UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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.)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 523-7722
(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
(Unaudited)
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation
of $14,610,369
and $14,265,488, respectively $ 8,551,113 $ 8,809,883
Cash and cash equivalents 206,840 120,525
Cash restricted for tenant
security deposits 27,404 27,256
Replacement reserve escrow 17,635 72,378
Prepaid expenses and other assets 428,603 663,021
Deferred expenses, net of accumulated
amortization of $181,074 and $171,421,
respectively 134,581 144,234
----------- -----------
Total assets $ 9,366,176 $ 9,837,297
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $10,192,797 $10,220,052
Accrued expenses and other liabilities 502,876 625,590
----------- -----------
Total liabilities 10,695,673 10,845,642
----------- -----------
Partners' deficit (Note 2):
Investor Limited Partners (27,184
Units outstanding) (465,731) (172,633)
Original Limited Partner (547,849) (525,767)
General Partners (315,917) (309,945)
----------- -----------
Total Partners' deficit (1,329,497) (1,008,345)
----------- -----------
Total liabilities and
Partners' deficit $ 9,366,176 $ 9,837,297
=========== ===========
</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
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------------
2000 1999
----------- ---------
<S> <C> <C>
Revenue:
Rental $ 1,035,012 $ 970,570
Interest income 4,810 8,201
----------- -----------
Total revenue 1,039,822 978,771
----------- -----------
Expenses:
Operating (Note 3) 246,781 229,879
Maintenance 64,614 93,547
Real estate taxes 110,757 136,200
General and administrative (Note 3) 34,881 24,336
Management fees (Note 3) 54,922 42,992
Depreciation and amortization 354,534 369,943
Interest 218,456 220,690
----------- -----------
Total expenses 1,084,945 1,117,587
----------- -----------
Net loss $ (45,123) $(138,816)
=========== ===========
Allocation of net loss:
Investor Limited Partners
(27,184 Units outstanding):
Net loss $ (44,672) $ (137,428)
=========== ===========
Investor Limited Partners, Per Unit:
Net loss $ (1.64) $ (5.06)
=========== ===========
Original Limited Partners
Net loss $ - $ -
=========== ===========
General Partners:
Net loss $ (451) $ (1,388)
=========== ===========
</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
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (45,123) $ (138,816)
Adjustments to reconcile
net income (loss) to net
cash provided by operating activities:
Interest earned on
replacement reserve escrow (179) (145)
Depreciation and amortization 354,534 369,943
Changes in assets and liabilities:
Increase in restricted cash for tenant
security deposits (148) (162)
Decrease in prepaid expenses
and other assets 234,418 141,021
Decrease in accrued expenses
and other liabilities (120,510) (120,507)
--------- ----------
Net cash provided by operating
activities 422,992 251,334
--------- ----------
Cash flows from investing activities:
Deposits to replacement reserve escrow (12,600) (12,600)
Withdrawals from replacement reserve escrow 67,522 151
Additions to fixed assets (86,111) (73,402)
Decrease in accrued expenses and other
liabilities related to fixed asset
additions (2,204) (3,046)
--------- ----------
Net cash used in investing
activities (33,393) (88,897)
--------- ----------
Cash flows from financing activities:
Principal payments on mortgage notes payable (27,255) (25,021)
Distributions (276,029) (276,029)
--------- ----------
Net cash used in financing
activities (303,284) (301,050)
--------- ----------
Net increase (decrease) in
cash and cash equivalents 86,315 (138,613)
Cash and cash equivalents, beginning of period 120,525 629,483
--------- ----------
Cash and cash equivalents, end of period $ 206,840 490,870
========= ==========
</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, 1999 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, 2000, its results of operations and its cash flows for the
three months ended March 31, 2000 and 1999.
The results of operations for the three months ended March 31, 2000 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' deficit for the three months ended
March 31, 2000 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
<S> <C> <C> <C> <C>
Balance at
December 31, 1999 $ (172,633) $ (525,767) $ (309,945) $ (1,008,345)
Distributions (248,426) (22,082) (5,521) (276,029)
Net loss (44,672) - (451) (45,123)
---------- ---------- ---------- ------------
Balance at
March 31, 2000 $ (465,731) $ (547,849) $ (315,917) $ (1,329,497)
========== ========== ========== ============
</TABLE>
(3) Related Party Transactions
The Partnership pays property management fees to an affiliate of the
General Partners for management services. Pursuant to the management
agreements, management fees are payable monthly at a rate of 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 administrative expenses.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Related Party Transactions, Continued
Amounts accrued or paid to the General Partners' affiliates were as
follows:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
--------------------------------
2000 1999
-------- ---------
<S> <C> <C>
Property management fees $ 54,922 $ 42,992
Expense reimbursements 41,734 33,967
-------- ---------
Charged to operations $ 96,656 $ 76,959
======== =========
</TABLE>
Expense reimbursements due from affiliates of $131,577 and $237,012 were
included in prepaid expenses and other assets at March 31, 2000 and
December 31, 1999, 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 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.
