amortized in December 2002.
A provision for bad debts of approximately $142,000 and $146,000 was charged for
the years ended December 2003 and 2002, respectively, representing the 2003 and
2002 Guaranteed Interest due from Holly Ridge and the 2003 Guaranteed Interest
due from Windemere.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
The Registrant does not have any market risk sensitive instruments.
7
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
-------------------- --------
Report of Independent Registered Public Accounting Firm 9
Statements of Financial Condition as of December 31,
2004 and 2003 10
Statements of Income for the years ended December 31, 2004,
2003 and 2002 11
Statements of Changes in Partners' Capital (Deficit) for
the years ended December 31, 2004, 2003 and 2002 12
Statements of Cash Flows for the years ended December 31,
2004, 2003 and 2002 13
Notes to Financial Statements 14
8
Report of Independent Registered Public Accounting Firm
To the Partners of
Capital Mortgage Plus L.P.
We have audited the accompanying statements of financial condition of Capital
Mortgage Plus, L.P. (a Delaware Limited Partnership) as of December 31, 2004 and
2003 and the related statements of income, changes in partners' capital
(deficit) and cash flows for the years ended December 31, 2004, 2003 and 2002.
These financial statements are the responsibility of the General Partner. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Partnership has determined
that it is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Partnership's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the General
Partner, as well as evaluating the overall financial statement 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 Capital Mortgage Plus, L.P. as
of December 31, 2004 and 2003, and the results of its operations, changes in
partners' capital (deficit) and its cash flows for the years ended December 31,
2004, 2003 and 2002, in conformity with accounting principles generally accepted
in the United States of America.
/s/ REZNICK GROUP, P.C.
Bethesda, Maryland
March 21, 2005
9
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31,
----------------------------
2004 2003
------------ ------------
Investments in mortgage loans (Note 3) $ 10,648,744 $ 15,891,923
Cash and cash equivalents 2,150,170 561,730
Accrued interest receivable (net of allowance
of $843,429 and $759,641) 72,895 193,876
Loan origination costs (net of accumulated
amortization of $138,292 and $177,323) 335,238 483,278
Other assets 5,068,755 0
------------ ------------
Total Assets $ 18,275,802 $ 17,130,807
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities
Accounts payable and other liabilities $ 27,008 $ 25,014
Due to general partner and affiliates (Note 4) 19,750 18,250
------------ ------------
Total liabilities 46,758 43,264
------------ ------------
Partners' capital (deficit):
Limited Partners (1,836,660 BACs issued and
outstanding) (Note 1) 18,421,004 17,302,333
General Partner (191,960) (214,790)
------------ ------------
Total partners' capital (deficit) 18,229,044 17,087,543
------------ ------------
Total Liabilities and Partners' Capital (Deficit) $ 18,275,802 $ 17,130,807
============ ============
See accompanying notes to financial statements.
10
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF INCOME
Years Ended December 31,
------------------------------------
2004 2003 2002
---------- ---------- ----------
Revenues:
Interest income:
Mortgage loans (Note 3) $2,018,754 $1,469,540 $2,490,705
Temporary investments 6,337 13,230 26,244
Other income 544,507 2,782 451,800
---------- ---------- ----------
Total revenues 2,569,598 1,485,552 2,968,749
---------- ---------- ----------
Expenses:
General and administrative 76,338 74,785 81,110
General and administrative-related parties (Note 4) 230,191 188,234 215,411
Provision for bad debts 83,788 141,748 146,388
Amortization 71,613 99,037 210,010
---------- ---------- ----------
Total expenses 461,930 503,804 652,919
---------- ---------- ----------
Net income $2,107,668 $ 981,748 $2,315,830
========== ========== ==========
Net income - limited partners $2,065,515 $ 962,113 $2,269,513
========== ========== ==========
Number of BACs outstanding 1,836,660 1,836,660 1,836,660
========== ========== ==========
Net income per BAC $ 1.12 $ 0.52 $ 1.24
========== ========== ==========
See accompanying notes to financial statements.
11
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 and 2002
Limited General
Total Partners Partner
------------ ------------ ------------
Partner's capital (deficit) - January 1, 2002 $ 23,061,020 $ 23,222,943 $ (161,923)
Net income 2,315,830 2,269,513 46,317
Distributions (1,644,562) (1,611,671) (32,891)
------------ ------------ ------------
Partner's capital (deficit) - December 31, 2002 23,732,288 23,880,785 (148,497)
Net income 981,748 962,113 19,635
Distributions (7,626,493) (7,540,565) (85,928)
------------ ------------ ------------
Partner's capital (deficit) - December 31, 2003 17,087,543 17,302,333 (214,790)
Net income 2,107,668 2,065,515 42,153
Distributions (966,167) (946,844) (19,323)
------------ ------------ ------------
Partner's capital (deficit) - December 31, 2004 $ 18,229,044 $ 18,421,004 $ (191,960)
============ ============ ============
See accompanying notes to financial statements.
