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 June 30,
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
14.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking
statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.
Actual results could differ materially from
those projected in the forward-looking
statements as a result of a number of factors,
including those identified herein.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Unaudited
June 30, December 31,
1998 1997
Real estate assets:
<S> <C> <C>
Multi-family apartment complex (Note 3) $ - $ 5,597,104
Retail centers (Note 3) - 29,622,892
Mortgage-backed securities ("MBS"), net of
accumulated amortization and unrealized
holding gains (Note 5) - 6,478,988
Total real estate assets - 41,698,984
Cash and cash equivalents (Note 2) 10,757,207 5,325,971
Other assets 84,395 629,755
Total assets $10,841,602 $47,654,710
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued expenses and other liabilities (Note 6)$171,075$660,976
Due to affiliates (Note 8) 17,001 -
Total liabilities 188,076 660,976
Partners' equity (deficit) (Note 7):
Unitholders
(7,499,718 Units outstanding) 11,314,195 47,281,562
Corporate Limited Partner
(100 Units outstanding) 356 835
General Partners (661,025) (650,556)
Unrealized holding gains on MBS (Note 5) - 361,893
Total Partners' equity 10,653,526 46,993,734
Total liabilities and Partners' equity$10,841,602$47,654,710
</TABLE>
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenue:
<S> <C> <C> <C> <C>
Rental $ 1,327 $1,709,805 $459,585 $3,448,644
Interest income - MBS (Note 5) 27,519 146,675 57,398 301,011
Interest income - other 568,499 198,158 995,151 307,518
Total revenue 597,345 2,054,638 1,612,134 4,057,173
Expenses:
Operating (Note 8) 2,407 283,037 259,062 503,832
Maintenance - 121,246 46,741 220,780
General and administrative (Note 8) 139,837 163,974 271,177 341,293
Real estate taxes - 209,312 60,367 426,961
Management fees (Note 8) - 97,286 34,315 188,347
Depreciation - 538,735 44,095 1,071,281
Total expenses 142,244 1,413,590 715,757 2,752,494
Income from operations before gain on
sale of properties and gain on sale of
MBS 455,101 641,048 896,377 1,304,679
Partnership's share of Joint Venture
net loss (Note 4) - (334,861) - (872,898)
Income before gain on sale of properties
and gain on sale of MBS 455,101 306,187 896,377 431,781
Gain on sale of properties (Note 3) - - 3,725,484 -
Gain on sale of MBS (Note 5) 302,230 - 302,230 -
Net income $ 757,331 $ 306,187$4,924,091 $ 431,781
Allocation of net income (Note 7):
Unitholders (7,499,718 Units
outstanding):
Income before gain on sale of
properties and gain on sale of
MBS $ 445,992 $ 300,059$ 878,437 $ 423,139
Gain on sale of properties - - 3,725,434 -
Gain on sale of MBS 302,226 - 302,226 -
Net income $ 748,218 $ 300,059$4,906,097 $ 423,139
Per Unit of Depositary Receipt:
Income before gain on sale of
properties and gain on sale of
MBS $ .06 $ .04$ .12 $ .06
Gain on sale of properties - - .50 -
Gain on sale of MBS .04 - .04 -
Net income $ .10 $ .04$ .66 $ .06
</TABLE>
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS, Continued
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Corporate Limited Partner (100
Units outstanding):
Income before gain on sale of
properties and gain on sale of
<S> <C> <C> <C> <C>
MBS $ 6 $ 4 $ 12 $ 6
Gain on sale of properties - - 50 -
Gain on sale of MBS 4 - 4 -
Net income $ 10 $ 4 $ 66 $ 6
General Partners:
Income before gain on sale of
properties and gain on sale of
MBS $ 9,103 $ 6,124$ 17,928 $ 8,636
Gain on sale of properties - - - -
Gain on sale of MBS - - - -
Net income $ 9,103 $ 6,124$ 17,928 $ 8,636
</TABLE>
The accompanying notes are an integral
part of the financial statements.<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
Operating activities:
<S> <C> <C>
Net income $ 4,924,091 $ 431,781
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 44,095 1,071,281
Amortization of MBS discount, net - (140)
Gain on sale of properties (3,725,484) -
