UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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 0-15816
Krupp Cash Plus-II Limited Partnership
Massachusetts 04-2915326
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<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 CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December31,
1996 1995
<S> <C> <C>
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of $4,494,847
and $4,137,678, respectively $ 5,844,931 $ 6,119,113
Retail centers, less accumulated
depreciation of $13,716,124 and
$12,489,601, respectively 36,612,605 37,613,542
Investment in Joint Venture (Note 2) 19,824,570 20,411,464
Mortgage-backed securities ("MBS"), net of
accumulated amortization (Note 3) 7,501,412 8,501,911
Total real estate assets 69,783,518 72,646,030
Cash and cash equivalents 9,113,581 8,065,906
Other assets 550,375 711,172
Total assets $79,447,474 $81,423,108
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ - $ 23,879
Accrued expenses and other liabilities (Note 4) 741,475 657,032
Total liabilities 741,475 680,911
Commitments and contingencies (Note 2)
Partners' equity (Note 5):
Unitholders
(7,499,718 Units outstanding) 79,086,604 81,088,463
Corporate Limited Partner
(100 Units outstanding) 1,259 1,286
General Partners (381,864) (347,552)
Total Partners' equity 78,705,999 80,742,197
Total liabilities and Partners' equity $79,447,474 $81,423,108
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Rental $1,656,759 $1,672,313 $4,957,993 $4,918,479
Partnership's share of
Joint Venture net
income (Note 2) 162,661 138,241 420,606 443,024
Interest income - MBS
(Note 3) 165,957 200,843 527,149 623,503
Interest income - other 124,463 122,907 352,546 345,962
Total revenue 2,109,840 2,134,304 6,258,294 6,330,968
Expenses:
Operating (Note 6) 246,089 235,091 705,863 640,189
Maintenance 107,445 140,098 343,720 336,980
General and adminis-
trative (Note 6) 70,799 87,646 195,166 248,492
Real estate taxes 194,873 218,509 593,934 646,943
Management fees (Note 6) 95,534 95,529 286,934 278,953
Depreciation 545,832 507,400 1,583,692 1,498,322
Total expenses 1,260,572 1,284,273 3,709,309 3,649,879
Net income $ 849,268 $ 850,031 $2,548,985 $2,681,089
Allocation of net income
(Note 5):
Unitholders (7,499,718
Units outstanding) $ 832,271 $ 833,019 $2,497,972 $2,627,432
Net income per Unit of
Depositary Receipt $ .11 $ .11 $ .33 $ .35
Corporate Limited Partner
(100 Units
outstanding) $ 11 $ 11 $ 33 $ 35
General Partners $ 16,986 $ 17,001 $ 50,980 $ 53,622
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Operating activities:
Net income $ 2,548,985 $ 2,681,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,583,692 1,498,322
Partnership's share of Joint Venture
net income (420,606) (443,024)
Distributions received from Joint Venture 420,606 443,024
Amortization of MBS discount, net (2,009) (2,003)
Decrease in other assets 160,797 274,673
Decrease in accounts payable (23,879) (211,793)
Increase in accrued expenses and other
liabilities 84,443 296,808
Net cash provided by operating
activities 4,352,029 4,537,096
Investing activities:
Additions to fixed assets (308,548) (203,905)
Settlement of land easement (25) (2,658)
Principal collections on MBS 1,002,508 908,600
Distributions received from Joint Venture
in excess of its earnings 586,894 601,976
Net cash provided by investing
activities 1,280,829 1,304,013
Financing activity:
Distributions (4,585,183) (4,579,940)
Net increase in cash and cash equivalents 1,047,675 1,261,169
Cash and cash equivalents, beginning of period 8,065,906 7,072,127
Cash and cash equivalents, end of period $ 9,113,581 $ 8,333,296
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO 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
Cash Plus-II Limited Partnership (the "Partnership") the disclosures
contained in this report are adequate to make the information presented
not misleading. See Notes to Financial Statements included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1995 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 financial statements reflect all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Partnership's financial position as of September 30, 1996,
its results of operations for the three and nine months ended September
30, 1996 and 1995, and cash flows for the nine months ended September
30, 1996 and 1995. Certain prior period balances have been reclassified
to conform with current period financial statement presentation.
