UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THEx
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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) ( Z i p
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
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
Multi-family apartment complexes, net of
accumulated depreciation of $9,947,500,
<S> <C> <C>
and $9,521,601, respectively $ 8,750,719 $ 9,030,289
Retail center, net of accumulated
depreciation of $3,479,230, and
$3,285,620, respectively 6,187,935 6,376,225
Total real estate assets 14,938,654 15,406,514
Cash and cash equivalents 1,428,873 1,311,037
Cash restricted for tenant security deposits 37,400 35,979
Cash restricted for capital improvements 52,175 57,462
Prepaid expenses and other assets 529,425 568,775
Deferred expenses, net of accumulated
amortization of $73,444 and $55,514,
respectively 213,850 231,780
Total assets $17,200,377 $17,611,547
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $12,655,009 $12,744,191
Accounts payable - 48,530
Accrued expenses and other liabilities 758,074 785,672
Total liabilities 13,413,083 13,578,393
Partners' equity (Note 2):
Investor Limited Partners (27,184
Units outstanding) 4,385,606 4,606,880
Original Limited Partner (357,130) (337,462)
General Partners (241,182) (236,264)
Total Partners' equity 3,787,294 4,033,154
Total liabilities and Partners' equity $17,200,377 $17,611,547
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenue:
<S> <C> <C> <C> <C>
Rental $1,122,274 $1,112,379 $2,287,161 $2,211,953
Interest income 19,332 16,292 39,569 29,839
Total revenue 1,141,606 1,128,671 2,326,730 2,241,792
Expenses:
Operating (Note 3) 285,765 236,881 570,204 479,797
Maintenance 81,774 70,818 152,000 131,252
Real estate taxes 112,593 108,741 222,556 222,312
Management fees (Note 3) 48,698 48,570 97,957 96,005
Depreciation and amortization 321,647 316,572 637,439 630,233
Interest 276,396 279,980 553,688 560,787
General and administrative
(Note 3) 7,770 33,121 36,702 49,577
Total expenses 1,134,643 1,094,683 2,270,546 2,169,963
Net income $ 6,963 $ 33,988 $ 56,184 $ 71,829
Allocation of net income (Note 2):
Investor Limited Partners
(27,184 Units outstanding) $ 6,267 $ 30,589 $ 50,566 $ 64,646
Per Unit of Investor Limited
Partner Interest $ .23 $ 1.13 $ 1.86 $ 2.38
Original Limited Partner $ 557 $ 2,719 $ 4,495 $ 5,746
General Partners $ 139 $ 680 $ 1,123 $ 1,437
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1996 1995
Operating activities:
<S> <C> <C>
Net income $ 56,184 $ 71,829
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 637,439 630,233
Decrease (increase) in cash restricted
for tenant security deposits (1,421) 14,436
Decrease in prepaid expenses and other assets 39,350 93,909
Decrease in accounts payable (48,530) (24,906)
Decrease in accrued expenses and other
liabilities (27,598) (69,151)
Net cash provided by operating
activities 655,424 716,350
Investing activities:
Additions to fixed assets (151,649) (78,740)
Decrease in cash restricted for
capital improvements 5,287 570
Net cash used in investing
activities (146,362) (78,170)
Financing activities:
Increase in deferred expenses - (6,613)
Principal payments on mortgage notes payable (89,182) (82,294)
Distributions (302,044) (302,044)
Net cash used in financing
activities (391,226) (390,951)
Net increase in cash and cash equivalents 117,836 247,229
Cash and cash equivalents, beginning of period 1,311,037 1,021,464
Cash and cash equivalents, end of period $1,428,873 $1,268,693
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 General Partners of Krupp
Realty Limited Partnership-VII and Subsidiaries (the "Partnership"), the
disclosures contained in this report are adequate to make the
information presented not misleading. See Notes to the Consolidated
Financial Statements included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1995 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 consolidated financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the Partnership's consolidated financial position as of
June 30, 1996, its results of operations for the three and six months
ended June 30, 1996 and 1995, and its cash flows for the six months
ended June 30, 1996 and 1995. Certain prior period balances have been
reclassified to conform with current period consolidated financial
statement presentation.
The results of operations for the three and six months ended June 30,
1996 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. Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the six months
ended June 30, 1996 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
Balance at
<S> <C> <C> <C> <C>
December 31, 1995 $4,606,880 $(337,462) $(236,264) $4,033,154
Distributions (271,840) (24,163) (6,041) (302,044)
Net income 50,566 4,495 1,123 56,184
Balance at
June 30, 1996 $4,385,606 $(357,130) $(241,182) $3,787,294
</TABLE>
<PAGE>
3. Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties,
the Partnership entered into agreements under which property management
fees are paid to an affiliate of the General Partners for services as
management agent. Such agreements provide for management fees payable
monthly at a rate of 4% of the gross receipts, net of leasing
commissions, from the commercial properties under management and 5% of
gross receipts from residential properties 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 properties including accounting, computer,
insurance, travel, legal and payroll; and with the preparation and
mailing of reports and other communications to the Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates
are as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Property management fees $48,698 $ 48,570 $ 97,957 $ 96,005
Expense reimbursements 34,690 30,593 70,789 63,400
Charged to operations $83,388 $ 79,163 $168,746 $159,405
</TABLE>
In addition to the amounts above, refinancing and disposition costs of
$0 and $3,793 were paid to the General Partners or their affiliates at
June 30, 1996 and December 31, 1995, respectively.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management s Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements including those
concerning Management s expectations regarding the future financial
performance and future events. These forward-looking statements involve
significant risk and uncertainties, including those described herein.
