UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
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Commission File number 0-14377
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Krupp Realty Limited Partnership-VII
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Massachusetts 04-2842924
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization
One Beacon Street, Boston, Massachusetts 02108
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(Address of principal executive (Zip code)
offices)
(617) 523-7722
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(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 preceeding 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.
Item 1. FINANCIAL STATEMENTS
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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 REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
2001 2000
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Multi-family apartment communities, net of
accumulated depreciation of $16,002,001 and
$15,671,250, respectively $ 7,508,260 $ 7,766,297
Cash and cash equivalents 300,894 456,851
Cash restricted for tenant security deposits 27,993 27,800
Replacement reserve escrow 64,443 56,043
Due from affiliates 28,062 31,115
Prepaid expenses and other assets 322,681 476,014
Investment in securities (Note 3) 65,340 65,340
Deferred expenses, net of accumulated amortization
of $219,670 and $210,020, respectively 95,982 105,632
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Total assets $ 8,413,655 $ 8,985,092
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LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 10,077,881 $ 10,107,446
Accrued expenses and other liabilities 613,347 717,537
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Total liabilities 10,691,228 10,824,983
Partners' deficit (Note 2):
Investor Limited Partners
(27,184 units outstanding) (1,354,649) (946,178)
Original Limited Partner (592,006) (569,931)
General Partners (330,918) (323,782)
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Total partners' deficit (2,277,573) (1,839,891)
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Total liabilities and partners' deficit $ 8,413,655 $ 8,985,092
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The accompanying notes are an integral part of the
consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31,
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2001 2000
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Revenue:
Rental $ 1,058,303 $ 1,035,012
Interest income 3,369 4,810
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Total revenue 1,061,672 1,039,822
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Expenses:
Operating (Note 5) 299,525 246,781
Maintenance 87,447 64,614
Real estate taxes 108,003 110,757
General and administrative (Note 5) 99,819 34,881
Management fees (Note 5) 47,112 54,922
Depreciation and amortization 340,401 354,534
Interest 241,109 218,456
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Total expenses 1,223,416 1,084,945
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Net loss $ (161,744) $ (45,123)
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Allocation of net loss:
Investor Limited Partners
(27,184 units outstanding):
Net loss $ (160,127) $ (44,672)
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Investor Limited Partners,
Per Unit:
Net loss $ (5.89) $ (1.64)
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Original Limited Partner:
Net loss $ - $ -
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General Partners:
Net loss $ (1,617) $ (451)
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The accompanying notes are an integral part of the
consolidated financial statements
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31,
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2001 2000
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Cash flows from operating activities:
Net loss $ (161,744) $ (45,123)
Adjustment to reconcile net loss to net
cash provided by operating activities:
Interest earned on replacement reserve escrow - (179)
Depreciation and amortization 340,401 354,534
Changes in assets and liabilities:
Increase in restricted cash for tenant securit (193) (148)
Decrease in prepaid expenses and other assets 156,386 234,418
Decrease in accrued expenses and other liabili (104,190) (120,510)
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Net cash provided by operating activities 230,660 422,992
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Cash flows from investing activities:
Deposits to replacement reserve escrow (8,400) (12,600)
Withdrawals from replacement reserve escrow - 67,522
Additions to fixed assets (72,714) (86,111)
Decrease in accrued expenses and other liabilities
related to fixed assets additions - (2,204)
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Net cash used in investing activities (81,114) (33,393)
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Cash flows from financing activities:
Principal payments on mortgage notes payable (29,565) (27,255)
Distributions (275,938) (276,029)
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Net cash used in financing activities (305,503) (303,284)
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Net (decrease) increase in cash and cash equivalents (155,957) 86,315
Cash and cash equivalents, beginning of period 456,851 120,525
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Cash and cash equivalents, end of period $ 300,894 $ 206,840
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The accompanying notes are an integral part of the
consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
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
principals 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 Realty Limited
Partnership-VII and Subsidiaries (the "Partnership"), the disclosures
contained in this report are adequate to make the information presented not
misleading. See notes to the Consolidated Financial Statements included in
the Partnership's Annual Report on Form 10-K for the year ended December
31, 2000 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, 2001 and
its results of operation and cash flows for the three months ended March
31, 2001 and 2000.
The results of operations for the three months ended March 31, 2001 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) Changes in Partners' Deficit
A summary of changes in Partners' deficit for the three months ended March
31, 2001 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partner Deficit
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Balance at
December 31, 2000 $ (946,178) $ (569,931) $ (323,782) $(1,839,891)
Net loss (160,127) -- (1,617) (161,744)
Distributions (248,344) (22,075) (5,519) (275,938)
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Balance at
March 31, 2001 $(1,354,649) $ (592,006) $ (330,918) $(2,277,573)
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(3) Investment in Securities
On October 5, 2000, the Partnership, as a member of an alliance of major
multi-family real estate companies, executed a master lease agreement
("MLA") with a provider of high-speed internet, video and voice services to
multi-family communities. Pursuant to the MLA, the Partnership granted the
provider preferred lease, license and access rights to provide data
services, consisting of high-speed broadband internet access and video
services, to the residents at some of its multi-family communities for a
ten-year period. In exchange for these rights, the Partnership received
250,843 shares of common stock which were valued at $.2285 per share or
$57,341. In addition, the Partnership will receive 7.5% of the gross
revenues that the provider obtains from providing its services as well as a
fixed amount for each resident that executes a subscriber agreement. In
conjunction with the execution of the MLA, the Partnership made an
investment of $5,751 in exchange for 25,164 additional shares of common
stock also valued at $.2285 per share. The Partnership incurred
approximately $2,248 in closing costs related to the acquisition by the
Partnership and the closing costs incurred were recorded as an investment
in securities in the financial statements as of December 31, 2000.
