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 SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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 2-68727
Krupp Associates 1980-1
(Exact name of registrant as specified in its charter)
Massachusetts 04-2708956
(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
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: Part IV, Item 14.
The exhibit index is located on pages 7 - 9.
<PAGE>
PART I
ITEM 1. BUSINESS
Krupp Associates 1980-1("KRLP-I") is a limited partnership formed on
July 31, 1980, pursuant to the provisions of the Massachusetts Uniform
Limited Partnership Act. The Krupp Company and The Krupp Corporation
serve as the General Partners of KRLP-I. Chivas Square Associates serves
as the Original Limited Partner of KRLP-I. On November 10, 1980, KRLP-I
commenced an offering of $4,000,000 of Class A Limited Partner Interests
in Units of $1,000 each, which was successfully completed on April 30,
1981. (For further details see Note A of Notes to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report). The primary
business of KRLP-I has been to invest in, operate, refinance, and
ultimately dispose of fully developed, income producing residential
properties and related assets. KRLP-I considers itself to be engaged in
the industry segment of investment in real estate.
On January 20, 1988, the General Partners formed Krupp Associates
Riverside Limited Partnership ("Realty-I") as a prerequisite for the
refinancing of Riverside Apartments. At the same time, the General
Partners transferred ownership of the property to Realty-I. The General
Partner of Realty-I is The Krupp Corporation ("Krupp Corp."). The Limited
Partner of Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its
interest in Realty-I to KRLP-I. KRLP-I and Realty-I are collectively
known as Krupp Realty Limited Partnership-I (collectively the
"Partnership").
The Partnership's remaining real estate investment, Riverside I
Apartments ("Riverside"), is a 140-unit apartment complex with
approximately 30,000 square feet of commercial retail space located in
Evansville, Indiana. Riverside is subject to some seasonal fluctuations
due to changes in utility consumption and seasonal maintenance
expenditures. However, the future performance of the Partnership will
depend upon factors which cannot be predicted. Such factors include
general economic and real estate market conditions, both on a national
basis and in those areas where the Partnership's investments are located,
real estate tax rates, operating expenses, energy costs, government
regulations, and federal and state income tax laws. The requirements for
compliance with federal, state and local regulations to date have not had
an adverse effect on the Partnership's operations, and no adverse effect
is anticipated in the future.
Riverside is also subject to such risks as (i) competition from existing
and future projects held by other owners in the area in which the
Partnership's property operates, (ii) possible reduction in rental income
due to an inability to maintain high occupancy levels and rental rates,
(iii) possible adverse changes in general economic and local conditions
such as competitive over-building, increased unemployment, adverse changes
in real estate zoning laws and the possible future adoption of rent
control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (iv)
other circumstances over which the Partnership may have little or no
control.
As of December 31, 1995, there were 8 full or part-time on-site project
personnel employed by the Partnership.
ITEM 2. PROPERTIES
<PAGE>
A summary of the Partnership's real estate investments is presented
below. Schedule III included in Appendix A to this report contains
additional detailed information with respect to the property.
Total Units/
<TABLE>
<CAPTION>
Current Average Occupancy
Year of Leasable December 31,
Description Acquisition Square Footage 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Riverside I Apartments 1981 140 Units 97% 96% 97% 97% 91%
Evansville, Indiana 30,000 Sq. Ft. 90% 87% 83% 87% 86%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
None.
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
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is
not anticipated that any such public market will develop.
The number of Class A Limited Partners as of December 31, 1995 was
approximately 400.
One of the objectives of the Partnership is to generate cash available
for distribution. However, there is no assurance that future operations
will generate cash available for distribution. The Partnership has not
made distributions since 1988 due to insufficient operating cash flow.
The Partnership does not anticipate resuming distributions until the
property generates sufficient operating cash flow.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding
the Partnership's consolidated financial position and operating results.
The information is comparable and should be read in conjunction with
Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations and the Financial Statements, which are included
in Items 7 and 8 of this report, respectively.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenue $1,056,448 $ 984,493 $ 914,910 $ 880,471 $ 904,239
Net loss $ (153,650) $ (183,110) $ (196,057) $ (313,519) $ (202,923)
Net loss
allocated to:
Class A
Limited
Partners $ (13,122) $ (78,034) $ (36,542) $ (176,896) $ (182,631)
Per Unit $ (3.28) $ (19.51) $ (9.14) $ (44.22) $ (45.66)
Original
Limited Partner $ - $ - $ - - $ (18,263)
General
Partners $ (140,528) $ (105,076) $ (159,515) $ (136,623) $ (2,029)
Total assets $2,467,327 $2,539,119 $2,603,526 $2,818,242 $2,997,139
Long-term
liabilities (1) $3,473,092 $3,488,515 $3,502,297 $3,526,345 $3,536,481
</TABLE>
(1) Includes demand notes payable, since the General Partners expect
they will be long-term obligations.
Prior performance of the Partnership is not necessarily indicative of
future operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operating performance of Riverside. Such
ability is also dependent upon the future sale of the asset. These
sources of liquidity could be used by the Partnership for payment of
expenses related to real estate operations, debt service and expenses.
Cash Flow and Capital Transaction Proceeds, if any, as calculated under
Section 8.2(a) ("Cash Flow") and 8.3(a) of the Partnership Agreement would
then be available for distribution to the Partners. The Partnership has
discontinued distributions due to insufficient operating cash flow.
The Partnership has experienced cash flow deficiencies for several years
and currently has very limited liquidity. Expenditures are being
monitored closely and capital improvements are made on an as-needed basis.
To date, the General Partners have been able to arrange financing through
borrowings, from an affiliate of the General Partners, to cover a
substantial portion of these cash flow deficiencies. Also, one of the
General Partners, The Krupp Company Limited Partnership ("The Krupp
Company"), contributed an additional
<PAGE>
$100,000 to the Partnership during 1991. In January 1993, The Krupp
Company loaned an additional $135,000 to the Partnership in the form of a
demand note to payoff a demand note from an unaffiliated bank. In
addition, the affiliate lender has been willing to defer interest payments
on the borrowings since late 1990. Furthermore, the General Partners,
through annual negotiations, have continued to arrange for the waiver of
property management fees and expense reimbursements payable to the
management agent, also an affiliate of the General Partners.
The General Partners anticipate operating deficits to continue and cannot
guarantee that they will be able to take actions that will cover any
future deficits. If the property is unable to generate funds sufficient
to cover these deficits, the Partnership could default on its mortgage
payments and become subject to foreclosure proceedings. However, the
Partnership is current on its mortgage payments.
In January 1996, the General Partners entered into a purchase and sale
agreement for the sale of Riverside to an unaffiliated buyer scheduled in
the second quarter of 1996 for the selling price of $4,500,000. In the
event the property is ultimately sold, the Partnership would be
liquidated. It is anticipated that all sale proceeds would be used to
satisfy Partnership obligations and no funds would be available to
investors for distribution.
Cash Flow (Deficit)
Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow (Deficit) of the Partnership for the year ended December 31,
1995. 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, Cash Flow (Deficit) should not be considered by the reader as a
substitute to net income/loss, as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net loss for tax purposes $(144,000)
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 179,000
Principal payments on mortgage (14,000)
Expenditures for capital improvements (146,000)
Cash Deficit $(125,000)
</TABLE>
Operations
1995 compared to 1994
In comparing 1995 to 1994, increase in cash deficit is attributable to
increased capital expenditures. Net income improved by $30,000, as
increases in rental revenue more than offset the increase in expenses.
Riverside showed a 7% increase in rental revenue due to increased
occupancy and management's successful effort in leasing 100% of the
commercial space in the fourth quarter of 1995.
<PAGE>
Overall total expenses increased approximately 4%, with a decrease in
operating expense offset by increases in maintenance and interest
expenses. Operating expense decreased due to lower leasing costs resulting
from higher occupancy levels, decreased utilities expense because of the
warmer winter season and a reduction in insurance expense due to a
favorable claim history. Maintenance expense increased as a result of
painting interior stairways and pavement repairs made to the sidewalks.
The increase in interest expense is attributable to a rise in the prime
rate from an average 7.1% in 1994 to 8.8% in 1995.
1994 compared to 1993
In comparing 1994 to 1993, cash deficits decreased approximately $61,000
primarily as a result of lower capital expenditures and improvements in
operating cash flow. The improvements in operating cash flow can be
attributed to increases in revenue due to residential rental increases and
the acquisition of three new commercial tenants during the fourth quarter
of 1993.
Overall, total expenses increased 5% with increases in operating costs
primarily due to increases in utility rates and leasing expenses. This is
offset by a decrease in maintenance expense as a result of the commercial
unit improvement program completed in 1993. Additionally, interest
expense increased as a result of a rise in prime rate in 1994.
Riverside Apartments residential occupancy averaged 97%, 96% and 97% for
the years ended December 31, 1995, 1994, and 1993, respectively. For the
years ended December 31, 1995, 1994 and 1993, occupancy of the commercial
space averaged 90%, 87% and 83%, respectively.
General
In accordance with Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", which is effective for fiscal years beginning after December
15, 1995, the Partnership has implemented policies and practices for
assessing impairment of its real estate asset.
The investment in the property is carried at cost less accumulated
depreciation unless the General Partners believe there is a significant
impairment in value, in which case a provision to write down investment in
property to fair value will be charged against income. At this time, the
General Partners do not believe that any assets of the Partnership are
significantly impaired.
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
<PAGE>
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 The Krupp Corporation, which is
both a General Partner of KRLP-I and The Krupp Company, the other General
Partner of KRLP-I, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Senior Vice President and Corporate
Controller
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,
healthcare facility ownership and the management of the Company. 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 approximately 3,400 are responsible for the more
than $4 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 a Director of Berkshire Realty Company, Inc. (NYSE-BRI). George
Krupp is Douglas Krupp's brother.
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 approximately 3,400 are responsible for more than $4 billion
under management for institutional and individual clients. Mr. Krupp
attended the University of Pennsylvania and Harvard University. Mr. Krupp
also serves as Chairman of the Board and Trustee of Krupp Government
Income Trust and as Chairman of the Board and Trustee of Krupp Government
Income Trust II.
