UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14377
Krupp Realty Limited Partnership-VII
Massachusetts 04-2842924
(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)
(617) 423-2233
(Registrant's telephone number, including area code)
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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
September 30, December 31,
1994 1993
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $8,447,927
and $7,820,288, respectively $ 9,815,305 $10,349,433
Retail center, net of accumulated
depreciation of $2,800,086 and
$2,513,207, respectively 6,805,314 7,046,517
Total real estate assets 16,620,619 17,395,950
Cash 812,016 840,798
Cash restricted for tenant security deposits 54,801 61,363
Cash restricted for capital improvements 58,015 57,748
Prepaid expenses and other assets (Note 2) 573,561 327,862
Deferred expenses, net of accumulated
amortization of $10,300 and $259,055,
respectively (Notes 2 and 3) 198,423 45,975
Total assets $18,317,435 $18,729,696
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable (Notes 3 and 5) $12,852,205 $12,682,032
Other liabilities 756,185 824,861
Total liabilities 13,608,390 13,506,893
Partners' equity (Note 4) 4,709,045 5,222,803
Total liabilities and partners' equity $18,317,435 $18,729,696
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-2-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenue:
Rental $1,093,652 $1,050,192 $3,188,206 $3,775,717
Interest income 7,353 9,587 18,652 20,069
Total revenue 1,101,005 1,059,779 3,206,858 3,795,786
Expenses:
Operating (including reimbursements
to affiliates of $40,769, $40,769,
$122,308 and $161,578,
respectively) 298,659 293,095 885,770 1,163,902
Maintenance 96,253 47,007 233,492 377,974
Real estate taxes 99,107 99,389 304,333 371,343
Management fees to an affiliate 49,791 44,875 138,172 168,800
Depreciation and amortization 312,875 314,237 970,793 1,070,980
Interest 346,613 318,957 947,132 1,140,696
General and administrative
(including reimbursements to
affiliates of $13,845, $13,045,
$41,278 and $39,067,
respectively) 45,738 24,815 89,902 67,252
Total expenses 1,249,036 1,142,375 3,569,594 4,360,947
Net loss before gain on
sale of Westbrook Place
and Willow Cove Apartments
("Westbrook") (148,031) (82,596) (362,736) (565,161)
Gain on sale of Westbrook - 845,746 - 845,746
Net income (loss) $ (148,031) $ 763,150 $ (362,736) $ 280,585
Allocation of net income (loss) (Note 4):
Per Unit of Investor
Limited Partner Interest
(27,184 Units outstanding) $ (5.39) $ 27.79 $ (13.21) $ 10.22
General Partners $ (1,480) $ 7,632 $ (3,627) $ 2,806
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-3-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Operating activities:
Net income (loss) $ (362,736) $ 280,585
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of Westbrook - (845,746)
Depreciation and amortization 970,793 1,070,980
Decrease in restricted cash for tenant security
deposits 6,562 18,815
Decrease (increase) in prepaid expenses and
other assets (245,699) 68,859
Decrease in accrued expenses and other liabilities (68,676) (23,271)
Net cash provided by operating activities 300,244 570,222
Investing activities:
Additions to fixed assets (139,187) (241,276)
Decrease (increase) in cash restricted for capital
improvements (267) 91,541
Proceeds from sale of Westbrook - 75,000
Net cash used in investing activities (139,454) (74,735)
Financing activities:
Principal payments on mortgage notes payable (111,856) (117,113)
Proceeds from refinancing mortgage note payable 5,300,000 -
Payoff of mortgage note payable (5,017,971) -
Increase in deferred expenses (208,723) -
Distributions (151,022) -
Net cash used in financing activities (189,572) (117,113)
Net increase (decrease) in cash (28,782) 378,374
Cash, beginning of period 840,798 387,512
Cash, end of period $ 812,016 $ 765,886
Supplemental schedule of noncash investing and financing activities:
The Partnership sold Westbrook on July 1, 1993 for net proceeds of $75,000
and retirement of all related collateralized debt as shown below:
First mortgage and accrued interest payable $ 3,799,398
Second mortgage payable 1,600,000
Cash proceeds 75,000
Net book value of property sold (4,628,652)
Gain on sale of Westbrook $ 845,746
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-4-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this report
on Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. In the opinion of The Krupp
Corporation and The Krupp Company Limited Partnership-II, the
General Partners of Krupp Realty Limited Partnership-VII (the
"Partnership"), the disclosures contained in this report are
adequate to make the information presented not misleading. See
Notes to Financial Statements included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1993 for
additional information relevant to significant accounting policies
followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the Partnership's financial position as of September 30,
1994, its results of operations for the three and nine months ended
September 30, 1994 and 1993 and its cash flows for the nine months
ended September 30, 1994 and 1993. Certain prior period balances
have been reclassified to reflect current year financial statement
presentation.
