UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year end December 31, 1996
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 0-15816
Krupp Cash Plus-II Limited Partnership
(Exact name of registrant as specified in its charter)
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)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:Depositary
Receipts
representing
Units of
Limited
Partner
Interests
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 11-15.
The total number of pages in this document is 46.
<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 Cash Plus-II Limited Partnership (the "Partnership") was formed on
December 18, 1985 by filing a Certificate of Limited Partnership in The
Commonwealth of Massachusetts. The Krupp Corporation and The Krupp Company
Limited Partnership-IV are the General Partners of the Partnership. Krupp
Depositary Corporation is the Corporate Limited Partner. For details, see
Note A to Financial Statements included in Item 8 (Appendix A) of this
report.
On March 28, 1986 the Partnership commenced the marketing and sale of
7,500,000 units of Depositary Receipts ("Units") for a maximum offering of
$150,000,000. The Partnership raised $149,845,812 from its public
offering. The Partnership invested the net proceeds from the offering in a
portfolio of unleveraged real estate (see Item 2 - Properties) and mortgage
backed securities ("MBS") issued by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA"),
or the Federal Home Loan Mortgage Corporation ("FHLMC") (see Note E to
Financial Statements, included in Item 8 (Appendix A) of this report). The
holding period for the portfolio of unleveraged real estate was anticipated
to be 5 to 10 years from the date of acquisition. However, the holding
period was to be aligned with the delivery of the Partnership's objectives,
as defined in the Partnership's Prospectus, with the clear understanding
that the Partnership must be dissolved by December 31, 2025.
Unfortunately, due to the economic downturn in the retail segment, the
objectives of the Partnership have not been achieved. The General Partners
expect to sell each property when they believe they can best maximize the
return to their investors. The Partnership considers itself to be engaged
only in the industry segment of investment in real estate and related
assets.
The Partnership's real estate investments are subject to some seasonal
fluctuations, resulting from changes in utility consumption, seasonal
maintenance expenditures and changes in retail rental income based on the
percentage of tenant gross receipts. 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
credit worthiness of GNMA, FNMA and FHLMC, interest rates, real estate
taxes, 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 effect on the
Partnership's operations, and no adverse effect therefrom is anticipated in
the future.
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) possible reduction
in rental income due to an inability to maintain high occupancy levels, the
financial failure of a tenant or the inability of retail tenants to achieve
gross sales at a level sufficient to provide for additional rental income
based on a percentage of sales, (iii) 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, and 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 (iv) other circumstances over which the Partnership
may have little or no control.
As of December 31, 1996, there were 5 full and part-time on-site personnel
employed by the Partnership.
<PAGE>
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership has unleveraged investments in
four retail centers with an aggregate of 364,894 square feet of leasable
space and one apartment complex with 222 units, all of which are wholly-
owned by the Partnership. In addition, the Partnership has an unleveraged
joint venture investment (the "Joint Venture") in a shopping center with
474,138 square feet of leasable space. Additional detailed information
with respect to individual properties is contained in Note D to the
Financial Statements, Schedule III and the Separate Financial Statements
for Brookwood Village Joint Venture included in Item 8 (Appendix A) of this
report.
A summary of the Partnership's real estate investments is presented below.
<TABLE>
<CAPTION>
Average Occupancy
Current Leasable For the Year Ended
Year of Square Footage/ December 31,
Description Acquisition Units 1996 1995 1994 1993 1992
Commercial
<S> <C> <C> <C> <C> <C> <C> <C>
Encino Oaks
Shopping Center
Encino, California 1986 52,380 Sq. Ft. 96% 99% 100% 97% 97%
Alderwood Towne Center
Lynnwood, Washington 1986 105,346 Sq. Ft. 92% 100% 99% 100% 97%
Canyon Place
Shopping Center
Portland, Oregon 1986 157,283 Sq. Ft. 95% 90% 82% 83% 87%
Coral Plaza
Shopping Center
Oak Lawn, Illinois 1987 49,885 Sq. Ft. 85% 85% 87% 88% 90%
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama (1) 1986 474,138 Sq. Ft. 92% 94% 95% 91% 84%
Residential
Cumberland Glen Apartments
Smyrna, Georgia 1987 222 units 94% 96% 97% 96% 92%
</TABLE>
(1)The Partnership has a 50% joint venture interest in this property.
The Partnership has no present plans for major improvements or developments
of its unleveraged real estate. Only improvements necessary to keep the
Partnership's properties competitive in their respective markets were
completed in 1996 and are expected to be completed in the next year.
There were 11 tenants which occupied 10% or more of their respective
leasable space as of December 31, 1996.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1996 there were no material pending legal proceedings to
which the Partnership was a party or to which any of its property was the
subject. Subsequent to year end, the Partnership, its Joint Venture
Partner (collectively the "Joint Venture Partners"), and Brookwood Village
Joint Venture, among others, were named as defendants in a lawsuit filed by
the previous owner of Brookwood Village Mall and Convenience Center related
to a $5,000,000 lien retained by the seller. On February 28, 1997,
Brookwood Village paid the discounted amount of $4,300,000 to release the
lien and settle the lawsuit. The Partnership and its Joint Venture Partner
each made capital contributions of $2,150,000 to fund the settlement
payment. See Note K to the Financial Statements included in Item 8
(Appendix A) of this report for further discussion of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no public market for the Units and it is not anticipated that any
such public market will develop. The transfer of Units is subject to
certain limitations contained in the Partnership Agreement.
The number of Investor Limited Partners ("Unitholders") as of December 31,
1996 was approximately 9,600.
The Partnership has made the following distributions to its Partners during
the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
Amount Per Unit Amount Per Unit
<S> <C> <C> <C> <C>
Limited Partners:
Unitholders
(7,499,718 Units) $5,999,775 $.80 $5,999,775 $.80
Corporate Limited Partner
(100 Units) 80 .80 80 .80
General Partners 114,605 109,044
$6,114,460 $6,108,899
</TABLE>
One of the objectives of the Partnership is to make partially tax sheltered
distributions of cash flow generated by the Partnership's properties and
MBS. However, there is no assurance that future operations will continue
to generate sufficient cash to maintain the current level of distributions
and to provide sufficient liquidity for the Partnership. The Partnership
made distributions of $.20 per Unit, per quarter to its investors and
expects to increase the distribution rate to $.25 per Unit, per quarter,
beginning with the distribution payable in May, 1997.
<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 read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations, and the Financial Statements
and Supplementary Data, which are included in Items 7 and 8 (Appendix A) of
this report, respectively.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total revenue $ 3,764,199 $ 8,367,001 $ 8,022,513 $ 8,432,254 $ 8,719,084
Net income
(loss) (1,455,849) 3,388,472 3,064,617 3,232,087 3,451,547
Net income (loss)
allocated to
Partners:
Unitholders (1,426,713) 3,320,658 3,003,285 3,167,403 3,382,471
Per Unit (.19) .44 .40 .42 .45
Corporate Limited
Partner (19) 44 40 42 45
General
Partners (29,117) 67,770 61,292 64,642 69,031
Total assets at
December 31 74,063,426 81,423,108 84,349,429 87,285,456 97,595,990
Distributions:
Unitholders 5,999,775 5,999,775 6,012,096 13,495,370 6,003,028
Per Unit(a) .80 .80 .80 1.80 .80
Corporate Limited
Partner 80 80 80 180 80
General
Partners 114,605 109,044 89,729 89,558 116,273
</TABLE>
(a)During the years ended December 31, 1996, 1995, 1994, 1993and 1992 the
Limited Partners' average Per Unit return ofcapital was $.09, $.04, $.20,
$1.21, and $.13, respectively.
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 liquidity is derived from the operations of the
Partnership's properties (Encino Oaks, Alderwood Towne, Canyon Place, Coral
Plaza and Cumberland Glen), distributions from the Partnership's interest
in the Joint Venture, earnings and principal 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 its
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 1997. In order to remain
competitive in their respective markets, the Partnership's properties are
anticipated to spend approximately $850,000 for capital improvements in
1997, most of which are tenant buildouts at retail centers.
Currently, the Joint Venture is pursuing leasing options to fill the space
vacated by Yieldings, a 21,307 square foot tenant, on December 31, 1996.