12
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------
Cash flows from operating activities:
Net income $ 2,107,668 $ 981,748 $ 2,315,830
----------- ----------- -----------
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Provision for bad debts 83,788 141,748 146,388
Gain on recovery of amortized portion of
equity loans (672,518) 0 (569,859)
Loss on unamortized portion of loan costs on
prepaid equity loans 133,460 0 121,561
Amortization 71,613 99,037 210,010
Amortization of interest rate buydown 0 (982) (1,452)
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest
receivable 37,142 (182,489) 109,095
(Increase) decrease in other assets (34,038) 406,229 (406,229)
Increase (decrease) in accounts payable and
other liabilities 1,995 (727) 741
Increase (decrease) in due to general
partner and affiliates 1,500 (38,157) (16,673)
----------- ----------- -----------
Total adjustments (377,058) 424,659 (406,418)
----------- ----------- -----------
Net cash provided by operating activities 1,730,610 1,406,407 1,909,412
----------- ----------- -----------
Cash flows from investing activities:
Receipt of principal on mortgage loans 139,597 122,800 4,705,496
Receipt of principal on equity loan 684,400 0 577,885
----------- ----------- -----------
Net cash provided by investing activities 823,997 122,800 5,283,381
----------- ----------- -----------
Cash flows from financing activities:
Distributions to partners (966,167) (7,626,493) (1,644,562)
----------- ----------- -----------
Net cash used in financing activities (966,167) (7,626,493) (1,644,562)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 1,588,440 (6,097,286) 5,548,231
Cash and cash equivalents at beginning of
year 561,730 6,659,016 1,110,785
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,150,170 $ 561,730 $ 6,659,016
=========== =========== ===========
Significant noncash investing and financing
activities:
Other assets include receivable of
principal on mortgage loans resulting
from prepayment of mortgage loan $ 5,034,666 $ - $ -
=========== =========== ===========
See accompanying notes to financial statements.
13
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 and 2002
NOTE 1 - General
Capital Mortgage Plus L.P., a Delaware limited partnership (the "Partnership")
commenced a public offering (the "Offering") on May 10, 1989 of 5,000,000
Beneficial Assignment Certificates ("BACs") representing assignments of limited
partnership interests valued at $20 per BAC totaling $100,000,000. The BACs
represent an assignment of all of the economic and all of the material ownership
rights attributable to the limited partnership interests in the Partnership. The
BACs holders have virtually the same rights and, for all practical purposes, are
limited partners of the Partnership.
Pursuant to the Offering, the Partnership received $36,733,200 of gross proceeds
from the BACs holders representing the issuance of 1,836,660 BACs. The final
closing of the Offering occurred on May 23, 1991 and no further issuance of BACs
is anticipated.
The Partnership was organized on November 23, 1988 and will continue until
December 31, 2041 unless terminated sooner under the provisions of its
partnership agreement.
The general partner of the Partnership is CIP Associates, Inc., a Delaware
corporation (the "General Partner"). On November 17, 2003, CharterMac acquired
Related Capital Company, which is the indirect parent of RCC Manager LLC, the
sole shareholder of the General Partner. Pursuant to the acquisition, CharterMac
acquired controlling interests in the General Partner. This acquisition did not
affect the Registrant or its day-to-day operations. Related FI BUC$ Associates,
Inc. is the Assignor Limited Partner of the Registrant.
The Partnership was formed to invest in insured or guaranteed mortgage
investments. The Partnership has invested in first mortgage construction and
permanent loans ("Mortgages") to finance multifamily residential rental
properties ("Developments") developed by unaffiliated entities. A substantial
portion of the Mortgages provides additional interest based on the annual cash
flow from the Developments and the proceeds of prepayments, sales or other
dispositions. All base interest and initially at least 90% of the principal of
the Mortgages is insured or coinsured by the Department of Housing and Urban
Development ("HUD") and a private mortgage lender (which is an affiliate of the
General Partner). The Partnership has also invested in uninsured equity loans
("Equity Loans") made directly to developers of developments on which the
Partnership holds a Mortgage.