The results of operations for the three and nine months ended
September 30, 1994 are not necessarily indicative of the results
which may be expected for the full year. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
2. Related Party Transactions
In addition to the amounts presented on the face of the Statement
of Operations, amounts paid to affiliates of the General Partners
during the nine months ended September 30, 1994 and for the year
ended December 31, 1993 for costs related to refinancing activities
of the Partnership's mortgage notes were $14,235 and $7,568,
respectively.
3. Mortgage Notes Payable
On April 13, 1994, the Partnership completed the refinancing of
Windsor Apartments. The property was refinanced with a $5,300,000
non-recourse mortgage note payable at the rate of 9.25% per annum
with monthly principal and interest payments of $43,602, based on
a 30-year amortization schedule. The mortgage note, which is
collateralized by the property, matures on May 1, 2001 at which
time the remaining principal (approximately $5,021,000) and any
accrued interest are due. After October 13, 1997, the note may be
prepaid subject to a prepayment penalty. The Partnership utilized
the proceeds to repay the prior mortgage note with a remaining
balance of $5,017,971 and to pay refinancing costs of $157,297.
Continued
-5-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS, Continued
4. Changes in Partners' Equity
A summary of changes in partners' equity (deficit) for the nine
months ended September 30, 1994 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
<S> <C> <C> <C> <C>
Balance at
December 31, 1993 $5,716,673 $(277,053) $(216,817) $5,222,803
Distribution (135,920) (12,082) (3,020) (151,022)
Net loss (359,109) - (3,627) (362,736)
Balance at
September 30, 1994 $5,221,644 $(289,135) $(223,464) $4,709,045
</TABLE>
5. Subsequent Event
On October 6, 1994, the Partnership successfully completed the
refinancing of Nora Corners. The property was refinanced with a
$4,250,000 non-recourse mortgage note payable at the rate of 9% per
annum, with monthly principal and interest payments of $35,666.
The mortgage note, which is collateralized by the property, matures
on October 1, 2004 at which time the remaining principal
(approximately $3,516,000) and any accrued interest is due. The
note may be prepaid after October 1, 1998, subject to a prepayment
penalty. The Partnership utilized the proceeds to repay the prior
mortgage note balance plus interest totaling $4,226,538.
Estimated closing costs of the refinancing are $66,000.
-6-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
Item 2. 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 successful operations of its real
estate investments. Such ability is also dependent upon the future
availability of bank borrowings and the future refinancing and sale of
the Partnership's remaining real estate investments. These sources of
liquidity will be used by the Partnership for payment of expenses
related to real estate operations, capital expenditures, debt service
and expenses. Cash Flow, if any, as calculated under Section 8.2(a)
of the partnership agreement, will then be available for distribution
to the Partners. The Partnership's status has improved over the past
years. This improvement is due to the sale of Westbrook/Willow Cove
in 1993, which had a negative cash flow, thus favorably impacting
future cash flows. In addition, the Partnership has taken advantage
of the low interest rates by refinancing Windsor Apartments in April
1994 and Nora Corners in October 1994. Due to these events, the
General Partners have determined that there is sufficient Distributable
Cash Flow in 1994 to reinstate distributions. These distributions
commenced in August 1994 and thereafter are to be paid semi-annually.
The next distribution is scheduled for February 1995.
On April 13, 1994, the Partnership successfully completed the
refinancing of Windsor Apartments mortgage note payable. The new
$5,300,000 note requires decreased debt service payments due to a lower
interest rate of 9.25% per annum from the previous rate of 10.3% per
annum. The Partnership also refinanced the Nora Corners mortgage note
payable on October 6, 1994. The new $4,250,000 note requires decreased
debt service payments due to a lower interest rate of 9% per annum from
the previous rate of 10.5% per annum. The reduced mortgage payments
will provide additional liquidity to the Partnership that may be used
to fund capital improvements at its properties or for distributions.