The Joint Venture is expected to spend approximately $884,000 for fixed
assets in 1997, including tenant improvements, upgrades to the appearance
of the exteriors of the buildings, parking garage lighting and bridge
improvements.
The Partnership holds MBS that are guaranteed by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home 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. Principal collections on
MBS have stabilized since 1994 because steady interest rates have slowed
the pace of refinancings that were experienced in 1994.
Subsequent to year end, the Joint Venture Partners and Brookwood Village
Joint Venture were named as defendants in a lawsuit filed by the previous
owners of Brookwood Village Mall and Convenience Center related to a
$5,000,000 lien retained by the seller. On February 28, 1997, Brookwood
Village Joint Venture paid the discounted amount of $4,300,000 to the
previous owner to release the lien and settle the lawsuit. The payment was
funded by capital contributions of $2,150,000 from each of the Joint
Venture Partners. See Note K to the Financial Statements included in Item
8 (Appendix A) of this report for further discussion of this matter.
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. As of December 31, 1996 the Partnership had
significant liquid resources. Therefore, the General Partners have
increased the annual distribution rate from $.80 per Unit to $1.00 per Unit
in 1997, beginning with the distribution payable in May, 1997.
Distributable Cash Flow and Net Cash 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 year ended December 31, 1996 and the period from
inception to December 31, 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 Year Inception to
Ended December 31, December 31,
1996 1996
<S> <C> <C>
Distributable Cash Flow:
Net income (loss) for tax purposes $ 4,052 $ 49,128
Items providing/not requiring or
(not providing) the use of
operating funds:
Tax basis depreciation and
amortization 1,753 16,582
Acquisition expenses paid from
offering proceeds charged
to operations - 248
Partnership's share of Joint
Venture taxable net loss (1,201) (7,265)
Distributions from Joint Venture 1,376 9,908
Additions to fixed assets (629) (3,216)
Amounts released from reserves
for capital improvements - 1,020
Total Distributable Cash Flow ("DCF") $ 5,351 $ 66,405
Unitholders' Share of DCF $ 5,244 $ 65,077
Unitholders' Share of DCF
per Unit $ .70 $ 8.68(c)
General Partners' Share of DCF $ 107 $ 1,328
Net Proceeds from Capital Transactions:
Principal collections on MBS, net $ 1,368 $ 38,000
Reinvestment of MBS principal
collections - (3,687)
Total Net Proceeds from Capital
Transactions $ 1,368 $ 34,313
Distributions:
Unitholders' $ 6,000(a) $ 99,818(b)
Unitholders' Average
per Unit $ .80(a) $ 13.31(b)(c)
General Partners $ 107(a) $ 1,328(b)
Total Distributions $ 6,107(a) $101,146(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 February, 1997.
(b)Includes an estimate of the distribution to be paid in February, 1997.
(c)Unitholders' average per Unit return of capital as of February, 1997 is
$4.63 [$13.31 - $8.68].
Operations
Partnership
1996 compared to 1995
Distributable Cash Flow decreased in 1996 as compared to 1995 primarily as
a result of a decrease in MBS interest income, an increase in expenses and
an increase in capital improvements at the Partnership's properties. Net
income, net of the Partnership's share of Joint Venture net income (loss),
also decreased in 1996 by approximately 15%.
Total revenue, net of the Partnership's share of Joint Venture income
(loss), decreased in 1996 as compared to 1995 primarily due to a decrease
in MBS interest income as discussed below. Rental revenue remained stable
as the decrease in occupancy at Alderwood Towne Center ("Alderwood") was
offset by the increase in occupancy at Canyon Place ("Canyon"). Alderwood's
decrease in average occupancy was the result of the eviction of Abodio, a
9,742 square foot tenant, in the second quarter of 1996. Additionally,
Clothestime, a 3,265 square foot tenant, chose not to renew its lease in
the third quarter. To offset this decrease, Jo-Ann Fabrics, a 14,833
square foot tenant, opened in the first quarter at Canyon, favorably
impacting rental revenue in 1996. Although market conditions in Atlanta
have somewhat declined, increased rental rates, instituted during the first
half of 1996, increased revenue at Cumberland Glen.
Total expenses in 1996 increased as compared to 1995, with increases in
maintenance and general and administrative expenses more than offsetting
the decrease in real estate taxes. Security increased at Encino Oaks
("Encino") in 1996 due to additional incidents reported at the property.
This, as well as increased landscaping expenditures at Encino, Alderwood
and Canyon, and a rise in snow removal costs at Alderwood and Canyon caused
maintenance expense to increase. Additionally, at Cumberland Glen the
interior of its buildings were enhanced, including wallpapering and cabinet
repairs, to keep the property appealing and help maintain occupancy in a
declining real estate market. The increase in general and administrative
expense was the result of increased costs incurred in connection with the
operation of the Partnership and its properties, including accounting,
computer, insurance, travel, legal and payroll, and the preparation and
mailing of reports and other communications to the Unitholders. Real
estate taxes decreased as a result of the reassessment of Canyon and
Coral's value in 1996. In conjunction with the higher number of capital
improvements performed in 1996, depreciation expense increased in 1996 when
compared to 1995.
1995 compared to 1994
Distributable Cash Flow increased due to decreased capital improvements,
increased rental revenues and distributions received from the Joint
Venture. Rental revenues in 1995 increased when compared to 1994 as a
result of increased rental revenue at Canyon and Cumberland Glen. Canyon
experienced an 8% increase in occupancy in 1995 as compared to 1994. This
increase in occupancy was due to the opening of the 4,391 square foot
Payless Shoes and the 10,592 square foot Petco Pet Food and Supplies stores
in the fourth quarter of 1994 and to the expansion of several tenants
between 1994 and 1995. At Cumberland Glen, the strong economic environment
in the Atlanta, Georgia area has allowed management to increase rental
rates on certain floor plans. All other properties have experienced
relatively stable occupancies with minor rental increases during 1995.
Total expenses as a whole remained relatively stable. However,
individually, maintenance, operating, general and administrative, and real
estate taxes all changed significantly in 1995 as compared to 1994.
Operating and general and administrative expenses decreased as a result of
lower reimbursable expenses throughout 1995. Maintenance expense decreased
in 1995 as compared to the same period in 1994 due to preventive
maintenance at Encino, roof repairs at Canyon, and improvements to the
parking lot and building interiors at Cumberland Glen, all performed in
1994. The increase in real estate taxes is due primarily to a refund of
approximately $270,000 recorded in the second quarter of 1994 for prior
years' real estate taxes at Coral Plaza.
MBS and Other Income
MBS interest income decreased approximately $129,000 in 1996 from 1995, and
$151,000 in 1995 from 1994 due to prepayments and repayments of principal
which occurred between 1994 and 1996. The asset balance on which income is
generated has decreased approximately 16% since December 31, 1995 and
approximately 27% since December 31, 1994.
Interest income on short-term investments remained relatively stable in
1996 when compared to 1995 as cash balances have leveled off. However, in
1995, higher average cash and cash equivalent balances, including
investments in commercial paper, resulted in higher interest income on
short-term investments when compared to 1994.
Joint Venture
Net income, net of the valuation provision for losses on real estate,
increased in 1996 when compared to 1995 as the decrease in total expenses
more than offset the decrease in total revenue. Yeildings, a 21,307 square
foot tenant, moved out on December 31, 1996. As a result of the move-out,
the Joint Venture incurred additional amortization costs of approximately
$39,000. Additionally, a credit adjustment of approximately $131,000,
during the fourth quarter, for Eckerd Drugs's prior years' rent
overpayment, based on a percentage of its sales, also attributed to the
Joint Venture's decline in rental revenue. Interest income also decreased
as the Joint Venture maintained lower average cash and cash equivalent
balances in 1996. Total expenses, net of the provision for losses of real
estate, decreased in 1996 when compared to 1995, a result of decreases in
operating and depreciation expenses. Increased leasing and advertising
efforts made in 1995, in an effort to maintain the Joint Venture's
occupancy, accounted for the decrease in operating expense in 1996.
Depreciation expense decreased as a result of an increase in fully
depreciated assets in 1996 when compared to 1995.
Net income in 1995 remained relatively stable when compared to 1994. Total
revenues remained relatively stable as a result of steady occupancy
throughout 1995. Total expenses in 1995 as compared to 1994 also remained
relatively flat. Real estate taxes decreased as a result of an abatement
in the third quarter of 1995 due to the revaluation of the Joint Venture by
the local taxing authority. This reduction is offset by an increase in
operating expense attributable to increased leasing efforts by management.
