UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-14377
Krupp Realty Limited Partnership-VII
(Exact name of registrant as specified in its charter)
Massachusetts 04-2842924
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 523-7722
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Investor
Limited Partner
Interest
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable.
Documents incorporated by reference: Part IV, Item 14.
The exhibit index is located on pages 10-13.
The total number of pages in this document is 31.
<PAGE>
PART I
This Form 10-K 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.
ITEM 1. BUSINESS
Krupp Realty Limited Partnership-VII ("KRLP-VII") was formed on August 21,
1984 by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. KRLP-VII issued all of the General Partner Interests to two
General Partners, The Krupp Corporation, a Massachusetts corporation, and The
Krupp Company Limited Partnership-II, a Massachusetts limited partnership. KRLP-
VII also issued all of the Original Limited Partner Interests to The Krupp
Company Limited Partnership-II. On November 2, 1984, KRLP-VII commenced an
offering of up to 40,000 units of Investor Limited Partner Interest (the
"Units") for $1,000 per Unit. The public offering was closed on April 25, 1986,
at which time 27,184 Units had been sold. For additional details, see Note A to
Consolidated Financial Statements included in Item 8 (Appendix A) of this
report. The primary business of KRLP-VII is to invest in, operate, refinance and
ultimately dispose of a diversified portfolio of residential and commercial real
estate. KRLP-VII considers itself to be engaged in only one industry segment,
investment in real estate.
On December 19, 1984 the General Partners formed Krupp Realty Courtyards
Limited Partnership ("Realty-VII") as a prerequisite for the refinancing of
Courtyards Village East Apartments ("Courtyards Village"). At the same time, the
General Partners transferred ownership of Courtyards Village to Realty-VII. The
General Partner of Realty-VII is KRLP-VII. The Limited Partners of Realty-VII
are KRLP-VII and The Krupp Corporation ("Krupp Corp."). Krupp Corp. has
beneficially assigned its interest in Realty-VII to KRLP-VII.
On March 31, 1994, the General Partners formed Windsor Partners Limited
Partnership ("Windsor L.P.") as a prerequisite for the refinancing of Windsor
Apartments. At the same time, the General Partners transferred ownership of the
property to Windsor L.P. In exchange for the property, KRLP-VII received 99%
Limited Partnership interest in Windsor L.P. The General Partner of Windsor L.P.
is ST. Windsor Corporation which has a 1% interest in Windsor L.P. and is 100%
owned by KRLP-VII.
KRLP-VII, Realty-VII and Windsor L.P. are collectively known as Krupp
Realty Limited Partnership-VII and Subsidiaries (collectively referred to herein
as the "Partnership").
On January 30, 1998, the Partnership sold Nora Corners Shopping Center
("Nora Corners"), a shopping center containing 89,432 leasable square feet,
located in Indianapolis, Indiana, to unaffiliated third parties (see Note D to
Consolidated Financial Statements, included in Item 8 (Appendix A) of this
report).
The Partnership's real estate investments are subject to some seasonal
fluctuations due to changes in utility consumption and seasonal maintenance
expenditures. However, the future performance of the Partnership will depend
upon factors which cannot be predicted. Such factors include general economic
and real estate market conditions, both on a national basis and in those areas
where the Partnership's real estate investments are located, the availability
and cost of borrowed funds, real estate tax rates, operating expenses, energy
costs, government regulations and federal and state income tax laws. The
requirements for compliance with federal, state and local regulations to date
have not had an adverse affect on the Partnership's operations, and no adverse
affect therefrom is anticipated in the future.
<PAGE>
The Partnership's investments in real estate are also subject to such risks
as (I) competition from existing and future projects held by other owners in the
locations of the Partnership's properties, (ii) fluctuations in rental income
due to changes in occupancy levels, (iii) possible adverse changes in mortgage
interest rates, (iv) possible adverse changes in general economic and local
conditions, such as competitive over-building, increases in unemployment, or
adverse changes in real estate zoning laws, (v) the possible future adoption of
rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
As of December 31, 1999, the Partnership did not employ any personnel.
ITEM 2. PROPERTIES
As of December 31, 1999, the Partnership had leveraged investments in two
apartment complexes having an aggregate of 524 units.
A summary of the Partnership's real estate investments as of December 31,
1999 is presented below. Schedule III included in Item 8 (Appendix A) to this
report contains additional detailed information with respect to individual
properties.
<TABLE>
<CAPTION>
Average Occupancy
For the Year Ended
December 31,
Year of ------------------------
Description Acquisition Total Units 1999 1998 1997 1996 1995
- ----------- ----------- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Courtyards Village
East Apartments
Naperville, Illinois 1985 224 95% 97% 97% 98% 95%
Windsor Apartments
Garland, Texas 1984 300 96% 97% 96% 96% 95%
--------
524 Units
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership is
a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of Investor Limited Partners as of December 31, 1999 was
approximately 1,365.
One of the objectives of the Partnership is to generate cash available for
distribution. The Partnership discontinued distributions during 1989 due to
insufficient operating Cash Flow. In 1994, however, the General Partners
determined that there was sufficient Cash Flow to reinstate distributions. These
distributions commenced in August, 1994 at a rate of $5.00 per Unit and
thereafter were paid semiannually at an annual rate of $20.00 per Unit through
1998. In 1999 the semiannual distributions were reduced to an annual rate of
$18.28 per Unit.
The Partnership made special capital distributions in 1998 totaling $86.14
per Unit with the funds received from the sale of Nora Corners in 1998. Pursuant
to the Partnership Agreement, distributions from capital transactions, such as
the sale of Nora Corners, are allocated 99% to Investor Limited Partners and 1%
to the General Partners. For details, see Note G to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report.
