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 March 31, 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
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
<S> <C> <C>
Real estate assets:
Multi-family apartment complexes, net of
accumulated depreciation of $10,650,461
and $10,420,771, respectively $ 8,634,192 $ 8,770,063
Retail center, net of accumulated
depreciation of $3,774,266 and $3,676,352,
respectively 5,941,143 6,038,521
Total real estate assets 14,575,335 14,808,584
Cash and cash equivalents 1,060,699 1,177,332
Cash restricted for tenant security deposits 36,961 36,823
Replacement reserve escrow 54,132 52,009
Prepaid expenses and other assets 545,127 584,929
Deferred expenses, net of accumulated
amortization of $100,344 and $91,377,
respectively 186,950 195,917
Total assets $16,459,204 $16,855,594
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage notes payable $12,514,323 $12,562,165
Accounts payable 5,465 7,431
Accrued expenses and other liabilities 764,277 846,419
Total liabilities 13,284,065 13,416,015
Partners' equity (deficit) (Note 2):
Investor Limited Partners (27,184
Units outstanding) 3,834,667 4,072,663
Original Limited Partner (406,103) (384,948)
General Partners (253,425) (248,136)
Total Partners' equity 3,175,139 3,439,579
Total liabilities and Partners' equity $16,459,204 $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
Ended March 31,
1997 1996
<S> <C> <C>
Revenue:
Rental $1,196,040 $1,164,887
Interest income 15,313 20,237
Total revenue 1,211,353 1,185,124
Expenses:
Operating (Note 3) 281,971 284,439
Maintenance 66,095 70,226
Real estate taxes 127,821 109,963
General and administrative (Note 3) 37,723 28,932
Management fees (Note 3) 50,088 49,259
Depreciation and amortization 336,571 315,792
Interest 273,480 277,292
Total expenses 1,173,749 1,135,903
Net income $ 37,604 $ 49,221
Allocation of net income (Note 2):
Investor Limited Partners
(27,184 Units outstanding) $ 33,844 $ 44,299
Per Unit of Investor Limited Partner
Interest $ 1.24 $ 1.63
Original Limited Partner $ 3,008 $ 3,938
General Partners $ 752 $ 984
</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 Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Operating activities:
Net income $ 37,604 $ 49,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 336,571 315,792
Changes in assets and liabilities:
Increase in cash restricted for tenant
security deposits (138) (1,202)
Decrease in prepaid expenses and other
assets 39,802 27,840
Decrease in accounts payable (1,123) (40,622)
Decrease in accrued expenses and other
liabilities (82,142) (43,911)
Net cash provided by operating
activities 330,574 307,118
Investing activities:
Deposits to replacement reserve escrow (6,000) (6,000)
Withdrawals from replacement reserve escrow 3,877 9,733
Additions to fixed assets (94,355) (18,624)
Increase (decrease) in accounts payable related
to fixed asset additions (843) 1,791
Net cash used in investing activities (97,321) (13,100)
Financing activities:
Principal payments on mortgage notes payable (47,842) (44,143)
Distributions (302,044) (302,044)
Net cash used in financing activities (349,886) (346,187)
Net decrease in cash and cash equivalents (116,633) (52,169)
Cash and cash equivalents, beginning of period 1,177,332 1,311,037
Cash and cash equivalents, end of period $1,060,699 $1,258,868
</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 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 March 31, 1997
and its results of operations and cash flows for the
three months ended March 31, 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 months ended
March 31, 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.Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for
the three months ended March 31, 1997 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, 1996 $ 4,072,663 $(384,948) $(248,136) $3,439,579
Distributions (271,840) (24,163) (6,041) (302,044)
Net income 33,844 3,008 752 37,604
Balance at
March 31, 1997 $ 3,834,667 $(406,103) $(253,425) $3,175,139
</TABLE>
Continued
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 residential management agreements
were sold to BRI OP Limited Partnership, 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
Ended March 31,
1997 1996
<S> <C> <C>
Property management fees $ 50,088 $ 49,259
Expense reimbursements 37,561 36,099
Charged to operations $ 87,649 $ 85,358
</TABLE>
<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.
Currently, management is reviewing refinancing options
for the Courtyards Village mortgage note. Increased
liquidity which may result from this refinancing will
be used to fund capital improvements at the
Partnership's properties, Courtyards Village, Nora
Corners and Windsor Apartments. Approximately
$1,240,000 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.
Cash Flow
Shown below, as required by the Partnership Agreement,
is the calculation of Cash Flow of the Partnership for
the three months ended March 31, 1997. The General
Partners provide 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.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net income for tax purposes $ 35,000
Items not requiring (requiring) the use of
operating funds:
Tax basis depreciation and amortization 341,000
Principal payments on mortgage notes payable (48,000)
Expenditures for capital improvements (94,000)
Releases from working capital reserves 68,000
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, for the first three months of
1997, before releases from capital reserves, decreased
when 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").
Improvements, including new signs at Windsor and pool
upgrades at Courtyards, were completed in the first
quarter of 1997.
Overall, net income decreased in the first quarter of
1997 when compared to the first quarter of 1996 as the
increase in total expenses more than offset the
increase in total revenue. While occupancy remained
relatively stable, rental revenue increased as a
result of moderate rental rate increases beginning in
the second quarter of 1996 at the Partnership's
residential properties. Interest income decreased due
to lower average cash and cash equivalent balances.
Total expenses remained relatively stable for the
three months ended March 31, 1997 when compared to the
same period in 1996 with the exception of increases in
general and administrative, real estate tax and
depreciation expenses. Legal costs related to the
recent unsolicited tender offer to purchase
Partnership Units resulted in the rise in general and
administrative expense, while a reassessment of
Windsor Apartments property value in the third quarter
of 1996 increased real estate tax expense.
Depreciation expense increased in conjunction with the
increase in capital improvements.
<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.
DATE: May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule for Fund 7 contains financial information extracted from the
financial statements for the quarter ended March 31, 1997 andis qualified in its
entirety by reference to such finanical statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,060,699
<SECURITIES> 0
<RECEIVABLES> 181,358<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 454,862
<PP&E> 29,287,356<F2>
<DEPRECIATION> (14,525,071)<F3>
<TOTAL-ASSETS> 16,459,204
<CURRENT-LIABILITIES> 769,742
<BONDS> 12,514,323<F4>
0
0
<COMMON> 3,175,139<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,459,204
<SALES> 0
<TOTAL-REVENUES> 1,211,353<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 900,269<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 273,480
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,604<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 $19,284,653, retail center of $9,715,409 and
deferred expenses of $287,294.
<F3>Accumulated depreciation of ($14,424,727) and accumulated amortization of
($100,34)
<F4>Represents mortgage notes payable.
<F5>Total deficit for General Partners ($253,425) and total equity of limted
partners is $3,428,564.
<F6>Represents all revenue of the Partnership.
<F7>Includes operating expenses of $435,877, real estate taxes of $127,821 and
depreciation and amortization of $336,571.
<F8>Net income allocated &752 to the General partners and $36,852 to the limited
partners. Average net income per unit of limited partner interest is $1.24.
</FN>
</TABLE>