Depreciation expense increased due to a large number of tenant buildouts
and improvements completed in 1995 and 1994.
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 and the Joint Venture's investments in properties are
carried at cost less accumulated depreciation unless the General Partners
believe there is a material impairment in value, in which case a provision
to write down investments in properties to fair value will be charged
against income. As of December 31, 1996, the Joint Venture recorded a
$9,000,000 valuation provision for losses on its real estate asset which
represents the difference between carrying value and estimated fair value
less costs to sell. The General Partners believe there are no other
impairment adjustments necessary for the remainder of its real estate
assets.
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 both the Partnership and The Krupp Company Limited
Partnership-IV, the other General Partner of the Partnership, is as
follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (50) Co-Chairman of the Board
George Krupp (52) Co-Chairman of the Board
Laurence Gerber (40) President
Robert A. Barrows (39) Treasurer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking,
healthcare facility ownership and the management of the Company. Today,
The Berkshire Group is an integrated real estate, mortgage and healthcare
company which is headquartered in Boston with regional offices throughout
the country. A staff of approximately 3,400 are responsible for the more
than $4 billion under management for institutional and individual clients.
Mr. Krupp is a graduate of Bryant College. In 1989 he received an honorary
Doctor of Science in Business Administration from this institution and was
elected trustee in 1990. Mr. Krupp is Chairman of the Board and a Director
of both Berkshire Realty Company, Inc. (NYSE-BRI) and Harborside Healthcare
(NYSE-HBR). George Krupp is Douglas Krupp's brother.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of
approximately 3,400 are responsible for more than $4 billion under
management for institutional and individual clients. Mr. Krupp attended
the University of Pennsylvania and Harvard University. Mr. Krupp also
serves as Chairman of the Board and Trustee of Krupp Government Income
Trust and as Chairman of the Board and Trustee of Krupp Government Income
Trust II.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as Director of Berkshire Realty
Company, Inc. (NYSE-BRI) and Harborside Healthcare Corporation (NYSE-HBR)
as well as President and Trustee of Krupp Government Income Trust and
President and Trustee of Krupp Government Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of The Berkshire Group. Mr. Barrows has held several positions within The
Berkshire Group since joining the company in 1983 and is currently
responsible for accounting and financial reporting, treasury, tax, payroll
and office administrative activities. Prior to joining The Berkshire
Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in Boston.
He received a B.S. degree from Boston College 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 December 31, 1996, no person of record owned or was known by the
General Partners to own beneficially more than 5% of the Partnership's
7,499,818 outstanding Depositary Receipts. The only interests held by
management or its affiliates consist of its General Partner and Corporate
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. Additionally, as of December 31, 1996,
no person of record owned or was known by the General Partners to own
beneficially more than 5% of the Partnership's outstanding Units.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)1. Financial Statements - see Index to Financial Statements and
Schedule included under Item 8 (Appendix A) on page F-2 of this
report.
2. Financial Statement Schedule - see Index to Financial Statements
and Schedule included under Item 8 (Appendix A) on page F-2 of
this report. All other schedules are omitted as they are not
applicable, not required or the information is provided in the
Financial Statements or the Notes thereto.
3. Separate Financial Statements - as required by Rule 3-09 of
Regulation S-X. The separate financial statements and schedule
for Brookwood Village Joint Venture (the "Joint Venture") are
included under Item 8 (Appendix A) on pages F-17 to F-30 of this
report.
(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 March 25, 1986
[Exhibit A to Prospectus included in Amendment No. 1 of Registrant's
Registration Statement on Form S-11 dated March 26, 1986 (File No.
33-2312)].*
(4.2)Subscription Agreement Specimen [Exhibit D to Prospectus included in
Amendment No. 1 of Registrant's Registration Statement on Form S-11
dated March 26, 1986 (File No. 33-2312)].*
(4.3)Eleventh Amendment and Restatement of Certificate of Limited
Partnership filed with the Massachusetts Secretary of State as of
February 6, 1987. [Exhibit 4.3a to Registrant's Report on Form 10-K
dated December 31, 1986 (File No. 33-2312)].*
(10) Material Contracts:
Encino Oaks Plaza
(10.1) Krupp Standard Purchase Agreement dated July 16, 1986 between
Krupp Realty and Development, Inc., a Massachusetts corporation
and Cal-American Income Property Fund II, a California limited
partnership. [Exhibit 1 to Registrant's Report on Form 8-K dated
July 31, 1986 (File No. 33-2312)].*
(10.2) Assignment of Contract between Krupp Realty and Development, Inc.,
a Massachusetts corporation and Krupp Cash Plus-II Limited
Partnership, a Massachusetts limited partnership dated July 28,
1986. [Exhibit 2 to Registrant's Report on Form 8-K dated July
31, 1986 (File No. 33-2312)].*
(10.3) Partnership Grant Deed dated July 31, 1986 from Cal-American
Income Property Fund II a California limited partnership, to Krupp
Cash Plus-II Limited Partnership, a Massachusetts limited
partnership. [Exhibit 3 to Registrant's Report on Form 8-K dated
July 31, 1986 (File No. 33-2312)].*
(10.4) Management Agreement dated July 31, 1986 between Krupp Cash Plus-
II Limited Partnership, as Owner and Krupp Asset Management
Company, now known as Berkshire Property Management ("BPM"), as
Agent. [Exhibit 10.4a to Registrant's Report on Form 10-K dated
December 31, 1986 (File No. 33-2312)].*
Alderwood Towne Center
(10.5) Krupp Standard Option Agreement dated July 16, 1986 between Krupp
Realty and Development, Inc., a Massachusetts corporation and
Alderwood Towne Center, a Washington tenancy-in-common. [Exhibit
10.5 included in Registrant's Post Effective Amendment No. 2 to
its Form S-11 Registration Statement dated September 3, 1986 (File
No. 33-2312)].*
(10.6) Escrow Agreement dated August 12, 1986 between Krupp Realty and
Development, Inc., a Massachusetts corporation and Alderwood Towne
Center, a Washington tenancy-in-common. [Exhibit 10.5 included in
Registrant's Post Effective Amendment No. 2 to its Form S-11
Registration Statement dated September 3, 1986 (File No. 33-
2312)].*
(10.7) Amendment to Option Agreement dated July 17, 1986 between Krupp
Realty and Development, Inc., a Massachusetts corporation and
Alderwood Towne Center, a Washington tenancy-in-common. [Exhibit
10.5 included in Registrant's Post Effective Amendment No. 2 to
its Form S-11 Registration Statement dated September 3, 1986 (File
No. 33-2312)].*
(10.8) Assignment of Option Agreement between Krupp Realty and
Development, Inc. a Massachusetts corporation and Krupp Cash Plus-
II Limited Partnership, a Massachusetts limited partnership dated
August 20, 1986. [Exhibit 4 to Registrant's Report on Form 8-K
dated September 3, 1986 (File No. 33-2312)].*
(10.9) Statutory Warranty Deed dated September 3, 1986 between Krupp Cash
Plus-II Limited Partnership, a Massachusetts limited partnership
and Alderwood Towne Center Associates. [Exhibit 5 to Registrant's
Report on Form 8-K dated September 3, 1986 (File No. 33-2312)].*
(10.10) Property Management Agreement dated September 3, 1986 between
Krupp Cash Plus-II Limited Partnership, as Owner and Krupp Asset
Management Company, now known as Berkshire Property Management
("BPM"), as Agent. [Exhibit 6 to Registrant's Report on Form 8-K
dated September 3, 1986 (File No. 33-2312)].*
Brookwood Village Mall and Convenience Center
(10.11) Purchase and Sale Agreement dated December 5, 1986 between Krupp
Realty and Development Inc., a Massachusetts corporation and
Everett Shepherd, Jr. et al as assigned to Brookwood Village
Joint Venture. [Exhibit 1 to Registrant's Report on Form 8-K
dated December 16, 1986 (File No. 33-2312)].*
(10.12) Statutory Warranty Deed with Vendors' Lien dated December 16,
1986 between Brookwood Village Joint Venture and Everett
Shepherd, Jr. et al. [Exhibit 2 to Registrant's Report on Form
8-K dated December 16, 1986 (File No. 33-2312)].*
(10.13) Business Certificate dated December 11, 1986 establishing
Brookwood Village Joint Venture. [Exhibit 3 to Registrant's
Report on Form 8-K dated December 16, 1986 (File No. 33-2312)].*
(10.14) Brookwood Village Joint Venture Agreement dated December 15,
1986 between Krupp Cash Plus-II Limited Partnership, a
Massachusetts limited partnership and Krupp Cash Plus-III
Limited Partnership, a Massachusetts limited partnership, now
known as Berkshire Realty Company, Inc. [Exhibit 10.14 to
Registrant's Report on Form 10-K dated December 31, 1986 (File
No. 33-2312)].*
(10.15) Property Management Agreement dated December 16, 1986 between
Brookwood Village Joint Venture, as Owner and Krupp Asset
Management Company, now known as Berkshire Property Management
("BPM"), as Agent. [Exhibit 4 to Registrant's Report on Form 8-K
dated December 16, 1986 (File No. 33-2312)].*
Canyon Place Shopping Center
(10.16) Krupp Standard Option Agreement dated October 24, 1986 between
Krupp Realty and Development, Inc., a Massachusetts corporation
and Canyon Place Associates, a Washington tenancy-in-common.