The Partnership made the following distributions to its Partners during the
years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1999 1998
--------------------- ---------------------
Amount Per Unit Amount Per Unit
---------- -------- --------- ---------
Limited Partners:
<S> <C> <C> <C> <C>
Investor Limited Partners
(27,184 Units
outstanding) $ 496,853 $ 18.28 $2,885,312 $ 106.14
Original Limited Partner 44,165 48,327
General Partners 11,041 35,460
---------- ----------
$ 552,059 $2,969,099
========== ==========
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be used in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and Notes thereto, which are included in Items 7 and 8 of this report,
respectively.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenue $ 3,997,617 $ 3,989,189 $ 4,795,059 $ 4,688,515 $ 4,537,418
Income (loss) before
gain on sale of
property (549,227) (298,630) (151,137) 10,513 (24,601)
Gain on sale of
property - 676,316 - - -
Net income (loss) (549,227) 377,686 (151,137) 10,513 (24,601)
Net income (loss)
allocated to:
Investor Limited
Partners (543,735) 373,909 (149,626) 9,462 (24,355)
Per Unit (20.00) 13.75 (5.50) .35 (.90)
Original Limited
Partner - - - 841 -
General Partners (5,492) 3,777 (1,511) 210 (246)
Total assets at
December 31, 9,837,297 10,974,526 17,995,610 16,855,594 17,611,547
Long-term obligations
at December 31, 10,108,246 10,220,786 14,345,624 12,366,197 12,563,382
Distributions:
Investor Limited
Partners 496,853 2,885,312 543,679 543,679 543,679
Per Unit 18.28 106.14 20.00 20.00 20.00
Original Limited
Partner 44,165 48,327 48,327 48,327 48,327
General Partners 11,041 35,460 12,082 12,082 12,082
</TABLE>
Operating results for the periods presented are not comparable due to the sale
of Nora Corners Shopping Center on January 30, 1998.
The per Unit distributions for the years ended December 31, 1999, 1998, 1997,
1996 and 1995 were $18.28, $106.14, $20.00, $20.00 and $20.00, respectively, of
which $86.14 in 1998 represented a return of capital.
Prior performance of the Partnership is not necessarily indicative of future
operations.
<PAGE>
ITEM 7. 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 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. In 1994, the General Partners determined that there was sufficient
Cash Flow to reinstate semiannual distributions. These distributions commenced
in August 1994 at a rate of $5.00 per Unit and increased in February 1995 to a
rate of $20.00 per Unit. Additionally, the Partnership made special capital
distributions in 1998 totaling $86.14 per Unit based on the remaining proceeds
of the sale of Nora Corners. Distributions of net cash proceeds from capital
transactions are allocated in accordance with the Partnership Agreement (as
described in Note G to the consolidated financial statements included in Item 8
(Appendix A) of this report). Due to the special capital distributions as a
result of the sale of Nora Corners, and the subsequent decrease in the Investor
Limited Partners' Capital, the semiannual distributions were adjusted in 1999 to
$18.28 per Unit, beginning with the distribution payable in February, 1999.
On January 30, 1998, the General Partners sold Nora Corners to unaffiliated
third parties. The property was included in a package with thirteen other
properties owned by affiliates of the General Partners. The total selling price
of the fourteen properties was $138,000,000, of which the Partnership received
$6,604,300 for the sale of its property, less the payoff of the mortgage note
and its share of the closing costs of $224,512 (see Note D to Consolidated
Financial Statements included in Item 8 (Appendix A) of this report).
On July 30, 1997, the Partnership successfully completed the refinancing of
the Courtyards Village East Apartments ("Courtyards Village") mortgage note. The
$5,280,000 note bears interest at an annual rate of 7.88%, requires equal
monthly principal and interest installments of $38,302, and matures on August 1,
2007. Net refinancing proceeds of approximately $1,860,000 provides additional
liquidity to fund capital improvements at the Partnership's properties,
Courtyards Village and Windsor Apartments.
In order to remain competitive in their respective markets, the
Partnership's properties spent approximately $813,000 in 1999 and are expecting
to spend approximately $340,000 for fixed assets in 2000, primarily funded from
cash generated from property operations. These improvements include interior and
exterior enhancements, installation of sprinkler system, pavement improvement
and roofing at Windsor Apartments.
<PAGE>
Financial Accounting Standards Board Statement No.137. ("FAS 137")
"Accounting for Derivative Instruments and Hedging Activities-deferral of the
Effective Date of the Statement of Financial Accounting Standards No.133." FAS
137 amended FAS 133 by deferring the effective date to fiscal quarters of all
fiscal years beginning after June 15, 2000. The General Partners believe that
the implementation of FAS 137 will not have a material impact on the
Partnership's financial statement.
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 incurred, and does not expect to incur,
any significant cost associated with being Year 2000 compliant.
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 years ended
December 31, 1999, 1998 and 1997. The sale of Nora Corners on January 30, 1998,
significantly impacts the comparability of the Partnership's operations between
these years.
1999 compared to 1998
Net income, net of Nora Corners's activity, decreased in 1999 when compared
to 1998 as increases in total expenses more than offset increases in total
revenue.
In comparing 1999 to 1998, the increase in rental revenue is attributable
to residential rental rate increases implemented at Courtyards and Windsor
Apartments. However this was substantially offset by decreases in interest
income due to lower average cash and cash equivalent balances available for
investment, resulting from the sale of Nora Corners.
Total expenses increased when compared to 1998, primarily due to increases
in operating expenses, real estate taxes, general and administrative, and
depreciation expense. Operating expense increased in 1999 as a result of an
increase in workmen's compensation expense over 1998 due to a favorable
adjustment to the liability and workmen's compensation reserve in 1998 as a
result of favorable claim experience. Real estate tax expense increased as a
result of a reassessment of Windsor Apartments's property value in 1998 by the
local taxing authority. General and administrative expenses increased due to
higher expenses incurred in connection with preparation and mailing of
Partnership reports and other investor communication. Depreciation expense
increased in conjunction with increased capital improvements completed at
<PAGE>
Courtyards Village, particularly the rehab of eleven apartments during the first
quarter.
1998 compared to 1997
Net income, net of Nora Corners's activity, decreased during 1998 when
compared to 1997 as the increase in expenses more than offset the increase in
total revenue. Rental revenue increased as a result of rental rate increases
implemented at both Courtyards Village and Windsor Apartments. Interest income
increased as a result of interest earned on the investment of proceeds received
from the sale of Nora Corners.
Total expenses in 1998, net of Nora Corners's activity, increased when
compared to 1997 due primarily to increases in depreciation and interest
expenses. This was partially offset by a decrease in operating expense.
Depreciation expense increased in conjunction with increased capital
improvements completed at the Partnership's properties. Interest expense rose as
a result of the refinancing of the Courtyards mortgage note in 1997 (see Note E
to Consolidated Financial Statements included in Item 8 (Appendix A) of this
report). Operating expense decreased primarily as a result of a reduction in
liability and workers compensation expense at the Partnership's properties, due
to lower claims experience.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to
the directors and executive officers of The Krupp Corporation, which is a
General Partner of KRLP-VII, and The Krupp Company Limited Partnership-II, the
other General Partner of KRLP-VII, is as follows:
Position with
Name and Age The Krupp Corporation
------------ ---------------------
Douglas Krupp (53) President and Co-Chairman of the Board
George Krupp (55) Co-Chairman of the Board
Wayne H. Zarozny (41) Treasurer
Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive
Officer of The Berkshire Group, an integrated real estate financial services
firm engaged in real estate acquisitions, property management, mortgage banking,
investment sponsorship, venture capital investing and financial management. Mr.