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 <PAGE>
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 Director of Berkshire
Realty Company, Inc. (NYSE-BRI) and President and Trustee of Krupp
Government Income Trust and President and Trustee of Krupp Government
Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of Berkshire Mortgage Finance and Corporate Controller of 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, 1995, no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
4,000 outstanding Units. On that date, the General Partners or their
affiliates owned 80 Units (2% of the total outstanding) of the Partnership
in addition to their General Partner interests and a portion of the
Original Limited Partner interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or
nominees for election as director. Additionally, as of December 31, 1995
no person of record owned or was known by the General Partners to own
beneficially more than 5% of the Partnership's outstanding Units.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - See Index to Consolidated
Financial Statements included under Item 8 (Appendix A) on page
F-2 to this report.
2. Consolidated Financial Statement Schedule III is included
under Item 8 (Appendix A) on page F-14. Certain other
schedules are omitted as they are not applicable, not
required or the information is provided in the consolidated
financial statements or the notes thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
<PAGE>
The following reflects all applicable exhibits required by
Item 601 of Regulation S-K.
(4) Instruments defining the rights of security holders
including indentures:
(4.1) Amended Agreement of Limited Partnership
dated as of May 15, 1981 [Exhibit 4.1 to
Registrant's Report on Form 10-K for 1982
(File 2-68727)].*
(4.2) Fourth Amendment to Certificate of Limited
Partnership filed with the Massachusetts
Secretary of State on October 19, 1981
[Exhibit 4.2 to Registrant's Report on
Form 10-K for 1982 (File 2-68727)].*
(10) Material contracts:
Riverside I Apartments
(10.1) Contract and Certificate of Limited
Partnership of Krupp Associates Riverside
Limited Partnership dated January 20, 1988
between The Krupp Corporation (the
"General Partner") and Krupp Associates
1980-1 (the "Limited Partner")[Exhibit
10.1 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.2) Assignment dated January 20, 1988 between
Krupp Associates 1980-1("Assignee") and
The Krupp Corporation ("Assignor")
[Exhibit 10.2 to Registrant's Report on
Form 10-K for the year ended December 31,
1988 (File No. 2-68727)].*
(10.3) Bill of Sale dated January 20, 1988
between Krupp Associates 1980-1 (as
"Seller") and Krupp Associates Riverside
Limited Partnership (as "Buyer")[Exhibit
10.3 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.4) Special Warranty Deed dated January 20,
1988 between Krupp Associates 1980-1
("Grantor") and Krupp Associates Riverside
Limited Partnership ("Grantee")[Exhibit
10.4 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.5) Assignment dated January 20, 1988 between
Krupp Associates 1980-1 ("Assignor") and
<PAGE>
Krupp Associates Riverside Limited
Partnership ("Assignee")[Exhibit 10.5 to
Registrant's Report on Form 10-K for the
year ended December 31, 1988 (File No. 2-
68727)].*
(10.6) Management Agreement dated January 28,
1988 between Krupp Associates Riverside
Limited Partnership, as Owner, and Krupp
Asset Management Company, now known as
Berkshire Property Management, as Agent.
[Exhibit 10.6 to Registrant's Report on
Form 10-K for the year ended December 31,
1988 (File No. 2-68727)].*
(10.7) Regulatory Agreement for Multifamily
Housing Projects Co-insured by HUD dated
January 21, 1988 between Krupp Associates
Riverside Limited Partnership (the
"Owner") and DRG Funding Corporation (the
"Mortgagee") [Exhibit 10.7 to Registrant's
Report on Form 10-K for the year ended
December 31, 1988 (File No. 2-68727)].*
(10.8) Mortgage Note dated January 21, 1988, from
Krupp Associates Riverside Limited
Partnership, an Indiana limited
partnership, to DRG Funding Corporation, a
Delaware corporation. [Exhibit 10.6 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
68727)].*
(10.9) Mortgage dated January 21, 1988, from
Krupp Associates Riverside Limited
Partnership, an Indiana limited
partnership, to DRG Funding Corporation, a
Delaware corporation. [Exhibit 10.7 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
68727)].*
(10.10) Security Agreement dated January 21, 1988
between Krupp Associates Riverside Limited
Partnership ("Debtor") and DRG Funding
Corporation ("Creditor") [Exhibit 10.10 to
Registrant's Report on Form 10-K for the
year ended December 31, 1988 (File No. 2-
68727)].*
(10.11) Escrow Deposit Agreement dated January 21,
1988, between Krupp Associates Riverside
Limited Partnership, an Indiana limited
partnership, and DRG Funding Corporation,
a Delaware corporation. [Exhibit 10.8 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
<PAGE>
68727)].*
(10.12) Purchase and Sale Agreement dated January
22, 1996, between Krupp Associates
Riverside Limited Partnership, an Indiana
Limited Partnership ("Seller") and BluSky,
Inc., an Indiana Corporation ("Buyer").
(File No. 2-68727).+
* Incorporated by reference
+ Incorporated herein.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995,
the Partnership did not file any reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
21st day of March, 1996.
KRUPP ASSOCIATES 1980-1
By: The Krupp Corporation, a General Partner
By: /s/Douglas Krupp
Douglas Krupp, Co-Chairman
(Principal Executive Officer)
and Director of The Krupp 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 21st day of March,
1996.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive Officer)
and
Douglas Krupp Director of The Krupp Corporation, a
General Partner.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a
General Partner.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner.
/s/Robert A. Barrows Senior Vice President and Corporate
Robert A. Barrows Controller of The Krupp Corporation, a
General Partner.
<PAGE>
APPENDIX A
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1995
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1995 and 1994 F-4
Consolidated Statements of Operations For the Years Ended
December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Changes in Partners' Deficit
For the Years Ended December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1995, 1994 and 1993 F-7
Notes to Consolidated Financial Statements F-8 - F-13
Schedule III - Real Estate and Accumulated Depreciation F-14
All other schedules are omitted as they are not applicable or not
required, or the information is provided in the consolidated financial
statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Associates 1980-1 and Subsidiary:
We have audited the consolidated financial statements and consolidated
financial statement schedule of Krupp Associates 1980-1 and subsidiary
(the "Partnership") listed in the index on page F-2 of this Form 10-K.
These consolidated financial statements and financial statement schedule
are the responsibility of the Partnership's management. 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 audit 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 consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management of the
Partnership, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Krupp Associates 1980-1 as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the
consolidated financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information required to be incurred therein.
The accompanying consolidated financial statements have been prepared
assuming that the Partnership will continue as a going concern. As
discussed in Note K to the consolidated financial statements, the
Partnership has experienced cash flow deficiencies in the past. In
connection therewith the General Partners, to date, have been able to
arrange financing to cover these deficits, and effective January 1, 1991
the General Partners obtained a waiver of management fees and expense
reimbursements due to the affiliated management agent. The General
Partners cannot guarantee that they will be able to continue to arrange
for financing to cover deficits as they arise or that the arrangement with
the management agent will continue. In addition, as disclosed in Note L,
the Partnership's subsidiary entered into a purchase and sale agreement
for the sale of the sole remaining property to an unaffiliated buyer for
$4,500,000. In the event the property is ultimately sold, the Partnership
would be liquidated. These factors raise substantial doubt about the
ability of the Partnership to continue as a going concern. The
consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 1, 1996
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
Multi-family apartment complex, net of
accumulated depreciation of $2,549,375
<S> <C> <C>
and $2,365,138, respectively (Note C) $ 2,180,147 $ 2,218,305
Cash 11,153 44,832
Cash restricted for tenant security deposits 37,288 41,529
Escrow for property replacements (Note D) 45,427 52,444
Prepaid expenses and other assets (Note H) 79,852 64,360
Deferred expenses, net of accumulated
amortization of $33,165 and $28,976,
respectively 113,460 117,649
Total assets $ 2,467,327 $ 2,539,119
LIABILITIES AND PARTNERS' DEFICIT
Mortgage note payable (Notes C and D) $ 2,231,009 $ 2,244,913
Notes payable (Notes E and H) 1,257,385 1,257,385
Accounts payable 117,977 149,866
Accrued expenses and other liabilities (Note F) 230,299 227,927
Accrued interest due to an affiliate (Notes E
and H) 519,325 394,046
Total liabilities 4,355,995 4,274,137
Partners' deficit (Note G):
Class A Limited Partners
(4,000 Units outstanding) (176,645) (163,523)
Original Limited Partner (426,615) (426,615)
General Partners (1,285,408) (1,144,880)
Total Partners' deficit (1,888,668) (1,735,018)
Total liabilities and Partners' deficit $ 2,467,327 $ 2,539,119
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
Revenue:
<S> <C> <C> <C>
Rental (Note I) $1,050,835 $ 981,018 $ 913,928
Other income 5,613 3,475 982
Total revenue 1,056,448 984,493 914,910
Expenses:
Operating (Note H) 383,364 395,828 325,581
Maintenance 100,470 76,781 118,395
Real estate taxes 127,913 133,951 129,261
Depreciation and amortization 188,426 177,796 168,507
General and administrative 38,393 31,979 30,942
Interest (Notes D, E and H) 371,532 351,268 338,281
Total expenses 1,210,098 1,167,603 1,110,967
Net loss (Note J) $ (153,650) $ (183,110) $ (196,057)
Allocation of net loss (Note G):
Class A Limited Partners $ (13,122) $ (78,034) $ (36,542)
Per Unit of Class A
Limited Partner Interest
(4,000 Units outstanding) $ (3.28) $ (19.51) $ (9.14)
Original Limited Partner $ - $ - $ -
General Partners $ (140,528) $ (105,076) $ (159,515)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Class A Original Total
General Limited Limited Partners'
Partners Partners Partner Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1992 $ (880,289) $ (48,947) $(426,615) $(1,355,851)
Net loss (159,515) (36,542) - (196,057)
Balance at
December 31, 1993 (1,039,804) (85,489) (426,615) (1,551,908)
Net loss (105,076) (78,034) - (183,110)
Balance at
December 31, 1994 (1,144,880) (163,523) (426,615) (1,735,018)
Net loss (Notes G and J) (140,528) (13,122) - (153,650)
Balance at
December 31, 1995 $(1,285,408) $(176,645) $(426,615) $(1,888,668)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
Operating activities:
<S> <C> <C> <C>
Net loss $ (153,650) $(183,110) $(196,057)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 188,426 177,796 168,507
Decrease (increase) in cash
restricted for tenant
security deposits 4,241 (711) (7,645)
Decrease (increase) in
prepaid expenses
and other assets (15,492) (3,055) 56,397
Increase (decrease) in
accounts payable (35,068) 9,393 (98,927)
Increase in accrued expenses
and other liabilities 2,372 15,475 7,525
Increase in interest due to
an affiliate 125,279 103,839 88,872
Net cash provided
by operating activities 116,108 119,627 18,672
Investing activities:
Additions to fixed assets (146,079) (75,328) (115,208)
Increase (decrease) in accounts
payable related to fixed asset
additions 3,179 2,789 (4,875)
Net decrease in escrow for property
replacements 7,017 5,493 117,409
Net cash used in
investing activities (135,883) (67,046) (2,674)
Financing activities:
Repayment of note payable to
third party - - (135,000)
Increase in notes payable to
affiliate - - 135,000
Principal payments on mortgage
note payable (13,904) (12,793) (11,254)
Net cash used in
financing activities (13,904) (12,793) (11,254)
Net increase (decrease) in cash (33,679) 39,788 4,744
Cash, beginning of year 44,832 5,044 300
Cash, end of year $ 11,153 $ 44,832 $ 5,044
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization
KRLP-I was formed on July 31, 1980 by filing a Certificate of
Limited Partnership in The Commonwealth of Massachusetts. KRLP-
I issued all of the General Partner Interests to two General
Partners (The Krupp Company and The Krupp Corporation) in
exchange for capital contributions totalling $5,000.