[Exhibit 1 to Registrant's Report on Form 8-K dated December 23,
1986 (File No. 33-2312)].*
(10.17) Amendment to Option Agreement dated December 9, 1986 between
Krupp Realty and Development, Inc., a Massachusetts corporation
and Canyon Place Associates, a Washington tenancy-in-common.
[Exhibit 2 to Registrant's Report on Form 8-K dated December 23,
1986 (File No. 33-2312)].*
(10.18) Assignment of Option Agreement dated December 17, 1986 between
Krupp Realty and Development, Inc., a Massachusetts corporation
and Krupp Cash Plus-II Limited Partnership, a Massachusetts
limited partnership. [Exhibit 3 to Registrant's Report on Form
8-K dated December 23, 1986 (File No. 33-2312)].*
(10.19) Warranty Deed dated December 23, 1986 between Canyon Place
Associates, a Washington tenancy-in-common, as Grantor and Krupp
Cash Plus-II Limited Partnership, a Massachusetts limited
partnership, as Grantee. [Exhibit 4 to Registrant's Report on
Form 8-K dated December 23, 1986 (File No. 33-2312)].*
(10.20) Property Management Agreement dated December 23, 1986 between
Krupp Cash Plus-II Limited Partnership, as Owner and Krupp Asset
Management Company, now known as Berkshire Property Management
("BPM"), as Agent. [Exhibit 6 to Registrant's Report on Form 8-
K dated December 23, 1986 (File No. 33-2312)].*
Coral Plaza Shopping Center
(10.21) Purchase and Sale Agreement dated May 8, 1987 between Harris
Trust and Savings Bank, as trustee under Trust No. 42703, and
Krupp Realty and Development, Inc., a Massachusetts corporation,
as assigned to Krupp Cash Plus-II Limited Partnership. [Exhibit
19.1 to Registrant's Report on Form 10-Q dated June 30, 1987
(File No. 33-2312)].*
(10.22) Assignment between Coral Plaza Limited Partnership and Harris
Trust and Savings Bank, as Trustee under Trust No. 42703,
collectively as "Assignor," and Krupp Cash Plus-II Limited
Partnership, a Massachusetts limited partnership, as "Assignee"
dated June 2, 1987. [Exhibit 19.2 to Registrant's Report on
Form 10-Q dated June 30, 1987 (File No. 33-2312)].*
(10.23) Trustee's Deed dated May 28, 1987 from Harris Trust and Savings
Bank, as trustee under Trust No. 42703, to Krupp Cash Plus-II
Limited Partnership. [Exhibit 19.3 to Registrant's Report on
Form 10-Q dated June 30, 1987 (File No. 33-2312)].*
(10.24) Property Management Agreement, dated June 1, 1987, between Krupp
Cash Plus-II Limited Partnership, as Owner, and Krupp Asset
Management Company, now known as Berkshire Property Management
("BPM"), as Agent. [Exhibit 19.4 to Registrant's Report on Form
10-Q dated June 30, 1987 (File No. 33-2312)].*
Cumberland Glen Apartments
(10.25) Agreement of Purchase and Sale, dated August 24, 1987 between
FNBC Properties, Inc., a Delaware corporation, as "Seller," and
Krupp Realty and Development, Inc., a Massachusetts corporation,
as "Purchaser." [Exhibit 19.5 to Registrant's Report on Form
10-Q dated September 30, 1987 (File No. 0-15816)].*
(10.26) Assignment of Purchase and Sale Agreement, dated August 24, 1987
between Krupp Realty and Development, Inc., and Krupp Cash Plus-
II Limited Partnership, a Massachusetts limited partnership.
[Exhibit 19.6 to Registrant's Report on Form 10-Q dated
September 30, 1987 (File No. 0-15816)].*
(10.27) Quit Claim Deed, dated September 3, 1987, between The First
National Bank of Chicago, and Krupp Cash Plus-II Limited
Partnership. [Exhibit 19.7 to Registrant's Report on Form 10-Q
dated September 30, 1987 (File No. 0-15816)].*
(10.28) Property Management Agreement, dated September 3, 1987, between
Krupp Cash Plus-II Limited Partnership, as Owner, and Krupp
Asset Management Company, now known as Berkshire Property
Management ("BPM"), as Agent. [Exhibit 19.8 to Registrant's
Report on Form 10-Q dated September 30, 1987 (File No. 0-
15816)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996 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
27th day of March, 1997.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
By:
The Krupp Corporation, a General Partner
By:
/s/Douglas Krupp
Douglas Krupp, 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 27th day of March, 1997.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive
Officer) and Douglas Krupp Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/George Krupp Co-Chairman (Principal Executive
Officer) and
George Krupp Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/Laurence Gerber President of The Krupp Corporation, a
General
Laurence Gerber Partner of the Registrant.
/s/Robert A. Barrows Treasurer of the Krupp Corporation, a
General
Robert A. Barrows Partner of the Registrant.
APPENDIX A
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Balance Sheets at December 31, 1996 and December 31, 1995 F-4
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-5
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-7
Notes to Financial Statements F-8 - F-14
Schedule III - Real Estate and Accumulated Depreciation F-15 -
F-16
Separate Financial Statements - Brookwood Village Joint Venture F-17 - F-30
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Cash Plus-II Limited Partnership:
We have audited the financial statements and the financial statement
schedule of Krupp Cash Plus-II Limited Partnership (the "Partnership")
listed in the index on page F-2 of this Form 10-K. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Krupp Cash Plus-II
Limited Partnership as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 31, 1997, except for
the information disclosed in
Note K, for which the date is
February 28, 1997.