Krupp has held the position of Co-Chairman since The Berkshire Group was
established as The Krupp Companies in 1969 and he has served as the Chief
Executive Officer since 1992. Mr. Krupp serves as a member of the Board of
Trustees at Brigham & Women's Hospital. He is a graduate of Bryant College where
he received an honorary Doctor of Science in Business Administration in 1989 and
was elected trustee in 1990.
George Krupp is the Co-Founder and Co-Chairman of The Berkshire Group, an
integrated real estate financial services firm engaged in real estate
acquisitions, property management, mortgage banking, investment sponsorship,
venture capital investing and financial management. Mr. Krupp has held the
position of Co-Chairman since The Berkshire Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
<PAGE>
High School in Waltham, Massachusetts since September of 1997. Mr. Krupp
attended the University of Pennsylvania and Harvard University and holds a
Master's Degree in History from Brown University.
Wayne H. Zarozny is Vice President of The Berkshire Group. Mr. Zarozny has
held several positions within The Berkshire Group since joining the company in
1986 and is currently responsible for asset management, accounting, financial
reporting and treasury activities. Prior to joining The Berkshire Group, he was
an audit supervisor for Pannell Kerr Forster International and on the audit
staff of Deloitte, Haskins and Sells in Boston. He received a B.S. degree from
Bryant College, a Master's degree in Business Administration from Clark
University and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 9, 2000, beneficial owners of record owning more than 5% of
the Partnership's 27,184 outstanding Units were as follows:
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
- -------- -------------------- -------------------- -------
<S> <C> <C> <C>
Investor Equity Resources Group,
Limited Incorporated
Partner 14 Story Street
Units Cambridge, MA 02138 1,664.00 Units(1) 6.12%
Investor Madison Avenue Investment
Limited Partners, LLC
Partner P.O. Box 7533
Units Incline Village, NV 89452 1,396.90 Units(2)(3) 5.14%
Investor First Equity Realty, LLC
Limited
Partner 555 Fifth Avenue, 9th Floor
Units New York, NY 10017 1,396.90 Units(2)(4) 5.14%
Investor The Harmony Group II, LLC
Limited
Partner P.O. Box 7533
Units Incline Village, NV 89452 1,396.90 Units(2)(5) 5.14%
Investor Ronald M. Dickerman
Limited
Partner 555 Fifth Avenue, 9th Floor
Units New York, NY 10017 1,396.90 Units(2)(6) 5.14%
Investor Bryan E. Gordon
Limited
Partner P.O. Box 7533
Units Incline Village, NV 89452 1,396.90 Units(2)(7) 5.14%
<FN>
(1)According to the statement on Schedule 13D originally filed on April 3, 1996
by Equity Resources Group, Incorporated, Equity Resource Cambridge Fund Limited
Partnership, Equity Resource General Fund Limited Partnership, Equity Resource
Brattle Fund Limited Partnership, Equity Resource Fund XV Limited Partnership,
Equity Resource Fund XVI Limited Partnership, Equity Resource Fund XVII Limited
Partnership, Equity Resource Fund XVIII Limited Partnership, Equity Resource
Fund XIX Limited Partnership, James E. Brooks, Mark S. Thompson and Eggert
<PAGE>
Dagbjartsson, as amended by Amendment No. 1 thereto dated December 12, 1996 and
Amendment No. 2 thereto dated April 21, 1997, Equity Resources Group,
Incorporated, James E. Brooks, Mark S. Thompson and Eggert Dagbjartsson, in
their capacities as General Partners of each of Equity Resource Cambridge Fund
Limited Partnership, Equity Resource General Fund Limited Partnership, Equity
Resource Brattle Fund Limited Partnership, Equity Resource Fund XV Limited
Partnership, Equity Resource Fund XVI Limited Partnership, Equity Resource Fund
XVII Limited Partnership, Equity Resource Fund XVIII Limited Partnership and
Equity Resource Fund XIX Limited Partnership, respectively, share the power to
vote or direct the vote and to dispose of or direct the disposition of 1,664
units.
(2)According to the statement on Schedule 13G originally filed on February 9,
2000 (the "Madison Schedule 13G"), by Madison Avenue Investment Partners,
LLC("MAIP"), First Equity Realty , LLC ("First Equity"), The Harmony Group II,
LLC ("Harmony Group"), Ronald M. Dickerman and Bryan E. Gordon (collectively,
the "Reporting Persons"), (the "Madison Schedule 13G"), each of MAIP, First
Equity, Harmony Group and Reporting Persons may be deemed to constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act. According to
the Madison Schedule 13G, MAIP is the controlling person of various entities
which are the nominee owners of, or the successors by merger to the assets of
nominee owners of, Limited Partner Interest (the "Units") of the Issuer. As
stated in the Madison Schedule 13G, these nominees, none of which beneficially
own 5% or more of the Units, are ISA Partnership Liquidity Investors, Madison/AG
Partnership Value Partners III and Cobble Hill Investments, LP.
According to the Madison Schedule 13G, the controlling members of MAIP are The
Harmony Group II, LLC, a Delaware limited liability company of which Bryan E.
Gordon is the Managing Member, and First Equity Realty, LLC, a New York limited
liability company of which Ronald M. Dickerman is the Managing Member.
(3)According to the Madison Schedule 13G, Madison Avenue Investment Partners,
LLC has sole voting and dispositive power with respect to 1,396.90 units of the
Partnership.
(4)According to the Madison Schedule 13G, First Equity Realty, LLC has shared
voting and dispositive power with respect to 1,396.90 units of the Partnership.
(5)According to the Madison Schedule 13G, The Harmony Group II, LLC has shared
voting and dispositive power with respect to 1,396.90 units of the Partnership.
(6)According to the Madison Schedule 13G, Ronald M. Dickerman has shared voting
and dispositive power with respect to 1,396.90 units of the Partnership.
(7)According to the Madison Schedule 13G, Bryan E. Gordon has shared voting and
dispositive power with respect to 1,396.90 units of the Partnership.