Cash Flow
Shown below, as required by the Partnership Agreement, is the
calculation of Cash Flow for the nine months ended September 30, 1994:
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net loss for tax purposes $ (416,000)
Items not requiring (requiring) the use of
operating funds:
Tax basis depreciation and amortization 1,024,000
Principal payments on mortgage notes payable (112,000)
Capital improvement expenditures (139,000)
Cash Flow $ 357,000
</TABLE>
-7-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
Operations
The following discussion relates to the operations of the
Partnership and its properties (Courtyards Village, Nora Corners and
Windsor Apartments) for the three and nine months ended September 30,
1994 and 1993. The sale of Westbrook Place/Willow Cove Apartments
("Westbrook"), in July 1993, significantly impacts the comparability
of the Partnership's operations for the nine months ended September 30,
1994 and 1993.
During the first nine months of 1994, as compared to 1993, the
Partnership's rental revenues (net of Westbrook's rental revenues)
increased by $133,000. This increase was primarily due to rental
increases at Courtyards and Windsor as well as occupancy increases at
Windsor. Interior and exterior painting improvements and carpentry
renovations, started in 1993 at Courtyards and Windsor, were completed
in the first quarter of 1994. Landscaping and parking lot upgrades
were also implemented at Courtyards in 1993. These improvements
allowed the Partnership to obtain the rental increases at both
properties. Occupancy at Windsor increased due to the stabilization
of the Dallas economy, with home purchasing levelling off. As a
result, all rental concessions at Windsor were eliminated in the first
quarter of 1994. The Partnership's commercial property, Nora Corners,
signed a new tenant, Food King, a Chinese restaurant, in the first
quarter of 1994.
Property operations for the three months ended September 30, 1994,
as compared to the same period in 1993 have remained relatively stable,
with the exception of interest expense. Interest expense is higher due
to the prepayment penalty recorded in the third quarter of 1994 as a
result of the Windsor Apartments mortgage note refinancing. This
prepayment was offset in part by the reduced debt service payments made
by the Partnership due to the lower interest rate of 9.25% per annum
since April 1994 on the Windsor mortgage.
For the nine months ended September 30, 1994, as compared to the
same period in 1993, property expenses (excluding Westbrook) increased
by $99,000. The increase was primarily due to higher operating
expenses for the snow removal costs incurred as a result of the heavy
snow storms last winter. In addition, a slight increase was incurred
due to the employment of an in-house painter to maintain the appearance
of Courtyards.
Overall, year to date, operations at all of the Partnerships
properties have improved, as compared to the first nine months of 1993.
The General Partners believe that this improvement will be sustained
through the end of 1994.
-8-<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
-9-<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Krupp Realty Limited Partnership-VII
(Registrant)
BY: /s/Marianne Pritchard
Marianne Pritchard
Treasurer and Chief Accounting Officer
of the Krupp Corporation, a General
Partner.
DATE: November 3, 1994
-10- <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 1994 AND IS QUALIFITED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 924,832
<SECURITIES> 0
<RECEIVABLES> 158,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 415,020
<PP&E> 28,077,355<F1>
<DEPRECIATION> (11,258,313)<F2>
<TOTAL-ASSETS> 18,317,435
<CURRENT-LIABILITIES> 756,185
<BONDS> 12,852,205<F3>
<COMMON> 4,709,045<F4>
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,317,435
<SALES> 3,206,858
<TOTAL-REVENUES> 3,206,858
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,622,462<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 947,132
<INCOME-PRETAX> (362,736)
<INCOME-TAX> 0
<INCOME-CONTINUING> (362,736)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (362,736)
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes apartment complexes of $18,263,232, retail centre of $9,605,400 &
deferred expenses of $208,723.
<F2>Includes depreciation of $11,248,013 & amoritization of deferred expenses
$10,300.
<F3>Represents mortgage note payable.
<F4>Represents to the equity of general partners and limited partners of $(223,464)
and $4,932,509, respectively.
<F5>Includes operating expenses $1,347,336, real estate tax expenses $304,333 &
depreciation & amortization $970,793.
<F6>Net loss allocated $(3,627) to general partners and $(359,109) to limited
partners for the 9 months ended 9/30/94. Average net income per unit of
limited partners interest is $(13.21) on 27,184 units outstanding.
</FN>
</TABLE>