<PAGE>
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
<S> <C> <C>
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of
$4,626,130 and $4,137,678,
respectively $ 5,830,088 $ 6,119,113
Retail centers, less accumulated
depreciation of $14,132,636 and
$12,489,601, respectively 36,399,653 37,613,542
Investment in Joint Venture (Note D) 15,112,894 20,411,464
Mortgage-backed securities ("MBS"), net of
accumulated amortization (Note E) 7,134,203 8,501,911
Total real estate assets 64,476,838 72,646,030
Cash and cash equivalents (Note C) 8,953,003 8,065,906
Other assets 633,585 711,172
Total assets $ 74,063,426 $ 81,423,108
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable $ 31,990 $ 23,879
Accrued expenses and other
liabilities (Note F) 698,174 657,032
Due to affiliates (Note H) 161,374 -
Total liabilities 891,538 680,911
Commitments and contingencies (Note D)
Partners' equity (deficit) (Note G):
Unitholders
(7,499,718 Units outstanding) 73,661,975 81,088,463
Corporate Limited Partner
(100 Units outstanding) 1,187 1,286
General Partners (491,274) (347,552)
Total Partners' equity 73,171,888 80,742,197
Total liabilities and Partners' equity $ 74,063,426 $ 81,423,108
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Revenue:
Rental (Note I) $ 6,524,291 $ 6,588,018 $ 6,246,489
Partnership's share of Joint
Venture net income (loss)
(Note D) (3,923,070) 496,491 501,381
Interest income-MBS (Note E) 687,690 816,210 967,172
Interest income-other (Note C) 475,288 466,282 307,471
Total revenue 3,764,199 8,367,001 8,022,513
Expenses:
Operating (Note H) 948,743 918,694 1,029,931
Maintenance 545,017 501,083 581,822
General and administrative
(Note H) 440,178 343,761 442,987
Real estate taxes 779,921 815,364 630,923
Management fees (Note H) 374,702 374,554 348,589
Depreciation 2,131,487 2,025,073 1,923,644
Total expenses 5,220,048 4,978,529 4,957,896
Net income (loss) (Note J) $(1,455,849) $ 3,388,472 $ 3,064,617
Allocation of net income (loss)
(Note G):
Unitholders (7,499,718 Units
outstanding) $(1,426,713) $ 3,320,658 $ 3,003,285
Net income (loss) per Unit
of Depositary Receipt $ (.19) $ .44 $ .40
Corporate Limited Partner
(100 Units outstanding) $ (19) $ 44 $ 40
General Partners $ (29,117) $ 67,770 $ 61,292
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
<S> <C> <C> <C> <C>
Balance at
December 31, 1993 $86,776,391 $ 1,362 $(277,841) $86,499,912
Net income 3,003,285 40 61,292 3,064,617
Distributions (6,012,096) (80) (89,729) (6,101,905)
Balance at
December 31, 1994 83,767,580 1,322 (306,278) 83,462,624
Net income 3,320,658 44 67,770 3,388,472
Distributions (5,999,775) (80) (109,044) (6,108,899)
Balance at
December 31, 1995 81,088,463 1,286 (347,552) 80,742,197
Net loss (Note G) (1,426,713) (19) (29,117) (1,455,849)
Distributions (Note G) (5,999,775) (80) (114,605) (6,114,460)
Balance at
December 31, 1996 $73,661,975 $ 1,187 $(491,274) $73,171,888
</TABLE>
The per Unit distributions for the years ended December 31, 1996, 1995
and 1994 were $.80.
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Operating activities:
Net income (loss) $(1,455,849) $ 3,388,472 $ 3,064,617
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation 2,131,487 2,025,073 1,923,644
Partnership's share of Joint
Venture net loss (income) 3,923,070 (496,491) (501,381)
Distributions received from
Joint Venture - 496,491 501,381
Amortization of MBS premium
(discount),net (2,207) (3,943) 147
Decrease (increase) in other
assets 77,587 127,734 (104,219)
Increase (decrease) in
accounts payable 8,111 (197,631) 62,689
Increase (decrease) in due to
affiliates 161,374 - (3,695)
Increase (decrease) in
accrued expenses and
other liabilities 41,142 (8,263) 42,267
Net cash provided by
operating activities 4,884,715 5,331,442 4,985,450
Investing activities:
Additions to fixed assets (628,548) (471,770) (821,536)
Settlement of land easement (25) (2,658) 53,064
Principal collections on MBS 1,369,915 1,317,155 2,936,920
Distributions received from Joint
Venture in excess of its
earnings 1,375,500 928,509 397,619
Net cash provided by
investing activities 2,116,842 1,771,236 2,566,067
Financing activity:
Distributions (6,114,460) (6,108,899) (6,101,905)
Net increase in cash and cash
equivalents 887,097 993,779 1,449,612
Cash and cash equivalents,
beginning of year 8,065,906 7,072,127 5,622,515
Cash and cash equivalents,
end of year $ 8,953,003 $ 8,065,906 $ 7,072,127
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A.Organization
Krupp Cash Plus-II Limited Partnership (the "Partnership") was formed on
December 18, 1985 by filing a Certificate of Limited Partnership in The
Commonwealth of Massachusetts. The Partnership issued all of the General
Partner Interests to The Krupp Corporation and The Krupp Company Limited
Partnership-IV in exchange for capital contributions aggregating $3,000.
Except under certain limited circumstances upon termination of the
Partnership, the General Partners are not required to make any additional
capital contributions. The Partnership will continue to exist until
December 31, 2025, unless earlier terminated upon occurrence of certain
events as set forth in the Partnership Agreement.
The Partnership issued 100 Limited Partner Interests to Krupp Depositary
Corporation (the "Corporate Limited Partner") in exchange for a capital
contribution of $2,000. The Corporate Limited Partner, in turn, issued
Depositary Receipts ("Units") to the investors and assigned all of its
rights and interest in the Limited Partner Interests (except for its $2,000
Limited Partner's interest) to the holders of Depositary Receipts. As of
January 21, 1987, the Partnership completed its public offering having sold
7,499,818 Units for $149,845,812, net of $150,548 of purchase volume
discounts.
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 J).
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 maturities of
three months or less from the date of acquisition in cash and cash
equivalents. The cash equivalents are recorded at cost, which approximates
current market values.
Continued
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
Rental Revenues
Leases require the payment of base rent monthly in advance. Rental
revenues are recorded on the accrual basis. Commercial leases generally
contain provisions for additional rent based on a percentage of tenant
sales and other provisions which are also recorded on the accrual basis,
but are billed in arrears. Minimum rental revenue for long term commercial
leases is recognized on a straight-line basis over the life of the related
lease.
Leasing Commissions
Leasing commissions on commercial properties are deferred and amortized
over the life of the related lease.
Depreciation
Depreciation is provided for by the use of the straight-line method over
the estimated useful lives of the related assets as follows:
Buildings and improvements 2 to 25 years
Appliances, carpeting and equipment 3 to 5 years
Tenant improvements for commercial tenants are depreciated over the life of
the related lease.
Impairment of Long-Lived Assets
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 routinely performs market and growth studies along with
yearly appraisals of its unleveraged real estate. The investments in
properties are carried at cost less accumulated depreciation unless the
General Partners believe there is a material impairment in value, in which
case a provision to write down investments in properties to fair value will
be charged against income (see Note D).
Investment in Joint Venture
The Partnership has a 50% interest in the Joint Venture. This investment
is accounted for using the equity method of accounting as the Partnership
Agreement requires a simple majority vote for all major decisions regarding
the Joint Venture. As such, the Partnership does not have control of the
operations of the underlying assets. Under the equity method of
accounting, the Partnership's equity investment in the net income of the
Joint Venture is included currently in the Partnership's net income. Cash
distributions received from the Joint Venture reduce the Partnership's
investment (see Note D).
Continued
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
MBS
MBS are held for long-term investment and are carried at amortized cost.
Premiums or discounts are amortized over the life of the underlying
securities using the effective yield method. The market value of MBS is
determined based on quoted market prices.
Income Taxes
The Partnership is not liable for federal or state income taxes as
Partnership income 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's taxable income, such change will
be reported to the Partners.
Reclassifications
Certain prior year balances have been reclassified to conform with current
year financial statement presentation.
C.Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Cash and money market accounts $2,038,686 $ 710,395
Commercial paper 6,914,317 6,365,784
Bankers' acceptance - 989,727
$8,953,003 $8,065,906
</TABLE>
At December 31, 1996, commercial paper represents corporate issues
complying with Section 6.2(a) of the Partnership Agreement purchased
through a corporate issuer maturing in the first quarter of 1997. At
December 31, 1996, the carrying value of the Partnership's investment in
commercial paper approximates fair value.
D.Investment in Joint Venture
The Partnership and an affiliate of the Partnership (collectively referred
to herein as the "Joint Venture Partners") each have a 50% interest in 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.
Continued
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
D.Investment in Joint Venture - Continued
Under the purchase and sale agreement entered into by the Partnership, its
affiliates and the seller, the seller retained a lien on the premises
related to the future sale of the property or development of unimproved
land at Brookwood Village. The lien entitled the seller to receive
$5,000,000 of the 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. Subsequent to year end, the Joint
Venture Partners settled a lawsuit, which was filed by the previous owner,
related to the lien. See Note K for further discussion of this matter.
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", the Joint Venture recorded a $9,000,000 provision for loss on
its real estate asset which represents the difference between carrying
value and estimated fair value less costs to sell at December 31, 1996.
Financial statements for Brookwood Village Joint Venture are included on
pages F-17 to F-30 of this report.
