UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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 2-68727
Krupp Associates 1980-1
(Exact name of registrant as specified in its charter)
Massachusetts 04-2708956
(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: 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 7 - 9.
PART I
ITEM 1. BUSINESS
Krupp Associates 1980-1("KRLP-I") is a limited partnership formed on
July 31, 1980, pursuant to the provisions of the Massachusetts Uniform
Limited Partnership Act. The Krupp Company and The Krupp Corporation
serve as the General Partners of KRLP-I. Chivas Square Associates serves
as the Original Limited Partner of KRLP-I. On November 10, 1980, KRLP-I
commenced an offering of $4,000,000 of Class A Limited Partner Interests
in Units of $1,000 each, which was successfully completed on April 30,
1981. (For further details see Note A of Notes to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report). The primary
business of KRLP-I has been to invest in, operate, refinance, and
ultimately dispose of fully developed, income producing residential
properties and related assets. KRLP-I considers itself to be engaged in
the industry segment of investment in real estate.
On January 20, 1988, the General Partners formed Krupp Associates
Riverside Limited Partnership ("Realty-I") as a prerequisite for the
refinancing of Riverside Apartments. At the same time, the General
Partners transferred ownership of the property to Realty-I. The General
Partner of Realty-I is The Krupp Corporation ("Krupp Corp."). The Limited
Partner of Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its
interest in Realty-I to KRLP-I. KRLP-I and Realty-I are collectively
known as Krupp Realty Limited Partnership-I (collectively the
"Partnership").
The Partnership's remaining real estate investment, Riverside I
Apartments ("Riverside"), is a 140-unit apartment complex with
approximately 30,000 square feet of commercial retail space located in
Evansville, Indiana. Riverside is subject to some seasonal fluctuations
due to changes in utility consumption and seasonal maintenance
expenditures. However, the future performance of the Partnership will
depend upon factors which cannot be predicted. Such factors include
general economic and real estate market conditions, both on a national
basis and in those areas where the Partnership's investments are located,
real estate tax rates, operating expenses, energy costs, government
regulations, and federal and state income tax laws. The requirements for
compliance with federal, state and local regulations to date have not had
an adverse effect on the Partnership's operations, and no adverse effect
is anticipated in the future.
Riverside is also subject to such risks as (i) competition from existing
and future projects held by other owners in the area in which the
Partnership's property operates, (ii) possible reduction in rental income
due to an inability to maintain high occupancy levels and rental rates,
(iii) possible adverse changes in general economic and local conditions
such as competitive over-building, increased unemployment, 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, 1995, there were 8 full or part-time on-site project
personnel employed by the Partnership.
ITEM 2. PROPERTIES
A summary of the Partnership's real estate investments is presented
below. Schedule III included in Appendix A to this report contains
additional detailed information with respect to the property.
Total Units/
Current Average Occupancy
Year of Leasable December 31,
Description Acquisition Square Footage 1995 1994 1993 1992 1991
Riverside I Apartments 1981 140 Units 97% 96% 97% 97% 91%
Evansville, Indiana 30,000 Sq. Ft. 90% 87% 83% 87% 86%
ITEM 3. LEGAL PROCEEDINGS
None.
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
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is
not anticipated that any such public market will develop.
The number of Class A Limited Partners as of December 31, 1995 was
approximately 400.
One of the objectives of the Partnership is to generate cash available
for distribution. However, there is no assurance that future operations
will generate cash available for distribution. The Partnership has not
made distributions since 1988 due to insufficient operating cash flow.
The Partnership does not anticipate resuming distributions until the
property generates sufficient operating cash flow.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding
the Partnership's consolidated financial position and operating results.
The information is comparable and should be read in conjunction with
Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations and the Financial Statements, which are included
in Items 7 and 8 of this report, respectively.