The Class B Limited Partner Interests were issued to Chivas
Square Associates (the "Original Limited Partner"), in
connection with the transfer by the Original Limited Partner to
KRLP-I of the real estate property which it formerly owned,
subject to the related mortgage note payable.
The purchasers of 4,000 Units of Class A Investor Limited
Partner Interests at a price of $1,000 per Unit are the
Investor Limited Partners.
On January 20, 1988, the General Partners formed Krupp
Associates Riverside Limited Partnership ("Realty-I") as a
prerequisite for the refinancing of Riverside Apartments. At
the same time, the General Partners transferred ownership of
the property to Realty-I. The General Partner of Realty-I is
The Krupp Corporation ("Krupp Corp."). The Limited Partner of
Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its
interest in Realty-I to KRLP-I. KRLP-I and Realty-I are
collectively known as Krupp Realty Limited Partnership-I
(collectively the "Partnership").
B. Significant Accounting Policies
The Partnership uses the following accounting policies for
financial reporting purposes, which differ in certain respects
from those used for federal income tax purposes (See Note J):
Basis of Presentation
The consolidated financial statements present the
consolidated assets, liabilities and operations of the
Partnership. All intercompany balances and transactions
have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and
money market funds with commercial banks. The Partnership
has not experienced any losses to date on its invested cash.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements <PAGE>
and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
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 cash
equivalents are recorded at cost, which approximates current
market values.
Rental Revenues
Leases require the payment of base rent monthly in advance.
Rental revenues are recorded on the accrual basis. Leases
generally contain provisions for additional rent based on a
percentage of tenant sales and other provisions which are
also recorded on the accrual basis, but are billed in
arrears.
Depreciation
Depreciation is provided for by the use of the straight-line
method over the estimated useful life of the related asset
as follows:
Buildings and improvements 5-35 years
Appliances, carpeting and equipment 3-5 years
Impairment of Long-Lived Asset
In accordance with Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which is effective for
fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for
assessing impairment of its real estate asset.
The investment in the property is carried at cost less
accumulated depreciation unless the General Partners believe
there is a significant impairment in value, in which case a
provision to write down the investment in property to fair
value will be charged against income. At this time, the
General Partners do not believe that any assets of the
Partnership are significantly impaired.
Deferred Expenses
The Partnership is amortizing the costs associated with
refinancing the property over the term of the related
mortgage using the straight-line method.
Income Taxes
The Partnership is not liable for federal or state income
<PAGE>
taxes as Partnership income or loss 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 the Partnership's taxable
income or loss, such change will be reported to the
partners.
Reclassifications
Certain prior year balances have been reclassified to
conform with current year consolidated financial statement
presentation.
C. Property
The Partnership purchased Riverside I Apartments ("Riverside"),
a 140-unit apartment complex with approximately 30,000 square
feet of commercial space located in Evansville, Indiana, on
February 13, 1981. The total purchase price for Riverside was
$3,518,000, of which $1,842,200 was paid in cash and $1,675,800
was financed with a 40-year non-recourse mortgage payable to
the Department of Housing and Urban Development ("HUD").
On January 21, 1988, the Partnership refinanced Riverside under
a $2,310,000 non-recourse first mortgage note payable between
Realty-I (in which KRLP-I has a 100% beneficial interest) and
HUD. (See below for additional information.) The note is
collateralized by Riverside. The Partnership paid off the
prior mortgage with a portion of the proceeds.
D. Mortgage Note Payable
The non-recourse first mortgage note is payable in equal
monthly installments of $20,747 at an interest rate of 10.5%
per annum based on a thirty-five year amortization schedule.
The note matures on February 1, 2023, when the remaining
principal and any accrued interest will be due and payable.
Under the regulatory agreement with HUD, monthly deposits of
$4,036 must be contributed to a reserve for replacements. The
reserve for replacements is to be used to fund property
improvements. In addition, the regulatory agreement requires
HUD approval for any additional encumbrances or for transfer of
title to the project, and limits distributions based on the
project's operations to the extent of "surplus cash" as defined
in the regulatory agreement.
Based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities, the fair value of long-term debt is approximately
$4,000,000.
Principal payments due on the mortgage note payable are $15,302,
$16,988, $18,860, $20,939 and $23,246 for the five years 1996 through
2000, respectively.
During 1995, 1994 and 1993, the Partnership paid $235,059, $236,169, and
$238,090, respectively, of interest on its mortgage note payable.
<PAGE>
E. Notes Payable
The Partnership had demand notes outstanding with both the
General Partners and an affiliate of the General Partners at
December 31, 1995 and 1994, respectively, in the amount of
$1,257,385. Interest accrues monthly at the prime rate of an
unaffiliated bank (8.5% at December 31, 1995) plus one percent
per annum. During 1995, 1994 and 1993, no interest was paid on
these notes. The carrying value of the notes approximate fair
value.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at December 31, 1995 and
1994 consisted of the following:
1995 1994
Accrued real estate taxes $133,334 $130,956
Tenant security deposits 32,004 33,191
Deferred income 4,230 7,102
Accrued expenses, other 60,731 56,678
$230,299 $227,927
G. Partners' Deficit
Under the terms of the Partnership Agreement, profits and
losses from operations are allocated 90% to the Class A Limited
Partners, 9% to the Original Limited Partner and 1% to the
General Partners until such time that the Class A Limited
Partners have received a return of their total invested
capital. Thereafter, 40% shall be allocated to the Class A
Limited Partners, 20% to the Original Limited Partner and 40%
to the General Partners.
Under the terms of the Partnership Agreement, capital
transactions are allocated 90% to the Class A Limited Partners,
9% to the Original Limited Partner and 1% to the General
Partners, until such time that the Class A Limited Partners
have received a return of their total invested capital and
thereafter, allocated 40% to the Class A Limited Partners, 20%
to the Original Limited Partner and 40% to the General
Partners.
In general, the allocation of profits and losses are calculated
based on the terms of the Partnership Agreement, as described
above. However, the Internal Revenue Code contains rules which
govern the allocation of tax losses among partners. For the
years 1992 through 1995, the allocation of tax losses were
calculated based on these rules. Under this code, tax losses
are not allocated to a limited partner if a general partner
bears the economic risk for that loss. Due to operating losses
incurred during these years, the General Partners undertook
additional liabilities on behalf of the Partnership. As a
result, the Partnership allocated additional tax losses to the
General Partners. In conjunction with the tax election
referred to above, the financial statements presented herein
reflect the <PAGE>
allocation of net loss in accordance with the rules of the
Internal Revenue Code.
As of December 31, 1995, the following cumulative partner
contributions and allocations have been made since inception of
the Partnership:
<TABLE>
<CAPTION>
Class A Original
General Limited Limited
Partners Partners Partner Total
Capital
<S> <C> <C> <C> <C>
contributions $ 105,000 $ 4,000,000 $ (78,613) $ 4,026,387
Syndication costs - (480,000) - (480,000)
Cash distributions (8,445) (760,000) (76,000) (844,445)
Net loss from
operations (1,403,907) (4,911,584) (469,496) (6,784,987)
Net income from
sales and
restructuring 21,944 1,974,939 197,494 2,194,377
$(1,285,408) $ (176,645) $(426,615) $(1,888,668)
</TABLE>
H. Related Party Transactions
Commencing with the date of acquisition of the Partnership's
property, the Partnership entered into an agreement under which
property management fees are paid to an affiliate of the
General Partners for services as management agent. Such
agreement provides for management fees payable monthly at a
rate of 5% of the gross receipts from the property under
management. The Partnership also reimburses affiliates of the
General Partners for certain expenses incurred in connection
with the operation of the Partnership and its property
including accounting, computer, insurance, travel, legal and
payroll costs relating to the preparation and mailing of
reports and other communications to the Limited Partners.
Since January 1, 1991, the General Partners arranged with the
management agent for the annual waivers of management fees and
expense reimbursements.
During 1995, 1994 and 1993, interest on borrowings accrued to
the General Partners or affiliates of the General Partners were
$125,279, $103,839 and $88,872, respectively.
During 1995, 1994 and 1993, amounts paid to the General
Partners or their affiliates relating to disposition activities
were $1,095, $8,711 and $0, respectively.
I. Future Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases for the
years 1996 through 2000 and thereafter are as follows:
1996 $260,677
1997 $266,328
1998 $269,608
1999 $272,252
<PAGE>
2000 $272,710
Thereafter $ 0
J. Federal Income Taxes
For federal income tax purposes, the Partnership is
depreciating its property using the accelerated cost recovery
system ("ACRS") and the modified accelerated cost recovery
system ("MACRS") depending on which is applicable.
The reconciliation of the net loss reported in the accompanying
Consolidated Statement of Operations with the net loss reported
in the Partnership's federal income tax return follows:
<TABLE>
<CAPTION>
1995 1994 1993
Net loss per Consolidated Statement
<S> <C> <C> <C>
of Operations $(153,650) $(183,110) $(196,057)
Add: Difference between book and tax
depreciation 9,419 (2,306) (10,451)
Income recognized for book
and not for tax - - (26,765)
Net loss for federal income tax purposes $(144,231) $(185,416) $(233,273)
</TABLE>
J. Federal Income Taxes - Continued
The allocation of net loss for federal income tax purposes for
1995 is as follows:
<TABLE>
<CAPTION>
Portfolio Passive
Income Loss Total
<S> <C> <C> <C>
Class A Limited Partners $ 479 $ (12,797) $ (12,318)
Original Limited Partner - - -
General Partners 5,134 (137,047) (131,913)
$ 5,613 $(149,844) $(144,231)
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, the per
Unit net loss for the Class A Limited Partners for federal
income tax purposes was $3.08, $19.75, and $10.87, respectively.
