UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 September 30, 2000
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File number 0-14377
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Krupp Realty Limited Partnership-VII
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Massachusetts 04-2842924
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization
One Beacon Street, Boston, Massachusetts 02108
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(Address of principal executive (Zip code)
offices)
(617) 523-7722
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(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 preceeding 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
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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>
(Unaudited)
September 30, December 31,
2000 1999
------------ -------------
<S> <C> <C>
Multi-family apartment complexes,
net of accumulated depreciation of
$15,295,488 and $14,265,488, respectively $ 8,054,215 $ 8,809,883
Cash and cash equivalents 185,957 120,525
Cash restricted for tenant security deposits 55,116 27,256
Replacement reserve escrow 56,445 72,378
Prepaid expenses and other assets 606,765 663,021
Deferred expenses, net of accumulated
amortization of $200,370 and $171,421,
respectively 115,285 144,234
------------ -------------
Total assets $ 9,073,783 $ 9,837,297
============ =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 10,136,507 $ 10,220,052
Accrued expenses and other liabilities 703,859 625,590
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Total liabilities 10,840,366 10,845,642
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Partners' deficit (Note 2):
Investor Limited Partners
(27,184 units outstanding) (873,603) (172,633)
Original Limited Partner (569,931) (525,767)
General Partners (323,049) (309,945)
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Total partners' deficit (1,766,583) (1,008,345)
------------ -------------
Total liabilities and partners'
deficit $ 9,073,783 $ 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 For the Nine
Months Ended Months Ended
September 30, September 30,
------------------------ ------------------------
----------- ----------- ----------- -----------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 1,046,455 $ 1,006,136 $ 3,120,757 $ 2,938,789
Interest income 2,546 2,165 11,049 16,111
----------- ----------- ----------- -----------
Total revenue 1,049,001 1,008,301 3,131,806 2,954,900
----------- ----------- ----------- -----------
Expenses:
Operating (Note 3) 270,530 256,714 769,655 740,027
Maintenance 72,144 48,796 240,268 271,149
Real estate taxes 108,937 97,617 313,188 327,584
General and administrative
(Note 3) 50,861 50,221 151,950 128,342
Management fees (Note 3) 34,878 35,135 150,387 115,278
Depreciation and
amortization 351,620 400,725 1,058,949 1,143,540
Interest 217,265 219,597 653,589 660,437
----------- ----------- ----------- -----------
Total expenses 1,106,235 1,108,805 3,337,986 3,386,357
----------- ----------- ----------- -----------
Net loss $ (57,234) $ (100,504) $ (206,180) $ (431,457)
=========== =========== =========== ===========
Allocation of net loss:
Investor Limited Partners
(27,184 units outstanding):
Net loss $ (56,662) $ (99,499) $ (204,118) $ (427,142)
=========== =========== =========== ===========
Investor Limited Partners,
Per Unit:
Net loss $ (2.08) $ (3.66) $ (7.51) $ (15.71)
=========== =========== =========== ===========
Original Limited Partner
Net loss $ - $ - $ - $ -
=========== =========== =========== ===========
General Partners
Net loss $ (572) $ (1,005) $ (2,062) $ (4,315)
=========== =========== =========== ===========
</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 Nine Months Ended
September 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (206,180) $ (431,457)
Adjustment to reconcile net loss to net
cash provided by operating activities:
Interest earned on replacement reserve
escrow (219) (782)
Depreciation and amortization 1,058,949 1,143,540
Changes in assets and liabilities:
Increase in restricted cash for
tenant security deposits (27,860) (487)
Decrease (increase) in prepaid
expenses and other assets 56,256 (291,040)
Increase in accrued expenses and
other liabilities 80,473 176,669
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Net cash provided by operating
activities 961,419 596,443
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Cash flows from investing activities:
Deposits to replacement reserve escrow (51,370) (37,800)
Withdrawals from replacement reserve
escrow 67,522 311
Additions to fixed assets (274,332) (522,755)
Decrease in accrued expenses and other
liabilities related to fixed asset
additions (2,204) (3,500)
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Net cash used in investing
activities (260,384) (563,744)
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Cash flows from financing activities:
Principal payments on mortgage notes
payable (83,545) (76,697)
Distributions (552,058) (552,060)
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Net cash used in financing
activities (635,603) (628,757)
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Net increase (decrease) in cash and cash
equivalents 65,432 (596,058)
Cash and cash equivalents, beginning of
period 120,525 629,483
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Cash and cash equivalents, end of period $ 185,957 $ 33,425
=========== ===========
</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 principals
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 September 30, 2000, its results of
operation for the three and nine months ended September 30, 2000 and 1999, and
its cash flows for the nine months ended September 30, 2000 and 1999.