E.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>
December 31, December 31,
1996 1995
<S> <C> <C>
Face Value $ 7,125,057 $ 8,494,972
Amortized Cost $ 7,134,203 $ 8,501,911
Estimated Market Value $ 7,476,000 $ 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 $351,000 and $542,000 and unrealized
losses of approximately $9,000 and $0 at December 31, 1996 and December 31,
1995, 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.
F.Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accrued real estate taxes $ 245,000 $ 264,996
Tenant security deposits 169,849 186,242
Other accrued expenses 206,436 194,249
Prepaid rent 76,889 11,545
$ 698,174 $ 657,032
</TABLE>
Continued
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
G. Partners' Equity
Profits or losses from Partnership operations and Distributable Cash Flow
are allocated 98% to the Unitholders and Corporate Limited Partner (the
"Limited Partners") (based on Units held) and 2% to the General Partners.
Profits and net cash flow arising from capital transactions will be
allocated in the manner described below. Losses from a capital
transaction are allocated 98% to the Limited Partners and 2% to the General
Partners.
Upon the occurrence of a capital transaction, as defined in the Partnership
Agreement, proceeds will be applied to the payment of all debts and liabili
ties of the Partnership then due and then fund any reserves for contingent
liabilities. Remaining net cash proceeds will then be distributed first,
to the Limited Partners until they have received a return of their total
invested capital, second, to the General Partners until they have received
a return of their total invested capital, third, to the Limited Partners
until they have received any deficiency in the 12% cumulative return on
invested capital through fiscal years prior to the date of the capital
transaction, fourth, to the General Partners until they have received an
amount necessary so that the amounts of net cash proceeds whenever
allocated under number three and number four are in the ratio of 85 to 15,
and fifth, 85% to the Limited Partners and 15% to the General Partners.
As of December 31, 1996, the following cumulative partner contributions and
allocations have been made since inception of the Partnership:
<TABLE>
<CAPTION>
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
<S> <C> <C> <C> <C>
Capital contributions $149,845,812 $ 2,000 $ 3,000 $149,850,812
Syndication costs (17,865,372) - - (17,865,372)
Net income 39,998,513 558 816,308 40,815,379
Distributions (98,316,978) (1,371) (1,310,582) (99,628,931)
Total at
December 31, 1996 $ 73,661,975 $ 1,187 $ (491,274) $ 73,171,888
</TABLE>
H. 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.
Continued
<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
H.Related Party Transactions - Continued
Amounts paid to the General Partners or their affiliates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Property management fees $374,702 $374,554 $348,589
Expense reimbursements 462,290 322,733 537,516
Charged to operations $836,992 $697,287 $886,105
</TABLE>
Due to affiliates consisted of expense reimbursements of $161,374 and $0 as
of December 31, 1996 and 1995, respectively.
I.Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases for the years 1997
through 2001 and thereafter are as follows:
1997 $3,861,000
1998 3,592,200
1999 3,285,600
2000 2,863,000
2001 2,001,200
Thereafter 4,364,500
J.Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating its
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) for each year reported in the
accompanying Statements of Operations with the net income reported in the
Partnership's federal income tax return for the years ended December 31,
1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income (loss) per Statement
of Operations $(1,455,849) $ 3,388,472 $ 3,064,617
Difference in book to tax
depreciation 378,160 303,088 241,855
Difference in Joint Venture
book to tax depreciation 505,859 833,854 524,957
Difference in Joint Venture
book to tax valuation
provision 4,500,000 - -
Rental adjustment required
by Generally Accepted
Accounting Principles 5,881 (50,659) (35,343)
Rental adjustment required
by Generally Accepted
Accounting Principles
for Joint Venture 117,836 (110,747) (142,376)
Net income for federal income
tax purposes $ 4,051,887 $ 4,364,008 $ 3,653,710
</TABLE>
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
J. Federal Income Taxes - Continued
The allocation of the net income for federal income tax purposes for
1996 is as follows:
<TABLE>
<CAPTION>
Passive Portfolio Portfolio
Income Income Expense Total
<S> <C> <C> <C> <C>
Unitholders $2,817,665 $1,153,130 $ - $3,970,795
Corporate Limited
Partner 38 15 - 53
General Partners 57,505 23,534 - 81,039
$2,875,208 $1,176,679 $ - $4,051,887
</TABLE>
For the years ended December 31, 1996, 1995 and 1994 the average
per Unit income to the Unitholders for federal income tax purposes
was $.53, $.57, and $.48 respectively.
The basis of the Partnership's assets for financial reporting
purposes is less than its tax basis by approximately $3,929,000
and $2,927,000 at December 31, 1996 and 1995, respectively. The
tax and book basis of the Partnership's liabilities are the same.
K. Subsequent Event
Subsequent to year end, the Partnership, its Joint Venture Partner
(collectively the "Joint Venture Partners"), and Brookwood Village
Joint Venture, among others, were named as defendants in a lawsuit
filed by the previous owner of Brookwood Village Mall and
Convenience Center related to a $5,000,000 lien retained by the
seller. On February 28, 1997, Brookwood Village paid the
discounted amount of $4,300,000 to release the lien and settle the
lawsuit. The Partnership and its Joint Venture Partner each made
capital contributions of $2,150,000 to fund the settlement
payment.
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
Costs Capitalized
Subsequent to
Initial Costs to Partnership Acquisition
Buildings Buildings
and and
Description Land Improvements Improvements
<S> <C> <C> <C> <C>
Encino Oaks Shopping Center
Encino, California $ 6,331,972 $ 2,110,657 $ 806,132
Alderwood Towne Center
Lynnwood, Washington 4,011,588 8,462,256 411,219
Canyon Place Shopping Center
Portland, Oregon 4,175,701 15,684,340 927,139
Coral Plaza Shopping Center
Oak Lawn, Illinois 1,296,760 6,027,818 337,088
Cumberland Glen Apartments
Smyrna, Georgia 680,781 8,996,474 778,963
Total $16,496,802 $41,281,545 $ 3,260,541
Gross Amounts Carried at End of Year
Buildings
and
Land Improvements Total (a)
Encino Oaks Shopping Center
Encino, California $ 6,331,972 $ 2,916,789 $ 9,248,761
Alderwood Towne Center
Lynnwood, Washington 4,011,588 8,873,475 12,885,063
Canyon Place Shopping Center
Portland, Oregon 4,125,320(b) 16,611,479 20,736,799
Coral Plaza Shopping Center
Oak Lawn, Illinois 1,296,760 6,364,906 7,661,666
Cumberland Glen Apartments
Smyrna, Georgia 680,781 9,775,437 10,456,218
Total $16,446,421 $44,542,086 $60,988,507
</TABLE>
(a)The Partnership uses the cost basis for property valuation for both
income tax and financial statement purposes. The Partnership holds title
to its properties free and clear from all mortgage indebtedness or other
material liens or encumbrances. The aggregate cost for federal income tax
purposes at December 31, 1996 is $61,129,208 and the aggregate accumulated
depreciation for federal income tax purposes is $(16,536,509).
(b)Canyon Place received a cash settlement of $50,381, net of legal costs,
for the granting of a railroad easement in 1994. For financial reporting
purposes, the carrying value of land has been reduced accordingly.
Continued
<PAGE>
<TABLE>
<CAPTION>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
December 31, 1996
Year
Accumulated Construction Date
Depreciation Completed Acquired Depreciable Life
<S> <C> <C> <C> <C>
Encino Oaks Shopping Center
Encino, California $ 1,305,924 1974 07/31/86 2
to 25 Years
Alderwood Towne Center
Lynnwood, Washington 3,694,393 1985 09/03/86 2
to 25
Years
Canyon Place Shopping Center
Portland, Oregon 6,703,635 1986 12/23/86 2 to
25 Years
Coral Plaza Shopping Center
Oak Lawn, Illinois 2,428,684 1985 06/02/87 2 to
25 Years
Cumberland Glen Apartments
Smyrna, Georgia 4,626,130 1985 09/03/87 3 to
25 Years
Total $18,758,766
</TABLE>
Reconciliation of Real Estate and Accumulated Depreciation for each of the
three years in the period ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Real Estate
Balance at beginning of year $ 60,359,934 $59,885,506 $59,117,034
Improvements 628,548 471,770 821,536
Settlement of land easement 25 2,658 (53,064)
Balance at end of year $ 60,988,507 $60,359,934 $59,885,506
1996 1995 1994
Accumulated Depreciation
Balance at beginning of year $ 16,627,279 $14,602,206 $12,678,562
Depreciation expense 2,131,487 2,025,073 1,923,644
Balance at end of year $ 18,758,766 $16,627,279 $14,602,206
</TABLE>
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
FINANCIAL STATEMENTS AND SCHEDULE
For the Year Ended December 31, 1996
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-19
Balance Sheets at December 31, 1996 and December 31, 1995 F-20
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-21
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-22
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-23
Notes to Financial Statements F-24 - F-28
Schedule III - Real Estate and Accumulated Depreciation F-29 -
F-30
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Joint Venture Partners of
Brookwood Village Joint Venture:
We have audited the financial statements and financial statement schedule
of Brookwood Village Joint Venture (the "Joint Venture") listed in the
index on page F-18 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Joint Venture'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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Joint Venture as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
As discussed in Note B to the financial statements, the Partnership has
adopted Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", effective January 1, 1996.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 31, 1997, except for
the information disclosed in
Note I, for which the date is
February 28, 1997.