Net income and distributions from operations of the Partnership are allocated 2%
to the General Partner and 98% to the limited partners, until the limited
partners have received an 11% per annum non-cumulative non-compounded return on
their adjusted contributions as defined in the Amended and Restated Agreement of
Limited Partnership. Thereafter, net income and distributions will be allocated
90% to the limited partners and 10% to the General Partner. Distributions of
disposition proceeds are allocated 1% to the General Partner and 99% to the
limited partners until each limited partner has received an amount equal to his
original contribution plus an amount which, when added to all prior
distributions equals a 7% per annum cumulative non-compounded return on his
adjusted contribution; then 2% and 98% of disposition proceeds, until each
limited partner has received an amount which, when added to all prior
distributions equals an 11% per annum cumulative non-compounded return on his
adjusted contribution; and thereafter 10% to the General Partner and 90% to the
limited partners.
The accrued cash distributions per BAC were approximately $4.11, $.52 and $4.38
for 2004, 2003 and 2002. The 2004, 2003 and 2002 distributions were made from
adjusted cash flow from operations (and, in particular, of the fourth quarters
2004 and 2002 distributions which were paid on February 14, 2005 and 2003,
respectively from the repayment of the Holly Ridge and Mortenson loans, $3.63
and $3.59 per BAC was considered to be a return of capital) and to a lesser
extent were supplemented from working capital reserves, which was considered to
be a return of capital.
NOTE 2 - Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
The preparation of financial statements in conformity with GAAP requires the
General Partner to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Significant
estimates are made when accounting for the allowance for the interest
receivable. Actual results could differ from those estimates.
Acquisition expenses incurred for the investment of Mortgages have been
capitalized and are included in loan origination costs, which are amortized over
the average expected lives of the respective Mortgages when acquired and written
off when the loan is repaid.
The Equity Loans are considered to be premiums paid to obtain the Mortgages and
are amortized over the average expected lives of the respective Mortgages.
Interest rate buydowns are amortized as an adjustment to the effective interest
rate over the average expected lives of the respective Mortgages.
14
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2004, 2003 and 2002
b) Cash and Cash Equivalents
Cash and cash equivalents include temporary investments with original maturity
dates of less than 3 months when acquired and are carried at cost plus accrued
interest, which approximates market.
c) Income Taxes
The Partnership is not required to provide for, or pay, any federal income
taxes. Income tax attributes that arise from its operation are passed directly
to the individual partners. The Partnership may be subject to state and local
taxes in jurisdictions in which it operates.
d) Revenue Recognition
Interest income on the Mortgages loans consists of contingent and non-contingent
interest as defined in the mortgage notes and other additional interest
agreements. Non-contingent interest consists of base and default interest, which
are recognized as earned. Contingent interest is based on the underlying
Development's cash flows and is recognized when received.
15
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2004, 2003 and 2002
Note 3 - Investments in Mortgage Loans
Information relating to investments in Mortgages and Equity Loans as of December
31, 2004 and 2003 is as follows:
Amounts Advanced
--------------------------------------------------------------
No. of Final Total Investments in
Apartment Date of Maturity Equity Amounts Loans at
Property/Location Units Investment Date Mortgages Loans Advanced 12/31/2004 (E)
- ----------------- --------- ---------- -------- ----------- ---------- ----------- --------------
Windemere
Apts./ 204 9/1990 9/2030 $ 8,110,300 $ 736,550 $ 8,846,850 $ 7,510,967
Wichita, KS
Fieldcrest III
Apts./ 112 8/1991 8/2031 3,343,700 383,300 3,727,000 3,137,777
Dothan, AL
Holly Ridge II
Apts./ 144 3/1993 (F) 5,310,100 684,400 5,994,500 0
Gresham, OR
----------- ---------- ----------- -----------
Total $16,764,100 $1,804,250 $18,568,350 $10,648,744
=========== ========== =========== ===========
Interest earned by the Partnership during 2004
------------------------------------------------------------------------------
Non-contingent Contingent
------------------------------- ---------------------------------------------
Default Annual Cash Flow
Investments in Base Interest Yield Participation Total
Loans at Interest Amount/ Amount/ Amount/ Interest
Property/Location 12/31/2003 (E) Amount/Rate (A) Rate (B) Rate (C) Rate (D) Earned
- ----------------- -------------- --------------- -------- -------- ------------- ----------
Windemere
Apts./ $ 7,583,559 $ 599,800 $123,625 $ 0 $ 0 $ 723,625
Wichita, KS 7.95% 1.60% 1.08% 30.00%
Fieldcrest III
Apts./ 3,163,777 273,410 0 0 0 273,410
Dothan, AL 8.68% 0% 1.36% 30.00%
Holly Ridge II
Apts./ 5,144,587 410,502 611,217 0 0 1,021,719
Gresham, OR 8.125% 1.00% .64% 30.00%
----------- ----------- -------- -------- ------- ----------
Total $15,891,923 $ 1,283,712 $734,842 $ 0 $ 0 $2,018,754
=========== =========== ======== ======== ======= ==========
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2004, 2003 and 2002
(A) Base interest on the Mortgages is that amount that is insured/co-insured by
HUD and is being shown net of service fee.
