UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 2-68727
Krupp Associates 1980-1
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)
(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
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 ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
Multi-family apartment complex, net of
accumulated depreciation of $2,682,241
and $2,549,375, respectively $ 2,105,856 $ 2,180,147
Cash 36,985 11,153
Cash restricted for tenant security deposits 34,831 37,288
Escrow for property replacements 54,585 45,427
Prepaid expenses and other assets 134,776 79,852
Deferred expenses, net of accumulated
amortization of $36,308 and $33,165,
respectively 110,317 113,460
Total assets $ 2,477,350 $ 2,467,327
LIABILITIES AND PARTNERS' DEFICIT
Mortgage note payable $ 2,219,585 $ 2,231,009
Notes payable 1,257,385 1,257,385
Accounts payable 59,828 117,977
Accrued expenses and other liabilities 279,242 230,299
Accrued interest due to affiliate (Note 3) 608,119 519,325
Total liabilities 4,424,159 4,355,995
Partners' deficit (Note 2):
Class A Limited Partners
(4,000 Units outstanding) (228,972) (176,645)
Original Limited Partner (431,848) (426,615)
General Partners (1,285,989) (1,285,408)
Total Partners' deficit (1,946,809) (1,888,668)
Total liabilities and Partners' deficit $ 2,477,350 $ 2,467,327
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Revenue:
Rental $275,187 $262,750 $831,260 $772,722
Other income 608 3,244 1,884 3,972
Total revenue 275,795 265,994 833,144 776,694
Expenses:
Operating 97,929 93,705 292,640 272,685
Maintenance 29,953 33,040 59,552 63,736
Real estate taxes 32,683 33,600 102,384 92,313
Depreciation and
amortization 46,691 47,040 136,009 136,557
General and administrative 8,664 12,992 28,264 30,818
Interest (Note 3) 90,833 92,898 272,436 278,890
Total expenses 306,753 313,275 891,285 874,999
Net loss $(30,958) $(47,281) $(58,141) $(98,305)
Allocation of net loss
(Note 2):
Class A Limited Partners $(27,862) $(42,553) $(52,327) $(88,475)
Per Unit of Class A Limited
Partner Interest (4,000
Units outstanding) $ (6.96) $ (10.64) $ (13.08) $ (22.12)
Original Limited Partner $ (2,787) $ (4,255) $ (5,233) $ (8,847)
General Partners $ (309) $ (473) $ (581) $ (983)
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 Nine Months
Ended September 30,
1996 1995
Operating activities:
Net loss $ (58,141) $ (98,305)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 136,009 136,557
Decrease in cash restricted for
tenant security deposits 2,457 2,957
Increase in prepaid expenses and other
assets (54,924) (38,783)
Decrease in accounts payable (59,362) (63,189)
Increase in accrued expenses and other
liabilities 48,943 26,244
Increase in interest due to affiliate 88,794 94,059
Net cash provided by operating
activities 103,776 59,540
Investing activities:
Additions to fixed assets (58,575) (58,507)
Increase in accounts payable for fixed asset
additions 1,213 -
Increase in escrow for property replacements (9,158) (14,075)
Net cash used in investing activities (66,520) (72,582)
Financing activity:
Principal payments on mortgage notes payable (11,424) (10,290)
Net increase (decrease) in cash 25,832 (23,332)
Cash, beginning of period 11,153 44,832
Cash, end of period $ 36,985 $ 21,500
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
NOTES TO CONSOLIDATED 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
Associates 1980-1 and Subsidiary (the "Partnership"), the disclosures
contained in this report are adequate to make the information presented
not misleading. See Notes to Consolidated Financial Statements included
in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995 for additional information relevant to significant
accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the Partnership's consolidated financial position as of
September 30, 1996, its results of operations for the three and nine
months ended September 30, 1996 and 1995, and its cash flows for the nine
months ended September 30, 1996 and 1995. Certain prior year balances
have been reclassified to conform with current year consolidated
financial statement presentation.
The results of operations for the three and nine months ended September
30, 1996 are not necessarily indicative of the results which may be
expected for the full year. See Management's Discussion and Analysis of
Financial Condition and Results of Operations included in this report.
(2) Summary of Changes in Partners' Deficit
A summary of changes in Partners' deficit for the nine months ended
September 30, 1996 is as follows:
Class A Original Total
General Limited Limited Partners'
Partners Partners Partner Deficit
Balance at
December 31, 1995 $(1,285,408) $(176,645) $(426,615) $(1,888,668)
Net loss (581) (52,327) (5,233) (58,141)
Balance at
September 30, 1996 $(1,285,989) $(228,972) $(431,848) $(1,946,809)
(3) Related Party Transactions
Interest on borrowings accrued to the General Partners or their
affiliates was $29,723 and $88,794 for the three and nine months ended
September 30, 1996, respectively, and $31,381 and $94,059 for the three
and nine months ended September 30, 1995, respectively.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements including those concerning
Management's expectations regarding the future financial performance and
future events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operating performance of Riverside Apartments
("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 cannot guarantee that they will be able to take actions
that will cover any future operating 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. Two weeks before
the scheduled sale date, the buyer rescinded his offer. The General Partners
continue to actively pursue other opportunities for the sale of the property.
Cash Flow
Shown below, as required by the Partnership Agreement, is the calculation of
Cash Flow of the Partnership for the nine months ended September 30, 1996.
The General Partners provide certain of the information below to meet
requirements of the Partnership Agreement and because they believe that it is
an appropriate supplemental measure of operating performance. However, 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 $(56,000)
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 134,000
Principal payments on mortgage (11,000)
Expenditures for capital improvements (59,000)
Additions to working capital reserves (8,000)
Cash Flow $ -0-
Operations
Cash Flow, before additions to working capital reserves, increased in the
first three quarters of 1996 as compared to the same period in 1995. The
increase is attributable to increases in revenue which more than offset the
increase in expenses. In comparing the increase in revenue for the three and
nine months ended September 30, 1996 to 1995, Riverside experienced an
increase in rental revenue due to both increases in residential rental rates
and a rise in commercial occupancy from an average occupancy rate of 93% to
100%, for the three months ended September 30, 1995 and 1996, respectively,
and 90% to 100% for the nine months ended September 30, 1995 and 1996,
respectively.
Total expenses remained stable for the three months ended September 30, 1996
and 1995. For the nine months ended September 30, 1996 and 1995, total
expenses increased due to increases in operating and real estate tax expenses.
The increase in operating expense is related to an increase in utility
expense. Real estate tax expense increased due to an adjustment of 1995 taxes
recorded in the second quarter of 1996.
General
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment of
its real estate 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 the
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.
KRUPP ASSOCIATES 1980 -1 AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes 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
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 Associates 1980-1
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting
Officer of The Krupp Corporation, a
General Partner.
DATE: November 4, 1996