<PAGE>
<TABLE>
<CAPTION>
BROOKWOOD VILLAGE JOINT VENTURE
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
<S> <C> <C>
Real estate assets:
Land $ 15,895,139 $ 14,569,321
Building and improvements 44,635,153 40,909,497
Less accumulated depreciation and
provision for loss (26,190,274) (15,164,143)
Total real estate assets 34,340,018 40,314,675
Cash and cash equivalents 166,919 234,661
Other assets 512,031 632,581
Total assets $ 35,018,968 $ 41,181,917
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable $ 44,762 $ 14,413
Accrued expenses and other liabilities
(Note C) 440,067 332,008
Due to affiliates (Note F) 8,351 12,568
Accrued legal settlement (Note I) 4,300,000 -
Total liabilities 4,793,180 358,989
Partners' equity (Note D) 30,225,788 40,822,928
Total liabilities and Partners' equity $ 35,018,968 $ 41,181,917
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Revenue:
Rental (Note E) $ 6,118,192 $ 6,243,206 $ 6,108,361
Interest income 28,503 50,656 20,666
Total revenue 6,146,695 6,293,862 6,129,027
Expenses:
Operating (Note F) 1,586,415 1,689,116 1,631,195
Maintenance 631,241 590,110 588,747
Real estate taxes 373,856 335,475 439,676
Management fees (Note F) 375,192 376,424 356,030
Depreciation 2,026,131 2,309,755 2,110,617
Provision for loss on real
estate (Note G) 9,000,000 - -
Total expenses 13,992,835 5,300,880 5,126,265
Net income (loss) (Note H) $(7,846,140) $ 992,982 $ 1,002,762
Allocation of net income (loss):
(Note D)
Krupp Cash Plus-II Limited
Partnership $(3,923,070) $ 496,491 $ 501,381
BRI Texas Apartments Limited
Partnership $(3,923,070) $ 496,491 $ 501,381
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
BRI
Krupp Texas
Cash Plus-II Apartments Total
Limited Limited Partners'
Partnership Partnership Equity
<S> <C> <C> <C>
Balance at
December 31, 1993 $21,737,592 $21,737,592 $43,475,184
Net income 501,381 501,381 1,002,762
Distributions (899,000) (899,000) (1,798,000)
Balance at
December 31, 1994 21,339,973 21,339,973 42,679,946
Net income 496,491 496,491 992,982
Distributions (1,425,000) (1,425,000) (2,850,000)
Balance at
December 31, 1995 20,411,464 20,411,464 40,822,928
Net loss (Note D) (3,923,070) (3,923,070) (7,846,140)
Distributions (Note D) (1,375,500) (1,375,500) (2,751,000)
Balance at
December 31, 1996 $15,112,894 $15,112,894 $30,225,788
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (7,846,140) $ 992,982 $ 1,002,762
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation 2,026,131 2,309,755 2,110,617
Provision for loss
on real estate 9,000,000 - -
Decrease (increase)
in other assets 120,550 177,170 (158,935)
Increase (decrease)
in accounts
payable 30,349 (14,741) (270,459)
Increase (decrease)
in due to
affiliates (4,217) 12,568 -
Increase (decrease)
in accrued expenses
and other
liabilities 108,059 (432,851) 473,289
Net cash provided
by operating
activities 3,434,732 3,044,883 3,157,274
Investing activity:
Additions to fixed assets (751,474) (580,348) (936,554)
Financing activity:
Distributions (2,751,000) (2,850,000) (1,798,000)
Net increase (decrease) in
cash and cash equivalents (67,742) (385,465) 422,720
Cash and cash equivalents,
beginning of year 234,661 620,126 197,406
Cash and cash equivalents,
end of year $ 166,919 $ 234,661 $ 620,126
Supplemental schedule of noncash investing and financing activities:
Adjustment to real estate
asset basis for release
of lien (Note I) $ 4,300,000 $ - $ -
Accrued legal settlement
(Note I) $ (4,300,000) $ - $ -
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
A.Organization
On December 16, 1986 Brookwood Village Joint Venture (the "Joint Venture")
acquired Brookwood Village Mall and Convenience Center ("Brookwood
Village"), a retail development located in Birmingham, Alabama. Brookwood
Village consists of a covered mall, a covered garage and a detached strip
shopping center with an aggregate net leasable square footage of 474,138.
The Joint Venture is 50% owned by Krupp Cash Plus-II Limited Partnership
and Texas Apartments Limited Partnership (the "Joint Venture Partners"),
both with similar investment objectives. The express purpose of entering
into the Joint Venture was to purchase, own, manage and operate Brookwood
Village. The Joint Venture shall exist until December 16, 2006 unless
earlier terminated upon occurrence of certain events as set forth in the
Brookwood Village Joint Venture Agreement.
Under the purchase and sale agreement entered into by the Partnership, its
affiliates and the seller, the seller retained a lien on the premises
related to the future sale of the property or development of unimproved
land at Brookwood Village. The lien entitled the seller to receive
$5,000,000 of the 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. Subsequent to year end, the Joint
Venture Partners settled a lawsuit, which was filed by the previous owner,
related to the lien. See Note I for further discussion of this matter.
B.Significant Accounting Policies
The Joint Venture 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 H):
Risks and Uncertainties
The Joint Venture invests its cash primarily in deposits and money market
funds with commercial banks. The Joint Venture 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 Joint Venture includes all short-term investments with maturities of
three months or less from the date of acquisition in cash and cash
equivalents. Cash equivalents are recorded at cost, which approximates
current market value.
Rental Revenues
Commercial leases require the payment of base rent monthly in advance.
Rental revenues are recorded on the accrual basis. Commercial leases
generally contain provisions for additional rent based on a percentage of
tenant sales and other provisions which are recorded as income when
received. Minimum rental revenue from long-term commercial leases is
recognized on a straight-line basis over the life of the related lease.
Continued
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies - Continued
Depreciation
Depreciation of building and improvements is provided for by the use of the
straight-line method over estimated useful lives of 3 to 25 years. Tenant
improvements are depreciated over the life of the lease.
Impairment of Long-Lived Assets
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 Joint Venture has implemented policies and practices for
assessing impairment of its real estate assets.
The Joint Venture Partners routinely perform market and growth studies
along with yearly appraisals of their unleveraged real estate. The
property is carried at cost less accumulated depreciation unless the Joint
Venture Partners believe there is a material impairment in value, in which
case a provision to write down investments in property to fair value will
be charged against income (see Note G).
Leasing Commissions
Leasing commissions are deferred and amortized over the life of the related
lease.
Income Taxes
The Joint Venture is not liable for federal or state income taxes because
Joint Venture income or loss is allocated to the Joint Venture Partners for
income tax purposes. In the event the Joint Venture's tax returns are
examined by the Internal Revenue Service or state taxing authority and such
an examination results in a change in the Joint Venture taxable income or
loss, such change will be reported to the Joint Venture Partners.
C.Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accrued real estate taxes $ 95,932 $ 95,934
Tenant security deposits 34,890 24,523
Other accrued expenses 211,834 211,551
Prepaid rent 97,411 -
$440,067 $332,008
</TABLE>
Continued
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
D.Partners' Equity
Under the terms of the Brookwood Village Joint Venture Agreement, profits,
losses and distributions are allocated 50% to each Joint Venture Partner.