Gain on sale of MBS (302,230) -
Partnership's share of Joint Venture
net loss - 872,898
Changes in assets and liabilities:
Decrease in other assets 535,456 51,653
Increase (decrease) in due to
affiliates 17,001 (138,867)
Increase (decrease) in accrued
expenses and other liabilities (489,901) 11,257
Net cash provided by operating
activities 1,003,028 2,299,863
Investing activities:
Additions to fixed assets (64,710) (209,556)
Principal collections on MBS 495,784 545,210
Capital contribution to Joint Venture - (2,150,000)
Distributions received from Joint Venture
in excess of its earnings - 199,000
Distribution received from Joint Venture
sale of property - 15,701,485
Proceeds from sale of properties, net 38,975,999 -
Proceeds from sale of MBS 5,923,541 -
Net cash provided by investing
activities 45,330,614 14,086,139
Financing activity:
Distributions (40,902,406) (3,419,104)
Net increase in cash and cash equivalents 5,431,236 12,966,898
Cash and cash equivalents, beginning of period5,325,971 8,953,003
Cash and cash equivalents, end of period $10,757,207 $21,919,901
</TABLE>
The accompanying notes are an integral
part of the financial statements.<PAGE>
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(1)Accounting Policies
Certain information and footnote disclosures
normally included in financial statements
prepared in accordance with generally accepted
accounting principles have been condensed or
omitted in this report on Form 10-Q pursuant
to the Rules and Regulations of the Securities
and Exchange Commission. In the opinion of
the General Partners of Krupp Cash Plus-II
Limited Partnership (the "Partnership") the
disclosures contained in this report are
adequate to make the information presented not
misleading. See Notes to Financial Statements
included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1997
for additional information relevant to
significant accounting policies followed by
the Partnership.
In the opinion of the General Partners of the
Partnership, the accompanying unaudited
financial statements reflect all adjustments
necessary to present fairly the Partnership's
financial position as of June 30, 1998, its
results of operations for the three and six
months ended June 30, 1998 and 1997, and cash
flows for the six months ended June 30, 1998
and 1997.
The results of operations for the three and
six months ended June 30, 1998 are not
necessarily indicative of the results which
may be expected for the full year. See
Management's Discussion and Analysis of
Financial Condition and Results of Operations
included in this report.
(2)Cash and Cash Equivalents
Cash and cash equivalents consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Cash and money market accounts$ 752,442 $ 1,725,998
Commercial paper 10,004,765 3,599,973
$10,757,207 $ 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.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(4)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
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(5)Mortgage Backed Securities
On April 29, 1998, the General Partners sold
the Partnership's MBS portfolio to
unaffiliated third parties for $5,923,541.
For financial reporting purposes, the
Partnership recognized a gain of $302,230 on
the sale. The gain was calculated as the
difference between the selling price and net
book value of the MBS.
The MBS held by the Partnership were issued by
the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association and the
Government National Mortgage Association. At
December 31, 1997, the MBS had a total face
value, amortized cost and estimated market
value of $6,106,003, $6,117,095 and
$6,479,000, respectively. Coupon rates of the
MBS ranged from 8.0% to 10.0% per annum and
were scheduled to mature in the years 2008
through 2017. At December 31, 1997, the
Partnership's MBS portfolio had unrealized
holding gains of $361,893 on its MBS
investments to adjust to market value, based
on quoted market prices.