The results of operations for the three and nine months ended September 30, 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' Deficit
A summary of changes in Partners' deficit for nine months ended September 30,
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 (496,852) (44,164) (11,042) (552,058)
Net loss (204,118) - (2,062) (206,180)
----------- ----------- ----------- ------------
Balance at
September 30, 2000 $ (873,603) $ (569,931) $ (323,049) $ (1,766,583)
=========== =========== =========== ============
</TABLE>
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 reimburse
affiliates of the General Partners for certain expenses incurred in connection
with the operation of the Partnership and its properties, including
administrative expenses.
Amounts accrued or paid to the General Partners' affiliates were as follows:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------------------- --------------------------
----------- ----------- ----------- ------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Property management fees $ 34,878 $ 35,135 $ 150,387 $ 115,278
Expenses reimbursement 53,877 54,606 149,558 142,951
----------- ----------- ----------- ------------
Charged to operations $ 88,755 $ 89,741 $ 299,945 $ 258,229
=========== =========== =========== ============
</TABLE>
Expense reimbursements due from affiliates of $191,848 and $237,015 were
included in prepaid expenses and other assets at September 30, 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.
Over the past several years real estate markets in general have improved, and
the General Partners feel this is an opportune time to formulate a liquidation
strategy for the Partnership. As such, the General Partners intend to begin the
process of more thoroughly assessing the property sales market in the
Partnership's market areas and developing a disposition strategy which will
yield the highest value to investors through an efficient and orderly
liquidation of the Partnership. In keeping with this strategy, the General
Partners intend to refinance mortgage loans which mature in the next 6 months
with financing that leaves flexibility for the property sales.
Assuming market conditions do not change, the assessment of the property sales
market is consistent with the General Partners' expectations, and an acceptable
disposition plan can be implemented the General Partners expect to complete the
liquidation process over the next 15 months. However, there can be no assurance
that such a liquidation will occur, or what amounts may be realized by the
Partnership.
The General Partners, on an ongoing basis, assess the current and future
liquidity needs in determining the level of working capital reserves the
Partnership should maintain. Adjustments to distributions are made when
appropriate to reflect such assessment. The current annual distribution rate is
$18.28 per Unit, and is paid semiannually in February and August.
Operations
The following discussion relates to the operations of the Partnership and its
properties (Courtyards Village and Windsor Apartments) for the three and nine
months ended September 30, 2000 and 1999.
Net loss decreased during the three and nine months ended September 30, 2000
when compared to the three and nine months ended September 30, 1999, as total
revenue 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 2000. Interest
income decreased during the nine months ended September 30, 2000 due to a lower
average cash and cash equivalent balances available for investment when compared
to 1999.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
Operations, Continued
Total expenses for the three months ended September 30, 2000 decreased when
compared to the three months ended September 30, 1999. Depreciation expense
decreased as fixed asset additions purchased in the previous years became fully
depreciated. Operating expenses increased as a result of increases in leasing,
utilities, insurance, and rubbish removal costs. Maintenance expenses for the
third quarter in 1999 were significantly lower than the same period in 2000 due
to a reclassification of expenses resulting from the December 1998 fire at
Windsor Apartments to an insurance receivable.
Total expenses for the nine months ended September 30, 2000 decreased when
compared to the nine months ended September 30, 1999 due to reasons discussed
above as well as a decrease in maintenance expenses. Maintenance expenses
decreased in 2000 as capital expenditures reduced the need for repairs and
maintenance in some areas.
<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 it's behalf by the
undersigned, thereunto duly authorized.
Krupp Realty Limited Partnership-VII
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(Registrant)
BY: /s/ Wayne H. Zarozny
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Wayne H. Zarozny
Treasurer and Chief Accounting
Officer of The Krupp Corporation,
a General Partner
DATE: November 14, 2000