Year Ended December 31,
1995 1994 1993 1992 1991
Total revenue $1,056,448 $ 984,493 $ 914,910 $ 880,471 $ 904,239
Net loss $ (153,650) $ (183,110) $ (196,057) $ (313,519) $ (202,923)
Net loss
allocated to:
Class A
Limited
Partners $ (13,122) $ (78,034) $ (36,542) $ (176,896) $ (182,631)
Per Unit $ (3.28) $ (19.51) $ (9.14) $ (44.22) $ (45.66)
Original
Limited Partner $ - $ - $ - - $ (18,263)
General
Partners $ (140,528) $ (105,076) $ (159,515) $ (136,623) $ (2,029)
Total assets $2,467,327 $2,539,119 $2,603,526 $2,818,242 $2,997,139
Long-term
liabilities (1) $3,473,092 $3,488,515 $3,502,297 $3,526,345 $3,536,481
(1) Includes demand notes payable, since the General Partners expect
they will be long-term obligations.
Prior performance of the Partnership is not necessarily indicative of
future operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operating performance of Riverside. Such
ability is also dependent upon the future sale of the asset. These
sources of liquidity could be used by the Partnership for payment of
expenses related to real estate operations, debt service and expenses.
Cash Flow and Capital Transaction Proceeds, if any, as calculated under
Section 8.2(a) ("Cash Flow") and 8.3(a) of the Partnership Agreement would
then be available for distribution to the Partners. The Partnership has
discontinued distributions due to insufficient operating cash flow.
The Partnership has experienced cash flow deficiencies for several years
and currently has very limited liquidity. Expenditures are being
monitored closely and capital improvements are made on an as-needed basis.
To date, the General Partners have been able to arrange financing through
borrowings, from an affiliate of the General Partners, to cover a
substantial portion of these cash flow deficiencies. Also, one of the
General Partners, The Krupp Company Limited Partnership ("The Krupp
Company"), contributed an additional
$100,000 to the Partnership during 1991. In January 1993, The Krupp
Company loaned an additional $135,000 to the Partnership in the form of a
demand note to payoff a demand note from an unaffiliated bank. In
addition, the affiliate lender has been willing to defer interest payments
on the borrowings since late 1990. Furthermore, the General Partners,
through annual negotiations, have continued to arrange for the waiver of
property management fees and expense reimbursements payable to the
management agent, also an affiliate of the General Partners.
The General Partners anticipate operating deficits to continue and cannot
guarantee that they will be able to take actions that will cover any
future deficits. If the property is unable to generate funds sufficient
to cover these deficits, the Partnership could default on its mortgage
payments and become subject to foreclosure proceedings. However, the
Partnership is current on its mortgage payments.
In January 1996, the General Partners entered into a purchase and sale
agreement for the sale of Riverside to an unaffiliated buyer scheduled in
the second quarter of 1996 for the selling price of $4,500,000. In the
event the property is ultimately sold, the Partnership would be
liquidated. It is anticipated that all sale proceeds would be used to
satisfy Partnership obligations and no funds would be available to
investors for distribution.
Cash Flow (Deficit)
Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow (Deficit) of the Partnership for the year ended December 31,
1995. 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, Cash Flow (Deficit) should not be considered by the reader as a
substitute to net income/loss, as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
Rounded to $1,000
Net loss for tax purposes $(144,000)
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 179,000
Principal payments on mortgage (14,000)
Expenditures for capital improvements (146,000)
Cash Deficit $(125,000)
Operations
1995 compared to 1994
In comparing 1995 to 1994, increase in cash deficit is attributable to
increased capital expenditures. Net income improved by $30,000, as
increases in rental revenue more than offset the increase in expenses.
Riverside showed a 7% increase in rental revenue due to increased
occupancy and management's successful effort in leasing 100% of the
commercial space in the fourth quarter of 1995.
Overall total expenses increased approximately 4%, with a decrease in
operating expense offset by increases in maintenance and interest
expenses. Operating expense decreased due to lower leasing costs resulting
from higher occupancy levels, decreased utilities expense because of the
warmer winter season and a reduction in insurance expense due to a
favorable claim history. Maintenance expense increased as a result of
painting interior stairways and pavement repairs made to the sidewalks.
The increase in interest expense is attributable to a rise in the prime
rate from an average 7.1% in 1994 to 8.8% in 1995.
1994 compared to 1993
In comparing 1994 to 1993, cash deficits decreased approximately $61,000
primarily as a result of lower capital expenditures and improvements in
operating cash flow. The improvements in operating cash flow can be
attributed to increases in revenue due to residential rental increases and
the acquisition of three new commercial tenants during the fourth quarter
of 1993.
