UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 0-14377
Krupp Realty Limited Partnership-VII
Massachusetts 04-2842924
(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
KRUPP REALTY LIMITED PARTNERSHIP-VII
BALANCE SHEETS
ASSETS
June 30, December 31,
1994 1993
Multi-family apartment complexes, net of
accumulated depreciation of $8,236,459
and $7,820,288, respectively $ 9,993,591 $10,349,433
Retail center, net of accumulated
depreciation of $2,702,805 and $2,513,207,
respectively 6,861,919 7,046,517
Total real estate assets 16,855,510 17,395,950
Cash 931,808 840,798
Cash restricted for tenant security deposits 54,525 61,363
Cash restricted for capital improvements 60,035 57,748
Prepaid expenses and other assets (Note 2) 520,792 327,862
Deferred expenses, net of accumulated
amortization of $6,173 and $259,055,
respectively (Notes 2 and 3) 201,254 45,975
Total assets $18,623,924 $18,729,696
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable (Note 3) $12,889,034 $12,682,032
Other liabilities 726,792 824,861
Total liabilities 13,615,826 13,506,893
Commitment (Note 3)
Partners' equity (Note 4) 5,008,098 5,222,803
Total liabilities and partners' equity $18,623,924 $18,729,696
The accompanying notes are an integral
part of the financial statements.
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KRUPP REALTY LIMITED PARTNERSHIP-VII
STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Revenue:
Rental income $1,065,111 $1,372,679 $2,094,554 $2,725,525
Interest income 5,683 5,706 11,299 10,482
Total revenue 1,070,794 1,378,385 2,105,853 2,736,007
Expenses:
Operating (including
reimbursements to affiliates
of $42,068, $60,653, $83,138
and $121,158, respectively) 299,970 437,954 587,111 870,807
Maintenance 86,483 223,732 137,239 330,967
Real estate taxes 98,502 140,981 205,226 271,954
Management fees to an affiliate 47,444 61,166 88,381 123,925
Depreciation and amortization 344,249 381,430 657,918 756,743
Interest 300,133 410,933 600,519 821,739
General and administrative
(including in reimbursements
to affiliates of $12,901,
$12,801, $25,834 and $25,674,
respectively) 23,552 35,006 44,164 42,437
Total expenses 1,200,333 1,691,202 2,320,558 3,218,572
Net loss $ (129,539) $ (312,817) $ (214,705) $ (482,565)
Allocation of net loss (Note 4):
Per Unit of Investor
Limited Partnership Interest
(27,184 Units outstanding) $ (4.72) $ (11.39) $ (7.82) $ (17.57)
General Partners $ (1,295) $ (3,129) $ (2,147) $ (4,826)
The accompanying notes are an integral
part of the financial statements.
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KRUPP REALTY LIMITED PARTNERSHIP-VII
STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
1994 1993
Operating activities:
Net loss $ (214,705) $(482,565)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 657,918 756,743
Interest accumulated, not paid - 59,407
Decrease in cash restricted
for tenant security deposits 6,838 2,875
Decrease (increase) in prepaid expenses
and other assets (192,930) 65,236
Decrease in accrued expenses
and other liabilities (98,069) (19,685)
Net cash provided by operating activities 159,052 382,011
Investing activities:
Additions to fixed assets (65,329) (136,262)
Decrease (increase) in cash restricted for
capital improvements (2,287) 6,232
Net cash used for investing activities (67,616) (130,030)
Financing activity:
Increase in deferred expenses (207,428) -
Principal payments on mortgage notes payable (75,027) (77,214)
Proceeds from refinancing mortgage note payable 5,300,000 -
Payoff of mortgage note payable (5,017,971) -
Net cash used for financing activities (426) (77,214)
Net increase in cash 91,010 174,767
Cash, beginning of period 840,798 387,512
Cash, end of period $ 931,808 $ 562,279
The accompanying notes are an integral
part of the financial statements.
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KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS
1. Significant 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 Krupp Corporation and The Krupp Company Limited
Partnership-II, the General Partners of Krupp Realty Limited
Partnership-VII (the "Partnership"), the disclosures contained
in this report are adequate to make the information presented
not misleading. See Notes to Financial Statements included in
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1993 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 financial statements reflect all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the Partnership's financial
position as of June 30, 1994, its results of operations for the
three and six months ended June 30, 1994 and 1993 and its cash
flows for the six months ended June 30, 1994 and 1993. Certain
prior year balances have been reclassified to conform with
current year financial statement presentation.
The results of operations for the three and six months ended
June 30, 1994 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. Related Party Transactions
Amounts paid to affiliates of the General Partners during the
six months ended June 30, 1994 and for the year ended December
31, 1993 for costs related to refinancing activities of the
Partnership's mortgage notes were $15,613 and $7,568,
respectively.
3. Mortgage Notes Payable
On April 13, 1994, the Partnership, completed the refinancing
of Windsor Apartments. The property was refinanced with a
$5,300,000 non-recourse mortgage note payable at the rate of
9.25% per annum with monthly principal and interest payments
of $43,602, based on a 30 year amortization schedule. The
mortgage note, which is collateralized by the property, matures
on May 1, 2001 at which time the remaining principal
(approximately $4,977,000) and any accrued interest are due.