K. Operating Deficits
The Partnership has experienced cash flow deficiencies for
several years. In connection therewith, the General Partners,
to date, have been able to arrange financing through short-term
borrowings from affiliates to cover a substantial portion of
these deficits. Also, one of the General Partners, The Krupp
Company, contributed an additional $100,000 to the Partnership
during 1991, and the General Partners have arranged for the
waiver of property management fees and expense reimbursements
payable to the management agent. In January 1993, The Krupp
Company loaned
<PAGE>
$135,000 in the form of a demand note to the Partnership to
payoff a demand note from an unaffiliated bank. The operating
deficits could continue and the General Partners cannot
guarantee that they will be able to take actions that will cover
any future deficits. In that event, the Partnership could
default on its mortgage payments and become subject to
foreclosure proceedings. This would have a significant impact
on the financial position and operations of the Partnership.
However, the Partnership is current on its mortgage payments,
and it cannot presently be determined if a foreclosure will
occur in the future. Accordingly, the financial statements do
not include any adjustments that might result from the outcome
of these uncertainties, all of which raise substantial doubt
about the ability of the Partnership to continue as a going
concern.
In the event of the sale of Riverside, the Partnership would be
liquidated. As a result of the liquidation, the partners would
receive allocations of taxable income equivalent to any negative
account balance they may have. In addition, there would be no
cash available in connection with such income. Therefore, in
the event that the partner does not have items which could
offset such income, the partner would have to pay taxes with
funds from other sources.
L. Subsequent Event
In January 1996, the General Partners entered into a purchase
and sale agreement for the sale of Riverside to an unaffiliated
buyer scheduled in the second quarter of 1996 for the selling
price of $4,500,000. In the event the property is ultimately
sold, the Partnership would be liquidated. It is anticipated
that all sale proceeds would be used to satisfy Partnership
obligations and no funds would be available to investors for
distribution.
<PAGE>
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost Subsequent to
to Partnership Acquisition
Building Building
and and
Description Encumbrances Land Improvements Improvements
Riverside I Apts
<S> <C> <C> <C> <C> <C>
Evansville, Indiana $ 2,231,009 $525,000 $ 3,021,592 $ 1,182,930
</TABLE>
Gross Amounts Carried at End of Year
<TABLE>
<CAPTION>
Building
and Accumulated
Land Improvements Total Depreciation
<S> <C> <C> <C> <C>
$525,000 $ 4,204,522 $4,729,522 $ 2,549,375
Year
Construction Year Depreciable
Completed Acquired Life
1973 1981 3-35 years
</TABLE>
Reconciliation of Real Estate and Accumulated Depreciation for each of the
three years in the period ended December 31, 1995:
<TABLE>
<CAPTION>
1995 1994 1993
Real Estate
<S> <C> <C> <C>
Balance at beginning of year $4,583,443 $4,508,115 $4,392,907
Improvements 146,079 75,328 115,208
Balance at end of year $4,729,522 $4,583,443 $4,508,115
Accumulated Depreciation
Balance at beginning of year $2,365,138 $2,191,531 $2,027,214
Depreciation expense 184,237 173,607 164,317
Balance at end of year $2,549,375 $2,365,138 $2,191,531
</TABLE>
The Partnership uses the cost basis for property valuation for both income
tax and financial statement purposes. The aggregate cost for income tax
purposes at December 31, 1995 is $4,730,796.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Fund 1
Financial Statements for the year ended December 31, 1995 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,153
<SECURITIES> 0
<RECEIVABLES> 5,072
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 157,495
<PP&E> 4,876,147<F1>
<DEPRECIATION> (2,582,540)<F2>
<TOTAL-ASSETS> 2,467,327
<CURRENT-LIABILITIES> 867,601
<BONDS> 3,488,394<F3>
<COMMON> (1,888,668)<F4>
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,467,327
<SALES> 0
<TOTAL-REVENUES> 1,056,448<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 838,566<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371,532
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,650)
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes multi-family complex of $4,729,522 and deferred expenses of $146,625.
<F2>Includes depreciation of $2,549,375 and amortization of defined expenses of
$33,165.
<F3>Represents mortgage note payable of $2,231,009 and notes to an affiliated party
of $1,257,385.
<F4>Deficit of General Partners ($285,408) and Limited Partners ($603,260).
<F5>Includes all revenue of the Partnership.
<F6>Includes operating expenses $522,227, real estate tax expense of $127,913 and
depreciation and amortization expense of $188,426.
<F7>Net loss allocated ($140,528) to the General Partners ($13,122) to the
Investor Limited Partners. Average net loss is ($3.28) per Unit of Investor
Limited Partner interest for 4,000 Units outstanding.
</FN>
</TABLE>
Execution Counterpart
Riverside One
PURCHASE AND SALE AGREEMENT
AGREEMENT dated as of January 22, 1996 between Krupp Associates
Riverside Limited Partnership, an Indiana limited partnership ("Seller"),
with an address of c/o Berkshire Property Investors, 470 Atlantic Avenue,
Boston, Massachusetts 02210, Attention: David J. Olney, Telecopier No.
617-574-8334 and BluSky, Inc., an Indiana corporation ("Buyer"), with an
address of 2508 U.S. Highway 41 North, Evansville, Indiana 47711,
Attention: Robert Brenner, Telecopier No. 812-426-1462.
In consideration of the mutual undertakings and covenants herein
contained, Seller and Buyer hereby covenant and agree as follows:
SECTION 1
SALE OF PROPERTY AND ACCEPTABLE TITLE
1.01 Agreement to Buy and to Sell: Property. Seller shall sell to
Buyer, and Buyer shall purchase from Seller, at the price and
upon the terms and conditions set forth in this Agreement the
following:
(a) that certain tract or parcel of land located in the City of
Evansville, Vanderburgh County, Indiana, more particularly
described in Schedule A attached hereto (the "Land");
(b) the 140 unit apartment complex including approximately
30,000 square feet of commercial office space, commonly
known as Riverside One Apartments, which contains related
improvements, facilities, amenities, structures, driveways
and walkways, all of which have been constructed on the
Land (collectively, the "Improvements");
(c) all right, title and interest of Seller in and to any
alleys, strips or gores adjoining the Land, and any
easements, rights-of-way or other interests in, on, under
or to, any land, highway, street, road, right-of-way or
avenue, open or proposed, in, on, under, across, in front
of, abutting or adjoining the Land, and all right, title
and interest of Seller in and to any awards for damage
thereto by reason of a change of grade thereof;
(d) the accessions, appurtenant rights, privileges,
appurtenances and all the estate and rights of Seller in
and to the Land and the Improvements. as applicable, or
otherwise appertaining to any of the property described in
the immediately preceding clauses (a), (b) and/or (c);
(e) the personal property listed in Schedule B attached hereto
owned by Seller and located on or in or used solely in
connection with the Land and Improvements (collectively,
the "Personal Property"); and
<PAGE>
(f) all of Seller's interest in any intangible property now or
hereafter, owned by Seller and used solely in connection
with the Land, Improvements and Personal Property,
including without limitation the right to use any trade
style or name now used in connection with the same, any
contract rights, escrow or security deposits, utility
agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined.
All of the items described in subparagraphs (a), (b), (c), (d),
(e) and (f) above are collectively the "Property".
1.02 Title. Seller shall convey to Buyer by special warranty deed (the
"Deed"), and Buyer shall accept the fee simple title to the
Property in accordance with the terms of this Agreement, and
Buyer's obligation to accept said title shall be conditioned upon
Buyer then being conveyed good and clear record and marketable
fee simple title to the Property, subject only to the Permitted
Exceptions (as hereinafter defined).
(a) Within seven (7) days from the date of this Agreement, or
as soon thereafter as Commonwealth Land Title Insurance
Company (the "Title Insurer") may prepare same, Buyer
shall obtain, and deliver a copy to Seller of, a
Commitment For Title Insurance for an ALTA Owner's Form B
Title Insurance Policy (the "Title Policy") and legible
copies of all instruments and plans mentioned therein as
exceptions to title (all of such items are hereinafter
collectively referred to as the "Commitment"). The
Commitment shall be in the amount of the Purchase Price
(as defined in Section 2.01 hereof). The cost of the Title
Policy shall be paid one-half by Buyer and one-half by
Seller. Should such Commitment contain any title
exceptions which are not acceptable to Buyer, in its sole
discretion, Buyer shall, prior to the expiration of the
Inspection Period (as defined in Section 16.01), notify
Seller if any such exceptions are unacceptable. If Buyer
fails to so notify Seller of any unacceptable exceptions
as described above, the exceptions set forth in Schedule B
of the Commitment shall be deemed accepted by Buyer and
included as the "Permitted Exceptions". If any exceptions
are unacceptable to Buyer and Buyer timely notifies Seller
in writing of such fact as above provided, Seller, in
Seller's sole discretion, shall have thirty (30) days from
the date Seller receives notice of such unacceptable
exceptions to remove or cure such exceptions and the date
of Closing shall be extended, if necessary. If Seller
fails or refuses to cure said unacceptable exceptions
within the time period above provided, Buyer may (i)
terminate this Agreement and the Deposit shall be returned
to Buyer, or (ii) waive such exceptions and accept title
subject thereto, in which event there shall be no
reduction in the Purchase Price.
Simultaneously with the delivery of the Deed, Seller shall
enter into, and deliver to Buyer a special warranty bill
of sale and instrument of transfer and assignment (the
"General Instrument"), in form and substance reasonably
satisfactory
<PAGE>
to Seller's and Buyer's counsel, assigning and transferring all of the
Seller's right, title and interest in and to all of the tangible and
intangible personal property constituting the Property.
1.03 Survey. Within thirty (30) days from the date hereof, Buyer shall
obtain an as-built survey (the "Survey") of the Land and the
Improvements dated within ninety (90) days of the Closing
prepared by a surveyor or engineer licensed in the state where
the Property is located with a current certificate attached
thereto or endorsed thereon executed by the surveyor in the form
of the Minimum Standard Detail Requirements Certificate for Land
Title Surveys. The cost of the Survey shall be paid one-half by
Buyer and one-half by Seller. Such survey shall indicate all
improvements, easements, highways, rights-of-way and other
matters affecting or abutting the Property and shall be
sufficient in form and content to induce the Title Insurer to
delete all standard and printed survey exceptions contained in
the Title Commitment.