Overall, total expenses increased 5% with increases in operating costs
primarily due to increases in utility rates and leasing expenses. This is
offset by a decrease in maintenance expense as a result of the commercial
unit improvement program completed in 1993. Additionally, interest
expense increased as a result of a rise in prime rate in 1994.
Riverside Apartments residential occupancy averaged 97%, 96% and 97% for
the years ended December 31, 1995, 1994, and 1993, respectively. For the
years ended December 31, 1995, 1994 and 1993, occupancy of the commercial
space averaged 90%, 87% and 83%, respectively.
General
In accordance with Financial Accounting Standards 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 asset.
The investment in the property is carried at cost less accumulated
depreciation unless the General Partners believe there is a significant
impairment in value, in which case a provision to write down investment in
property to fair value will be charged against income. At this time, the
General Partners do not believe that any assets of the Partnership are
significantly impaired.
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
both a General Partner of KRLP-I and The Krupp Company, the other General
Partner of KRLP-I, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Senior Vice President and Corporate
Controller
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 Berkshire Realty Company, Inc. (NYSE-BRI). 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 President and Director of Berkshire
Realty Company, Inc. (NYSE-BRI) and 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 Berkshire Mortgage Finance and Corporate Controller 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, 1995, no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
4,000 outstanding Units. On that date, the General Partners or their
affiliates owned 80 Units (2% of the total outstanding) of the Partnership
in addition to their General Partner interests and a portion of the
Original Limited Partner interest.
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, 1995
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 SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - See Index to Consolidated
Financial Statements included under Item 8 (Appendix A) on page
F-2 to this report.
2. Consolidated Financial Statement Schedule III is included
under Item 8 (Appendix A) on page F-14. Certain other
schedules are omitted as they are not applicable, not
required or the information is provided in the consolidated
financial statements or the notes thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
The following reflects all applicable exhibits required by
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 May 15, 1981 [Exhibit 4.1 to
Registrant's Report on Form 10-K for 1982
(File 2-68727)].*
(4.2) Fourth Amendment to Certificate of Limited
Partnership filed with the Massachusetts
Secretary of State on October 19, 1981
[Exhibit 4.2 to Registrant's Report on
Form 10-K for 1982 (File 2-68727)].*
(10) Material contracts:
Riverside I Apartments
(10.1) Contract and Certificate of Limited
Partnership of Krupp Associates Riverside
Limited Partnership dated January 20, 1988
between The Krupp Corporation (the
"General Partner") and Krupp Associates
1980-1 (the "Limited Partner")[Exhibit
10.1 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.2) Assignment dated January 20, 1988 between
Krupp Associates 1980-1("Assignee") and
The Krupp Corporation ("Assignor")
[Exhibit 10.2 to Registrant's Report on
Form 10-K for the year ended December 31,
1988 (File No. 2-68727)].*
(10.3) Bill of Sale dated January 20, 1988
between Krupp Associates 1980-1 (as
"Seller") and Krupp Associates Riverside
Limited Partnership (as "Buyer")[Exhibit
10.3 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.4) Special Warranty Deed dated January 20,
1988 between Krupp Associates 1980-1
("Grantor") and Krupp Associates Riverside
Limited Partnership ("Grantee")[Exhibit
10.4 to Registrant's Report on Form 10-K
for the year ended December 31, 1988 (File
No. 2-68727)].*
(10.5) Assignment dated January 20, 1988 between
Krupp Associates 1980-1 ("Assignor") and
Krupp Associates Riverside Limited
Partnership ("Assignee")[Exhibit 10.5 to
Registrant's Report on Form 10-K for the
year ended December 31, 1988 (File No. 2-
68727)].*
(10.6) Management Agreement dated January 28,
1988 between Krupp Associates Riverside
Limited Partnership, as Owner, and Krupp
Asset Management Company, now known as
Berkshire Property Management, as Agent.