</FN>
</TABLE>
The only interests held by management or its affiliates consist of its
General Partner and Original Limited Partner Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or nominees
for election as director. Please see Note H to the Consolidated Financial
Statements.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Consolidated Financial Statements - see Index to Consolidated
Financial Statements and Schedule included under Item 8 (Appendix
A), on page F-2 to this report.
<PAGE>
2. Consolidated Financial Statement Schedules - see Index to
Consolidated Financial Statements and Schedule included under
Item 8 (Appendix A), on page F-2 to this report. All other
schedules are omitted as they are not applicable or not required
or the information is provided in the Consolidated Financial
Statements or the Notes thereto.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable exhibits required under Item 601
of Regulation S-K:
(4) Instruments defining the rights of security holders including
indentures:
(4.1) Amended Agreement of Limited Partnership dated as of
October 23, 1984 [Exhibit A to Prospectus included in
Registrant's Registration Statement on Form S-11
(File 2-92889)].*
(4.2) Thirty-Second Amendment and Restatement of
Certificate of Limited Partnership filed with the
Massachusetts Secretary of State on June 4, 1986
[Exhibit 4.2 to Registrant's Report on Form 10-K
dated October 31, 1986 (File No. 0- 14377)].*
(10) Material Contracts
Windsor Apartments
(10.1) Purchase and Sale Agreement dated June 3, 1983
between Douglas Krupp, on behalf of himself and
others, and Garland Land Joint Venture [Exhibit 1 to
Registrant's Report on Form 8-K dated December 27,
1984 (File No. 2-92889)].*
(10.2) Property Management Agreement, dated December 27,
1984 between Krupp Realty Limited Partnership-VII, as
Owner and BRI OP Limited Partnership, formerly known
as Berkshire Property Management, a subsidiary of
Berkshire Realty Company, Inc. [Exhibit 10.4 to
Registrant's Report on Form 10-K for the fiscal year
ended October 31, 1984 (File No. 2-92889)].*
(10.3) Promissory Note dated April 13, 1994 by and between
Windsor Partners Limited Partnership and Sun Life
Insurance Company of America [Exhibit 10.1 to
Registrant's Report on Form 10- Q dated June 30, 1994
(File No. 0-14377)].*
(10.4) Deed of Trust, Security Agreement, Fixture Filing,
Financing Statement and Assignment of Leases and
Rents dated April 13, 1994 from the grantor, Windsor
Partners Limited Partnership, to the Trustee, Brian
C. Rider [Exhibit 10.2 to Registrant's Report on Form
10-Q dated June 30, 1994 (File No. 0-14377)].*
Courtyards Village East Apartments
(10.5) Purchase and Sale Agreement dated October 12, 1984
between Douglas Krupp on behalf of himself and
others, and The Courtyards Village and The Courtyards
Village Inn-East Apartments Partnership [Exhibit 1 to
Registrant's Report on Form 8-K dated April 1, 1985
(File 2-92889)].*
<PAGE>
(10.6) Amended Trust Agreement dated May 6, 1976 between The
Courtyards Village and The Courtyards Village
Inn-East Apartments Partnership and American National
Bank and Trust Company of Chicago [Exhibit 2 to
Registrant's Report on Form 8-K dated April 1, 1985
(File No. 2-92889)].*
(10.7) Assignment of Trust of American National Bank and
Trust Company of Chicago dated April 1, 1985 [Exhibit
3 to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.8) Mortgage Note dated January 1, 1973 between American
National Bank and Trust Company of Chicago and
Republic Realty Mortgage Company [Exhibit 4 to
Registrant's Report on Form 8-K dated April 1, 1985
(File No. 2-92889)].*
(10.9) Modification Agreement dated May 1, 1975 between
American National Bank and Trust Company of Chicago
and Republic Realty Mortgage Corporation. [Exhibit 5
to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.10) Mortgage Note dated May 18, 1976 between American
National Bank and Trust Company of Chicago and
Republic Realty Mortgage Company [Exhibit 6 to
Registrant's Report on Form 8-K dated April 1, 1985
(File No. 2-92889)].*
(10.11) Mortgage Agreement dated May 18, 1976 between
American National Bank and Trust Company of Chicago
and Republic Realty Mortgage Corporation [Exhibit 7
to Registrant's Report on Form 8-K dated April 1,
1985 (File No. 2-92889)].*
(10.12) Amended HUD Regulatory Agreement dated May 18, 1976
between American National Bank and Trust Company of
Chicago and Republic Realty Mortgage Corporation
[Exhibit 8 to Registrant's Report on Form 8-K dated
April 1, 1985 (File No. 2-92889)].*
(10.13) Consolidation Agreement dated June 14, 1976 between
American Bank and Trust Company of Chicago, as
Trustee, and Republic Realty Mortgage Corporation
[Exhibit 9 to Registrant's Report on Form 8-K dated
April 1, 1985 (File No. 2-92889)].*
(10.14) Property Management Agreement, dated April 1, 1985
between Krupp Realty Limited Partnership-VII, as
Owner and BRI OP Limited Partnership, formerly known
as Berkshire Property Management, an affiliate of
Berkshire Realty Company, Inc. [Exhibit 10.20 to
Registrant's Report on Form 10-K for the year ended
October 31, 1985 (File No. 2-92889)].*
(10.15) Promissory Note dated July 30, 1997 between American
National Bank and Trust Company of Chicago and Reilly
Mortgage Group, Inc.*
(10.16) Multifamily Mortgage, Assignment of Rents, and
Security Agreement dated July 30, 1997 between
American National Bank and Trust Company of Chicago
and Reilly Mortgage Group, Inc.*
* Incorporated by reference
<PAGE>
(C) Reports on Form 8-K
During the last quarter of the year ended December 31, 1999, the
Partnership did not file any reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 30th day of
March, 2000.
KRUPP REALTY LIMITED PARTNERSHIP-VII
By: The Krupp Corporation, a General
Partner
By: /s/ Douglas Krupp
Douglas Krupp, President, Co-Chairman
(Principal Executive Officer) and
Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 30th day of March, 2000.
Signatures Titles
- ---------- ------
/s/ Douglas Krupp President, Co-Chairman (Principal Executive
Douglas Krupp Officer) and Director of The Krupp
Corporation, a General Partner.
/s/ George Krupp Co-Chairman (Principal Executive Officer) and
George Krupp Director of The Krupp Corporation, a General
Partner.
/s/ Wayne H. Zarozny Treasurer (Principal Financial and Accounting
Wayne H. Zarozny Officer) of The Krupp Corporation, a General
Partner.