As of December 31, 1996, the following cumulative Joint Venture Partner
contributions and allocations had been made since inception of the Joint
Venture:
<TABLE>
<CAPTION>
Krupp Texas
Cash Plus-II Apartments Total
Limited Limited Partners'
Partnership Partnership Equity
<S> <C> <C> <C>
Capital contributions $ 23,843,095 $ 23,843,095 $ 47,686,190
Net income 1,176,946 1,176,946 2,353,892
Distributions (9,907,147) (9,907,147) (19,814,294)
Total at
December 31, 1996 $ 15,112,894 $ 15,112,894 $ 30,225,788
</TABLE>
E.Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases in the five years
1997 through 2001 and thereafter are as follows:
1997 $ 3,978,000
1998 3,604,100
1999 3,230,800
2000 2,603,400
2001 2,193,600
Thereafter 11,002,800
Contingent rental revenue, based on a percentage of tenant sales and other
provisions contained in tenant leases, totalled $421,665, $388,387 and
$382,687 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F.Related Party Transactions
Commencing with the date of acquisition of Brookwood Village, the Joint
Venture entered into agreements under which property management fees are
paid to an affiliate of the Joint Venture Partners for services as
management agent. Such agreements provide for management fees payable
monthly at the rate of up to 6% of the gross receipts net of leasing
commissions. The Joint Venture also reimburses affiliates of the Joint
Venture Partners for certain expenses incurred in connection with the
operation of Brookwood Village including accounting, computer, insurance,
travel, legal and payroll.
Amounts accrued or paid to affiliates of the Joint Venture Partners during
the years ended December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Property management fees $ 375,192 $376,424 $356,030
Expense reimbursements 165,611 137,455 224,200
Charged to operations $ 540,803 $513,879 $580,230
</TABLE>
Continued
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
F. Related Party Transactions - Continued
Due to affiliates consists of the following as of December 31, 1996
and 1995:
1996 1995
Expense reimbursements $ 8,351 $ 12,568
G. Provision for Losses on Real Estate
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", the Joint Venture recorded a $9,000,000 valuation provision
for losses on its real estate asset which represents the difference between
carrying value and estimated fair value at December 31, 1996.
H. Federal Income Taxes
The reconciliation of the net income (loss) for each year reported in the
accompanying Statement of Operations with the net income reported in the
Joint Venture's 1996, 1995 and 1994 federal income tax return follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C> <C>
Net income (loss) per Statement
of Operations $(7,846,140) $ 992,982 $ 1,002,762
Difference in book to tax
depreciation 1,011,716 1,299,910 801,340
Difference in book to tax
valuation provision 9,000,000 - -
Rental adjustment required
by Generally Accepted
Accounting Principles 141,808 63,257 (152,321)
Difference in book to tax
bad debt 15,534 - -
Net income for federal income
tax purposes $ 2,322,918 $ 2,356,149 $ 1,651,781
</TABLE>
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
H. Federal Income Taxes - Continued
The allocation of the 1996 net income for federal income tax purposes is as
follows:
<TABLE>
<CAPTION>
Passive Portfolio
Income Income Total
<S> <C> <C> <C>
Krupp Cash Plus-II Limited
Partnership $ 1,186,373 $ 14,252 $ 1,200,625
BRI Texas Apartments Limited
Partnership 1,108,041 14,252 1,122,293
$ 2,294,414 $ 28,504 $ 2,322,918
</TABLE>
Passive income differs due to individual Joint Venture Partner depreciation
elections.
The basis of the Joint Venture's assets for financial reporting purposes is
less than its tax basis by approximately $7,689,000 and $6,653,000 at
December 31, 1996 and 1995, respectively. The tax and book basis of the
Joint Venture's liabilities are the same.
I. Subsequent Event
In accordance with the purchase and sale agreement related to the
original acquisition of Brookwood Village, the previous owner was
entitled to receive $5,000,000 of the proceeds from the sale of
Brookwood Village and certain other amounts in connection with the
development or expansion of Brookwood Village. On January 24, 1997, the
previous owner filed suit in the Circuit Court of Jefferson County,
Alabama against the Joint Venture Partners and Brookwood Village Joint
Venture, among others. In the suit, the plaintiff claimed that the
defendants had effectively sold Brookwood Village on June 27, 1991 when
one of the original Joint Venture Partners exchanged its assets for an
ownership interest in an affiliated real estate investment trust. The
defendants sought damages of approximately $7,200,000, which included
the $5,000,000 payment stipulated in the original purchase and sale
agreement and interest accrued thereon from the date of the exchange.
On February 28, 1997, the Joint Venture Partners paid the discounted
amount of $4,300,000 to the previous owner to release the lien and
settle the lawsuit. The payment was funded by capital contributions of
$2,150,000 from each of the Joint Venture Partners. For financial
reporting purposes, the settlement payment of $4,300,000 related to the
release of the previous owner's lien was included in the asset basis of
the property and was reflected as an accrued liability as of December
31, 1996.
<PAGE>
<TABLE>
<CAPTION>
BROOKWOOD VILLAGE JOINT VENTURE
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
Costs Capitalized
Subsequent
Initial Costs to Joint Venture to Acquisition(c)
Buildings Buildings
and and
Description Land Improvements Improvements Land
<S> <C> <C> <C> <C>
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama $14,569,321 $32,713,684 $11,921,469 $1,325,819
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts Carried at End of Year
Buildings
and
Land Improvements Total (a)
<S> <C> <C> <C>
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama $15,895,139 (c) $44,635,153 (c) $60,530,292
</TABLE>
<TABLE>
<CAPTION>
Accumulated Depreciation
and Year
Valuation Construction Date Depreciable
Provision Completed Acquired Life
<S> <C> <C> <C> <C>
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama $26,190,274 (b) 1973 12/16/86 3 to 25 Years
</TABLE>
(a)The Joint Venture uses the cost basis for property valuation for both
income tax and financial statement purposes. The aggregate cost for
federal income tax purposes at December 31, 1996 is $48,341,614 and
aggregate accumulated depreciation for federal income tax purposes is
$(1,636,615).
(b)Includes accumulated depreciation of $17,190,274 and a valuation
provision of $9,000,000 at December 31, 1996.
(c)For financial reporting purposes, the carrying value of the properties
has been increased ($1,325,819 to land and $2,974,181 to buildings and
improvements), based on the settlement of the previous owner's lien for
$4,300,000 (see Note I).
Continued
<PAGE>
BROOKWOOD VILLAGE JOINT VENTURE
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
December 31, 1996
Reconciliation of Real Estate and Accumulated Depreciation for each of the
three years in the period ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Real Estate
Balance at beginning of year $55,478,818 $54,898,470 $53,961,916
Adjustment to basis based on
previous owner's lien 4,300,000 - -
Improvements 751,474 580,348 936,554
Balance at end of year $60,530,292 $55,478,818 $54,898,470
1996 1995 1994
Accumulated Depreciation
and Valuation Provision
Balance at beginning of year $15,164,143 $12,854,388 $10,743,771
Depreciation expense 2,026,131 2,309,755 2,110,617
Provision for losses of real estate 9,000,000 - -
Balance at end of year $26,190,274 $15,164,143 $12,854,388
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cash Plus
II financial statements for the year ended December 31, 1996 and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,953,003
<SECURITIES> 7,134,203
<RECEIVABLES> 287,564<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 346,021
<PP&E> 76,101,401<F2>
<DEPRECIATION> (18,758,766)
<TOTAL-ASSETS> 74,063,426
<CURRENT-LIABILITIES> 891,538
<BONDS> 0
0
0
<COMMON> 73,171,888<F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 74,063,426
<SALES> 0
<TOTAL-REVENUES> 3,764,199<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,220,048<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,455,849)<F6>
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes ll receivables included in other assets on the balance sheet.
<F2>Multi-family complex of $10,456,218, retail centers of $50,532,289 and
investment in J.V. of $15,112,894.
<F3>Deficit of the General Partners of ($491,274) and equity of Limited Partners
$73,663,162.
<F4>Includes all revenue of the Partnership.
<F5>Includes all expenses of the Partnership.
<F6>Net loss allocated ($29,117) to the General Partners and (1,426,732) to the
Limited Partners.
</FN>
</TABLE>
