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, 1995
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 0-15816
Krupp Cash Plus-II Limited Partnership
Massachusetts 04-2915326
(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 CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
September 30, December 31,
1995 1994
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of $4,017,837
and $3,670,683, respectively $ 6,212,423 $ 6,424,540
Retail centers, less accumulated depreciation
of $12,082,691 and $10,931,523, respectively 37,779,118 38,858,760
Investment in Joint Venture (Note 2) 20,737,997 21,339,973
Mortgage-backed securities ("MBS") (Note 3) 8,908,526 9,815,123
Total real estate assets 73,638,064 76,438,396
Cash and cash equivalents 8,333,296 7,072,127
Other assets 444,503 766,734
Total assets $82,415,863 $84,277,257
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 9,717 $ 221,510
Accrued expenses and other liabilities 842,373 593,123
Total liabilities 852,090 814,633
Partners' equity (Note 4):
Unitholders
(7,499,718 Units outstanding) 81,895,180 83,767,580
Corporate Limited Partner
(100 Units outstanding) 1,297 1,322
General Partners (332,704) (306,278)
Total Partners' equity 81,563,773 83,462,624
Total liabilities and Partners' equity $82,415,863 $84,277,257
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenue:
Rental $1,672,313 $1,541,131 $4,918,479 $4,637,723
Partnership's share of Joint
Venture net income (Note 2) 138,241 133,861 443,024 414,555
Interest income - MBS 200,843 232,702 623,503 746,452
Interest income - other 122,907 82,575 345,962 197,280
Total revenue 2,134,304 1,990,269 6,330,968 5,996,010
Expenses:
Operating (Note 5) 235,091 289,102 640,189 798,235
Maintenance 140,098 174,800 336,980 431,206
General and administrative
(Note 5) 87,646 108,050 248,492 351,181
Real estate taxes 218,509 222,461 646,943 424,389
Management fees (Note 5) 95,529 85,557 278,953 262,056
Depreciation 507,400 490,653 1,498,322 1,418,098
Total expenses 1,284,273 1,370,623 3,649,879 3,685,165
Net income $ 850,031 $ 619,646 $2,681,089 $2,310,845
Allocation of net income (Note 4):
Unitholders (7,499,718
Units outstanding) $ 833,019 $ 607,245 $2,627,432 $2,264,598
Net income per Unit of
Depositary Receipt $ .11 $ .08 $ .35 $ .30
Corporate Limited Partner
(100 Units outstanding) $ 11 $ 8 $ 35 $ 30
General Partners $ 17,001 $ 12,393 $ 53,622 $ 46,217
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
1995 1994
Operating activities:
Net income $ 2,681,089 $ 2,310,845
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,498,322 1,418,098
Partnership's share of Joint Venture
net income (443,024) (414,555)
Distributions received from Joint Venture 1,045,000 674,000
Amortization of MBS discount, net (2,003) (1,704)
Decrease in other assets 322,231 235,687
Decrease in accounts payable (211,793) (128,715)
Increase in accrued expenses and other
liabilities 249,250 183,584
Net cash provided by operating
activities 5,139,072 4,277,240
Investing activities:
Additions to fixed assets (206,563) (292,658)
Principal collections on MBS 908,600 2,385,207
Purchase of short-term investments (3,222,357) -
Maturity of short-term investments 3,222,357 -
Net cash provided by
investing activities 702,037 2,092,549
Financing activity:
Distributions (4,579,940) (4,580,962)
Net increase in cash and cash equivalents 1,261,169 1,788,827
Cash and cash equivalents, beginning of period 7,072,127 5,622,515
Cash and cash equivalents, end of period $ 8,333,296 $ 7,411,342
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO 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 Cash
Plus-II Limited Partnership (the "Partnership") the disclosures contained
in this report are adequate to make the information presented not
misleading. The investments in properties are carried at cost less
accumulated depreciation unless the General Partners believe there is a
permanent 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 impaired. See Notes to Financial Statements included in
the Partnership's Annual Report on Form 10-K for the year ended December
31, 1994 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 only of normal recurring accruals) necessary to present fairly
the Partnership's financial position as of September 30, 1995, its results
of operations for the three and nine months ended September 30, 1995 and
1994 and its cash flows for the nine months ended September 30, 1995 and
1994.
The results of operations for the three and nine months ended September
30, 1995 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) Investment in Joint Venture
The Partnership and an affiliate of the Partnership each have a 50%
interest in the Joint Venture. The express purpose of entering into the
Joint Venture was to acquire and operate Brookwood Village Mall and
Convenience Center ("Brookwood Village"). Brookwood Village is a shopping
center containing 474,138 net leasable square feet located in Birmingham,
Alabama.