<PAGE>
APPENDIX A
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1999
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1999 and
December 31, 1998 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Changes in Partners' Equity (Deficit)
for the Years Ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8 - F-15
Schedule III - Real Estate and Accumulated Depreciation F-16 - F-17
All other schedules are omitted as they are not applicable, not required, or the
information is provided in the consolidated financial statements or the notes
thereto.
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-VII and Subsidiaries:
In our opinion, the consolidated financial statements and the financial
statement schedule listed in the index on page F-2 present fairly, in all
material respects, the financial position of Krupp Realty Limited
Partnership-VII and Subsidiaries (the "Partnership") at December 31, 1999 and
December 31, 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements and financial statement schedule are the responsibility of
the Partnership's management; our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
February 25, 2000
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $14,265,488 and
$12,751,953, respectively (Note E) $ 8,809,883 $ 9,510,531
Cash and cash equivalents (Note C) 120,525 629,483
Cash restricted for tenant security deposits 27,256 26,606
Replacement reserve escrow (Note E) 72,378 21,160
Prepaid expenses and other assets 663,021 603,914
Deferred expenses, net of accumulated
amortization of $171,421 and $132,823,
respectively (Note H) 144,234 182,832
----------- -----------
Total assets $ 9,837,297 $10,974,526
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
Liabilities:
Mortgage notes payable (Notes D and E) $10,220,052 $10,323,428
Accrued expenses and other liabilities (Note F) 625,590 558,157
----------- -----------
Total liabilities 10,845,642 10,881,585
----------- -----------
Commitment (Note G)
Partners' (deficit) equity (Note G):
Investor Limited Partners (27,184 Units
outstanding) (172,633) 867,955
Original Limited Partner (525,767) (481,602)
General Partners (309,945) (293,412)
----------- -----------
Total Partners' (deficit)equity (1,008,345) 92,941
----------- -----------
Total liabilities and Partners'
(deficit) equity $ 9,837,297 $10,974,526
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-4
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rental $ 3,970,170 $ 3,853,006 $ 4,718,640
Interest income (Note C) 27,447 136,183 76,419
----------- ----------- -----------
Total revenue 3,997,617 3,989,189 4,795,059
----------- ----------- -----------
Expenses:
Operating (Notes D and H) 1,010,972 964,827 1,122,340
Maintenance 341,331 331,021 393,024
Real estate taxes 428,806 360,747 465,010
General and administrative (Note H) 176,664 118,755 128,855
Management fees (Note H) 157,467 172,873 204,023
Depreciation and amortization 1,552,134 1,421,027 1,468,094
Interest (Note E) 879,470 918,569 1,164,850
----------- ----------- -----------
Total expenses 4,546,844 4,287,819 4,946,196
----------- ----------- -----------
Loss before gain on sale
of property (549,227) (298,630) (151,137)
Gain on sale of property (Note D) - 676,316 -
----------- ----------- -----------
Net income (loss) (Note I) $ (549,227) $ 377,686 $ (151,137)
=========== =========== ===========
Allocation of net income (loss)(Note G):
Investor Limited Partners
(27,184 Units outstanding):
Loss before gain on sale
of property $ (543,735) $ (295,644) $ (149,626)
Gain on sale of property - 669,553 -
----------- ----------- -----------
Net income (loss) $ (543,735) $ 373,909 $ (149,626)
=========== =========== ===========
Investor Limited Partners, Per Unit:
Loss before gain on sale
of property $ (20.00) $ (10.88) $ (5.50)
Gain on sale of property - 24.63 -
----------- ----------- -----------
Net income (loss) $ (20.00) $ 13.75 $ (5.50)
=========== =========== ===========
Original Limited Partner:
Loss before gain on sale
of property $ - $ - $ -
Gain on sale of property - - -
----------- ----------- -----------
Net income (loss) $ - $ - $ -
=========== =========== ===========
General Partners:
Loss before gain on sale
of property $ (5,492) $ (2,986) $ (1,511)
Gain on sale of property - 6,763 -
----------- ----------- -----------
Net income (loss) $ (5,492) $ 3,777 $ (1,511)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-5
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Investor Original
Limited Limited General Total Partners'
Partners Partner Partners (Deficit) Equity
----------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Balance at
December 31, 1996 $ 4,072,663 $(384,948) $ (248,136) $ 3,439,579
Distributions (543,679) (48,327) (12,082) (604,088)
Net loss (149,626) - (1,511) (151,137)
----------- --------- ---------- -----------
Balance at
December 31, 1997 3,379,358 (433,275) (261,729) 2,684,354
Net income 373,909 - 3,777 377,686
Distributions (2,885,312) (48,327) (35,460) (2,969,099)
----------- --------- ---------- -----------
Balance at
December 31, 1998 867,955 (481,602) (293,412) 92,941
Net loss (Note G) (543,735) - (5,492) (549,227)
Distributions (Note G) (496,853) (44,165) (11,041) (552,059)
----------- --------- ---------- -----------
Balance at
December 31, 1999 $ (172,633) $(525,767) $ (309,945) $(1,008,345)
=========== ========= ========== ===========
</TABLE>
The per Unit distributions for each of the years ended December 31, 1999, 1998
and 1997 was $18.28, $106.14 and $20.00, respectively, of which $0, $86.14 and
$0 represented a return of capital, respectively.
The accompanying notes are an integral
part of the consolidated financial statements.