The results of operations for the three and nine months ended September
30, 1996 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) Investment in Joint Venture
The Partnership and an affiliate of the Partnership each have a 50%
interest in the Brookwood Village Joint Venture (the "Joint Venture").
The express purpose of entering into the Joint Venture was to acquire
and operate Brookwood Village Mall and Convenience Center ("Brookwood
Village"). Brookwood Village is a shopping center containing 474,138
net leasable square feet located in Birmingham, Alabama.
Under the purchase and sale agreement entered into by the Partnership,
its affiliates and the previous owner, the previous owner retained an
interest related to the future development at Brookwood Village. The
seller is entitled to receive up to $5,000,000 of proceeds from the sale
of Brookwood Village and potentially additional amounts related to
expansion and development. The Joint Venture holds title to Brookwood
Village free and clear from all other material liens or encumbrances.
Condensed financial statements of the Joint Venture are as follows:
<TABLE>
<CAPTION>
Brookwood Village Joint Venture
Condensed Balance Sheets
ASSETS
September 30, December 31,
1996 1995
<S> <C> <C>
Property, at cost $ 55,896,913 $ 55,478,818
Accumulated depreciation (16,663,554) (15,164,143)
39,233,359 40,314,675
Other assets 1,065,064 867,242
Total assets $ 40,298,423 $ 41,181,917
LIABILITIES AND PARTNERS' EQUITY
Total liabilities $ 649,283 $ 358,989
Partners' equity
The Partnership 19,824,570 20,411,464
Joint Venture Partner 19,824,570 20,411,464
Total Partners' equity 39,649,140 40,822,928
Total liabilities and Partners' equity $ 40,298,423 $ 41,181,917
</TABLE>
Brookwood Village Joint Venture
Condensed Statements of Operations
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue $1,557,553 $1,555,064 $ 4,505,010 $ 4,611,561
Property operating expenses (727,810) (687,205) (2,164,387) (2,133,784)
Depreciation (504,421) (591,377) (1,499,411) (1,591,729)
Net income $ 325,322 $ 276,482 $ 841,212 $ 886,048
</TABLE>
(3) Mortgage Backed Securities
The MBS held by the Partnership are issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association and the
Government National Mortgage Association. Additional information on the
MBS held is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Face Value $ 7,492,464 $ 8,494,972
Amortized Cost $ 7,501,412 $ 8,501,911
Estimated Market Value $ 7,817,000 $ 9,044,000
</TABLE>
Coupon rates of the MBS range from 8.0% to 10.0% per annum and mature in
the years 2008 through 2017. The Partnership's MBS portfolio had gross
unrealized gains of approximately $339,000 and $542,000 at September 30,
1996 and December 31, 1995, respectively and unrealized losses of
approximately $23,000 and $0, respectively. The Partnership does not
expect to realize these gains or losses as it has the intention and
ability to hold the MBS until maturity.
(4) Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Accrued real estate taxes $318,434 $264,996
Other accrued expenses 219,536 194,249
Tenant security deposits 169,657 186,242
Prepaid rent 33,840 11,545
$741,467 $657,032
</TABLE>
(5) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the nine months
ended September 30, 1996 is as follows:
<TABLE>
<CAPTION>
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
<S> <C> <C> <C> <C>
Balance at
December 31, 1995 $81,088,463 $ 1,286 $(347,552) $80,742,197
Net income 2,497,972 33 50,980 2,548,985
Distributions (4,499,831) (60) (85,292) (4,585,183)
Balance at
September 30, 1996 $79,086,604 $ 1,259 $(381,864) $78,705,999
</TABLE>
(6) Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties,
the Partnership entered into agreements under which property management
fees are paid to an affiliate of the General Partners for services as
management agent. Such agreements provide for management fees payable
monthly at a rate up to 6% of the gross receipts net of leasing
commissions from commercial properties under management and up to 5% of
the 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 accounting, computer,
insurance, travel, legal and payroll, and with the preparation and
mailing of reports and other communications to the Unitholders.
Amounts accrued or paid to the General Partners or their affiliates are
as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Property management fees $ 95,534 $ 95,529 $286,934 $278,953
Expense reimbursements 83,067 87,728 229,061 240,361
Charged to operations $178,601 $183,257 $515,995 $519,314
</TABLE>
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
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 liquidity is derived from the operations of the
Partnership's properties (Encino Oaks, Alderwood Towne Center, Canyon Place,
Coral Plaza and Cumberland Glen), distributions from the Partnership's
interest in the Joint Venture, earnings and collections on MBS, and interest
earned on its short-term investments. The Partnership's liquidity is
utilized to pay operating costs and to fund distributions to the partners.