[Exhibit 10.6 to Registrant's Report on
Form 10-K for the year ended December 31,
1988 (File No. 2-68727)].*
(10.7) Regulatory Agreement for Multifamily
Housing Projects Co-insured by HUD dated
January 21, 1988 between Krupp Associates
Riverside Limited Partnership (the
"Owner") and DRG Funding Corporation (the
"Mortgagee") [Exhibit 10.7 to Registrant's
Report on Form 10-K for the year ended
December 31, 1988 (File No. 2-68727)].*
(10.8) Mortgage Note dated January 21, 1988, from
Krupp Associates Riverside Limited
Partnership, an Indiana limited
partnership, to DRG Funding Corporation, a
Delaware corporation. [Exhibit 10.6 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
68727)].*
(10.9) Mortgage dated January 21, 1988, from
Krupp Associates Riverside Limited
Partnership, an Indiana limited
partnership, to DRG Funding Corporation, a
Delaware corporation. [Exhibit 10.7 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
68727)].*
(10.10) Security Agreement dated January 21, 1988
between Krupp Associates Riverside Limited
Partnership ("Debtor") and DRG Funding
Corporation ("Creditor") [Exhibit 10.10 to
Registrant's Report on Form 10-K for the
year ended December 31, 1988 (File No. 2-
68727)].*
(10.11) Escrow Deposit Agreement dated January 21,
1988, between Krupp Associates Riverside
Limited Partnership, an Indiana limited
partnership, and DRG Funding Corporation,
a Delaware corporation. [Exhibit 10.8 to
Registrant's Report on Form 10-K for the
year ended December 31, 1987 (File No. 2-
68727)].*
(10.12) Purchase and Sale Agreement dated January
22, 1996, between Krupp Associates
Riverside Limited Partnership, an Indiana
Limited Partnership ("Seller") and BluSky,
Inc., an Indiana Corporation ("Buyer").
(File No. 2-68727).+
* Incorporated by reference
+ Incorporated herein.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995,
the Partnership did not file any reports on Form 8-K.
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
21st day of March, 1996.
KRUPP ASSOCIATES 1980-1
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 21st day of March,
1996.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive Officer)
and
Douglas Krupp Director of The Krupp Corporation, a
General Partner.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a
General Partner.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner.
/s/Robert A. Barrows Senior Vice President and Corporate
Robert A. Barrows Controller of The Krupp Corporation, a
General Partner.
APPENDIX A
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1995
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1995 and 1994 F-4
Consolidated Statements of Operations For the Years Ended
December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Changes in Partners' Deficit
For the Years Ended December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1995, 1994 and 1993 F-7
Notes to Consolidated Financial Statements F-8 - F-13
Schedule III - Real Estate and Accumulated Depreciation F-14
All other schedules are omitted as they are not applicable or not
required, or the information is provided in the consolidated financial
statements or the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Associates 1980-1 and Subsidiary:
We have audited the consolidated financial statements and consolidated
financial statement schedule of Krupp Associates 1980-1 and subsidiary
(the "Partnership") listed in the index on page F-2 of this Form 10-K.
These consolidated 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 consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management of the
Partnership, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Krupp Associates 1980-1 as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the
consolidated financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information required to be incurred therein.