(6) Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Accrued real estate taxes $ - $ 235,000
Other accrued expenses 171,075 229,097
Tenant security deposits - 187,668
Prepaid rent - 9,211
$171,075 $ 660,976
</TABLE>
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(7) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the six
months ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
Corporate Unrealized Total
Limited General Holding Partners'
UnitholdersPartner 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
Income before gain on
sale of properties
and gain on sale
of MBS 878,437 12 17,928 - 896,377
Gain on sale of
properties 3,725,434 50 - - 3,725,484
Gain on sale of MBS 302,226 4 - - 302,230
Unrealized holding
gains on MBS - - - (361,893) (361,893)
Distributions:
Operations (1,499,944) (20) (28,397) - (1,528,361)
Capital
transactions (39,373,520) (525) - - (39,374,045)
Balance at
June 30, 1998 $11,314,195$ 356 $(661,025)$ - $10,653,526
</TABLE>
(8)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
(8) Related Party Transactions, Continued
Amounts accrued or paid to the General Partners' affiliates
were as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Property management fees $ - $ 97,286 $ 34,315$188,347
Expense reimbursements 111,163 136,962 218,725 273,265
Charged to operations $111,163 $234,248 $253,040$461,612
</TABLE>
Due to affiliates consisted of expense reimbursements of
$17,001 at June 30, 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 six
months ended June 30, 1998.
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.
On May 15, 1998, the Partnership made a
special distribution of $5.25 per Unit 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 and the Federal Home Loan Mortgage
Corporation. On April 29, 1998, the General
Partners sold the Partnership's MBS portfolio
to unaffiliated third parties. For financial
reporting purposes, the Partnership recognized
a gain of $302,230 from the sale. At December
31, 1997, the Partnership recorded unrealized
holding gains on its MBS of $361,893 to adjust
the investments to market value (see Note 5).
On May 13, 1997, Brookwood Village was sold to
an unaffiliated third party. Prior to the
sale, the Partnership, its Joint Venture
Partner 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 (see Note 4).
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Operations
Partnership
The following discussion relates to the
operations of the Partnership for the three
and six months ended June 30, 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 and the sale
of the Partnership's MBS portfolio on April
29, 1998, significantly impacts the
comparability of the Partnership's operations
between the periods.
Net income for the three and six months ended
June 30, 1998 as compared to the three and six
months ended June 30, 1997, net of activity of
the Partnership's sold properties and MBS
portfolio, increased as total revenue
increased and total expenses decreased. Total
revenue increased due to higher average cash
and cash equivalent balances available for
investment, a result of proceeds received from
the sale of the Partnership's properties and
MBS portfolio.
Total expenses for the three and six months
ended June 30, 1998, net of activity of the
Partnership's sold properties, decreased when
compared to the same periods 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 4).
Joint Venture
Brookwood Village was sold on May 13, 1997 to
an unaffiliated third party. See Note 4 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
Response: None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Krupp Cash Plus-II Limited Partnership
(Registrant)
BY: /s/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief
Accounting Officer of The
Krupp Corporation, a General
Partner.
DATE: August 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,757,207
<SECURITIES> 0
<RECEIVABLES> 84,395<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0<F2>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 10,841,602
<CURRENT-LIABILITIES> 188,076
<BONDS> 0
0
0
<COMMON> 10,653,526<F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,841,602
<SALES> 0
<TOTAL-REVENUES> 1,612,134<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 715,757<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (4,027,714)<F2>
<CHANGES> 0
<NET-INCOME> 4,924,091<F6>
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<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. On April 29, 1998 the General Partners sold the
Partnership's MBS portfolio for $5,923,541. For financial reporting purposes,
the Partnership recognized a gain of $302,230 on the sale.
<F3>Deficit of the General Partners of ($661,025) and equity of Limited Partners of
$11,314,551.
<F4>Includes all revenue of the Partnership.
<F5>Includes all operating expenses of the Partnership.
<F6>Net income allocated $4,906,163 to the Limited Partners and $17,928 to the
General Partners.
</FN>
</TABLE>