The General Partners, on an ongoing basis, assess the current and future
liquidity needs in determining the levels of working capital reserves the
Partnership should maintain. Adjustments to distributions are made when
appropriate to reflect such assessments. The current annual distribution
rate is $18.28 per Unit, and is paid semiannually in February and August.
Year 2000
The General Partners of the Partnership have conducted an assessment of the
Partnership's core internal and external computer information systems and
have taken the necessary steps to understand the nature and extent of the
work required to make its systems Year 2000 ready. They have evaluated Year
2000 compliance issues with respect to its non-financial systems and have
received assurances from third-party service providers (including but not
limited to its telecommunications providers and banks) with regard to their
Year 2000 readiness.
The General Partners completed the testing and conversion of the
Partnerships financial accounting operating systems in February 1998. As a
result, the General Partners have generated operating efficiencies and
believe their financial accounting operating systems are Year 2000 ready.
The General Partners incurred hardware costs as well as consulting and other
expenses related to the infrastructure and facilities enhancements necessary
to complete the upgrade and prepare for the Year 2000. There are no other
significant internal systems or software that the Partnership is using at
the present time.
To date, the Partnership has not had, and does not expect to have, any Year
2000 related problems.
Operations
The following discussion relates to the operations of the Partnership and
its properties (Courtyards Village and Windsor Apartments) for the three
months ended March 31, 2000 and 1999.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
-----------
Net loss decreased during the three months ended March 31, 2000 when
compared to the three months ended March 31, 1999, as total revenues
increased and total expenses decreased. The increase in total revenue is
primarily a result of rental rate increases implemented at all of the
Partnership's properties at the end of the first quarter of 1999. Interest
income decreased due to lower average cash and cash equivalent balances
available for investment when compared to 1999.
Total expenses for the three months ended March 31, 2000 decreased when
compared to the three months ended March 31, 1999 with decreases in
maintenance, real estate taxes and depreciation expense more than offsetting
increases in operating and general and administrative expenses. Maintenance
expense decreased in 2000 as payment of an insurance deductible for damage
resulting from a December, 1998 fire at Windsor Apartments was charged to
maintenance during the first quarter of 1999. Real estate taxes decreased
due to abatements and refunds of prior year taxes received by Windsor
Apartments. Depreciation expense decreased as fixed asset additions
purchased in the previous years became fully depreciated. Operating expenses
increased as a result of increases in payroll, insurance and refuse removal
costs. General and administrative expenses increased as a result of
increased investor communication costs including printing and mailing of
quarterly and annual reports.
<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 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 7 Financial Statements for the three months ended March 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 206,840
<SECURITIES> 0
<RECEIVABLES> 140,312
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 540,170
<PP&E> 23,477,137 <F2>
<DEPRECIATION> (14,791,443) <F3>
<TOTAL-ASSETS> 9,366,176
<CURRENT-LIABILITIES> 502,876
<BONDS> 10,192,797 <F4>
0
0
<COMMON> 0
<OTHER-SE> (1,329,497) <F5>
<TOTAL-LIABILITY-AND-EQUITY> 9,366,176
<SALES> 0
<TOTAL-REVENUES> 1,039,822 <F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 866,489 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,456
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,123) <F8>
<EPS-BASIC> 0 <F8>
<EPS-DILUTED> 0 <F8>
<FN>
<F1> Includes all receivables included in "prepaid expenses and other assets" on
the Balance Sheet.
<F2> Multi-family complexes of $23,161,485 and deferred expenses of $315,652
<F3> Accumulated depreciation of $14,610,372 and accumulated amortization of
$181,071.
<F4> Represents mortgage notes payable.
<F5> Total deficit of the General Partners of ($315,917) and of the Limited
Partners of ($1,013,580).
<F6> Includes all revenue of the Partnership.
<F7> Includes operating expenses of $401,198, real estate taxes of $110,757 and
depreciation and amortization of $354,534.
<F8> Net loss allocated ($451) to the General Partners and ($44,672) to the
Limited Partners. Average net loss per Unit of Limited Partner interest is
($1.64) on 27,184 Units outstanding.
</FN>
</TABLE>
