UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31,
1998
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
The total number of pages in this document is
13.<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
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1998 1997
Real estate assets:
<S> <C> <C>
Multi-family apartment complex (Note 3) $ - $ 5,597,104
Retail centers (Notes 3 and 4) - 29,622,892
Mortgage-backed securities ("MBS"), net of
accumulated amortization (Note 6) 6,165,999 6,478,988
Total real estate assets 6,165,999 41,698,984
Cash and cash equivalents (Note 2) 43,422,810 5,325,971
Other assets 379,922 629,755
Total assets $ 49,968,731$47,654,710
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued expenses and other liabilities (Note 7)$212,526$ 660,976
Due to affiliates (Note 9) 123,422 -
Total liabilities 335,948 660,976
Partners' equity (deficit) (Note 8):
Unitholders
(7,499,718 Units outstanding) 49,939,497 47,281,562
Corporate Limited Partner
(100 Units outstanding) 871 835
General Partners (670,128) (650,556)
Unrealized holding gains on MBS (Note 6) 362,543 361,893
Total Partners' equity 49,632,783 46,993,734
Total liabilities and Partners' equity $ 49,968,731$47,654,710
</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 March 31,
1998 1997
Revenue:
<S> <C> <C>
Rental $ 458,258 $1,738,839
Interest income - MBS (Note 6) 129,879 154,336
Interest income - other 426,652 109,360
Total revenue 1,014,789 2,002,535
Expenses:
Operating (Note 9) 256,655 220,795
Maintenance 46,741 99,534
General and administrative (Note 9) 131,340 177,319
Real estate taxes 60,367 217,649
Management fees (Note 9) 34,315 91,061
Depreciation 44,095 532,546
Total expenses 573,513 1,338,904
Income from operations before gain on sale of
properties 441,276 663,631
Partnership's share of Joint Venture net
loss (Note 5) - (538,037)
Income before gain on sale of properties 441,276 125,594
Gain on sale of properties (Note 3) 3,725,484 -
Net income $4,166,760 $ 125,594
Allocation of net income (Note 8):
Unitholders (7,499,718 Units outstanding):
Income before gain on sale of properties$ 432,445 $ 123,080
Gain on sale of properties 3,725,434 -
Net income $4,157,879 $ 123,080
Per Unit of Depositary Receipt:
Income before gain on sale of properties$ .06 $ .02
Gain on sale of properties .50 -
Net income $ .56 $ .02
Corporate Limited Partner
(100 Units outstanding):
Income before gain on sale of properties$ 6 $ 2
Gain on sale of properties 50 -
Net income $ 56 $ 2
General Partners:
Income before gain on sale of properties$ 8,825 $ 2,512
Gain on sale of properties - -
Net income $ 8,825 $ 2,512
The accompanying notes are an integral
part of the financial statements.<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1998 1997
Operating activities:
Net income $ 4,166,760$ 125,594
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 44,095 532,546
Amortization of MBS discount, net 301 (539)
Gain on sale of properties (3,725,484) -
Partnership's share of Joint Venture net
loss - 538,037
Changes in assets and liabilities:
Decrease in other assets 239,929 31,013
Increase (decrease) in due to
affiliates 123,422 (154,451)
Decrease in accrued expenses and other
liabilities (449,478) (50,106)
Net cash provided by operating
activities 399,545 1,022,094
Investing activities:
Additions to fixed assets (64,710) (53,137)
Principal collections on MBS 313,338 295,673
Capital contribution to Joint Venture - (2,150,000)
Increase in accrued expenses and other
liabilities related to fixed asset additions 1,028 1,184
Distributions received from Joint Venture in
excess of its earnings - 199,000
Proceeds from sale of properties, net 38,975,999 -
Net cash provided by (used in)
investing activities 39,225,655 (1,707,280)
Financing activity:
Distributions (1,528,361) (1,518,246)
Net increase (decrease) in cash and cash
equivalents 38,096,839 (2,203,432)
Cash and cash equivalents, beginning of period 5,325,971 8,953,003
Cash and cash equivalents, end of period $43,422,810$ 6,749,571
Supplemental schedule of noncash investing and financing activities:
Unrealized holding gains on MBS (Note 6) $ 650$ -
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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, 1997
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
necessary to present fairly the Partnership's
financial position as of March 31, 1998 and
its results of operations and cash flows for
the three months ended March 31, 1998 and
1997.
The results of operations for the three months
ended March 31, 1998 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)Cash and Cash Equivalents
Cash and cash equivalents consisted of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Cash and money market accounts $ 1,244,696 $ 1,725,998
Commercial paper 42,178,114 3,599,973
$ 43,422,810 $ 5,325,971
</TABLE>
(3)Sale of Properties
On January 30, 1998, the Partnership sold its
remaining properties to unaffiliated third
parties. The Partnership's properties were
included in a package with nine other
properties owned by affiliates of the General
Partners. The total selling price of the
fourteen properties was $138,000,000, of which
the Partnership received $39,822,700, less its
share of closing costs of $846,701. For
financial reporting purposes, the Partnership
realized a gain of $3,725,484 on the sale.