Should such Survey contain any encumbrances, encroachments or
other survey defects (collectively "survey matters") which are
not acceptable to Buyer in its sole discretion, Buyer shall,
prior to the later of ten (10) days after receipt of the Survey
or the expiration of the Inspection Period (as defined in
Section 16.01), notify Seller if any such survey matters are
unacceptable. If Buyer fails to so notify Seller of the
unacceptable survey matters as described above, the Survey shall
be deemed accepted by Buyer. If any survey matters are
unacceptable to Buyer and Buyer timely notifies Seller in writing
of such fact as above provided, Seller, in Seller's sole
discretion, shall have thirty (30) days from the date Seller
receives notice of such unacceptable survey matters to cure such
survey matters and the date of Closing shall be extended, if
necessary. If Seller fails or refuses to cure said unacceptable
survey matters within the time period provided, Buyer may (i)
terminate this Agreement and the Deposit shall be returned to
Buyer, or (ii) waive such survey matters and accept title subject
thereto, ln which event there shall be no reduction in the
Purchase Price.
SECTION 2
PURCHASE PRICE, ACCEPTABLE FUNDS,
DEPOSIT AND ESCROW OF DEPOSIT
2.01 Purchase Price. The purchase price ("Purchase Price") to be paid
by Buyer to Seller for the Property is Four Million Five Hundred
Thousand Dollars ($4,500,000.00) subject to the prorations and
adjustments as hereinafter provided in this Agreement.
2.02 Payment of Monies. All monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by
wire transfer.
2.03 Payment of Purchase Price. The Purchase Price, subject to
prorations and adjustments, shall be paid as follows:
(a) Fifty Thousand Dollars ($50,000.00) have been paid as a
deposit this day (the "Initial Deposit"): and
<PAGE>
(b) The balance of the Purchase Price shall be paid at the
time of delivery of the Deed by wire transfer in
accordance with wiring instructions to be provided by
Seller.
2.04 Deposit; Escrow Agent. The Initial Deposit shall be delivered by
Buyer to Jeffrey A. Bosse, Esq. (the "Escrow Agent")
simultaneously with the complete execution of this Agreement.
(The Initial Deposit together with interest accrued thereon, are
collectively referred to herein as the "Deposit"). Upon receipt
from Buyer of the Deposit, Escrow Agent shall invest the Deposit
in an interest-bearing account or money market fund agreeable to
Buyer. All interest on the Deposit shall accrue to the Buyer,
except as otherwise provided in Section 12.03 hereof. At the
Closing, Escrow Agent shall release the Deposit to Seller, which
Deposit shall be credited against the balance of the Purchase
Price owed by Buyer to Seller. Escrow Agent shall agree to hold
and dispose of the Deposit in accordance with the terms and
provisions of this Agreement.
2.05 Escrow Provisions. Escrow Agent hereby acknowledges receipt by
Escrow Agent of the Deposit paid by Buyer to be applied on the
Purchase Price of the Property under the terms hereof. Escrow
Agent agrees to hold, keep and deliver said Deposit and all other
sums delivered to it pursuant hereto in accordance with the terms
and provisions of this Agreement. Escrow Agent shall not be
entitled to any fees or compensation for its services hereunder.
Escrow Agent shall be liable only to hold said sums and deliver
the same to the parties named herein in accordance with the
provisions of this Agreement, it being expressly understood that
by acceptance of this agreement Escrow Agent is acting in the
capacity of a depository only and shall not be liable or
responsible to anyone for any damages, losses or expenses unless
same shall have been caused by the gross negligence or willful
malfeasance of Escrow Agent. In the event of any disagreement
between Buyer and Seller resulting in any adverse claims and
demands being made in connection with or for the monies involved
herein or affected hereby, Escrow Agent shall be entitled to
refuse to comply with any such claims or demands so long as
disagreement may continue; and in so refusing Escrow Agent shall
make no delivery or other disposition of any of the monies then
held by it under the terms of this Agreement, and in so doing
Escrow Agent shall not become liable to anyone for such refusal;
and Escrow Agent shall be entitled to continue to refrain from
acting until (a) the rights of the adverse claimants shall have
been finally adjudicated in a court of competent jurisdiction of
the monies involved herein or affected hereby, or (b) all
differences shall have been adjusted by agreement between Seller
and Buyer, and Escrow Agent shall have been notified in writing
of such agreement signed by the parties hereto. Escrow Agent
shall not be required to disburse any of the monies held by it
under this Agreement unless in accordance with either a joint
written instruction of Buyer and Seller or an Escrow Demand from
either Buyer or Seller in accordance with the provisions
hereinafter. Upon receipt by Escrow Agent from either Buyer or
Seller (the "Notifying Party") of any notice or request (the
"Escrow Demand") to perform any act or disburse any portion of
the monies held by Escrow Agent under the terms of this
Agreement, Escrow Agent shall give written notice to the other
party (the "Notified Party"). If within five (5) days after the
giving of <PAGE>
such notice, Escrow Agent does not receive any written objection
to the Escrow Demand from the Notified Party, Escrow Agent shall
comply with the Escrow Demand. If Escrow Agent does receive
written objection from the Notified Party in a timely manner,
Escrow Agent shall take no further action until the dispute
between the parties has been resolved pursuant to either clause
(a) or (b) above. Further Escrow Agent shall have the right at
all times to pay all sums held by it (i) to the appropriate party
under the terms hereof, or (ii) into any court of competent
jurisdiction after a dispute between or among the parties hereto
has arisen, whereupon Escrow Agent's obligations hereunder shall
terminate.
Seller and Buyer jointly and severally agree to indemnify and
hold harmless said Escrow Agent from any and all costs, damages
and expenses, including reasonable attorneys' fees, that said
Escrow Agent may incur in its compliance of and in good faith
with the terms of this agreement; provided, however, this
indemnity shall not extend to any act of gross negligence or
willful malfeasance on the part of the Escrow Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the
delivery of all documents necessary for the closing of this
transaction pursuant to this Agreement (the "Closing") shall take
place in the offices of Jeffery A. Bosse, 522 Main Street,
Evansville, Indiana 47708 or, if requested by Buyer's lender, at
the offices of such lender's counsel in Evansville, Indiana or
such other place as Seller and Buyer shall mutually agree, at
10:00 A.M. local time on April 22, 1996. It is agreed that time
is of the essence of this Agreement.
SECTION 4
SELLER'S PRE-CLOSING DELIVERIES
Seller shall furnish to Buyer for inspection and approval by
Buyer the following:
4.01 Leases. Seller shall provide Buyer with access on-site to the
originals of all leases and related lease files.
4.02 Permits. Copies of all certificates of occupancy (if any), and
other permits and licenses (if any) required for the occupancy
and operation of the Property.
4.03 Taxes. A copy of 1994 and 1995 (if available) real estate and
personal property tax statements for the Property.
4.04 Current Rent Roll. A list of the current rents now being
collected on each of the apartment units in the Improvements
which includes: apartment number, unit type, unit status, tenant
name, commencement and termination dates, market rent, lease
rent, deposits and details of any concessions.
4.05 Service Contracts. Copies of all service, maintenance, supply and
<PAGE>
management contracts affecting the use, ownership, maintenance
and/or operation of the Property.
4.06 Utility Bills. Copies of all utility bills (gas, electric, water
and sewer) relating to the Property for the immediately prior 12
month period.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof
as follows:
5.01 Ownership. Seller is the sole owner of the Property.
5.02 Leases. As of the date of the Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy
agreements (written or verbal) which grant any possessory
interest in and to any space situated on or in the Improvements
or that otherwise give rights with regard to use of the
improvements other than the leases (the "Leases") described in
Schedule C attached hereto (the "Rent Roll"). The Rent Roll is
true, accurate and complete as of the date hereof. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in
this Agreement:
(a) the Leases are in full force and effect and none of them
has been modified, amended or extended;
(b) Seller has neither sent written notice to any tenant of the
Property, nor received any notice from any such tenant,
claiming that such tenant, or Seller, as the case may be,
is in default, which default remains uncured other than as
shown on Schedule C attached hereto;
(c) to the best knowledge of Seller, no action or proceeding
instituted against Seller by any tenant of any unit in the
Property is presently pending;
(d) there are no security deposits or other deposits other than
those set forth in the Rent Roll;
(e) no rent has been paid more than thirty (30) days in advance
under any lease of any unit in the Property other than as
shown on the Rent Roll; and
(f) no leasing commission shall be due from Buyer for any
period subsequent to Closing and Buyer shall not be liable
for any leasing commission incurred by Seller prior to
Closing unless such leasing commission arises pursuant to a
new lease entered into after the date of this Agreement and
approved by Buyer pursuant to Section 8.01.
5.03 <PAGE>
Service and Management Contracts. Schedule D attached hereto
lists all services, maintenance, supply and management contracts
(collectively, "Service Contracts") affecting the operation of
the Property. At Closing, Buyer shall be required to assume the
obligations, as owner, under those Service Contracts which are
non-cancelable and are designated by the letters "NC" on
Schedule D (the "Non-Cancelable Service Contracts"). With
respect to all other Service Contracts, Buyer may give written
notice to Seller at any time prior to the expiration of the
Inspection Period designating the Service Contracts which Buyer
elects not to assume. Buyer shall be deemed to have approved,
and agreed to assume, all Services Contracts as to which Buyer
does not give such written notice on a timely basis. At Closing,
Buyer shall assume the Non-Cancelable Service Contracts and all
other Service Contracts, which Buyer has or is deemed to have,
approved (collectively the "Assumed Service Contracts") and
Seller shall terminate all other Service Contracts.
5.04 Ability to Perform. Seller has full power to execute, deliver
and carry out the terms and provisions of this Agreement and has
taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of Seller
enforceable in accordance with its terms. Except as set forth in
this Agreement, no order, permission, consent, approval,
license, authorization, registration or validation of, or filing
with, or exemption by, any governmental agency, commission,
board or public authority is required to authorize, or is
required in connection with, the execution, delivery and
performance of this Agreement by Seller or the taking by Seller
of any action contemplated by this Agreement.
5.05 No Actions. There are no pending, or to Seller's knowledge,
threatened legal actions or proceedings against or relating to
Seller or the ownership of the Property.