Actual results may differ materially from those anticipated by such
forward-looking statements.
Liquidity and Capital Resources
The 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 would also be impacted by 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. In
1994, the General Partners determined that there was sufficient cash flow
to reinstate semi-annual distributions. These distributions commenced in
August 1994 at a rate of $5.00 per Unit and increased in February 1995 to
an annual rate of $20.00 per Unit.
The Partnership's properties (Courtyards Village, Nora Corners and Windsor
Apartments) have generated increased revenue due to increased occupancy and
higher rental rates in 1996, as compared to 1995. Furthermore, the
Partnership has increased availability of funds due to reduced mortgage
payments resulting from the 1994 refinancings of mortgage notes payable at
Nora Corners and Windsor Apartments.
In 1996, Courtyards Village, Nora Corners and Windsor Apartments have
scheduled capital improvement expenditures totaling $312,000, $103,000 and
$336,000, respectively. The General Partners believe these improvements
will improve the appearance of the properties and allow them to remain
competitive in their respective real estate markets.
Cash Flow
Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow of the Partnership for the six months ended June 30, 1996.
The General Partners provide certain of the information below to meet
requirements of the Partnership Agreement and because they believe that it
is an appropriate supplemental measure of operating performance. However,
Cash Flow 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.
<PAGE>
Rounded to $1,000
Net income for tax purposes $ 24,000
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 673,000
Principal payments on mortgage notes payable (89,000)
Expenditures for capital improvements (152,000)
Additions to working capital reserves (154,000)
Cash Flow $ 302,000
Operations
Cash Flow for the six months ended June 30, 1996, before additions to
working capital reserves, decreased as compared to the same period in 1995
due primarily to increased capital improvements at Windsor Apartments for
exterior painting in the second quarter of 1996. Net income decreased for
the three and six months ended June 30, 1996 as compared to the same period
in 1995, as the increase in total expenses more than offset the increase in
revenue. Strong market conditions resulted in an increase in rental rates
at Courtyards Village and Windsor Apartments in 1996.
Total expenses increased 4% for the three and six months ended June 30,
1996 as compared to the same period in 1995. This increase is attributable
to a rise in operating and maintenance expenses between the two periods.
Although utility rates have remained the same in 1996, severe weather in
the Chicago area, especially in the first quarter of 1996, has resulted in
higher utility consumption at Courtyards Village. This, coupled with prior
year's insurance refunds received in 1995, has increased operating expense
when comparing the three and six months ended June 30, 1996 to the same
period in 1995. Maintenance expense increased due to exterior painting
and carpentry along with increased landscaping at Courtyards Village and
Windsor Apartments. These repairs have enhanced the appearance of the
properties and will help them remain competitive in their respective
markets.
General
In accordance with Financial Accounting Standard 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 assets.
The investments in properties are 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 investments in
properties 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.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
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
<PAGE>
SIGNATURE
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/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer of the Krupp
Corporation, a General Partner.
DATE: July , 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp
Fund 7 financial statements for the six months ending June 30, 1996
and is qualified in its entirety by reference to such finanial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,428,873
<SECURITIES> 0
<RECEIVABLES> 221,381<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 397,619
<PP&E> 28,652,678<F2>
<DEPRECIATION> (13,500,174)<F3>
<TOTAL-ASSETS> 17,200,377
<CURRENT-LIABILITIES> 758,074
<BONDS> 12,655,009<F4>
0
0
<COMMON> 3,787,294<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,200,377
<SALES> 0
<TOTAL-REVENUES> 2,326,730<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,716,858<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 553,688
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,184<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<FN>
<F1>Includes all receivables included in "prepaid expenses and other assets"
on the balance sheet.
<F2>Includes apartment complexes of $18,698,219, retail center of $9,667,165
deferred expenses of $287,294.
<F3>Accumulated depreciation of $13,426,730 and accumulated amortization of
deferred expenses of $73,444.
<F4>Represents mortgage notes payable.
<F5>Total deficit of general partners of ($241,182) and equity of limited
partners $4,028,476.
<F6>Represents total revenue of the Partnership.
<F7>Includes operating expenses of $856,863, real estate taxes of $222,556,
and depreciation and amortization of $637,439.
<F8>Net income allocated $1,123 to the general partners and $55,061 to the
limited partners. Average net income per unit of limited parnter interest
is $2.38 on 27,184 units outstanding.
</FN>
</TABLE>