Management has found it necessary in recent years to have the Partnership
pay a large share of tenant buildouts to attract quality tenants to our
retail centers. This policy has proven to be successful in attracting
tenants and maintaining high occupancies at properties where it has been
undertaken and is expected to continue in 1996. In order to remain
competitive in their respective markets, the Partnership's properties are
anticipated to spend approximately $635,000 for fixed assets in 1996, most
of which are tenant buildouts at retail centers. The Joint Venture is
expected to spend approximately $847,000 for capital improvements.
The Partnership holds MBS that are guaranteed by Government National
Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC"). The
principal risks in respect to MBS are the credit worthiness of GNMA, FNMA,
or FHLMC, and the risk that the current value of any MBS may decline as a
result of changes in market interest rates. The General Partners believe
the interest rate risk is minimal due to the fact that the Partnership has
the ability to hold these securities to maturity.
The Partnership currently enjoys significant liquidity. The General
Partners, on an ongoing basis, assess the current and future liquidity needs
in determining the levels of working capital the Partnership should
maintain. Adjustments to distributions are made when appropriate to reflect
such assessments.
Distributable Cash Flow and Net Proceeds from Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Proceeds
from Capital Transactions, as defined by Section 17 of the Partnership
Agreement for the nine months ended September 30, 1996 and the period from
inception to September 30, 1996. The General Partners provide certain of
the information below to meet requirements of the Partnership Agreement and
because they believe that it is an appropriate supplemental measure of
operating performance. However, Distributable Cash Flow and Net Proceeds
from Capital Transactions should not be considered by the reader as a
substitute to net income, as an indicator of the Partnership's operating
performance or to cash flow as a measure of liquidity.
<TABLE>
<CAPTION>
(In $1,000's except per Unit amounts)
For the Nine Months Inception to
Ended September 30, September 30,
1996 1996
<S> <C> <C>
Distributable Cash Flow:
Net income for tax purposes $3,242 $48,318
Items providing/not requiring or (not
providing) the use of operating funds:
Tax basis depreciation and amortization 1,294 16,123
Acquisition expenses paid from offering
proceeds charged to operations - 248
Partnership's share of Joint Venture
taxable net income (797) (6,861)
Distributions from Joint Venture 1,008 9,540
Additions to fixed assets (309) (2,896)
Amounts released from reserves
for capital improvements - 1,020
Total Distributable Cash Flow ("DCF") $4,438 $65,492
Unitholders' Share of DCF $4,349 $64,182
Unitholders' Share of DCF per Unit $ .58 $ 8.56 (c)
General Partners' Share of DCF $ 89 $ 1,310
Net Proceeds from Capital Transactions:
Principal collections on MBS $1,000 $37,632
Reinvestment of MBS principal collections - (3,687)
Total Net Proceeds from Capital
Transactions $1,000 $33,945
Distributions:
Unitholders $4,500 (a) $98,318 (b)
Unitholders' Average per Unit $ .60 (a) $ 13.11 (b)(c)
General Partners $ 89 (a) $ 1,310 (b)
Total Distributions $4,589 (a) $99,628 (b)
</TABLE>
(a) Represents distributions paid in 1996, except the February, 1996
distribution, which relates to 1995 cash flow and includes an estimate
of the distribution to be paid in November, 1996.
(b) Includes an estimate of the distribution to be paid in November, 1996.
(c) Unitholders' average per Unit return of capital as of November, 1996 is
$4.55 [$13.11 - $8.56].
Operations
Partnership
Distributable Cash Flow decreased $88,000 for the nine months ended
September 30, 1996 as compared to the same period in 1995 as a result of
decreased distributions received from the Joint Venture and an increase in
capital improvements at the Partnership's properties. Although net income
of the Partnership stayed relatively stable for the three months ended
September 30, 1996 as compared to the same period in 1995, net income
decreased between the two nine month periods by approximately 5%.