5.06 No Violation Notice. Seller has not received written notice:
(a) from any federal, state, county or municipal authority
alleging any fire, health, safety, building, pollution,
environmental, zoning or other violation of law in respect
of the Property or any part thereof, which has not been
entirely corrected;
(b) concerning the possible or anticipated condemnation of any
part of the Property, or the widening, change of grade or
limitation on use of streets abutting the same or
concerning any special taxes or assessments levied or to be
levied against the Property or any part thereof;
(c) from any insurance company or bonding company of any
defects or inadequacies in the Property or any part
thereof, which would adversely affect the insurability of
the same or cause the imposition of extraordinary premiums
or charges therefor or of any termination or threatened
termination of any policy of insurance or bond; or
<PAGE>
(d) concerning any change in the zoning classification of the
Property or any part thereof.
5.07 No Management Contracts, Employment Contracts, Unions, Pension
Plans. Seller has not entered into any management contracts,
employment contracts or labor union contracts and has not
established any retirement, pension or profit sharing plans
relating to the operation or maintenance of the Property which
shall survive the Closing or for which Buyer shall have any
liability or obligation.
5.08 Environmental Compliance. Seller has no actual knowledge, and
has not received written notice from any governmental authority
or other person, that (a) the Property is in violation of any
Environmental Law (as defined in Section 6.01) or (b) the
Property or Seller is the subject of any administrative or
judicial action or proceeding pursuant to any Environmental Law
in connection with the property.
5.09 No Employment Contracts, Unions, Pension Plans. Seller has not
entered into any employment contracts or labor union contracts
and has not established any retirement, pension or profit
sharing plans relating to the operation or maintenance of the
Property which shall survive the Closing or for which Buyer
shall have any liability or obligation.
Any reference in this Section 5 to Seller's knowledge,
representation, warranty or notice of any matter, shall only
mean such knowledge or notice that is actually known by or has
actually been received by David J. Olney or Eric A. Calub, the
authorized agents of Seller. Any representation or warranty of
the Seller is based solely upon those matters of which David J.
Olney or Eric A.
Calub has actual knowledge. Any knowledge or notice given, had or received
by any of Seller's agents, servants or employees, other than David J.
Olney or Eric A. Calub, shall not be imputed to Seller.
SECTION 6
AS-IS CONDITION
6.01 As Is. Buyer acknowledges and agrees that it will be purchasing
the Property based solely upon its inspection and investigations
of the Property and that Buyer will be purchasing the Property
"AS IS" and "WITH ALL FAULTS" based upon the condition of the
Property as of the date of this Agreement, subject to reasonable
wear and tear and loss by fire or other casualty or condemnation
from the date of this Agreement until the Closing. Without
limiting the foregoing, Buyer acknowledges that, except as may
otherwise be specifically set forth elsewhere in this Agreement,
neither Seller nor its consultants or agent have made any other
representations or warranties of any kind upon which Buyer is
relying as to any
<PAGE>
matters concerning the Property, including, but not limited to,
the condition of the land or any Improvements, the existence or
nonexistence of asbestos, toxic water or any hazardous material,
the tenants of the Property or the leases affecting the
Property, economic projections or market studies concerning the
Property, any development rights, taxes, bonds, covenants,
conditions and restrictions affecting the Property, water or
water rights, topography, drainage, soil, subsoil of the
Property, the utilities serving the Property or any zoning,
environmental or building laws, rules or regulations affecting
the Property. Seller makes no representation that the Property
complies with Title III of the Americans with Disabilities Act
or any fire codes or building codes. Buyer hereby releases
Seller from any and all liability in connection with any claims
which Buyer may have against Seller, and Buyer hereby agrees not
to assert any claims, for contribution, cost recovery or
otherwise, against Seller, relating directly or indirectly to
the existence of asbestos or hazardous materials or substances
on, or environmental conditions of, the Property. As used
herein, the term "Hazardous Materials" or "Hazardous Substances"
means (i) hazardous wastes, hazardous substances, hazardous
constituents, toxic substances or related materials, whether
solids, liquids or gases, including but not limited to
substances defined as "hazardous wastes," "hazardous
substances," toxic substances," pollutants," "contaminants,"
"radioactive materials," or other similar designations in, or
otherwise subject to regulation under, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), 42 U.S.C. 9601 et seq.; the Toxic
Substance Control Act ("TSCAS"), 15 U.S.C. 2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 1802; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
9601, et seq.; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et
seq.; the Safe Drinking Water Act, 42 U.S.C. 300f et seq.; the
Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq.; and in any
permits, licenses, approvals, plans, rules, regulations or
ordinances adopted, or other criteria and guidelines promulgated
pursuant to the preceding laws or other similar federal, state
or local laws, regulations, rules or ordinance now or hereafter
in effect relating to environmental matters (collectively the
"Environmental Laws"); and (ii) any other substances,
constituents or wastes subject to any applicable federal, state
or local law, regulation or ordinance, including any
environmental law, now or hereafter in effect, including but not
limited to (A) petroleum, (B) refined petroleum products, (C)
waste oil, (D) waste aviation or motor vehicle fuel and (E)
asbestos.
6.02 No Financial Representation. Seller has provided to Buyer
certain unaudited historical financial information regarding the
Property relating to certain periods of time in which Seller
owned the Property. Seller and Buyer hereby acknowledge that
such information has been provided to Buyer and Buyer's request
solely as illustrative material. Seller makes no representation
or warranty that such material is complete or accurate or that
Buyer will achieve similar financial or other results with
respect to the operations of the Property, it being acknowledged
by Buyer that Seller's operation of the Property and allocations
of revenues or expenses may be vastly different than Buyer may
be able to attain. <PAGE>
Buyer acknowledges that it is a sophisticated and experienced
purchaser of real estate and further that Buyer has relied upon
its own investigation and inquiry with respect to the operation
of the Property and releases Seller from any liability with
respect to such historical information.
SECTION 7
INSURANCE
7.01 Maintenance of Insurance. Until the Closing, Seller shall
maintain its present insurance on the Property which insurance
in respect of fire and casualty shall be covered by a standard
All-Risk Policy in the amounts as currently insured. Subject to
the provisions of Section 7.02, the risk of loss in and to the
Property shall remain vested in Seller until the Closing. Buyer
will obtain its own insurance on the Property at Closing.
7.02 Casualty or Condemnation. If prior to the Closing, the
Improvements or any material portion thereof (having a
replacement cost equal to or in excess of $100,000.00) are
damaged or destroyed by fire or casualty, or any part of the
Property is taken by eminent domain by any governmental entity,
then Buyer or Seller shall have the option, exercisable by
written notice given to the other party at or prior to the
Closing, to terminate this Agreement, whereupon all obligations
of all parties hereto shall cease, the Deposit shall be returned
to Buyer and this Agreement shall be void and without recourse
to the parties hereto except for provisions which are expressly
stated to survive such termination. If neither Buyer nor Seller
elects to terminate this Agreement or if such damage or
destruction or taking has a replacement cost or is in an amount
of less than $100,000.00, Buyer shall proceed with the purchase
of the Property without reduction or offset of the Purchase
Price, and in such case unless Seller shall have previously
restored the Property to its condition prior to the occurrence
of any such damage or destruction, Seller shall pay over or
assign to Buyer all amounts received or due from, and all claims
against, any insurance company or governmental entity as a
result of such destruction or taking.
SECTION 8
SELLER'S OBLIGATIONS PRIOR TO CLOSING
Seller covenants that between the date of this Agreement and
the Closing:
8.01 No Lease Amendments. Prior to Closing, Seller shall continue its
efforts to lease the Property in a manner consistent with
Seller's prior business practice. Seller shall not, without
Buyer's prior written consent (a) enter into any new lease for
an apartment unit or office space with a first-time tenant
unless the lease is for a period of no more than one year and
the rent shall be not less than the amount of the market rent
noted on the Rent Roll for the respective apartment or office
space; or (b) enter into, amend, renew or extend any Lease for
an apartment unit or office space with an existing tenant unless
the lease is for a period of not more than one year and that the
rent for the amended, renewal or extension term shall not be
less than the amount of rent noted on <PAGE>
the Rent Roll, for the respective apartment or office space; or
(c) terminate any Lease except by reason of a default by the
tenant thereunder or by reason of the provisions contained in
the Lease.
8.02 Continuation of Service Contracts. Seller shall not modify or
amend any Service Contract or enter into any new service
contract for the Property, without the prior written consent of
Buyer which consent shall not be unreasonably withheld or
delayed provided the same is terminable without penalty by the
then owner of the Property upon not more than thirty (30) days
notice.
8.03 Replacement of Personal Property. No personal property included
as part of the Property shall be removed from the Property
unless the same is replaced with similar items of at least equal
quality prior to the Closing.
8.04 Tax Procedure. Seller shall not withdraw, settle or otherwise
compromise any protest or reduction proceeding affecting real
estate taxes assessed against the Property for any fiscal period
in which the Closing is to occur or any subsequent fiscal period
without the prior written consent of Buyer. Real estate tax
refunds and credits received after the Closing which are
attributable to the fiscal tax year during which the Closing
occurs shall be apportioned between Seller and Buyer, after
deducting the expenses of collection thereof, based upon the
relative time periods each owns the Property, which obligation
shall survive the Closing.
8.05 Access. Seller shall allow Buyer or Buyer's representatives
access to the Property, the Leases and other documents required
to be delivered under this Agreement upon reasonable prior
notice at reasonable times, including Buyer shall be permitted
to make a final inspection of the Property immediately prior to
Closing.
8.06 Operations. Seller shall continue to operate and maintain the
Property in a manner consistent with Seller's prior business
practice; provided in no event shall Seller be obligated to make
any capital improvements, repairs or replacements.
SECTION 9
SELLER'S CLOSING OBLIGATIONS
9.01 Closing, Deliveries and Obligations. At the Closing, Seller
shall deliver the following to Buyer:
(a) Deed. The Deed and the General Instrument of
transfer, in form reasonably satisfactory to Buyer's
and Seller's counsel, duly executed and acknowledged,
which together convey the Property to Buyer, subject
only to Permitted Exceptions.
(b) Assignment of Leases and Security Deposits. An
assignment of the Leases and Security Deposits in
form reasonably satisfactory to Buyer's and Seller's
counsel.