The accompanying consolidated financial statements have been prepared
assuming that the Partnership will continue as a going concern. As
discussed in Note K to the consolidated financial statements, the
Partnership has experienced cash flow deficiencies in the past. In
connection therewith the General Partners, to date, have been able to
arrange financing to cover these deficits, and effective January 1, 1991
the General Partners obtained a waiver of management fees and expense
reimbursements due to the affiliated management agent. The General
Partners cannot guarantee that they will be able to continue to arrange
for financing to cover deficits as they arise or that the arrangement with
the management agent will continue. In addition, as disclosed in Note L,
the Partnership's subsidiary entered into a purchase and sale agreement
for the sale of the sole remaining property to an unaffiliated buyer for
$4,500,000. In the event the property is ultimately sold, the Partnership
would be liquidated. These factors raise substantial doubt about the
ability of the Partnership to continue as a going concern. The
consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 1, 1996
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
Multi-family apartment complex, net of
accumulated depreciation of $2,549,375
and $2,365,138, respectively (Note C) $ 2,180,147 $ 2,218,305
Cash 11,153 44,832
Cash restricted for tenant security deposits 37,288 41,529
Escrow for property replacements (Note D) 45,427 52,444
Prepaid expenses and other assets (Note H) 79,852 64,360
Deferred expenses, net of accumulated
amortization of $33,165 and $28,976,
respectively 113,460 117,649
Total assets $ 2,467,327 $ 2,539,119
LIABILITIES AND PARTNERS' DEFICIT
Mortgage note payable (Notes C and D) $ 2,231,009 $ 2,244,913
Notes payable (Notes E and H) 1,257,385 1,257,385
Accounts payable 117,977 149,866
Accrued expenses and other liabilities (Note F) 230,299 227,927
Accrued interest due to an affiliate (Notes E
and H) 519,325 394,046
Total liabilities 4,355,995 4,274,137
Partners' deficit (Note G):
Class A Limited Partners
(4,000 Units outstanding) (176,645) (163,523)
Original Limited Partner (426,615) (426,615)
General Partners (1,285,408) (1,144,880)
Total Partners' deficit (1,888,668) (1,735,018)
Total liabilities and Partners' deficit $ 2,467,327 $ 2,539,119
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Revenue:
Rental (Note I) $1,050,835 $ 981,018 $ 913,928
Other income 5,613 3,475 982
Total revenue 1,056,448 984,493 914,910
Expenses:
Operating (Note H) 383,364 395,828 325,581
Maintenance 100,470 76,781 118,395
Real estate taxes 127,913 133,951 129,261
Depreciation and amortization 188,426 177,796 168,507
General and administrative 38,393 31,979 30,942
Interest (Notes D, E and H) 371,532 351,268 338,281
Total expenses 1,210,098 1,167,603 1,110,967
Net loss (Note J) $ (153,650) $ (183,110) $ (196,057)
Allocation of net loss (Note G):
Class A Limited Partners $ (13,122) $ (78,034) $ (36,542)
Per Unit of Class A
Limited Partner Interest
(4,000 Units outstanding) $ (3.28) $ (19.51) $ (9.14)
Original Limited Partner $ - $ - $ -
General Partners $ (140,528) $ (105,076) $ (159,515)
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1995, 1994 and 1993
Class A Original Total
General Limited Limited Partners'
Partners Partners Partner Deficit
Balance at
December 31, 1992 $ (880,289) $ (48,947) $(426,615) $(1,355,851)
Net loss (159,515) (36,542) - (196,057)
Balance at
December 31, 1993 (1,039,804) (85,489) (426,615) (1,551,908)
Net loss (105,076) (78,034) - (183,110)
Balance at
December 31, 1994 (1,144,880) (163,523) (426,615) (1,735,018)
Net loss (Notes G and J) (140,528) (13,122) - (153,650)
Balance at
December 31, 1995 $(1,285,408) $(176,645) $(426,615) $(1,888,668)
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Operating activities:
Net loss $ (153,650) $(183,110) $(196,057)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 188,426 177,796 168,507
Decrease (increase) in cash
restricted for tenant
security deposits 4,241 (711) (7,645)
Decrease (increase) in
prepaid expenses
and other assets (15,492) (3,055) 56,397
Increase (decrease) in
accounts payable (35,068) 9,393 (98,927)
Increase in accrued expenses
and other liabilities 2,372 15,475 7,525
Increase in interest due to
an affiliate 125,279 103,839 88,872
Net cash provided
by operating activities 116,108 119,627 18,672
Investing activities:
Additions to fixed assets (146,079) (75,328) (115,208)
Increase (decrease) in accounts
payable related to fixed asset
additions 3,179 2,789 (4,875)
Net decrease in escrow for property
replacements 7,017 5,493 117,409
Net cash used in
investing activities (135,883) (67,046) (2,674)
Financing activities:
Repayment of note payable to
third party - - (135,000)
Increase in notes payable to
affiliate - - 135,000
Principal payments on mortgage
note payable (13,904) (12,793) (11,254)
Net cash used in
financing activities (13,904) (12,793) (11,254)
Net increase (decrease) in cash (33,679) 39,788 4,744
Cash, beginning of year 44,832 5,044 300
Cash, end of year $ 11,153 $ 44,832 $ 5,044
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization
KRLP-I was formed on July 31, 1980 by filing a Certificate of
Limited Partnership in The Commonwealth of Massachusetts. KRLP-
I issued all of the General Partner Interests to two General
Partners (The Krupp Company and The Krupp Corporation) in
exchange for capital contributions totalling $5,000.