F-6
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (549,227) $ 377,686 $ (151,137)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Interest earned on replacement
reserve escrow (1,023) (160) -
Depreciation and amortization 1,552,133 1,421,027 1,468,094
Gain on sale of property - (676,316) -
Changes in assets and liabilities:
Decrease (increase) in
restricted cash for tenant
security deposits (650) (626) 10,843
Decrease (increase) in prepaid
expenses and other assets (59,107) 3,646 (157,524)
Increase (decrease) in accrued
expenses and other
liabilities 68,729 (254,228) (41,650)
----------- ----------- -----------
Net cash provided by
operating activities 1,010,855 871,029 1,128,626
----------- ----------- -----------
Cash flows from investing activities:
Deposits to replacement reserve
escrow (50,400) (21,000) (12,000)
Withdrawals from replacement
reserve escrow 205 - 64,009
Additions to fixed assets (812,887) (1,829,349) (1,300,570)
Increase (decrease) in accrued
expenses and other liabilities
related to fixed asset
additions (1,296) 3,500 (3,315)
Proceeds from sale of property,
net - 6,514,681 -
----------- ----------- -----------
Net cash (used in) provided
by investing activities (864,378) 4,667,832 (1,251,876)
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on mortgage
notes payable (103,376) (94,906) (166,985)
Proceeds from mortgage
note payable - - 5,280,000
Repayment of mortgage
note payable - (4,084,037) (3,172,809)
Increase in deferred expenses - (15,496) (136,040)
Distributions (552,059) (2,969,099) (604,088)
----------- ----------- -----------
Net cash (used in) provided
by financing activities (655,435) (7,163,538) 1,200,078
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (508,958) (1,624,677) 1,076,828
Cash and cash equivalents,
beginning of year 629,483 2,254,160 1,177,332
----------- ----------- -----------
Cash and cash equivalents,
end of year $ 120,525 $ 629,483 $ 2,254,160
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-7
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization
Krupp Realty Limited Partnership-VII ("KRLP-VII") was formed on August 21,
1984 by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. KRLP-VII terminates on December 31, 2025 unless earlier
terminated upon the occurrence of certain events as set forth in the
Partnership Agreement. KRLP-VII issued all of the General Partner Interests
to two General Partners, The Krupp Corporation, a Massachusetts
corporation, and The Krupp Company Limited Partnership-II, a Massachusetts
limited partnership, in exchange for capital contributions aggregating
$1,000. In addition, the General Partners were required to make additional
capital contributions of $135,891 which were used to pay organization and
offering costs in excess of 5% of the gross proceeds of the offering.
Except under certain limited circumstances upon termination of KRLP-VII,
the General Partners are not required to make any other additional capital
contributions.
KRLP-VII also issued all of the Original Limited Partner Interests to The
Krupp Company Limited Partnership-II in exchange for a capital contribution
of $4,000.
On November 2, 1984, KRLP-VII commenced an offering of up to 40,000 units
of Investor Limited Partner Interest (the "Units") for $1,000 per Unit. The
public offering was closed on April 25, 1986, at which time 27,184 Units
had been sold for $27,184,000.
On December 19, 1984 the General Partners formed Krupp Realty Courtyards
Limited Partnership ("Realty-VII") as a prerequisite for the refinancing of
Courtyards Village East Apartments ("Courtyards Village"). At the same
time, the General Partners transferred ownership of Courtyards Village to
Realty- VII. The General Partner of Realty-VII is KRLP-VII. The Limited
Partners of Realty-VII are KRLP-VII and The Krupp Corporation ("Krupp
Corp."). Krupp Corp. has beneficially assigned its interest in Realty-VII
to KRLP-VII.
On March 31, 1994, the General Partners formed Windsor Partners Limited
Partnership ("Windsor L.P.") as a prerequisite for the refinancing of
Windsor Apartments. At the same time, the General Partners transferred
ownership of the property to Windsor L.P. In exchange for the property,
KRLP-VII received a 99% Limited Partnership interest in Windsor L.P. The
General Partner of Windsor L.P. is ST. Windsor Corporation which has a 1%
interest in Windsor L.P. and is 100% owned by KRLP-VII.
KRLP-VII, Realty-VII and Windsor L.P. are collectively known as Krupp
Realty Limited Partnership-VII and Subsidiaries (collectively referred to
herein as the "Partnership").
On January 30, 1998, the Partnership sold Nora Corners, a shopping center
containing 89,432 leasable square feet, located in Indianapolis, Indiana,
to Kejack, Inc. and its permitted assigns, which are unaffiliated third
parties. Nora Corners Shopping Center was included in a package with
thirteen other properties owned by affiliates of the General Partners (see
Note D).
Continued
F-8
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those used
for federal income tax purposes (see Note I):
Basis of Presentation
The consolidated financial statements present the consolidated assets,
liabilities and operations of the Partnership. All intercompany
balances and transactions have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market
funds with commercial banks. The Partnership has not experienced any
losses to date on its invested cash.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, contingent assets and liabilities and revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents
The Partnership includes all short-term investments with original
maturities of three months or less from the date of acquisition in cash
and cash equivalents. The cash investments are recorded at cost, which
approximates market values.
Rental Revenues
Leases require the payment of base rent monthly in advance. Rental
revenues are recorded on the accrual basis.
Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives of the related assets as follows:
Buildings and improvements 3 to 25 years
Equipment, furnishings and fixtures 3 to 8 years
Impairment of Long-Lived Assets
Real estate assets and equipment are stated at depreciated cost.
Pursuant to Statement of Financial Accounting Standards Opinion No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", impairment losses are recorded on long-lived
assets used in operations on a property by property basis, when events
and circumstances indicate that the assets might be impaired and the
estimated undiscounted cash flows to be generated by those assets are
less than the carrying amount of those assets. Upon determination that
an impairment has occurred, those assets shall be reduced to fair value
less estimated costs to sell.
Continued
F-9
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies, Continued
Deferred Expenses
Costs of obtaining and recording mortgages are amortized over the term
of the related mortgage notes using the straight line method which
approximates the effective interest method.
Income Taxes
The Partnership is not liable for federal or state income taxes as the
Partnership income or loss is allocated to the Partners for income tax
purposes. In the event that the Partnership's tax returns are examined
by the Internal Revenue Service or state taxing authority and the
examination results in a change in the Partnership taxable income or
loss, such change will be reported to the Partners.
Descriptive Information About Reportable Segments
The Partnership operates and develops apartment communities which
generate rental and other income through the leasing of apartment
units. The General Partners separately evaluate the performance of each
of the Partnership's apartment communities. However, because each of
the apartment communities have similar economic characteristics,
facilities, services and tenants, the apartment communities have been
aggregated into a single dominant apartment communities segment.
All revenues are from external customers and no revenues are generated
from transactions with other segments. There are no tenants which
contributed 10% or more of the Partnership's total revenue during 1999,
1998 or 1997.
C. Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash and money market accounts $ 120,525 $ 479,625
Commercial paper - 149,858
---------- ----------
$ 120,525 $ 629,483
========== ==========
</TABLE>
Continued
F-10
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
D. Sale of Property
On January 30, 1998, the Partnership sold Nora Corners Shopping Center
("Nora Corners") to unaffiliated third parties. Nora Corners was included
in a package with thirteen other properties owned by affiliates of the
General Partners. The total selling price of the fourteen properties was
$138,000,000, of which the Partnership received $6,604,300, less repayment
of the existing mortgage note and interest of $4,114,668 and its share of
closing costs of $224,512. For financial reporting purposes, the
Partnership realized a gain of $676,316 on the sale. The gain was
calculated as the difference between the property's selling price less net
book value of the property and closing costs.