(B) Default Interest is the minimum amount due over the base rate, and is not
contingent upon cash flow. This interest is secured by partnership
interests in the borrower.
(C) Annual Yield is the amount over the default rate and is contingent upon
cash flow of the Development.
(D) Cash Flow Participation is the percent of cash flow due to the Partnership
after payment of the Annual Yield and is contingent upon cash flow.
(E) The Investments in Loans amount reflects the unpaid balance of the
Mortgages and the unamortized balance of the Equity Loans in the amounts of
$10,648,744 and $0, respectively, at December 31, 2004 and $15,823,007 and
$68,916, respectively, at December 31, 2003.
(F) On December 29, 2004, HR II Associates, the owner of Holly Ridge, prepaid
the Mortgage and equity Loan in full. The Mortgage and the Equity Loan were
secured by a mortgage on Holly Ridge property and partnership interests in
HR II Associates. The outstanding debt repaid to the Partnership totaled
$6,421,915, including the $5,034,666 outstanding balance of the Mortgage,
the $684,400 Equity Loan and $702,849 of additional interest due pursuant
to the loan documents. At December 31, 2004, principal repayment of
$5,034,666 and interest of $34,089 are included in Other Assets as a
receivable. Amounts were received in January 2005 and were utilized to fund
distribution paid in 2005. See Note 8.
2004 2003
------------ ------------
Investment in loans January 1, $ 15,891,923 $ 16,098,198
Additions:
Fieldcrest discount amortization 0 982
------------ ------------
0 982
------------ ------------
Deductions:
Amortization of equity loans (57,033) (84,457)
Collection of principal -Mortgages
-Windemere (72,592) (67,015)
-Fieldcrest (26,000) (23,829)
-Holly Ridge (5,075,672) (31,956)
Collection of principal
-Equity Loan
-Holly Ridge* (11,882) 0
------------ ------------
(5,243,179) (207,257)
------------ ------------
Investment in loans December 31, $ 10,648,744 $ 15,891,923
============ ============
* This is the unamortized portion of the Equity Loan and the balance of the
$684,400 repaid is included in other income on the Statements of Income.
The Windemere Mortgage is co-insured by HUD and Related Mortgage Corporation
("RMC"), a company which is affiliated with the non-executive Chairman of
CharterMac. The Fieldcrest III Mortgage is insured by HUD. The Holly Ridge II
Mortgage was insured by HUD.
In addition to the interest rate payable during the post-construction periods,
the Partnership will be entitled to payment of 30% of cash flow, if any,
remaining after payment of the permanent loan interest and accrued interest if
any, and certain amounts from sales or refinancing proceeds.
The Equity Loans are non-interest bearing and are secured by the assignment of
the owner/developers' interests in the Developments. The Equity Loans are not
insured by HUD or any other party and, for financial statement reporting
purposes, are considered to be premiums paid to obtain the Mortgages. These
premiums are amortized over the average expected lives of the respective
Mortgages.
At December 31, 2004, all of the loans due to the Partnership are current with
respect to their Federal Housing Authority ("FHA") mortgage obligations.
Windemere has not paid its default interest of approximately $124,000, $124,000,
$125,000, $88,000, $126,000, $127,000 and $129,000 for the years ended December
31, 2004, 2003, 2002, 2001, 2000, 1999 and 1996, respectively. Holly Ridge had
not paid its default interest of approximately $40,000 for the year ended
December 31, 2003, which was subsequently paid when the Holly Ridge Mortgage and
Equity Loan were prepaid on December 29, 2004. As a result, an allowance for
uncollectability relating to the default interest amounted to approximately
$843,000 and $760,000 at December 31, 2004 and 2003, respectively.
17
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2004, 2003 and 2002
NOTE 4 - Related Parties
The costs incurred to related parties for the years ended December 31, 2004,
2003 and 2002 were as follows:
2004 2003 2002
-------- -------- --------
Partnership management fees (a) $ 97,287 $ 97,287 $119,098
Expense reimbursement (b) 132,904 90,947 96,313
-------- -------- --------
Total general and administrative-
related parties $230,191 $188,234 $215,411
======== ======== ========
(a) A Partnership management fee for managing the affairs of the Partnership
equal to .5% per annum of invested assets is payable out of cash flow to the
General Partner. The fourth quarter 2002 Partnership management fee was
calculated on the reduced asset base due to the repayment of the Mortenson
Mortgage Loan and Equity Loan on October 31, 2002. During the years ended
December 31, 2004, 2003 and 2002, payments of approximately $97,000, $122,000
and $126,000 were made, respectively. At December 31, 2004 and 2003, there were
no balances due to the General Partner for these fees.