The gain was calculated as the difference
between the properties' selling prices less
net book value of the properties and closing
costs.
(4)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
Partnership recorded valuation provisions for
losses on its real estate assets of $5,375,772
at December 31, 1997. These provisions
represented the difference between carrying
values and selling prices less estimated costs
to sell as a result of the sale of the
Partnership's properties on January 30, 1998
(see Note 3).
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(5)Investment in Joint Venture
The Partnership and an affiliate of the
Partnership (collectively referred to herein
as the "Joint Venture Partners") each had 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, a
shopping center containing 474,083 net
leasable square feet and located in
Birmingham, Alabama, was sold on May 13, 1997
to an unaffiliated third party.
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 proceeds from
the sale of Brookwood Village and potentially
additional amounts related to the expansion
and development. On February 28, 1997,
Brookwood Village paid the discounted amount
of $4,300,000 to settle a lawsuit filed by the
previous owner, thereby releasing the lien.
The Partnership and its Joint Venture Partner
each made capital contributions of $2,150,000
to fund the settlement payment.
Based upon the Joint Venture Partners'
assessment of the current and future market
conditions, the capital improvements necessary
to remain competitive in its market, its
capital resources and the differing strategies
of the Joint Venture Partners, the Joint
Venture Partners determined that it was in
their best interests, and that of their
respective investors, to sell Brookwood
Village. On May 13, 1997, the Joint Venture
Partners exchanged Brookwood Village with an
unaffiliated third party for net consideration
totaling $32,422,220, less prorations and
closing costs of $863,164, which included two
multi-family properties and cash. Each Joint
Venture Partner was allocated 50% of the net
consideration received. The Partnership
received cash totaling $15,779,528, net of the
Partnership's share of prorations and closing
costs. For financial reporting purposes, the
Joint Venture realized a loss of $721,760 on
the exchange. The loss was calculated as the
difference between net consideration received
less net book value of the property and
closing costs.
As a result of the sale of Brookwood Village,
the Joint Venture Partners liquidated the
Joint Venture and distributed its remaining
assets in the fourth quarter of 1997. In
accordance with the Joint Venture Agreement,
each Joint Venture Partner received 50% of the
remaining net assets of $793,804. Subsequent
to the final distribution, the Joint Venture
was dissolved.
Continued<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(6)Mortgage Backed Securities and Other
Investments
The MBS held by the Partnership were 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>
March 31, December 31,
1998 1997
<S> <C> <C>
Face Value $ 5,792,665 $ 6,106,003
Amortized Cost $ 5,803,456$ 6,117,095
Estimated Market Value $ 6,166,000$ 6,479,000
</TABLE>
Coupon rates of the MBS ranged from 8.0% to
10.0% per annum and were due to mature in the
years 2008 through 2017.
In accordance with Financial Accounting
Standard No. 115 "Accounting for Certain
Investments in Debt and Equity Securities",
unrealized holding gains and losses for
available-for-sale securities are reported as
a separate component of equity until realized.
At March 31, 1998 and December 31, 1997, the
Partnership had unrealized holding gains of
$362,543 and $361,893, respectively, on its
MBS investments to adjust to market value
based on quoted market prices.
(7)Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities
consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Accrued real estate taxes $ - $ 235,000
Other accrued expenses 182,210 229,097
Tenant security deposits - 187,668
Prepaid rent - 9,211
Accounts payable 1,919 -
Distributions payable 28,397 -
$ 212,526 $ 660,976
</TABLE>
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(8) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the
three months ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
Corporate Unrealized Total
Limited General Holding Partners'
Unitholders Partner Partners Gains on MBS Equity
Balance at
<S> <C> <C> <C> <C> <C>
December 31, 1997 $47,281,562 $ 835 $(650,556)$ 361,893$46,993,734
Gain on sale of
properties 3,725,434 50 - - 3,725,484
Unrealized holding
gains on MBS - - - 650 650
Distributions (1,499,944) (20) (28,397) - (1,528,361)
Net income 432,445 6 8,825 - 441,276
Balance at
March 31, 1998 $49,939,497 $ 871 $(670,128)$ 362,543$49,632,783
</TABLE>
The distributions payable to the General
Partners totaled $28,397 and were included in
accrued expenses and other liabilities at
March 31, 1998.
(9)Related Party Transactions
The Partnership paid property management fees
to affiliates of the General Partners for
management services. Payment of these fees
ended in conjunction with the sale of the
Partnership's properties on January 30, 1998
(see Note 3). Pursuant to the management
agreements, management fees were 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
continues to reimburse affiliates of the
General Partners for certain expenses incurred
in connection with the operation of the
Partnership, including administrative
expenses.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(9) Related Party Transactions, Continued
Amounts accrued or paid to the General Partners' affiliates
were as follows:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Property management fees $ 34,315 $ 91,061
Expense reimbursements 107,562 136,303
Charged to operations $141,877 $227,364
</TABLE>
Due to affiliates consisted of expense reimbursements of
$123,422 at March 31, 1998.
In addition to the amounts above, costs paid to the General
Partners' affiliates associated with the sale of the
Partnership's remaining properties were $319,839 during the
three months ended March 31, 1998.