(4) Mortgage Notes Payable
On April 27, 2001, the General Partners signed an agreement extending the
mortgage notes payable on Windsor Apartments, under the original terms,
until May 1, 2002. The Partnership paid an extension fee of $24,962 for
this privilege.
(5) Related Party Transactions
The Partnership pays property management fees to an affiliate of the
General Partners for management services. Pursuant to the management
agreements, management fees are payable monthly at a rate of 5% of gross
receipts from residential properties 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 properties,
including administrative expenses.
Amounts accrued or paid to the General Partners' affiliates were as
follows:
For the Three Months Ended
March 31,
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2001 2000
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Property management fees $ 47,112 $ 54,922
Expenses reimbursement 117,687 41,734
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Charged to operations $ 164,799 $ 96,656
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Expense reimbursements due from affiliates of $28,062 and $31,115 were
included in due from affiliates at March 31, 2001 and December 31, 2000,
respectively.
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
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 successful operations of its real estate
investments. Such ability would also be impacted by the future availability
of bank borrowings and the future refinancing and sale of the Partnership's
remaining real estate investments. These sources of liquidity will be used
by the Partnership for payment of expenses related to real estate
operations, capital improvements, debt service and other expenses. Cash
Flow, if any, as calculated under section 8.2 (a) of the Partnership
Agreement, will then be available for distribution to the Partners.
Over the past several years, real estate markets in general have improved,
and the General Partners feel it is an opportune time to formulate a
liquidation strategy for the Partnership. As previously disclosed, the
General Partners have begun the process of more thoroughly assessing the
real estate sales market in the Partnership's market areas and developing a
disposition strategy which will yield the highest value to investors
through an efficient and orderly liquidation of the Partnership. In keeping
with this strategy, the General Partners have extended the term of the
mortgage loan which would have matured in the next 2 months with financing
that leaves flexibility for the property sales.
Assuming market conditions do not change, the assessment of the real estate
sales market is consistent with the General Partners' expectations, and an
acceptable disposition plan can be implemented, the General Partners expect
to complete the liquidation process over the next 12 months. However, there
can be no assurance that such a liquidation will occur, or what amounts may
be realized by the Partnership.
On April 27, 2001, the General Partners signed an agreement extending the
mortgage notes payable on Windsor Apartments, under the original terms,
until May 1, 2002. The Partnership paid an extension fee of $24,962 for
this privilege.
The General Partners, on an ongoing basis, assess the current and future
liquidity needs in determining the level of working capital reserves the
Partnership should maintain. Adjustments to distributions are made when
appropriate to reflect such assessment. The current annual distribution
rate is $18.28 per Investor Limited Partner Unit, and is paid semi-annually
in February and August.
Operations
The following discussion relates to the operations of the Partnership and
its properties (Courtyards Village and Windsor Apartments) for the three
months ended March 31, 2001 and 2000.
Net loss increased during the three months ended March 31, 2001 when
compared to same period in 2000, as the increase in total expenses exceeded
the increase in total revenue. The increase in total revenue was primarily
a result of rental rate increases implemented at all of the Partnership's
properties at the end of the first quarter of 2000.
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
Total expenses for the three months ended March 31, 2001 increased when
compared to the three months ended March 31, 2000. Operating expenses
increased as a result of increases in payroll, utilities and rubbish
removal costs. Maintenance expenses increased due to increases in recurring
repair and maintenance costs. General and administrative expenses also
increased as a result of increases in investor communications costs
including the annual look-back adjustment which totaled approximately
$43,000. Depreciation expense decreased as fixed asset additions purchased
in the previous years became fully depreciated.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's future earnings, cash flows and fair values relevant to
financial instruments are dependent upon prevalent market rates. Market
risk is the risk of loss from adverse changes in market prices and interest
rates. The Partnership manages its market risk by matching projected cash
inflows from operating activities, investing activities and financing
activities with projected cash outflows to fund debt payments,
acquisitions, capital expenditures, distributions and other cash
requirements. All of the Partnership's debt (maturing at various times
through 2007) has a fixed interest rate, which minimizes the interest rate
risk.
A detailed analysis of quantitative and qualitative market risk exposures
was provided in the in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 2000. There have been no material changes in market
risk subsequent to that date
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 it's behalf by the
undersigned, thereunto duly authorized.
Krupp Realty Limited Partnership-VII
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(Registrant)
BY: /s/ David C. Quade
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David C. Quade
Treasurer (Principal Financial and
Accounting Officer) of The Krupp
Corporation, a General Partner
DATE: May 15, 2001