(b) The General Partner and its affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management,
registrar, transfer and assignment functions, asset management; investor
communications, printing services and other administrative services. The amount
of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. An affiliate of the General Partner performs asset
monitoring services for the Partnership. These asset monitoring services include
site visits and evaluations of the performance of the properties securing the
loans. During the years ended December 31, 2004, 2003 and 2002, payments of
approximately $152,000, $104,000 and $106,000 were made, respectively, relating
to these costs. As of December 31, 2004 and 2003, the General Partner and its
affiliates were due approximately $20,000 and $18,000, respectively.
RMC is a co-insurer on the Windemere Mortgage in which the Partnership has
invested. RMC was a co-insurer in the Mortenson Mortgage. RMC is entitled to a
mortgage insurance premium which is paid by the mortgagors.
NOTE 5 - Concentration of Credit Risk
The Partnership maintains its cash in several banks which are insured by the
Federal Deposit Insurance Corporation (FDIC) for a balance up to $100,000. At
times during 2004, the account balance exceeded the FDIC limit.
Due to the prepayment of three of the Partnership's original investments in
Mortgages and Equity Loans, the portfolio is not diversified by location around
the United States. Thus, the Partnership may not be protected against a general
downturn in the national economy.
NOTE 6 - Fair Value of Financial Instruments
Financial Accounting Standards Board SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments," requires that the estimated fair value of financial
instruments, as defined by SFAS No. 107, be disclosed. Financial instruments are
defined as cash, evidence of an ownership interest in an entity or a contract
which creates obligations and rights to exchange cash and/or other financial
instruments. SFAS No. 107 also requires disclosures of the methods and
significant assumptions used to estimate the fair value of financial
instruments.
Considerable judgment is required in interpreting data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Partnership could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The following methods/assumptions were used to estimate the fair value of each
class of financial instrument:
Cash and Cash Equivalents
- -------------------------
Fair value is determined to be the carrying value because each class of
financial instrument matures in three months or less and does not represent
unanticipated credit concerns.
Investments in Loans
- --------------------
At December 31, 2004, the estimated carrying value of the Mortgages and Equity
Loans approximated fair value. The estimated fair values at December 31, 2004
were based on internal valuations of the two Developments collateralizing these
mortgages. Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument which
sets forth the terms of a loan. This estimate is subjective in nature and
involves uncertainties and matters of significant judgment. Changes in
assumptions could significantly affect estimates. Due to the property-specific
nature of the loans and the lack of a ready market for such investments, this
fair value estimate does not necessarily represent the amount which the
Partnership could realize upon a current sale of its investments.
18
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2004, 2003 and 2002
NOTE 7 - Quarterly Financial Information (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
--------------- ------------------ ---------------- ----------------
Fiscal Year 2004
- ----------------------
Total Revenue $ 367,281 $ 367,858 $ 367,643 $1,466,816
Net income 245,430 243,790 227,207 1,391,241
Net income per BAC .13 .13 .12 .74
Fiscal Year 2003
- ----------------------
Total Revenue $ 392,458 $ 369,127 $ 368,774 $ 355,193
Net income 279,371 247,029 214,328 241,020
Net income per BAC .15 .13 .11 .13
The Registrant has not disposed of any segments of business and has not
experienced any extraordinary, unusual or infrequently occurring items within
the two most recent fiscal years, other than the repayment of the Mortgage and
Equity Loan with respect to Holly Ridge.
NOTE 8 - Subsequent Event
On February 14, 2005, distributions of $6,833,523 and $70,741 were paid to BAC
holders and the General Partner, respectively, representing the 2004 fourth
quarter distributions, which were funded primarily by the Holly Ridge repayment
proceeds of which $6,667,076 and $67,344, respectively, is considered to be a
return of capital.
19
CAPITAL MORTGAGE PLUS L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 and 2002
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Principal Executive
Officer and Principal Financial Officer of CIP Associates, Inc. , the general
partner of the Registrant, has evaluated the effectiveness of the Registrant's
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as of the end of the period covered by this report. Based on
such evaluation, such officer has concluded that, as of the end of such period,
the Registrant's disclosure controls and procedures are effective.
INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes in
the Registrant's internal control over financial reporting during the fiscal
year to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. The Registrant's affairs
are managed and controlled by the General Partner. The General Partner was
organized in Delaware in November 1988. The executive officers and director of
the General Partner have held their positions as indicated below.
On November 17, 2003, CharterMac acquired Related Capital Company, which is the
indirect parent of RCC Manager LLC, the sole shareholder of the General Partner.
Pursuant to the acquisition, CharterMac acquired controlling interests in the
General Partner. This acquisition did not affect the Registrant or its
day-to-day operations as the General Partner's management team remained
unchanged. Alan P. Hirmes replaced Stephen M. Ross as Director of CIP Associates
Inc. effective April 1, 2004 as a result of this acquisition. Certain
information concerning the director and executive officers of the General
Partner is set forth below.
The Registrant, the General Partner and its director and executive officers, and
any BACs holder holding more than ten percent of the Registrant's BACs are
required to report their initial ownership of such BACs and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4 and 5. Such executive officers, directors (and ten percent holders) are
required by Securities and Exchange Commission regulators to furnish the
Registrant with copies of all Forms 3, 4 or 5 they file. The Registrant is not
aware of any BACs holders who own more than ten percent of the BACs. During the
most recent fiscal year, all of these filing requirements were satisfied by the
officers and director of the General Partner on a timely basis. In making these
disclosures, the Registrant has relied solely on written representations of the
General Partner's director and executive officers or copies of the reports they
have filed with the Securities and Exchange Commission during and with respect
to its most recent fiscal year.
CIP Associates Inc.
Position Held
Name Position Since
- ---------------------- -------------------- -----------------
Alan P. Hirmes Director and President 1988
Stuart J. Boesky Senior Vice President 1988
Glenn F. Hopps Treasurer 1998
Teresa Wicelinski Secretary 1998
ALAN P. HIRMES, 50, the Director and President of the General Partner. Mr.
Hirmes has been a Certified Public Accountant in New York since 1978. Prior to
joining Related in October 1983, Mr. Hirmes was employed by Weiner & Co.,
certified public accountants. Mr. Hirmes is also a Managing Director of Related.
Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. Mr.
Hirmes also serves on the Board of Trustees of CharterMac and American Mortgage
Acceptance Company ("AMAC").
STUART J. BOESKY, 48, is a Senior Vice President of the General Partner. Mr.
Boesky practiced real estate and tax law in New York City with the law firm of
Shipley & Rothstein from 1984 until February 1986 when he joined Related where
he presently serves as Managing Director. From 1983 to 1984 Mr. Boesky practiced
law with the Boston law firm of Kaye, Fialkow Richard & Rothstein (which
subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a
consultant specializing in real estate at the accounting firm of Laventhol &
Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of
Arts degree and from Wayne State School of Law with a Juris Doctor degree. He
then received a Master of Law degree in Taxation from Boston University School
of Law. Mr. Boesky also serves on the Board of Trustees of CharterMac and AMAC.
GLENN F. HOPPS, 42, joined Related in December, 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.
TERESA WICELINSKI, 39, joined Related in June 1992, and prior to that date was
employed by Friedman, Alprin & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.
20
There are no family relationships between the foregoing director and/or
executive officers.
The parent of the General Partner of the Partnership, CharterMac, has adopted a
Code of Ethics that applies to the Principal Executive Officer and Principal
Financial Officer of CharterMac and its subsidiaries, including the General
Partner. CharterMac's Code of Ethics will be provided without charge to any
person who requests it. Such request should be directed to, Investor Services,
CharterMac, 625 Madison Avenue, New York, NY 10022.
Item 11. Executive Compensation.
The Registrant has no officers or directors. The Registrant does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the General Partner for their services. The director and certain
officers of the General Partner receive compensation from the General Partner
and its affiliates for services performed for various affiliated entities which
may include services performed for the Registrant. Such compensation may be
based in part on the performance of the Registrant; however, the General Partner
believes that any compensation attributable to services performed for the
Registrant is immaterial. See also Note 4-Related Parties, in Notes to the
Financial Statements, included in Item 8 above.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 3, 2005, no person was known by the Registrant to be the beneficial
owner of more than five percent of the Limited Partnership Interests and/or
BACs; and neither the General Partner nor any director or officer of the General
Partner owns any Limited Partnership Interests or BACs.
Item 13. Certain Relationships and Related Transactions.
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates, as discussed in Item 11, Executive
Compensation. However, there have been no direct financial transactions between
the Registrant and the director and/or officers of the General Partner. See Note
4-Related Parties, in Notes to the Financial Statements, included in Item 8
above.
