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 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. CONSOLIDATED 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
ASSETS
September 30, December 31,
1996 1995
Multi-family apartment complexes, net of
accumulated depreciation of $10,182,384,
and $9,521,601, respectively $ 8,828,868 $ 9,030,289
Retail center, net of accumulated
depreciation of $3,578,549, and
$3,285,620, respectively 6,129,236 6,376,225
Total real estate assets 14,958,104 15,406,514
Cash and cash equivalents 1,052,362 1,311,037
Cash restricted for tenant security deposits 37,611 35,979
Cash restricted for capital improvements 52,364 57,462
Prepaid expenses and other assets 548,354 568,775
Deferred expenses, net of accumulated
amortization of $82,411 and $55,514,
respectively 204,883 231,780
Total assets $16,853,678 $17,611,547
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $12,609,054 $12,744,191
Accounts payable 1,566 48,530
Accrued expenses and other liabilities 807,598 785,672
Total liabilities 13,418,218 13,578,393
Partners' equity (deficit) (Note 2):
Investor Limited Partners (27,184 Units
outstanding) 4,064,108 4,602,033
Original Limited Partner (380,968) (333,153)
General Partners (247,680) (235,726)
Total Partners' equity 3,435,460 4,033,154
Total liabilities and Partners' equity $16,853,678 $17,611,547
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Revenue:
Rental $1,148,701 $1,132,319 $3,435,862 $3,344,272
Interest income 17,290 18,274 56,859 48,113
Total revenue 1,165,991 1,150,593 3,492,721 3,392,385
Expenses:
Operating (Note 3) 300,572 290,888 870,776 770,685
Maintenance 101,056 125,375 253,056 256,627
Real estate taxes 130,056 106,905 352,612 329,217
General and administrative
(Note 3) 19,920 50,636 56,622 100,213
Management fees (Note 3) 45,526 50,855 143,483 146,860
Depreciation and
amortization 343,170 321,868 980,609 952,101
Interest 275,480 279,137 829,168 839,924
Total expenses 1,215,780 1,225,664 3,486,326 3,395,627
Net income (loss) $ (49,789) $ (75,071) $ 6,395 $ (3,242)
Allocation of net income(loss)
(Note 2):
Investor Limited Partners
(27,184 Units
outstanding) $ (49,291) $ (74,320) $ 5,755 $ (3,210)
Per Unit of Investor
Limited Partner
Interest $ (1.81) $ (2.73) $ .21 $ (.12)
Original Limited Partner $ - $ - $ 512 $ -
General Partners $ (498) $ (751) $ 128 $ (32)
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
1996 1995
Operating activities:
Net income (loss) $ 6,395 $ (3,242)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 980,609 952,101
Decrease (increase) in cash restricted
for tenant security deposits (1,632) 20,236
Decrease in prepaid expenses and other
assets 20,421 2,292
Decrease in accounts payable (46,964) (15,305)
Increase (decrease) in accrued expenses
and other liabilities 21,926 (41,250)
Net cash provided by operating
activities 980,755 914,832
Investing activities:
Additions to fixed assets (505,302) (154,356)
Decrease (increase) in cash restricted for
capital improvements 5,098 (5,430)
Net cash used in investing
activities (500,204) (159,786)
Financing activities:
Increase in deferred expenses - (6,613)
Principal payments on mortgage notes payable (135,137) (124,697)
Distributions (604,089) (604,088)
Net cash used in financing
activities (739,226) (735,398)
Net increase (decrease) in cash and cash equivalents (258,675) 19,648
Cash and cash equivalents, beginning of period 1,311,037 1,021,464
Cash and cash equivalents, end of period $1,052,362 $1,041,112
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
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, 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 period balances have been reclassified to
conform with current period 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.Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the nine months
ended September 30, 1996 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
Balance at
December 31, 1995 $4,602,033 $(333,153) $(235,726) $4,033,154
Distributions (543,680) (48,327) (12,082) (604,089)
Net income 5,755 512 128 6,395
Balance at
September 30, 1996 $4,064,108 $(380,968) $(247,680) $3,435,460
3. Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties,
the Partnership entered into agreements under which property management
fees are paid to an affiliate of the General Partners for services as
management agent. Such agreements provide for management fees payable
monthly at a rate of 4% of the gross receipts, net of leasing commissions,
from the commercial properties under management and 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 accounting, computer, insurance, travel, legal and payroll; and
with the preparation and mailing of reports and other communications to the
Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates are as
follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Property management fees $45,526 $ 50,855 $143,483 $146,860
Expense reimbursements 36,521 40,332 107,310 103,732
Charged to operations $82,047 $ 91,187 $250,793 $250,592
In addition to the amounts above, refinancing and disposition costs of $0
and $3,793 were paid to the General Partners or their affiliates at
September 30, 1996 and December 31, 1995, 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 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. In 1994, the General Partners
determined that there was sufficient cash flow to reinstate semi-annual
distributions. These distributions commenced in August 1994 at a rate of
$5.00 per Unit and increased in February 1995 to an annual rate of $20.00 per
Unit.
In 1996, Courtyards Village, Nora Corners and Windsor Apartments anticipate
capital improvement expenditures totaling approximately $281,000, $111,000
and $337,000, respectively. The General Partners believe these improvements
will improve the appearance of the properties and allow them to remain
competitive in their respective real estate markets.
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 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 $ (21,000)
Items not requiring or (requiring) the use of
operating funds:
Tax basis depreciation and amortization 1,010,000
Principal payments on mortgage notes payable (135,000)
Expenditures for capital improvements (505,000)
Releases from working capital reserves 255,000
Cash Flow $ 604,000
Operations
Cash Flow for the nine months ended September 30, 1996, before additions to
working capital reserves, decreased as compared to the same period in 1995 due
primarily to increased capital improvements at Windsor Apartments and
Courtyards Village for exterior painting in 1996. Overall, net income (loss)
improved for the three and nine months ended September 30, 1996 as compared to
the same periods in 1995. Total revenue increased while total expenses
remained relatively stable during the quarter ended September 30, 1996 as
compared to the same period in 1995. During the nine month period ended
September 30, 1996, the increase in revenue more than offset the increase in
total expenses when compared to the same period in 1995. The increases in
revenue are due to increased rental rates at Courtyards Village and Windsor
Apartments as these properties continue to enjoy strong market conditions and
steady occupancy in 1996.
Although total expenses remained relatively stable for the third quarter of
1996 as compared to the same period in 1995, maintenance and real estate tax
expenses decreased and increased, respectively. Maintenance expense decreased
as landscaping, parking lot and exterior building improvements were
implemented at Courtyards Village and Windsor Apartments in the third quarter
of 1995. These improvements enhanced the appearance of the properties and
will help them remain competitive in their respective markets. Real estate
taxes increased as a result of a reassessment of Windsor Apartments in 1996 by
the local taxing authority.
During the first nine months of 1996, total expenses increased when compared
to the first nine months of 1995. This increase is attributable to a rise in
both operating and real estate tax expenses. Operating expense increased as
utility consumption increased due to severe weather conditions in the Chicago
area during the first quarter of 1996. Additionally, operating expense
increased as a result of prior years' insurance refunds received in the second
quarter of 1995. Real estate taxes increased for the same reason as discussed
above.
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 assets.
The investments in properties are 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 investments in
properties 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 REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES
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 Realty Limited Partnership-VII
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting
Officer of the Krupp Corporation, a
General Partner.
DATE: November 5, 1996