Nora Corners was situated on 11.21 acres of land, seven acres of which were
owned by certain non-affiliated third parties. These seven acres of land
were leased to the Partnership subject to a 99-year land lease which
expired in 2061. The land lease required annual rental payments of $17,280
from 1987 through 2012. On January 30, 1998, in conjunction with the sale
of Nora Corners, the land lease was assigned to the purchaser of the
property, under the terms of the land lease.
E. Mortgage Notes Payable
The properties owned by the Partnership are pledged as collateral for the
respective non-recourse mortgage notes payable outstanding at December 31,
1999 and 1998. Mortgage notes payable consisted of the following:
<TABLE>
<CAPTION>
Principal Annual Interest
Property 1999 1998 Rate Maturity Date
------------------ ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Courtyards Village
East Apartments $ 5,164,455 $ 5,214,939 7.88% August 1, 2007
Windsor Apartments 5,055,597 5,108,489 9.25% May 1, 2001
----------- -----------
Total $10,220,052 $10,323,428
=========== ===========
</TABLE>
Courtyards Village East Apartments
On July 30, 1997, the Partnership refinanced the Courtyards Village
Apartments mortgage note. The property was refinanced with a $5,280,000
non-recourse mortgage note payable at the rate of 7.88% per annum with
monthly principal and interest payments of $38,302. The mortgage note,
which is collateralized by the property, matures on August 1, 2007 at
which time the remaining principal (approximately $4,658,637) and any
accrued interest are due. The note may be prepaid, subject to a
prepayment premium, at any time with 30 days notice. The Partnership
used the majority of the proceeds from the refinancing to repay the
existing mortgage note on the property of $3,172,809, pay closing costs
of $136,040 and to establish various escrows. As part of the
refinancing, the Partnership was required to establish a $9,525 repair
escrow and a replacement reserve escrow. The replacement reserve escrow
required no initial deposit at the close and monthly deposits of $4,200
which began on September 1, 1998.
Continued
F-11
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
E. Mortgage Notes Payable, Continued
Courtyards Village East Apartments, Continued
Based on the borrowing rates currently available to the Partnership for
bank loans with similar terms and average maturities, the fair value of
long-term debt is approximately $5,076,000 and $5,582,000 for the years
ended December 31, 1999 and 1998, respectively.
Nora Corners Shopping Center
In conjunction with the sale of the property on January 30, 1998, the
Partnership paid the outstanding principal of the non-recourse mortgage
note of $4,084,037 (see Note D).
Windsor Apartments
The property is subject to a non-recourse mortgage note payable in the
original amount of $5,300,000, based on a 30-year amortization and
payable in equal monthly installments of $43,602, consisting of
principal and interest. At maturity, all unpaid principal,
approximately $5,021,000, and any accrued interest are due. The note
may be prepaid subject to a prepayment penalty.
Based on the borrowing rates currently available to the Partnership for
bank loans with similar terms and average maturities, the fair value of
long-term debt is approximately $5,161,000 and $5,416,000 for the years
ended December 31, 1999 and 1998, respectively.
Due to restrictions on transfers and prepayment, the Partnership may be
unable to refinance certain mortgage notes payable at such calculated fair
value.
The aggregate scheduled principal amounts of long-term borrowings due
during the five years ending December 31, 2004 are $111,806, $5,079,337,
$63,481, $68,668 and $74,279.
The Partnership paid interest on its borrowings in the amounts of $879,470,
$918,569 and $1,155,562 during the years ended December 31, 1999, 1998 and
1997, respectively.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Accounts payable $ 18,550 $ 4,306
Accrued real estate taxes 392,868 362,556
Other liabilities 132,502 126,445
Tenant security deposits 45,604 54,240
Prepaid rent 36,066 10,610
----------- -----------
$ 625,590 $ 558,157
=========== ===========
</TABLE>
Continued
F-12
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G. Partners' Equity
Under the terms of the Partnership Agreement, losses from operations are
allocated 99% to the Investor Limited Partners and 1% to the General
Partners. Profits from operations are allocated 90% to the Investor Limited
Partners, 8% to the Original Limited Partner and 2% to the General
Partners, until such time that the Investor Limited Partners have received
a return of their total invested capital plus a 9% per annum cumulative
return thereon and thereafter, 69% to the Investor Limited Partners, 25% to
the Original Limited Partner and 6% to the General Partners.
Profits from Capital Transactions are allocated first, to the Investor
Limited Partners until they have received a return of their total invested
capital. Thereafter, profits from Capital Transactions are allocated in
accordance with the Partnership Agreement. Losses from Capital Transactions
are allocated 99% to the Investor Limited Partners and 1% to the General
Partners. Notwithstanding anything above, the General Partners shall be
allocated at least 1% of all profits and losses from Capital Transactions.
Under the terms of the Partnership Agreement, cash distributions are made
on the same basis as the allocations of profits described above. Pursuant
to the Partnership Agreement, proceeds from Capital Transactions shall
first be applied to the payment of all debts and liabilities of the
Partnership and second to fund reserves for contingent liabilities. The
remaining net cash proceeds will then be distributed 99% to the Investor
Limited Partners until they have received a return of their total invested
capital and 1% to the General Partners, thereafter net cash proceeds will
be distributed in accordance with the Partnership Agreement and will be
distributed in part after payment by the Partnership of a certain
subordinated financial consulting fee as described below.
The Partnership entered into a Sales Agent Agreement for the public
offering of Units. Under that Agreement, the Partnership was required to
pay to the sales agent underwriting commissions and related financial
consulting fees equal to 9% of the gross proceeds from the offering. In
addition, the sales agent will be entitled to receive, over the life of the
Partnership, a subordinated financial consulting fee based upon the net
cash proceeds received by the Partnership as a result of sales and
refinancings of Partnership properties, which fee shall be in an amount not
exceeding 1.5% of the gross proceeds of the offering of Units. No such fees
will, however, be payable unless and until all Partners have received a
return of their Invested Capital and the Investor Limited Partners have
received a 9% per annum cumulative return.
Continued
F-13
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G. Partners' Equity, Continued
As of December 31, 1999, the following cumulative partner contributions and
allocations have been made since the inception of the Partnership:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners (Deficit)
------------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Capital contributions $ 27,184,000 $ 4,000 $ 136,891 $ 27,324,891
Syndication costs (3,697,375) - (135,891) (3,833,266)
Distributions:
Operations (5,969,347) (530,608) (132,650) (6,632,605)
Capital
transactions (2,341,632) - (23,378) (2,365,010)
Income (loss):
Operations (15,201,065) 841 (153,430) (15,353,654)
Capital
transactions (147,214) - (1,487) (148,701)
------------ ---------- --------- ------------
Balance at
December 31, 1999 $ (172,633) $ (525,767) $(309,945) $ (1,008,345)
============ ========== ========= ============
</TABLE>
H. 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 4% of the
gross receipts, net of leasing commissions, from the commercial property
which was under management until January 30, 1998 (see Note D) 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 administrative expenses.