The Class B Limited Partner Interests were issued to Chivas
Square Associates (the "Original Limited Partner"), in
connection with the transfer by the Original Limited Partner to
KRLP-I of the real estate property which it formerly owned,
subject to the related mortgage note payable.
The purchasers of 4,000 Units of Class A Investor Limited
Partner Interests at a price of $1,000 per Unit are the
Investor Limited Partners.
On January 20, 1988, the General Partners formed Krupp
Associates Riverside Limited Partnership ("Realty-I") as a
prerequisite for the refinancing of Riverside Apartments. At
the same time, the General Partners transferred ownership of
the property to Realty-I. The General Partner of Realty-I is
The Krupp Corporation ("Krupp Corp."). The Limited Partner of
Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its
interest in Realty-I to KRLP-I. KRLP-I and Realty-I are
collectively known as Krupp Realty Limited Partnership-I
(collectively the "Partnership").
B. Significant Accounting Policies
The Partnership uses the following accounting policies for
financial reporting purposes, which differ in certain respects
from those used for federal income tax purposes (See Note J):
Basis of Presentation
The consolidated financial statements present the
consolidated assets, liabilities and operations of the
Partnership. All intercompany balances and transactions
have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and
money market funds with commercial banks. The Partnership
has not experienced any losses to date on its invested cash.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements
and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
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.
Rental Revenues
Leases require the payment of base rent monthly in advance.
Rental revenues are recorded on the accrual basis. 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.
Depreciation
Depreciation is provided for by the use of the straight-line
method over the estimated useful life of the related asset
as follows:
Buildings and improvements 5-35 years
Appliances, carpeting and equipment 3-5 years
Impairment of Long-Lived Asset
In accordance with Financial Accounting Standards 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 asset.
The investment in the property is carried at cost less
accumulated depreciation unless the General Partners believe
there is a significant impairment in value, in which case a
provision to write down the investment in property to fair
value will be charged against income. At this time, the
General Partners do not believe that any assets of the
Partnership are significantly impaired.
Deferred Expenses
The Partnership is amortizing the costs associated with
refinancing the property over the term of the related
mortgage using the straight-line method.
Income Taxes
The Partnership is not liable for federal or state income
taxes as Partnership income or loss is allocated to the
partners for income tax purposes. In the event that the
Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and the
examination results in a change in the Partnership's taxable
income or loss, such change will be reported to the
partners.
Reclassifications
Certain prior year balances have been reclassified to
conform with current year consolidated financial statement
presentation.
C. Property
The Partnership purchased Riverside I Apartments ("Riverside"),
a 140-unit apartment complex with approximately 30,000 square
feet of commercial space located in Evansville, Indiana, on
February 13, 1981. The total purchase price for Riverside was
$3,518,000, of which $1,842,200 was paid in cash and $1,675,800
was financed with a 40-year non-recourse mortgage payable to
the Department of Housing and Urban Development ("HUD").
On January 21, 1988, the Partnership refinanced Riverside under
a $2,310,000 non-recourse first mortgage note payable between
Realty-I (in which KRLP-I has a 100% beneficial interest) and
HUD. (See below for additional information.) The note is
collateralized by Riverside. The Partnership paid off the
prior mortgage with a portion of the proceeds.
D. Mortgage Note Payable
The non-recourse first mortgage note is payable in equal
monthly installments of $20,747 at an interest rate of 10.5%
per annum based on a thirty-five year amortization schedule.
The note matures on February 1, 2023, when the remaining
principal and any accrued interest will be due and payable.
Under the regulatory agreement with HUD, monthly deposits of
$4,036 must be contributed to a reserve for replacements. The
reserve for replacements is to be used to fund property
improvements. In addition, the regulatory agreement requires
HUD approval for any additional encumbrances or for transfer of
title to the project, and limits distributions based on the
project's operations to the extent of "surplus cash" as defined
in the regulatory agreement.