<PAGE>
(c) Lease Records. Original copies of all Leases, and
related documents in the possession or under the
control of Seller. Such records shall include a
schedule of all cash security deposits and a check or
credit to Buyer in the amount of such security
deposits held by Seller at the Closing under the
Leases together with appropriate instruments of
transfer or assignment with respect to any lease
securities which are other than cash and a schedule
updating the Rent Roll and setting forth all arrears
in rents and all prepayments of rents.
(d) Permits. Seller shall deliver, to the extent in the
possession of Seller: original copies of all
certificates, licenses, permits, authorizations and
approvals issued for or with respect to the Property
by governmental authorities having jurisdiction,
except that photocopies may be substituted if the
originals are posted at the Property.
(e) Service Contracts. An assignment of the Assumed
Service Contracts, in form reasonably satisfactory to
Buyer's and Seller's counsel, together with all
Assumed Service Contracts in Seller's possession or
control which are in effect at the Closing.
(f) Title Affidavits. Such affidavits as the Title
Insurer may reasonably require in order to omit from
its title insurance policy all exceptions for (i)
parties in possession other than under the rights to
possession granted under the Leases; and
(ii)mechanics' liens.
(g) Files. Seller shall make all of its tiles and records
relating to the Property available to Buyer at the
Property upon reasonable prior notice for copying,
which obligation shall survive the Closing.
(h) Notices of Sales. Sufficient letters, executed by
Seller, advising the tenants under the Leases of the
sale of the Property to Buyer and directing that all
rents and other payments thereafter becoming due
under the Leases be sent to Buyer or as Buyer may
direct.
(i) Non-Foreign Affidavit. Seller shall execute and
deliver to Buyer and Buyer's counsel, at Closing such
evidence as may be reasonably requires by Buyer to
show compliance by Seller with the Foreign Investment
and Real Property Tax Act, IRC Section 1445(b)(2), as
amended.
9.02 Seller's Expenses. Seller shall pay its own counsel fees and
one-half of: (i) transfer taxes and documentary stamps, (ii)
Title Insurance costs, (iii) Survey costs, (iv) escrow and
recording fees, and (v) all other customary closing costs in
transactions of this nature in Evansville, Indiana.
<PAGE>
SECTION 10
BUYER'S CLOSING OBLIGATIONS
At the Closing, Buyer shall:
10.01 Payment of Purchase Price. Deliver to Seller the Purchase Price,
as adjusted for (i) apportionments under Section 11, and (ii)
any adjustments thereto required pursuant to the express
provisions this Agreement.
10.02 Assumption. Deliver to Seller assumption agreements signed by
Buyer with respect to the performance by Buyer of the landlords
obligations under the Leases, Security Deposits and the Assumed
Service Contracts, in each case in respect of the period from
and after the Closing.
10.03 Recording Deed. Cause the Deed to be recorded.
10.04 Other Documents. Deliver any other documents required by this
Agreement to be delivered by Buyer.
10.05 Buyer's Expenses. Pay its own counsel fees and one half of: (i)
transfer taxes and documentary stamps, (ii) Title Insurance
costs, (iii) Survey costs, (iii) escrow and recording fees, and
(v) all other customary closing costs in transactions of this
nature in Evansville, Indiana.
SECTION 11
APPORTIONMENTS AND ADJUSTMENTS TO PURCHASE PRICE
11.01 Apportionments. The following apportionments shall be made
between the parties at the Closing as of the close of the
business day prior to the Closing:
(a) prepaid and collected rent;
(b) security deposits;
(c) inasmuch as all current employees of the Property are the
employees of Seller's management agent, Buyer shall have no
liability for, and there shall be no adjustment for payment
of, wages, vacation pay, pension and welfare benefits and
other fringe benefits of any persons employed at the
Property;
(d) real estate and personal property taxes, water charges,
sewer rents and vault charges, if any, on the basis of the
fiscal period for which assessed, except that if there is a
water meter on the Property, apportionment at the Closing
shall be based on the last available reading, subject to
adjustment after the Closing on a per diem basis, when the
next reading is available;
(e) Seller shall receive a credit for utility deposits for any
utility accounts which are transferred to Buyer;
<PAGE>
(f) charges or prepayments under transferable Service
Contracts;
(g) all other income and expenses relating to the Property.
If the Closing shall occur before a new tax rate is fixed, the
apportionment of taxes at the Closing shall be upon the basis of the old
tax rate for the preceding period applied to the latest assessed
valuation. Promptly after the new tax rate is fixed, the
apportionment of taxes shall be recomputed. Any discrepancy resulting from
such recomputation and any errors or omissions in computing apportionments
at the Closing shall be promptly corrected, which obligation shall survive
the Closing.
11.02 Application of Rent Payments. If any tenant is in arrears in
the payment of rent at the Closing, rents received from such
tenant within thirty (30) days after the Closing shall be
applied in the following order of priority: (a) first to the
month in which the Closing occurred, (b) then to the period
prior to the month in which the Closing occurred, and (c) then
to any month or months following the month in which the Closing
occurred. If rents or any portion thereof received by Seller or
Buyer after the Closing are payable to the other party by reason
of this allocation, the appropriate sum shall be paid to the
other party within thirty (30) days from the receipt thereof,
which obligation shall survive the Closing. Thereafter, Seller
shall be entitled to attempt to collect directly from tenants
any rents which were due Seller prior to Closing, but Buyer
shall have no further obligations with respect thereto.
SECTION 12
FAILURE TO PERFORM
12.01 Buyer's Election. If Seller is unable to give title or to make
conveyance, or to satisfy all of Seller's closing obligations as
set forth in this Agreement, Buyer shall notify Seller in
writing on or prior to Closing specifying in detail the nature
of Seller's default. Seller, in its sole discretion, may, but
shall not be obligated to, extend the Closing for a period not
to exceed thirty (30) days during which period Seller may
attempt to cure any such default described in Buyer's notice. If
either Seller elects, in its sole discretion, not to attempt to
cure such default or Seller extends the Closing but is unable to
cure such default, Buyer shall have the right to elect, in its
sole discretion, at the Closing or the extended Closing, if
applicable, to accept such title as Seller can deliver to the
Property in its then condition and to pay therefor the Purchase
Price without reduction or offset, in which case Seller shall
convey such title for such price.
12.02 Seller's Default. If at the Closing, Seller is unable to give
title or to make conveyance, or to satisfy all of Seller's
obligations as set forth in this Agreement, and Buyer does not
elect to take title as provided in Section 12.01, Seller shall
be in default under this Agreement and all Deposits made
hereunder shall be forthwith returned to Buyer. In addition to
the foregoing, if Buyer desires to purchase the Property in
accordance with the terms of <PAGE>
this Agreement and Seller refuses to perform Seller's
obligations hereunder, Buyer, at its option, and as Buyers sole
and exclusive remedy, shall have the right to compel specific
performance by Seller hereunder in which event any deposit made
hereunder shall be credited against the Purchase Price.
12.03 Buyer's Default. The parties acknowledge that in the event of
Buyer's failure to fulfill its obligations hereunder it is
impossible to compute exactly the damages which would accrue to
the Seller in such event. The parties have taken these facts
into account in setting the amount of the Deposit, required
pursuant to Section 2.04, for Fifty Thousand Dollars
($50,000.00) and hereby agree that: (i) such amount together
with the interest earned thereon is the pre-estimate of such
damages which would accrue to Seller; (ii) such amount
represents damages and not any penalty against Buyer; and (iii)
if this Agreement shall be terminated by Seller by reason of
Buyer's failure to fulfill Buyer's obligations hereunder, the
Deposit together with the interest thereon shall be Seller's
full and liquidated damages and shall be Seller's sole and
exclusive remedy in lieu of all other rights and remedies which
Seller may have against Buyer at law or in equity.
SECTION 13
BROKERAGE AND FINANCING FEES
13.01 Brokerage Fees. Seller and Buyer mutually represent and warrant
that Newcomb Realty and Investments ("Broker") is the only
broker with whom they have dealt in connection with this
purchase and sale and that neither Seller nor Buyer knows of any
other broker who has claimed or may have the right to claim a
commission in connection with this purchase and sale. The
commission of the Broker in the sum of Sixty-Seven Thousand Five
Hundred Dollars ($67,500.00} shall be paid by the Seller, but
Seller shall be obligated to pay such commission only if, as and
when the Deed is recorded. In any event, Buyer shall have no
obligation to pay a brokerage commission to Broker or any other
broker. Seller and Buyer shall indemnify and defend each other
against any costs, claims or expenses, including attorneys'
arising out of the breach on their respective parts of any
representations, warranties or agreements contained in this
Section. The representations and obligations under this Section
shall survive the Closing or, if the Closing does not occur, the
termination of this Agreement.
13.02 Financing Fees. Buyer shall pay any and all commitment fees
required by Buyer's lender in connection with the financing by
Buyer of the purchase of the Property. In addition, Buyer shall
pay all other fees and expenses required by Buyer's lender in
connection with the obtaining of the financing of the Property.
SECTION 14
NOTICES
14.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally or shall be sent by
Federal Express or other comparable overnight delivery courier,
<PAGE>
addressed as set forth at the beginning of this Agreement or by
telecopier to the telecopier number as set forth at the
beginning of this Agreement. Notices shall be deemed effective,
when so delivered. Copies of all such notices to Buyer shall be
sent to Allison K. Comstock, Esq., Law Office of Jeffrey A.
Bosse, 522 Main Street, Evansville, Indiana 47708, Telecopier
No. 812-421-4077 and copies of all such notices to Seller shall
be sent to Joel H. Sirkin, Esquire, Hale and Dorr, 60 State
Street, Boston, Massachusetts 02109, Telecopier No.
617-526-5000.
SECTION 15
LIMITATIONS ON SURVIVAL
15.01 Representations and Warranties. Except as otherwise expressly
provided in this Agreement, no representations, warranties,
covenants or other obligations of Seller set forth in this
Agreement shall survive the Closing, and no action based thereon
shall be commenced after Closing. The representations,
warranties, covenants and other obligations of Seller set forth
in Section 5 shall survive until one hundred twenty (120) days
after the Closing, and no action based thereon shall be
commenced more than one hundred twenty (120) days after the
Closing.
15.02 Merger. The delivery of the Deed by Seller, and the acceptance
and recording thereof by Buyer, shall be deemed the full
performance and discharge of each and every obligation on the
part of Seller to be performed hereunder and shall be merged in
the delivery and acceptance of the Deed, except as provided in
Section 15.01 and except for such other obligations of Seller
which are expressly provided herein to survive the Closing.