After October 13, 1997, the note may be prepaid subject to a
prepayment penalty. The Partnership utilized the proceeds to
repay the prior mortgage note with a remaining balance of
$5,017,971 and to pay refinancing costs of $207,428.
Continued
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KRUPP REALTY LIMITED PARTNERSHIP-VII
NOTES TO FINANCIAL STATEMENTS - Continued
4. Changes in Partners' Equity
A summary of changes in partners' equity (deficit) for the six months ended
June 30, 1994 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
Balance at
December 31, 1993 $5,716,673 $(277,053) $(216,817) $5,222,803
Net loss (212,558) - (2,147) (214,705)
Balance at
June 30, 1994 $5,504,115 $(277,053) $(218,964) $5,008,098
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KRUPP REALTY LIMITED PARTNERSHIP-VII
Item 2. 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 successful operations of its
real estate investments. Such ability is also dependent upon 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
expenditures, debt service and 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. The
Partnership's status has improved over the past years. This
improvement was due to the sale of Westbrook/Willow Cove in 1993,
thus favorably impacting future cash flows. In addition, the
Partnership has taken advantage of the low interest rates by
refinancing Windsor Apartments in April 1994. Also, the
refinancing of Nora Corners is currently being finalized, with a
tentative close date in August 1994. Due to these events the
General Partners have determined that there is sufficient
Distributable Cash Flow in 1994 to reinstate distributions. These
distributions are commencing in August 1994 and thereafter are to
be paid semiannually.
On April 13, 1994, the Partnership successfully completed the
refinancing of Windsor Apartments mortgage note payable. The new
$5,300,000 note requires decreased debt service payments due to a
lower interest rate of 9.25% per annum from the previous rate of
10.3% per annum. The reduced mortgage payments will provide
additional liquidity to the Partnership that may be used to fund
capital improvements at its properties or for distributions.
The mortgage note at Nora Corners Shopping Center matured on June
1, 1994. The Partnership is finalizing the terms of a new note,
with the same lender, for approximately $4,250,000, at an interest
rate of 9%. The refinancing has a tentative close date of August
23, 1994.
Cash Flow
Shown below, as required by the Partnership Agreement, is the
calculation of Cash Flow for the six months ended June 30, 1994:
Rounded to $1,000
Net loss for tax purposes $(254,000)
Items not requiring (requiring) the use of
operating funds:
Tax basis depreciation and amortization 701,000
Principal payments on mortgage notes payable (75,000)
Capital improvement expenditures (65,000)
Replacement reserves for capital improvement
expenditures (2,000)
Working capital reserves (169,000)
Cash Flow $ 136,000
Continued
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KRUPP REALTY LIMITED PARTNERSHIP-VII
Operations
The following discussion relates to the operations of the
Partnership and its properties (Courtyards Village, Nora Corners
and Windsor Apartments) for the three and six months ended June 30,
1994 and 1993. The sale of Westbrook Place/Willow Cove Apartments
("Westbrook"), in July 1993, significantly impacts the
comparability of the Partnership's operations between the three and
six month periods.
During the first six months of 1994, as compared to 1993, the
Partnership's rental revenues (net of Westbrook's rental revenues)
increased by $69,000. This increase was primarily due to rental
increases at Courtyards and Windsor as well as occupancy increases
at Windsor. Property values increased at Courtyards and Windsor as
a result of interior and exterior painting improvements and
carpentry renovations, started in 1993 and completed in the first
quarter of 1994. Landscaping and parking lot upgrades were also
implemented at Courtyards in 1993. These improvements allowed the
Partnership to obtain the rental increases at both properties.
Occupancy at Windsor increased due to the stabilization of the
Dallas economy, with home purchasing levelling off. As a result,
all rental concessions at Windsor were eliminated in the first
quarter of 1994. The Partnership's commercial property, Nora
Corners, signed a new tenant, Food King, a Chinese restaurant, in
the first quarter of 1994.
For the three and six months ended June 30, 1994, as compared to
the same periods in 1993, property expenses (excluding Westbrook)
have remained relatively stable.
Overall, year to date, operations at all of the Partnerships
properties have improved, as compared to the first six months of
1993. The General Partners believe that this improvement will
continue into the second half of 1994.
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KRUPP REALTY LIMITED PARTNERSHIP-VII
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
(a) Exhibits
Windsor Apartments
(10.1) Promissory Note dated April 13, 1994 by and
between Windsor Partners Limited Partnership
and Sun Life Insurance Company of America.
(10.2) Deed of Trust, Security Agreement, Fixture
Filing, Financing Statement and Assignment of
Leases and Rents dated April 13, 1994 from the
Grantor, Windsor Partners Limited Partnership,
to the Trustee, Brian C. Ridger.
(b) Reports on Form 8-K
Response: None
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SIGNATURES
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
(Registrant)
BY:/s/Marianne Pritchard
Marianne Pritchard
Treasurer and Chief Accounting
Officer of The Krupp Corporation,
a General Partner.
DATE: August 1, 1994
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