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 THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30,
1997
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
The total number of pages in this document is
10.
<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,
1997 1996
Real estate assets:
Multi-family apartment complexes, net of
accumulated depreciation of $10,880,907,
<S> <C> <C>
and $10,420,771, respectively $ 8,510,178 $ 8,770,063
Retail center, net of accumulated
depreciation of $3,872,181, and
$3,676,352, respectively 5,843,228 6,038,521
Total real estate assets 14,353,406 14,808,584
Cash and cash equivalents (Note 2) 1,049,681 1,177,332
Cash restricted for tenant security deposits 31,755 36,823
Replacement reserve escrow 60,132 52,009
Prepaid expenses and other assets 701,457 584,929
Deferred expenses, net of accumulated
amortization of $109,310 and $91,377,
respectively 177,984 195,917
Total assets $16,374,415 $16,855,594
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage notes payable $12,465,507 $12,562,165
Accounts payable 3,324 7,431
Accrued expenses and other liabilities 765,818 846,419
Total liabilities 13,234,649 13,416,015
Partners' equity (deficit) (Note 3):
Investor Limited Partners (27,184
Units outstanding) 3,802,831 4,072,663
Original Limited Partner (408,933) (384,948)
General Partners (254,132) (248,136)
Total Partners' equity 3,139,766 3,439,579
Total liabilities and Partners' equity $16,374,415 $16,855,594
</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,
1997 1996 1997 1996
Revenue:
<S> <C> <C> <C> <C>
Rental $1,165,732 $1,122,274 $2,361,772$2,287,161
Interest income 12,745 19,332 28,058 39,569
Total revenue 1,178,477 1,141,606 2,389,830 2,326,730
Expenses:
Operating (Note 4) 284,927 285,765 566,898 570,204
Maintenance 121,511 81,774 187,606 152,000
Real estate taxes 106,990 112,593 234,811 222,556
General and administrative (Note 4)36,236 7,770 73,959 36,702
Management fees (Note 4) 54,348 48,698 104,436 97,957
Depreciation and amortization 337,327 321,647 673,898 637,439
Interest 272,511 276,396 545,991 553,688
Total expenses 1,213,850 1,134,643 2,387,599 2,270,546
Net income (loss) $ (35,373) $ 6,963 $ 2,231$ 56,184
Allocation of net income (loss)
(Note 3):
Investor Limited Partners
(27,184 Units outstanding) $ (35,019) $ 6,267 $ 2,008$ 50,566
Per Unit of Investor Limited
Partner Interest $ (1.29) $ .23 $ .07$ 1.86
Original Limited Partner $ - $ 557 $ 178$ 4,495
General Partners $ (354) $ 139 $ 45$ 1,123
</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,
1997 1996
Operating activities:
<S> <C> <C>
Net income $ 2,231 $ 56,184
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 673,898 637,439
Changes in assets and liabilities:
Decrease (increase) in cash restricted
for tenant security deposits 5,068 (1,421)
Decrease (increase) in prepaid expenses and
other assets (116,528) 39,350
Decrease in accounts payable (3,440) (48,530)
Decrease in accrued expenses and other
liabilities (80,601) (27,598)
Net cash provided by operating
activities 480,628 655,424
Investing activities:
Deposits to replacement reserve escrow (12,000) (12,000)
Withdrawals from replacement reserve escrow 3,877 17,287
Additions to fixed assets (200,787) (151,649)
Decrease in accounts payable related to fixed
asset additions (667) -
Net cash used in investing
activities (209,577) (146,362)
Financing activities:
Principal payments on mortgage notes payable (96,658) (89,182)
Distributions (302,044) (302,044)
Net cash used in financing
activities (398,702) (391,226)
Net increase (decrease) in cash and cash equivalents
(127,651) 117,836
Cash and cash equivalents, beginning of period 1,177,332 1,311,037
Cash and cash equivalents, end of period $1,049,681 $1,428,873
</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, 1996
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, 1997, its
results of operations for the three and six
months ended June 30, 1997 and 1996, and its
cash flows for the six months ended June 30,
1997 and 1996. 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, 1997 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)Cash and Cash Equivalents
Cash and cash equivalents consisted of the
following:
June 30,December 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash and money market accounts $ 553,276 $ 285,964
Commercial paper 496,405 891,368
$1,049,681 $ 1,177,332
</TABLE>
At June 30, 1997, commercial paper represents
corporate issues complying with Section 6.2(a)
of the Partnership Agreement purchased through
a corporate issuer maturing in the third
quarter of 1997. At June 30, 1997, the
carrying value of the Partnership's investment
in commercial paper approximates fair value.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the six
months ended June 30, 1997 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, 1996$ 4,072,663$(384,948)$(248,136)$3,439,579
Net income 2,008 178 45 2,231
Distributions (271,840) (24,163) (6,041) (302,044)
Balance at
June 30, 1997 $ 3,802,831$(408,933)$(254,132)$3,139,766
</TABLE>
(4)Related Party Transactions
Commencing with the date of acquisition of the
Partnership's properties, the Partnership
entered into agreements under which property
management fees are paid to an affiliate of
the General Partners for services as
management agent. Such agreements provide for
management fees payable monthly at a rate of
4% of the gross receipts, net of leasing
commissions, from the commercial property
under management and 5% of gross receipts from
residential properties under management. The
residential management agreements were sold to
BRI OP Limited Partnership, a subsidiary of
Berkshire Realty Company Inc., a publicly
traded real estate investment trust and an
affiliate of the General Partners, on February
28, 1997. The Partnership also reimburses
affiliates of the General Partners for certain
expenses incurred in connection with the
operation of the Partnership and its
properties including accounting, computer,
insurance, travel, legal and payroll; and with
the preparation and mailing of reports and
other communications to the Limited Partners.