Amounts accrued or paid to the General Partners' affiliates during the
years ended December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Property management fees $157,467 $172,873 $204,023
Expense reimbursements 196,973 146,025 161,571
-------- -------- --------
Charged to operations $354,440 $318,898 $365,594
======== ======== ========
</TABLE>
Expense reimbursements due from affiliates of $237,015 and $239,514 were
included in prepaid expenses and other assets at December 31, 1999 and
1998, respectively.
In addition to the amounts above, costs associated with the sale of Nora
Corners of $4,171 and Courtyards Village refinancing costs of $53,540 were
paid to the General Partners' affiliates during the years ended December
31, 1998 and 1997, respectively.
Continued
F-14
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
I. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating property
using the Accelerated Cost Recovery System ("ACRS") and the Modified
Accelerated Cost Recovery System ("MACRS") depending on which is applicable.
The reconciliation of the net income (loss) reported in the accompanying
Consolidated Statement of Operations with the net income (loss) reported in
the Partnership's federal income tax return for the years ended December 31,
1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) per
Consolidated Statement of
Operations $ (549,227) $ 377,686 $ (151,137)
Difference in book
and tax depreciation
and amortization 215,924 152,684 35,424
Difference between book and
tax gain on sale of
property - 977,707 -
Rental adjustment
required by Generally
Accepted Accounting
Principles (399) 28,672 (10,930)
---------- ----------- -----------
Net income (loss) for federal
income tax purposes $ (333,702) $ 1,536,749 $ (126,643)
========== =========== ===========
</TABLE>
The allocation of the net income for federal income tax purposes for the year
ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Portfolio Passive
Income Loss Total
---------- ---------- -----------
<S> <C> <C> <C>
Investor Limited Partners $ 24,935 $ (355,300) $ (330,365)
Original Limited Partner - - -
General Partners 252 (3,589) (3,337)
---------- ---------- -----------
$ 25,187 $ (358,889) $ (333,702)
========== ========== ===========
</TABLE>
For the years ended December 31, 1999, 1998 and 1997, the per Unit net
income (loss) to the Investor Limited Partners for federal income tax
purposes was $12.15, $55.97 and $(4.61), respectively.
The basis of the Partnership's assets for financial reporting purposes
exceeds its tax basis by approximately $2,279,000 and $2,830,800 at
December 31, 1999 and 1998, respectively. The basis of the Partnership's
liabilities for financial reporting purposes is less than its tax basis by
approximately $3,520,000 at December 31, 1999.
F-15
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs
Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
--------------------------- ------------
Buildings & Buildings & Depreciable
Description Encumbrances Land Improvements Improvements Life
- ----------- ------------ ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Courtyards
Village East
Apartments
Naperville,
Illinois $ 5,164,455 $ 487,529 $ 6,486,198 $ 4,821,820 3 to 25 Years
Windsor
Apartments
Garland,
Texas 5,055,597 696,362 9,251,669 1,331,793 3 to 25 Years
------------ ---------- ----------- ------------
Total $ 10,220,052 $1,183,891 $15,737,867 $ 6,153,613
============ ========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts Carried at
End of Year
--------------------------------
Buildings Year
and Accumulated Construction Date
Description Land Improvements Total Depreciation Completed Acquired
- ----------- -------- ------------ ---------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Courtyards
Village East
Apartments
Naperville,
Illinois $ 487,529 $ 11,308,018 $11,795,547 $ 6,943,011 1973 4/1/85
Windsor
Apartments
Garland,
Texas 696,362 10,583,462 11,279,824 7,322,477 1984 12/27/84
---------- ------------ ----------- -----------
Total $1,183,891 $ 21,891,480 $23,075,371 $14,265,488
========== ============ =========== ===========
</TABLE>
Continued
F-16
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued)
December 31, 1999
Reconciliation of Real Estate and Accumulated Depreciation for each of the three
years in the period ended December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
Real Estate
-----------
<S> <C> <C> <C>
Balance at beginning of year $22,262,484 $30,206,277 $28,905,707
Acquisition and improvements 812,887 1,829,349 1,300,570
Sale of property - (9,773,142) -
----------- ----------- -----------
Balance at end of year $23,075,371 $22,262,484 $30,206,277
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
Accumulated Depreciation
------------------------
<S> <C> <C> <C>
Balance at beginning of year $12,751,953 $15,523,683 $14,097,123
Depreciation expense 1,513,535 1,297,939 1,426,560
Sale of property - (4,069,669) -
----------- ----------- -----------
Balance at end of year $14,265,488 $12,751,953 $15,523,683
=========== =========== ===========
</TABLE>
The aggregate cost of the Partnership's real estate for federal income tax
purposes is $23,089,267 and the aggregate accumulated depreciation for federal
income tax purposes is $17,097,694.
F-17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 7 Financial Statements for the twelve months ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 120,525
<SECURITIES> 0
<RECEIVABLES> 244,193<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 518,462
<PP&E> 23,391,023<F2>
<DEPRECIATION> (14,436,906)<F3>
<TOTAL-ASSETS> 9,837,297
<CURRENT-LIABILITIES> 625,590
<BONDS> 10,220,052<F4>
0
0
<COMMON> 0
<OTHER-SE> (1,008,345)<F5>
<TOTAL-LIABILITY-AND-EQUITY> 9,837,297
<SALES> 0
<TOTAL-REVENUES> 3,997,617<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,667,374<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 879,470
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (549,227)<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 $23,075,371 and deferred expenses of $315,652.
<F3>Accumulated depreciation of $14,265,488 and accumulated amortization of
$171,418.
<F4>Represents mortgage notes payable.
<F5>Total deficit of the General Partners of ($309,945) and of the Limited
Partners of ($698,400).
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $1,686,434, real estate taxes of $428,806 and
depreciation and amortization of $1,552,134.
<F8>Net loss allocated ($5,492) to the General Partners and ($543,735) to the
Limited Partners. Average net loss per Unit of Limited Partner interest is
($20.00) on 27,184 Units outstanding.
</FN>
</TABLE>
