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 March 31, 1997
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
The total number of pages in this document is 10.
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
March 31, December 31,
1997 1996
Multi-family apartment complex, net of
accumulated depreciation of $2,774,040
and $2,730,441, respectively $ 2,056,853 $ 2,093,819
Cash and cash equivalents 72,891 75,012
Cash restricted for tenant security deposits 38,194 38,004
Replacement reserve escrow 40,259 49,030
Prepaid expenses and other assets 122,643 86,267
Deferred expenses, net of accumulated
amortization of $38,402 and $37,355,
respectively 108,223 109,270
Total assets $ 2,439,063 $ 2,451,402
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage note payable $ 2,211,456 $ 2,215,574
Notes payable 1,257,385 1,257,385
Accounts payable 73,002 93,704
Accrued expenses and other liabilities 268,112 242,244
Accrued interest due to an affiliate (Note 3) 666,919 637,842
Total liabilities 4,476,874 4,446,749
Partners' deficit (Note 2):
Class A Limited Partners
(4,000 Units outstanding) (310,874) (272,656)
Original Limited Partner (440,038) (436,216)
General Partners (1,286,899) (1,286,475)
Total Partners' deficit (2,037,811) (1,995,347)
Total liabilities and Partners' deficit $ 2,439,063 $ 2,451,402
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
Ended March 31,
1997 1996
Revenue:
Rental $264,455 $273,981
Other income 1,088 433
Total revenue 265,543 274,414
Expenses:
Operating 98,258 101,580
Maintenance 15,038 10,234
Real estate taxes 34,500 35,178
Management fees (Note 3) 13,504 -
General and administrative 12,091 16,719
Depreciation and amortization 44,646 44,117
Interest (Note 3) 89,970 90,993
Total expenses 308,007 298,821
Net loss $(42,464) $(24,407)
Allocation of net loss (Note 2):
Class A Limited Partners $(38,218) $(21,966)
Per Unit of Class A Limited Partner
Interest (4,000 Units outstanding) $ (9.55) $ (5.49)
Original Limited Partner $ (3,822) $ (2,197)
General Partners $ (424) $ (244)
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 Three Months
Ended March 31,
1997 1996
Operating activities:
Net loss $(42,464) $(24,407)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 44,646 44,117
Changes in assets and liabilities:
Decrease (increase) in cash restricted
for tenant security deposits (190) 2,813
Increase in prepaid expenses and
other assets (36,376) (39,911)
Decrease in accounts payable (18,534) (2,536)
Increase in accrued expenses and other
liabilities 25,868 30,795
Increase in interest due to an affiliate 29,077 29,671
Net cash provided by operating
activities 2,027 40,542
Investing activities:
Deposits to replacement reserve escrow (12,109) (12,109)
Withdrawals from replacement reserve escrow 20,880 -
Additions to fixed assets (6,633) (12,904)
Increase (decrease) in accounts payable related
to fixed asset additions (2,168) 4,325
Net cash used in investing activities (30) (20,688)
Financing activity:
Principal payments on mortgage notes payable (4,118) (3,709)
Net increase (decrease) in cash and cash equivalents (2,121) 16,145
Cash and cash equivalents, beginning of period 75,012 11,153
Cash and cash equivalents, end of period $ 72,891 $ 27,298
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, 1996 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 March 31, 1997 and its results of
operations and cash flows for the three months ended March 31,
1997 and 1996.
The results of operations for the three months ended March 31,
1997 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 three months
ended March 31, 1997 is as follows:
Class A Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
December 31, 1996 $(272,656) $(436,216) $(1,286,475) $(1,995,347)
Net loss (38,218) (3,822) (424) (42,464)
Balance at
March 31, 1997 $(310,874) $(440,038) $(1,286,899) $(2,037,811)
(3) 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. These
manaagement agreements were sold to BRI OP Limited Partnership,
a publicly traded real estate investment trust and an affiliate
of the General Partners, on February 28, 1997. 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. From 1991 through 1996, the General
Partners arranged with the management agent for the annual
waivers of management fees and expense reimbursements. As a
result of the sale of the management agreements, effective
January 1, 1997, monthly payment of management fees were
reinstituted. The management agreement was sold to BRI OP
Limited Partnership, a publicly traded real estate investment
trust and an affiliate of the General Partners, on February 28,
1997. The General Partners will continue to negotiate for the
waiver of expense reimbursements. Property management fees paid
to an affiliate of the General Partners were $13,504 and $0 for
the three months ended March 31, 1997 and 1996, respectively.
Interest accrued on borrowings to the General Partners or their
affiliates was $29,077 and $29,671 for the three months ended
March 31, 1997 and 1996, respectively.
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) 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 when necessary. 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 from 1991 through 1996, have arranged for the
waiver of property management fees and expense reimbursements payable to
the management agent, also an affiliate of the General Partners. Effective
January 1, 1997, monthly payment of management fees were reinstituted as a
result of the sale of the property management contract to an affiliate of
the General Partners. The General Partners will continue to negotiate for
the waiver of expense reimbursements.
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, as of March 31, 1997,
the Partnership is current on its mortgage payments.
The General Partners continue to actively pursue the sale of Riverside
Apartments. In the event the property is sold, the Partnership will be
liquidated. It is anticipated that all sale proceeds will be used to
satisfy Partnership obligations and no funds will 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 three months ended March
31, 1997. The General Partners provide 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 $(15,000)
Items not requiring (requiring) the use of
operating funds:
Tax basis depreciation and amortization 17,000
Principal payments on mortgage (4,000)
Expenditures for capital improvements (7,000)
Cash Flow (Deficit) $ (9,000)
Operations
In comparing the first quarter of 1997 as compared to the same period in
1996, the decrease in Cash Flow, is attributable to a decrease in net
income, as revenue decreased and expenses increased. Rental revenue
decreased due a decline Riverside's average commercial occupancy from being
fully occupied at 100% during the first quarter of 1996, to an average
occupancy of 85% during the first quarter of 1997.
Total expenses increased slightly for the three months ended March 31,
1997, as compared to the three months ended March 31, 1996, with increases
in management fees and maintenance expense partially offset by decreases in
operating and general and administrative expenses. Effective January 1,
1997, monthly payment of management fees were reinstituted as a result of
the sale of the property management contract to an affiliate of the General
Partners. Maintenance expense increased due to contracted cleaning
services which were previously provided by salaried employees. Thus, the
increase in maintenance expense is directly offset by a decrease in
operating expense. General and administrative expense decreased due to
lower audit expenditures.
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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief Accounting Officer of The Krupp
Corporation, a General Partner.
DATE: May 13, 1997