Amounts accrued or paid to the General
Partners or their affiliates were as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Property management fees$ 54,348 $ 48,698 $104,436 $ 97,957
Expense reimbursements 41,454 34,690 79,015 70,789
Charged to operations$ 95,802 $ 83,388 $183,451 $ 168,746
</TABLE>
(5) Subsequent Event
Subsequent to the end of the second
quarter, on July 30, 1997, the Partnership
refinanced the Courtyards Village mortgage
note. The new $5,280,000 note bears
interest at an annual rate of 7.88% with
equal monthly installments of $38,302,
consisting of principal and interest, and
matures on June 1, 2007. Net refinancing
proceeds are expected to total
approximately $1,860,000.
<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 improvements,
debt service and other 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.
Subsequent to the end of the second quarter,
on July 30, 1997, the Partnership refinanced
the Courtyards Village mortgage note. The new
$5,280,000 note bears interest at an annual
rate of 7.88% with equal monthly installments
of $38,302, consisting of principal and
interest, and matures on June 1, 2007.
Refinancing proceeds of approximately
$1,860,000 from the refinancing will provide
additional liquidity to fund capital
improvements at the Partnership's properties,
Courtyards Village, Nora Corners and Windsor
Apartments. Approximately $1,217,000 in fixed
asset expenditures are anticipated in 1997 in
order to improve the appearance of the
properties and allow them to remain
competitive in their respective markets.
These improvements include sign replacements
at Windsor Apartments and interior
improvements and appliance replacements at
both Courtyards Village and Windsor
Apartments. Improvements at Nora Corners
primarily consist of tenant build-outs and
upgrades to the exterior of the building.
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, 1997. The General Partners provide the
information below to meet requirements of the
Partnership Agreement. 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.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net loss for tax purposes $ (3,000)
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 682,000
Principal payments on mortgage notes payable (97,000)
Expenditures for capital improvements (201,000)
Additions to working capital reserves (79,000)
Cash Flow $ 302,000
</TABLE>
Continued<
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
Operations
Cash Flow, as calculated by Section 8.2 (a) of
the Partnership Agreement, before additions to
capital reserves, decreased during the six
months ended June 30, 1997 as compared to the
same period in 1996 due primarily to increased
capital improvements at the Partnership's two
residential properties, Courtyards Village
("Courtyards") and Windsor Apartments
("Windsor") and to a decrease in net income.
Overall, net income decreased for the three
and six months ended June 30, 1997 when
compared to the same periods in 1996 as the
increase in total expenses more than offset
the increase in total revenue. While
occupancy remained relatively stable during
these periods, rental revenue increased as a
result of collections of late and relet fees
at Courtyards during the second quarter of
1997 and rental rate increases implemented at
Courtyards and Windsor in 1996 and 1997.
Total expenses increased for the three and six
months ended June 30, 1997 as compared to the
same periods in 1996 as maintenance, general
and administrative, and depreciation expenses
all rose. Maintenance expense increased
primarily due to preventative pest control at
Windsor and landscaping at Courtyards during
the second quarter of 1997. General and
administrative expense increased due to costs
incurred in connection with the operation of
the Partnership, including the preparation of
reports and other communications to investors.
Also, the Partnership incurred legal costs
related to the unsolicited tender offers made
to purchase Partnership Units. Depreciation
expense increased in conjunction with
increased capital improvements completed at
the Partnership's properties in recent years.
<PAGE>
<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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief Accounting Officer of the
Krupp Corporation, a General Partner.
<PAGE>
DATE: August 12, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Krupp
Realty Fund 7 financial statement for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> 12-31-97
<PERIOD-END> 06-30-97
<CASH> 1,049,681
<SECURITIES> 0
<RECEIVABLES> 191,831<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 601,513
<PP&E> 29,393,788<F2>
<DEPRECIATION> (14,862,398)<F3>
<TOTAL-ASSETS> 16,374,415
<CURRENT-LIABILITIES> 769,142
<BONDS> 12,465,507<F4>
0
0
<COMMON> 3,139,766<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,374,415
<SALES> 0
<TOTAL-REVENUES> 2,389,830<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,841,608<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 545,991
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,231<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<FN>
<F1>Includes all receivables grouped in "Prepaid expenses and other assets"
on the balance sheet.
<F2>Includes apartment complexes of $19,391,085, retail center of $9,715,409 and
deferred expenses of $284,294.
<F3>Accumulated depreciation of $14,753,088 and accumulated amortization of
deferred expenses of $109,310.
<F4>Represents mortgage note payable.
<F5>Total deficit of the General Partners of ($254,132) and equity of the
Limited Partners $3,393,898.
<F6>Represents total revenue of the Partnership.
<F7>Operating expenses of $932,899, real estate tax expense $234,811 and
depreciation and amortization of $673,898.
<F8>Net income allocated $45 to the General Partners and $2,186 to the Limited
Partners. Average net income per unit of Limited Partner interest is $.07
on 27,184 units outstanding.
</FN>
</TABLE>