Based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities, the fair value of long-term debt is approximately
$4,000,000.
Principal payments due on the mortgage note payable are $15,302,
$16,988, $18,860, $20,939 and $23,246 for the five years 1996 through
2000, respectively.
During 1995, 1994 and 1993, the Partnership paid $235,059, $236,169, and
$238,090, respectively, of interest on its mortgage note payable.
E. Notes Payable
The Partnership had demand notes outstanding with both the
General Partners and an affiliate of the General Partners at
December 31, 1995 and 1994, respectively, in the amount of
$1,257,385. Interest accrues monthly at the prime rate of an
unaffiliated bank (8.5% at December 31, 1995) plus one percent
per annum. During 1995, 1994 and 1993, no interest was paid on
these notes. The carrying value of the notes approximate fair
value.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at December 31, 1995 and
1994 consisted of the following:
1995 1994
Accrued real estate taxes $133,334 $130,956
Tenant security deposits 32,004 33,191
Deferred income 4,230 7,102
Accrued expenses, other 60,731 56,678
$230,299 $227,927
G. Partners' Deficit
Under the terms of the Partnership Agreement, profits and
losses from operations are allocated 90% to the Class A Limited
Partners, 9% to the Original Limited Partner and 1% to the
General Partners until such time that the Class A Limited
Partners have received a return of their total invested
capital. Thereafter, 40% shall be allocated to the Class A
Limited Partners, 20% to the Original Limited Partner and 40%
to the General Partners.
Under the terms of the Partnership Agreement, capital
transactions are allocated 90% to the Class A Limited Partners,
9% to the Original Limited Partner and 1% to the General
Partners, until such time that the Class A Limited Partners
have received a return of their total invested capital and
thereafter, allocated 40% to the Class A Limited Partners, 20%
to the Original Limited Partner and 40% to the General
Partners.
In general, the allocation of profits and losses are calculated
based on the terms of the Partnership Agreement, as described
above. However, the Internal Revenue Code contains rules which
govern the allocation of tax losses among partners. For the
years 1992 through 1995, the allocation of tax losses were
calculated based on these rules. Under this code, tax losses
are not allocated to a limited partner if a general partner
bears the economic risk for that loss. Due to operating losses
incurred during these years, the General Partners undertook
additional liabilities on behalf of the Partnership. As a
result, the Partnership allocated additional tax losses to the
General Partners. In conjunction with the tax election
referred to above, the financial statements presented herein
reflect the
allocation of net loss in accordance with the rules of the
Internal Revenue Code.
As of December 31, 1995, the following cumulative partner
contributions and allocations have been made since inception of
the Partnership:
Class A Original
General Limited Limited
Partners Partners Partner Total
Capital
contributions $ 105,000 $ 4,000,000 $ (78,613) $ 4,026,387
Syndication costs - (480,000) - (480,000)
Cash distributions (8,445) (760,000) (76,000) (844,445)
Net loss from
operations (1,403,907) (4,911,584) (469,496) (6,784,987)
Net income from
sales and
restructuring 21,944 1,974,939 197,494 2,194,377
$(1,285,408) $ (176,645) $(426,615) $(1,888,668)
H. Related Party Transactions
Commencing with the date of acquisition of the Partnership's
property, the Partnership entered into an agreement under which
property management fees are paid to an affiliate of the
General Partners for services as management agent. Such
agreement provides for management fees payable monthly at a
rate of 5% of the gross receipts from the property 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 property
including accounting, computer, insurance, travel, legal and
payroll costs relating to the preparation and mailing of
reports and other communications to the Limited Partners.
Since January 1, 1991, the General Partners arranged with the
management agent for the annual waivers of management fees and
expense reimbursements.
During 1995, 1994 and 1993, interest on borrowings accrued to
the General Partners or affiliates of the General Partners were
$125,279, $103,839 and $88,872, respectively.
During 1995, 1994 and 1993, amounts paid to the General
Partners or their affiliates relating to disposition activities
were $1,095, $8,711 and $0, respectively.