Item 14. Principal Accountant Fees and Services
Audit Fees
- ----------
The aggregate fees billed by Reznick Group, (formerly Reznick, Fedder and
Silverman) and their respective affiliates (collectively, "Reznick") for
professional services rendered for the audit of our annual financial statements
for the years ended December 31, 2004 and 2003 and for the reviews of the
financial statements included in the Registrant's Quarterly Reports on Form 10-Q
were $25,000 for each of those years. There were no other audit related fees for
the years ended December 31, 2004 and 2003.
Tax Fees
- --------
The aggregate fees billed by Weiser LLP (formerly, Rubin and Katz LLP) and their
respective affiliates (collectively, "Weiser") for professional services
rendered for the preparation of our annual tax returns were $8,300 for each of
the years ended December 31, 2004 and 2003. There were no other tax related fees
for the years ended December 31, 2004 and 2003.
All Other Fees
- --------------
None.
The Partnership has no directors or executive officers and accordingly has no
audit committee and no audit committee financial expert. The Partnership is not
a listed issuer as defined in Regulation 10A-3 promulgated under the Securities
Exchange Act of 1934.
21
PART IV
Item 15. Exhibits, Financial Statement Schedules
Sequential
(a) 1. Financial Statements Page
-------------------- ---------
Report of Independent Registered Public Accounting Firm 9
Statements of Financial Condition as of December 31, 2004
and 2003 10
Statements of Income for the years ended December 31, 2004,
2003 and 2002 11
Statements of Changes in Partners' Capital (Deficit) for
the years ended December 31, 2004, 2003 and 2002 12
Statements of Cash Flows for the years ended December 31,
2004, 2003 and 2002 13
Notes to Financial Statements 14
(a) 2. Financial Statement Schedules
-----------------------------
All schedules have been omitted because they are not required
or because the required information is contained in the finan-
cial statements or notes hereto.
(a) 3. Exhibits
--------
(3A) The Registrant's Amended and Restated Agreement of Limited
Partnership, incorporated by reference to Exhibit A to the
Registrant's Prospectus, dated May 10, 1989 (the "Prospectus"),
filed pursuant to Rule 424(b) under the Securities Act of 1933,
File No. 33-26690.
(3B) The Registrant's Certificate of Limited Partnership, as
amended, incorporated by reference to Exhibits 3B and 3C to
the Registrant's Registration Statement on Form S-11, File No.
33-26690, dated January 24, 1989 and to Exhibit 3D to Amendment
No. 1 to such Registration Statement dated April 28, 1989
(3C) Amendment No. 1, dated July 7, 1989, to the Registrant's
Amended and Restated Agreement of Limited Partnership
(10A) Mortgage Note, dated August 31, 1990, with respect to
Mortenson Manor Apartments in Ames, Iowa, in the principal
amount of $4,974,900 (incorporated by reference to Exhibit
10(a) in the Registrant's Current Report on Form 8-K dated
August 31, 1990)
(10B) Equity Loan Note dated August 31, 1990, with respect to
Mortenson Manor Apartments in Ames, Iowa, in the principal
amount of $577,885 (incorporated by reference to Exhibit 10(b)
in the Registrant's Current Report on Form 8-K dated August
31, 1990)
(10C) Subordinated Promissory Note, dated August 31, 1990 with
respect to Mortenson Manor Partnership (incorporated by
reference to Exhibit 10(c) in the Registrant's Current Report
on Form 8-K dated August 31, 1990)
(10D) Mortgage Note, dated September 27, 1990, with respect to
Windemere Apartments in Wichita, Kansas, in the principal
amount of $8,110,300 (incorporated by reference to Exhibit
10(a) in the Registrant's Form 8 Amendment dated October
30, 1990 to Current Report on Form 8-K dated September 28,
1990)
(10E) Equity Loan Note, dated September 27, 1990, with respect to
Windemere Apartments in Wichita, Kansas, in the principal
amount of $736,500 (incorporated by reference in Exhibit 10(b)
in the Registrant's Form 8 Amendment dated October 30, 1990
to Current Report on Form 8-K dated September 28, 1990)
(10F) Subordinated Promissory Note, dated September 27, 1990 with
respect to Windemere Development, Inc. (incorporated by
reference to Exhibit 10(c) in the Registrant's Form 8 Amend-
ment dated October 30, 1990 to Current Report on Form 8-K
dated September 28, 1990)
(10G) Mortgage Note, dated August 23, 1991, with respect to Field-
crest III Apartments in Dothan, Alabama, in the principal
amount of $3,450,200 (incorporated by reference to Exhibit
10(a) in the Registrant's Current Report on Form 8-K dated
August 27, 1991)
(10H) Equity Loan Note, dated August 27, 1991, with respect to
Fieldcrest III Apartments in Dothan, Alabama, in the principal
amount of $383,300 (incorporated by reference to Exhibit 10(b)
in the Registrant's Current Report on Form 8-K dated August
27, 1991)
(10I) Subordinated Promissory Note, dated August 27, 1991 with