(10) Subsequent Event
On April 29, 1998, the General Partners sold the Partnership's
MBS portfolio to an unaffiliated third party for $5,923,541.
<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
Based upon the General Partners' assessment of
the current and future market conditions, the
capital improvements necessary to remain
competitive in the properties' respective
markets and the Partnership's capital
resources, the General Partners determined
that it was in their best interests, and that
of their respective investors, to sell the
Partnership's remaining properties. On
January 30, 1998, the General Partners sold
all of the Partnership's properties to
unaffiliated third parties. The properties
were included in a package with nine other
properties owned by affiliates of the General
Partners. The total selling price of the
fourteen properties was $138,000,000, of which
the Partnership received $39,822,700 for the
sale of its properties, less its share of the
closing costs of $846,701 (see Note 3). The
sale of the properties is considered a
Terminating Capital Transaction, as defined by
the Partnership Agreement.
The Partnership anticipates making a special
distribution of $5.25 per Unit in the second
quarter of 1998, based upon approximately 80%
of the proceeds of the sale and estimated
liquidation value of remaining Partnership
assets. Once all necessary reserves and
contingent liabilities are funded, the
remaining proceeds will be distributed. All
Partnership affairs are expected to be
completed by year-end.
The Partnership held MBS that were guaranteed
by the Government National Mortgage
Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and Federal
Home Loan Mortgage Corporation ("FHLMC"). The
Partnership had unrealized holding gains on
its MBS of $362,543 and $361,893 at March 31,
1998 and December 31, 1997, respectively, to
adjust the investments to market value (see
Note 6). Subsequent to March 31, 1998, the General
Partners sold the Partnership's MBS portfolio
to an unaffiliated third party (see Note 10).
In 1997, the Joint Venture Partners and
Brookwood Village Joint Venture were named as
defendants in a lawsuit filed by the previous
owners of Brookwood Village 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.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Operations
Partnership
The following discussion relates to the
operations of the Partnership for the three
months ended March 31, 1998 and 1997. The sale
of the Partnership's properties (Encino Oaks
Shopping Center, Alderwood Towne Center,
Canyon Place Shopping Center, Coral Plaza
Shopping Center and Cumberland Glen
Apartments) on January 30, 1998, significantly
impacts the comparability of the Partnership's
operations between the two periods.
Net income for the three months ended March
31, 1998 as compared to the three months ended
March 31, 1997, net of activity of the
Partnership's sold properties, increased as
total revenue increased and total expenses
decreased. Total revenue increased due to
higher average cash and cash equivalent
balances available for investment, as a result
of the sale of the Partnership's properties.
Proceeds of approximately $38,976,000 were
received from the sale. This increase is
partially offset by a decrease in MBS interest
income due to repayments of principal on the
MBS portfolio.
Total expenses for the three months ended
March 31, 1998, net of activity of the
Partnership's sold properties, decreased when
compared to the same period in 1997, due to a
decrease in general and administrative
expense. This decrease is the result of legal
costs incurred in 1997 which related to the
unsolicited tender offers to purchase Units of
Depositary Receipts and the settlement of the
Brookwood Village Joint Venture litigation
(see Note 5).
Joint Venture
Brookwood Village was sold on May 13, 1997 to
an unaffiliated third party. See Note 5 for
further discussion of this matter.
<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
(a)Exhibits
Response: None
(b)Reports on Form 8-K
Date Event Reported
Financial Statements Filed
January 30, 1998 Disposition of the Pro Forma
Balance Sheet at Partnership's remaining
September 30, 1997.properties
Pro Forma Statements of Operations for the
nine months ended September 30,1997 and for
the year ended December 31, 1996.
<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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief
Accounting Officer of
the Krupp Corporation,
a General Partner.
DATE: May 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cash Pluss
II Financial Statements for the three months ended March 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 43,422,810
<SECURITIES> 6,165,999
<RECEIVABLES> 359,097<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,825
<PP&E> 0<F2>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 49,968,731
<CURRENT-LIABILITIES> 335,948
<BONDS> 0
0
0
<COMMON> 49,270,240<F3>
<OTHER-SE> 362,543<F4>
<TOTAL-LIABILITY-AND-EQUITY> 49,968,731
<SALES> 0
<TOTAL-REVENUES> 1,014,789<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 573,513<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (3,725,484)<F2>
<CHANGES> 0
<NET-INCOME> 4,166,760<F7>
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes all receivables included in "other assets" on the Balance Sheet.
<F2>The Partnership's properties were sold on January 30, 1998 to unaffiliated
third parties. The total selling price of the fourteen properties sold was
$138,000,000, of which the Partnership received $39,822,700, less closing costs
of $846,701. For financial reporting purposes, the Partnership realized a gain
of $3,725,484 on the sale.
<F3>Deficit of the General Partners of ($670,128) and equity of Limited Partners of
$49,940,368.
<F4>Unrealized holding gain on MBS.
<F5>Includes all revenue of the Partneship.
<F6>Includes all operating expenses of the Partnership.
<F7>Net income allocated $4,157,935 to the Limited Partners and $8,825 to the
Limited Partners.
</FN>
</TABLE>
