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 June 30, 2002
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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
incorporation or organization identification no.)
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 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.
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 REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In Liquidation)
ASSETS
(Unaudited)
June 30, December 31,
2002 2001
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Cash and cash equivalents $ 1,334,793 $ 8,968,487
Due from affiliates 30,617 28,737
Prepaid expenses and
other assets 47,420 48,499
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Total assets $ 1,412,830 $ 9,045,723
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued expenses and other
liabilities $ 71,638 $ 103,342
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Total liabilities 71,638 103,342
Partners' equity (Note 2):
Investor Limited Partners
(27,184 units outstanding) 1,327,780 8,852,957
Original Limited Partner - -
General Partners 13,412 89,424
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Total partners' equity 1,341,192 8,942,381
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Total liabilities and partners'
equity $ 1,412,830 $ 9,045,723
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
2
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In Liquidation)
(Unaudited)
For the Three Months For the Six Months Ended
Ended June 30, June 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenue:
Rental $ 1,486 $ 1,051,531 $ 3,042 $ 2,109,834
Interest income 5,986 2,225 43,989 5,594
----------- ----------- ----------- -----------
Total revenue 7,472 1,053,756 47,031 2,115,428
Expenses:
Operating (Note 3) (3,447) 287,630 3,846 587,155
Maintenance (211) 102,575 985 190,022
Real estate taxes - 118,951 - 226,954
General and
administrative(Note 3) 22,829 58,759 23,134 158,578
Management fees(Note 3) - 45,189 7,794 92,301
Depreciation and
amortization - 344,409 - 684,810
Interest - 218,010 - 459,119
----------- ----------- ----------- -----------
Total expenses 19,171 1,175,523 35,759 2,398,939
----------- ----------- ----------- -----------
Net Income (loss) $ (11,699) $ (121,767) $ 11,272 $ (283,511)
=========== =========== =========== ===========
Allocation of net income (loss) (Note 2):
Investor Limited Partners
(27,184 units outstanding):
Net Income (loss) $ (11,582) $ (120,549) $ 11,159 $ (280,676)
=========== =========== =========== ===========
Investor Limited Partners,
Per Unit:
Net Income (loss) $ (0.42) $ (4.43) $ 0.41 $ (10.33)
=========== =========== =========== ===========
Original Limited Partner:
Net Income $ - $ - $ - $ -
=========== =========== =========== ===========
General Partners:
Net Income (loss) $ (117) $ (1,218) $ 113 $ (2,835)
=========== =========== =========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
3
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Liquidation)
(Unaudited)
For the Six Months Ended
June 30,
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2002 2001
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Cash flows from operating activities:
Net income (loss) $ 11,272 $ (283,511)
Adjustment to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization - 684,810
Changes in assets and
liabilities:
Increase in restricted cash
for tenant security deposits - (222)
(Increase) decrease in prepaid
expenses and other assets (801) 134,660
Decrease in accrued expenses
and other liabilities (31,704) (98,749)
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Net cash (used in)
provided by operating
activities (21,233) 436,988
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Cash flows from investing activities:
Deposits to replacement reserve
escrow - (21,000)
Fixed asset additions - (292,716)
Increase in accrued expenses and
other liabilities related to
fixed assets additions - 2,346
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Net cash used in
investing activities - (311,370)
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Cash flows from financing activities:
Principal payments on mortgage
notes payable - (59,896)
Distributions (7,612,461) (275,938)
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Net cash used in financing
activities (7,612,461) (335,834)
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Net decrease in cash and cash
equivalents (7,633,694) (210,216)
Cash and cash equivalents, beginning
of period 8,968,487 456,851
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Cash and cash equivalents, end
of period $ 1,334,793 $ 246,635
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
4
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation)
(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 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, 2001 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 June 30, 2002, its
results of operation for the three and six months ended June 30, 2002 and
2001, and its cash flows for the six months ended June 30, 2002 and 2001.
During 2001, the Partnership sold its remaining real estate investments,
and its intention is to liquidate the Partnership's remaining assets,
distribute its remaining cash and dissolve the Partnership in 2002.
The results of operations for the three and six months ended June 30, 2002
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' Equity
A summary of changes in Partners' equity for the six months ended June 30,
2002 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
----------- ----------- ----------- -----------
Balance at
December 31, 2001 $ 8,852,957 $ - $ 89,424 $ 8,942,381
Net Income 11,159 - 113 11,272
Distributions (7,536,336) - (76,125) (7,612,461)
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Balance at
June 30, 2002 $ 1,327,780 $ - $ 13,412 $ 1,341,192
=========== =========== =========== ===========
5
KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
(3) Related Party Transactions
During 2001, the Partnership paid 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 For the Six Months Ended
Ended June 30, June 30,
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2002 2001 2002 2001
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Property management
fees $ - $ 45,189 $ 7,794 $ 92,301
Expenses reimbursement - 67,900 175 185,587
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Charged to operations $ - $ 113,089 $ 7,969 $ 277,888
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Expense reimbursements due from affiliates of $30,617 and $28,737 were
included in due from affiliates at June 30, 2002 and December 31, 2001,
respectively.
6
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
On November 20, 2001, the Partnership sold Windsor Apartments, a 300-unit
multi-family apartment community to an unaffiliated third party. The Partnership
received $12,235,336, net of closing costs of $80,518 and payoff of mortgage
payable and accrued interest of $4,971,598.
On August 29, 2001, the Partnership sold Courtyards Village, a 224-unit
multi-family apartment complex to an unaffiliated third party. The Partnership
received $7,608,399 for the sale, net of closing costs of $83,648 and debt of
$5,075,953 assumed by the buyer, and repaid the mortgage note payable and
accrued interest of $30,106.
As of June 30, 2002 and December 31, 2001, the Partnership has no investment in
any multi-family apartment communities.
Operations
The following discussion relates to the operations of the Partnership and its
properties (Courtyards Village and Windsor Apartments) for the three and six
months ended June 30, 2002 and 2001.
Net income increased during the three and six months ended June 30, 2002 when
compared to same period in 2001 due to sale of the Partnership's remaining real
estate assets in August and November of 2001.
Total revenue for the six months ended June 30, 2002 decreased when compared to
the six months ended June 30, 2001 as a result of the sale of the Partnerships'
properties. Interest income earned increased substantially from the cash
proceeds received from the sale of the Partnership's real estate properties.
Total expenses for the quarter ended June 30, 2002 decreased significantly when
compared to the same period in 2001 since the Partnership no longer has
ownership in any real estate properties as of December 31, 2001.
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 distributions and other cash requirements.
A detailed analysis of quantitative and qualitative market risk exposures was
provided in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2001. There have been no material changes in market risk subsequent
to that date.
All of the Partnership's mortgage debt was repaid as of June 30, 2002 and
December 31, 2001.
7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
None
8
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 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: August 14, 2002
9
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Krupp Realty Limited Partnership-VII
(the "Partnership") on Form 10-Q for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, David C. Quade, Principal Financial and Accounting Officer of The Krupp
Corporation, a General Partner of the Partnership, certify, pursuant to U.S.C.
ss. 1350 as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition of the Partnership as of June 30, 2002
and the results of operations of the Partnership for the three month period
then ended.
\s\ David C. Quade
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David C. Quade
Principal Financial and Accounting Officer
10