respect to Fieldcrest III Apartments (incorporated by refer-
ence to Exhibit 10(c) in the Registrant's Current Report on
Form 8-K dated August 27, 1991)
22
Item 15. Exhibits, Financial Statement Schedules (continued)
Sequential
(a) 1. Financial Statements Page
-------------------- ---------
(10J) Mortgage Note, dated March 1, 1993, with respect to Holly
Ridge Apartments in Gresham, Oregon, in the principal amount
of $5,310,000 (incorporated by reference to Exhibit 10(a) in
the Registrant's Current Report on Form 8-K dated March 16,
1993)
(10K) Equity Loan dated March 16, 1993, with respect to Holly Ridge
Apartments in Gresham, Oregon, in the principal amount of
$684,000 (incorporated by reference to Exhibit 10(b) in the
Registrant's Current Report on Form 8-K dated March 16, 1993)
(10L) Subordinated Promissory Note, dated March 16, 1993, with
respect to Holly Ridge Apartments in Gresham, Oregon
(incorporated by reference to Exhibit 10(c) in the
Registrant's Current Report on Form 8-K dated March 16, 1993)
(10M) Modification Agreement, dated January 1, 1995, with respect
to Mortenson Manor Apartments in Ames, Iowa (incorporated by
reference to Exhibit (10P) in the Registrant's Form 10-K for
the fiscal year ended December 31, 1995)
(10N) Guaranty made for the benefit of the Registrant, dated
January 1, 1995, with respect to the Modification Agreement
regarding Mortenson Manor Apartments (incorporated by refer-
ence to Exhibit (10Q) in the Registrant's Form 10-K for the
fiscal year ended December 31, 1995)
31.1 Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1 Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section
1350 of Title 18 of the United States Code (18 U.S.C. 1350).
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITAL MORTGAGE PLUS L.P.
(Registrant)
By: CIP ASSOCIATES, INC.
General Partner
Date: March 29, 2005 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
President (Principal Executive and
Financial Officer)
24
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
Signature Title Date
- ------------------- ----------------------------------------- --------------
President (Principal Executive and
/s/ Alan P. Hirmes Financial Officer and Director) of CIP
- ------------------ Associates, Inc. (the General Partner March 29, 2005
Alan P. Hirmes of the Registrant) --------------
/s/ Glenn F. Hopps Treasurer (Principal Accounting
- ------------------ Officer) of CIP Associates, Inc. March 29, 2005
Glenn F. Hopps (the General Partner of the Registrant) --------------
25
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE
13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer
of CIP Associates, Inc., (the "General Partner"), the general partner of Capital
Mortgage Plus L.P. (the "Partnership"), hereby certify that:
1. I have reviewed this annual report on Form 10-K for the period ending
December 31, 2004 of the Partnership;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented in
this annual report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rues 13a-15(f) and 15d-15(f)) for the Partnership and I
have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the Partnership
including its consolidated subsidiaries, is made known to me by others
within those entities, particularly during the period in which this
annual report was being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles; and
c) evaluated the effectiveness of the Partnership's disclosure controls
and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this annual report based on such evaluation;
and
d) disclosed in this annual report any change in the Partnership's
internal control over financial reporting that occurred during the
period ending December 31, 2004 that has materially affected, or is
reasonably likely to materially affect, the Partnership's internal
control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the Partnership's auditors and to
the boards of directors of the General Partners:
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Partnership's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Partnership's
internal control over financial reporting.
Date: March 29, 2005
--------------
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Principal Executive Officer and
Principal Financial Officer
26
Exhibit 32.1
CERTIFICATION PURSUANT TO
RULE 13a-14(b) OR RULE 15d-14(b) AND
SECTION 1350
OF TITLE 18 OF THE UNITED STATES
CODE (18 U.S.C. 1350)
In connection with the Annual Report of Capital Mortgage Plus L.P. (the
"Partnership") on Form 10-K for the period ending December 31, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer
of CIP Associates, Inc., the general partner of the Partnership, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the Securities and Exchange Commission or its staff upon request.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Principal Executive Officer and
Principal Financial Officer
March 29, 2005
27