I. Future Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases for the
years 1996 through 2000 and thereafter are as follows:
1996 $260,677
1997 $266,328
1998 $269,608
1999 $272,252
2000 $272,710
Thereafter $ 0
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 loss reported in the accompanying
Consolidated Statement of Operations with the net loss reported
in the Partnership's federal income tax return follows:
1995 1994 1993
Net loss per Consolidated Statement
of Operations $(153,650) $(183,110) $(196,057)
Add: Difference between book and tax
depreciation 9,419 (2,306) (10,451)
Income recognized for book
and not for tax - - (26,765)
Net loss for federal income tax purposes $(144,231) $(185,416) $(233,273)
J. Federal Income Taxes - Continued
The allocation of net loss for federal income tax purposes for
1995 is as follows:
Portfolio Passive
Income Loss Total
Class A Limited Partners $ 479 $ (12,797) $ (12,318)
Original Limited Partner - - -
General Partners 5,134 (137,047) (131,913)
$ 5,613 $(149,844) $(144,231)
For the years ended December 31, 1995, 1994 and 1993, the per
Unit net loss for the Class A Limited Partners for federal
income tax purposes was $3.08, $19.75, and $10.87, respectively.
K. Operating Deficits
The Partnership has experienced cash flow deficiencies for
several years. In connection therewith, the General Partners,
to date, have been able to arrange financing through short-term
borrowings from affiliates to cover a substantial portion of
these deficits. Also, one of the General Partners, The Krupp
Company, contributed an additional $100,000 to the Partnership
during 1991, and the General Partners have arranged for the
waiver of property management fees and expense reimbursements
payable to the management agent. In January 1993, The Krupp
Company loaned
$135,000 in the form of a demand note to the Partnership to
payoff a demand note from an unaffiliated bank. The operating
deficits could continue and the General Partners cannot
guarantee that they will be able to take actions that will cover
any future deficits. In that event, the Partnership could
default on its mortgage payments and become subject to
foreclosure proceedings. This would have a significant impact
on the financial position and operations of the Partnership.
However, the Partnership is current on its mortgage payments,
and it cannot presently be determined if a foreclosure will
occur in the future. Accordingly, the financial statements do
not include any adjustments that might result from the outcome
of these uncertainties, all of which raise substantial doubt
about the ability of the Partnership to continue as a going
concern.
In the event of the sale of Riverside, the Partnership would be
liquidated. As a result of the liquidation, the partners would
receive allocations of taxable income equivalent to any negative
account balance they may have. In addition, there would be no
cash available in connection with such income. Therefore, in
the event that the partner does not have items which could
offset such income, the partner would have to pay taxes with
funds from other sources.
L. Subsequent Event
In January 1996, the General Partners entered into a purchase
and sale agreement for the sale of Riverside to an unaffiliated
buyer scheduled in the second quarter of 1996 for the selling
price of $4,500,000. In the event the property is ultimately
sold, the Partnership would be liquidated. It is anticipated
that all sale proceeds would be used to satisfy Partnership
obligations and no funds would be available to investors for
distribution.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
Costs Capitalized
Initial Cost Subsequent to
to Partnership Acquisition
Building Building
and and
Description Encumbrances Land Improvements Improvements
Riverside I Apts
Evansville, Indiana $ 2,231,009 $525,000 $ 3,021,592 $ 1,182,930
Gross Amounts Carried at End of Year
Building
and Accumulated
Land Improvements Total Depreciation
$525,000 $ 4,204,522 $4,729,522 $ 2,549,375
Year
Construction Year Depreciable
Completed Acquired Life
1973 1981 3-35 years
Reconciliation of Real Estate and Accumulated Depreciation for each of the
three years in the period ended December 31, 1995:
1995 1994 1993
Real Estate
Balance at beginning of year $4,583,443 $4,508,115 $4,392,907
Improvements 146,079 75,328 115,208
Balance at end of year $4,729,522 $4,583,443 $4,508,115
Accumulated Depreciation
Balance at beginning of year $2,365,138 $2,191,531 $2,027,214
Depreciation expense 184,237 173,607 164,317
Balance at end of year $2,549,375 $2,365,138 $2,191,531
The Partnership uses the cost basis for property valuation for both income
tax and financial statement purposes. The aggregate cost for income tax
purposes at December 31, 1995 is $4,730,796.