Total revenue decreased for the three and nine months ending September 30,
1996 as compared to the same periods in 1995. Alderwood Towne Center
("Alderwood") and Canyon Place ("Canyon") experienced swings in occupancy
during this time. Alderwood's decrease in occupancy was a result of the
eviction of Abodio, a 9,742 square foot tenant, in the second quarter of
1996. Clothestime, a 3,265 square foot tenant chose not to renew their
lease in the third quarter. At Canyon, the 14,833 square foot Jo-Ann
Fabrics opened late in the first quarter of 1996, favorably impacting
rental revenue for the remainder of 1996. Although market conditions in
Atlanta have somewhat declined, relatively steady occupancy as well as
increased rental rates instituted during the first half of 1996, increased
revenue at Cumberland Glen. MBS interest income decreased for the three
and nine months ended September 30, 1996 as compared to the same period in
1995, due to prepayments and repayments of principal. Interest income on
short-term investments remained relatively stable during these same
periods as cash balances have leveled off.
Total expenses decreased for the three months ended September 30, 1996 as
compared to the same period in 1995. The decrease in total expenses is
primarily attributable to both lower maintenance expenditures and a
decrease in real estate taxes. Maintenance decreased as a result of
preventative maintenance work completed in 1995 on the parking lots at
Cumberland Glen, Encino Oaks and Canyon as well as roofing repairs at
Alderwood. Real estate taxes decreased due to the revaluation of Coral
Plaza by the local taxing authority during 1996. This decrease is
expected to make a positive impact for the remainder of 1996.
Total expenses increased for the nine months ended September 30, 1996 as
compared to the same period in 1995. Increases in operating and
depreciation expenses more than offset the decreases in real estate taxes
and general and administrative expenses. Operating expense increased as a
result of prior years' insurance refunds received in the second quarter of
1995. Depreciation expense increased in conjunction with a higher number
of capital improvements performed in 1996 to enhance the appearance of the
Partnership's properties. Real estate taxes decreased as a result of the
revaluation of Coral Plaza during 1996.
Joint Venture
Overall, net income, before depreciation, decreased for the three and nine
months ended September 30, 1996 as compared to the same periods in 1995.
Revenue for the third quarter of 1996 remained relatively stable when
compared to the third quarter of 1995. However, for the two nine month
periods, revenue decreased as a result of lower reimbursable tenant
billings derived from a combination of lower occupancy and lower
reimbursable operating expenses in 1996.
Interest income on investments also decreased during the three and nine
month periods due to lower average cash and cash equivalent balances in
1996.
The increase in property expenses for the three and nine months ended
September 30, 1996 as compared to the same periods in 1995 is primarily
due to an increase in real estate taxes. The increase in real estate
taxes is a result of an abatement of 1994 real estate taxes in the third
quarter of 1995 as the Joint Venture was reassessed by the local taxing
authority.
General
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment
of its real estate assets.
The Partnership's investments in properties and the Joint Venture are carried
at cost less accumulated depreciation unless the General Partners believe
there is a significant impairment in value, in which case a provision to
write down investments in properties and the Joint Venture to fair value will
be charged against income. At this time, the General Partners do not believe
that any assets of the Partnership are significantly impaired.
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Change 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 Cash Plus-II Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer
of the Krupp Corporation, a General
Partner
DATE: October 30, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial inforamtion extracted from Cash Plus II
Financial Statements for the nine months ended September 39, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,113,581
<SECURITIES> 7,501,412
<RECEIVABLES> 322,905<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 227,470
<PP&E> 80,493,077<F2>
<DEPRECIATION> (18,210,971)
<TOTAL-ASSETS> 79,447,474
<CURRENT-LIABILITIES> 741,475
<BONDS> 0
0
0
<COMMON> 78,705,999<F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 79,447,474
<SALES> 0
<TOTAL-REVENUES> 6,258,294<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,709,309<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,548,985<F6>
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes all receivables included in "other assets" on the Balance Sheet.
<F2>Multi-family complex of $10,339,778, retail centers of $50,328,729 and
investment in J.V. of $19,824,570.
<F3>Deficit o the General Partners of ($381,864) and equity of Limited Partners
$79,087,863.
<F4>Includes all revenue of the Partnership.
<F5>Includes all expenses of the Partnership.
<F6>Net income allocated $50,980 to the General Partners and $2,498,005 to the
Limited Partners.
</FN>
</TABLE>