SECTION 16
CONDITIONS
16.01 Inspection Condition. It shall be a condition of this Agreement
that on or before February 21, 1996 (the "Inspection Period"),
Buyer shall have approved in its sole discretion, (i) the
matters set forth in Section 4; (ii) all zoning, building code
and other governmental laws, ordinances, rules, regulations,
rulings and decision applicable to the Property; (iii) an
appraisal of the Property; (iv) an engineering and physical
inspection of the Property; and (v) an inspection of the
financial books and records relating to all income and expenses
of the Property. In the conduct of its inspection of the
Property, Buyer shall not unreasonably interfere with the
operation of the Property or the occupancy of the tenants. To
the extent any of the inspections disrupt the condition of the
Property, Buyer shall restore the Property to its prior
condition thereafter and Buyer shall indemnify Seller against
any loss or damage to person or property arising from the
conduct of Buyer's inspection of the Property. The foregoing
provisions of this Agreement shall survive the Closing or any
termination of this Agreement.
In the event that Buyer deems any inspection matter unacceptable
to Buyer, in Buyer's sole discretion, Buyer shall be entitled to
terminate this Agreement by written notice given to Seller on or
<PAGE>
before the expiration of the Inspection Period, at which time,
the Deposit together with the interest thereon shall be promptly
returned to Buyer, and, thereafter this Agreement shall be void
and without recourse to either party except for provisions which
are expressly stated to survive termination of this Agreement.
In the event Buyer does not so timely deliver written notice of
termination prior to the expiration of the Inspection Period,
then the foregoing Inspection Condition set forth in Section
16.01 shall automatically be deemed waived by Buyer and
satisfied in full. In the event Buyer timely elects to terminate
this Agreement during the Inspection Period as permitted above,
and as additional consideration for Seller granting Buyer the
foregoing condition precedent, Buyer shall deliver to Seller
with Buyer's notice of termination copies of all studies,
surveys, plans, investigations and reports obtained by or
prepared by Buyer in connection with Buyer's inspection of the
Property. Buyer makes no warranty or representation as to the
accuracy of any information contained in such documents.
16.02 Environmental Condition. It shall be a condition of this
Agreement that on or before March 22, 1996 (the "Environmental
Inspection Period"), Buyer shall have obtained, at Buyer's
expense, and approved, in its sole discretion, a report (the
"Environmental Survey") prepared by a qualified consultant
selected by Buyer ("Buyer's Consultant") and addressed to Buyer
concerning the presence of any (i) contamination of the Property
by Hazardous Materials (as defined in Section 6.01); (ii)
apparent violation of Environmental Laws (as defined in Section
6.01); upon or associated with activities upon the Property; or
(iii) potential incurrence of Environmental Damages (as
hereinafter defined) by the owners or operators of the Property
(collectively "Environmental Exceptions"). The Environmental
Survey may be performed at any time or times, except that entry
upon the Property shall be on reasonable notice and under
reasonable conditions established by Seller. Buyer's Consultants
are hereby authorized to enter upon the Property for such
purposes and to perform such testing and take such samples as
may be necessary to conduct the Environmental Survey in the
reasonable opinion of the Buyer's Consultant.
The Environmental Survey shall include, without limitation, the
results of:
(i) a site inspection;
(ii) interviews of present occupants of the
Property;
(iii) a review of public records concerning the
Property and other properties in the
vicinity of the Property; and
(iv) a review of aerial photographs of the
Property and other evidence of historic land
uses.
The Environmental Survey shall include, if determinable by the
Buyer's Consultant, based upon this scope of work, the estimated
<PAGE>
cost and period of time required to remediate any Environmental
Exceptions.
The term "Environmental Damages" means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict
liability), encumbrances, liens, costs and expenses of
investigation and defense of claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or
judgment of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including,
without limitation, reasonable attorney fees and disbursements
and consultant fees, any of which are incurred at any time as a
result of the existence of Hazardous Material upon, about, or
beneath the Property or migrating or threatening to migrate to
or from the Property, or the existence of a violation of
Environmental Laws pertaining to the Property regardless of
whether the existence of such Hazardous Material or the
violation of Environmental Laws arose prior to the present
ownership or operation of the Property.
If the Environmental Survey requires or recommends an additional
Environmental Survey, such Additional Survey may be promptly
performed at Buyer's expense, if Buyer so elects.
To the extent any of the inspections disrupt the condition of
the Property, Buyer shall restore the Property to its prior
condition thereafter and Buyer shall indemnify Seller against
any loss or damage to person or property arising from the
conduct of Buyer's inspection of the Property. The foregoing
provisions of this Agreement shall survive the Closing or any
termination of this Agreement.
In the event that Buyer deems any matter disclosed by the
Environmental Survey unacceptable to Buyer, in Buyer's sole
discretion, Buyer shall be entitled to terminate this Agreement
by written notice given to Seller on or before the expiration of
the Environmental Inspection Period, at which time, the Deposit
together with the interest thereon shall be promptly returned to
Buyer, and, thereafter this Agreement shall be void and without
recourse to either party except for provisions which are
expressly stated to survive termination of this Agreement. In
the event Buyer does not so timely deliver written notice of
termination prior to the expiration of the Environmental
Inspection Period, then the foregoing Environmental Condition
set forth in Section 16.02 shall automatically be deemed waived
by Buyer and satisfied in full. In the event Buyer timely elects
to terminate this Agreement during the Inspection Period as
permitted above, and as additional consideration for Seller
granting Buyer the foregoing condition precedent, Buyer shall
deliver to Seller with Buyer's notice of termination copies of
all environmental surveys obtained by or prepared by Buyer in
connection with Buyer's inspection of the Property. Buyer makes
no warranty or representation as to the accuracy of any
information contained in such documents.
16.03 Financing Condition. If Buyer does not terminate this Agreement
pursuant to either Section 16.01 or 16.02, Buyer shall be deemed
to have approved the inspection matters described in Section
16.01 <PAGE>
and the environmental matters described in Section 16.02 and it
shall be a condition of this Agreement that on or before March
22, 1996 (the Financing Period"), Buyer shall have obtained a
financing commitment (the "Financing Commitment") for a loan in
an amount and on such other terms as are acceptable to Buyer in
connection with the purchase of the Property. Buyer shall use
diligent efforts to apply for and obtain the Financing
Commitment. In the event Buyer does not obtain the Financing
Commitment, Buyer shall be entitled to terminate this Agreement
by written notice given to Seller on or before the expiration of
the Financing Period, at which time the Deposit shall be
promptly returned to Buyer, and thereafter this Agreement shall
be void and without recourse to either party except for
provisions which are expressly stated to survive termination of
this Agreement. In the event Buyer does not so timely deliver
written notice of termination prior to the expiration of the
Financing Period, then the foregoing Financing Condition shall
automatically be deemed waived by Buyer and satisfied in full.
SECTION 17
MISCELLANEOUS PROVISIONS
17.01 Assignment. Buyer shall be entitled to assign this Agreement and
its rights hereunder to a corporation, general partnership,
limited partnership or other lawful entity entitled to do
business in the state in which the Property is located provided
such corporation or partnership, shall be controlled,
controlling or under the common control with Buyer ("Assignee").
In the event of such an assignment of this Agreement to Assignee
(a) Buyer shall notify Seller promptly (b) Buyer shall not be
released from liability under this Agreement and from and after
such assignment, Buyer and Assignee shall be jointly and
severally liable hereunder, (c) Assignee shall assume all
obligations of Buyer under this Agreement and (d) from and after
any such assignment the term "Buyer" shall be deemed to mean the
Assignee under any such assignment.
17.02 Limitation of Liability. No shareholders of Seller, nor any of
its respective officers, directors, agents, employees, heirs,
successors or assigns shall have any personal liability of any
kind or nature for or by reason of any matter or thing
whatsoever under. in connection with, arising out of or in any
way related to this Agreement and the transactions contemplated
herein, and Buyer hereby waives for itself and anyone who may
claim by, through or under Buyer any and all rights to sue or
recover on account of any such alleged personal liability.
No shareholders of Buyer, nor any of its respective officers,
directors, agents, employees, heirs, successors or assigns shall
have any personal liability of any kind or nature for or by
reason of any matter or thing whatsoever under, in connection
with, arising out of or in any way related to this Agreement and
the transactions contemplated herein, and Seller hereby waives
for itself and anyone who may claim by, through or under Seller
any and all rights to sue or recover on account of any such
alleged personal liability.
17.03 Integration. This Agreement embodies and constitutes the entire
<PAGE>
understanding between the parties with respect to the
transaction contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written,
are merged into this Agreement. Neither this Agreement nor any
provision hereof may be waived. modified, amended, discharged or
terminated except by an instrument signed by the party against
whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent
set forth in such instrument.
17.04 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state in which the Property
is located.
17.05 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or
limit the scope or intent of this Agreement or any of the
provisions hereof.
17.06 Bind and Inure. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and assigns.
17.07 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by both Seller and Buyer. The
delivery by Buyer to Seller of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the
delivery to Buyer of a duly executed counterpart of this
Agreement and the satisfaction of all conditions under which
such offer is made. but such offer may be revoked by Buyer by
written notice given at any time prior to such acceptance and
satisfaction.
17.08 Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall
include the plural and the plural shall include the singular, as
the context may require.
17.09 Attachments. If the provisions of any schedule or rider to this
Agreement are inconsistent with the provisions of this
Agreement. the provisions of such schedule or rider shall
prevail. Schedules A, B, C and D, attached are hereby
incorporated as integral Parts of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
under seal as of the date first above written.
WITNESS: SELLER:
KRUPP ASSOCIATES RIVERSIDE LIMITED
PARTNERSHIP, an Indiana limited partnership
By: The Krupp Corporation
General Partner a Massachusetts
corporation
Maureen Clougher By: David J. Olney
<PAGE>
Authorized Agent
BUYER:
BLUSKY, INC.
Allison K. Comstock By: Robert Brenner
Its: President
The undersigned Broker joins in the execution of this Agreement to
acknowledge and agree to the terms of Section 13.01 hereof.
WITNESS: BROKER:
NEWCOMB REALTY AND INVESTMENTS
Allison K. Comstock By: Kenneth Newcomb
Its: Owner
RECEIPT
The Purchase and Sale Agreement, together with Buyer's Deposit, has been
received by the Escrow Agent on this the 22nd day of January, 1996, and
the Escrow Agent acknowledges the terms thereof and agrees to perform as
Escrow Agent in accordance therewith.
ESCROW AGENT
By:Jeffrey A. Bosse
<PAGE>