Under the purchase and sale agreement entered into by the Partnership, its
affiliates and the previous owner, the previous owner retained an interest
related to the future development at Brookwood Village. The seller is
entitled to receive up to $5,000,000 of proceeds from the sale of
Brookwood Village and potentially additional amounts related to expansion
and development. The Joint Venture holds title to Brookwood Village free
and clear from all other material liens or encumbrances.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(2) Investment in Joint Venture, Continued
Condensed financial statements of the Joint Venture are as follows:
Brookwood Village Joint Venture
Condensed Balance Sheets
ASSETS
September 30, December 31,
1995 1994
Property, at cost $ 54,944,813 $ 54,898,470
Accumulated depreciation (14,446,117) (12,854,388)
40,498,696 42,044,082
Other assets 1,348,860 1,145,125
Total assets $ 41,847,556 $ 43,189,207
LIABILITIES AND PARTNERS' EQUITY
Total liabilities $ 371,562 $ 509,261
Partners' equity
The Partnership 20,737,997 21,339,973
Joint Venture Partner 20,737,997 21,339,973
Total Partners' equity 41,475,994 42,679,946
Total liabilities and Partners' equity $ 41,847,556 $ 43,189,207
Brookwood Village Joint Venture
Condensed Statements of Operations
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
Revenue $1,555,064 $1,537,758 $ 4,611,561 $ 4,466,644
Property operating expenses (687,205) (771,426) (2,133,784) (2,213,966)
Depreciation (591,377) (498,611) (1,591,729) (1,423,569)
Net income $ 276,482 $ 267,721 $ 886,048 $ 829,109
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
(3) MBS and Other Investments
At September 30, 1995, the Partnership's MBS Portfolio had an approximate
market value of $9,418,000 with unrealized gains of $513,000 and
unrealized losses of $3,000.
(4) Changes in Partners' Equity
A summary of changes in partners' equity (deficit) for the nine months
ended September 30, 1995 is as follows:
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
Balance at
December 31, 1994 $83,767,580 $ 1,322 $(306,278) $83,462,624
Net income 2,627,432 35 53,622 2,681,089
Distributions (4,499,832) (60) (80,048) (4,579,940)
Balance at
September 30, 1995 $81,895,180 $ 1,297 $(332,704) $81,563,773
(5) 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 the rate of up to 6% of the gross receipts, net of leasing
commissions from commercial properties under management and up to 5% of
the 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
properties including accounting, computer, insurance, travel, legal and
payroll; and with the preparation and mailing of reports and other
communications to the Unitholders.
Amounts accrued or paid to the General Partners and/or their affiliates
were as follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
Management fees $ 95,529 $ 85,557 $278,953 $262,056
Expense reimbursements 87,728 143,069 240,361 431,341
Charged to operations $183,257 $228,626 $519,314 $693,397
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's liquidity is derived from the operations of the
Partnership's properties (Encino Oaks, Alderwood Towne, Canyon Place, Coral
Plaza and Cumberland Glen), distributions from the Partnership's interest in
Brookwood Village Joint Venture, earnings and collections on MBS, and interest
earned on its short-term investments. The Partnership's investments in
properties are carried at cost less accumulated depreciation unless the
General Partners believe there is a permanent 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 impaired. The Partnership's liquidity is
utilized to pay operating costs and to fund distributions to the partners.
Management has found it necessary in recent years to pay a large share of
tenant buildouts to attract quality tenants to our retail centers. This policy
has proven to be successful in attracting tenants and maintaining high
occupancies at properties where it has been undertaken and is expected to
continue through 1995. In order to remain competitive in their respective
markets, the Partnership's properties are anticipated to spend approximately
$690,000 for fixed assets in 1995, most of which are tenant buildouts at retail
centers. The Joint Venture is expected to spend approximately $629,000 for
capital improvements.
The Partnership holds MBS that are guaranteed by Government National
Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA"),
and Federal Home Mortgage Corporation ("FHLMC"). The principal risks in
respect to MBS are the credit worthiness of GNMA, FNMA, or FHLMC, and the risk
that the current value of any MBS may decline as a result of changes in market
interest rates. The General Partners believe the interest rate risk is minimal
due to the fact that the Partnership has the ability to hold these securities
to maturity. Principal collections on MBS have decreased significantly in the
first nine months of 1995 because rising interest rates slowed the pace of
refinancings that were experienced in 1994.
The Partnership currently enjoys significant liquidity. The General
Partners, on an ongoing basis, assess the current and future liquidity needs
in determining the levels of working capital the Partnership should maintain.
Adjustments to distributions are made when appropriate to reflect such
assessments.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
Distributable Cash Flow and Net Cash Proceeds from Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Cash
Proceeds from Capital Transactions, as defined by Section 17 of the Partnership
Agreement for the nine months ended September 30, 1995 and the period from
inception to September 30, 1995. 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, Distributable Cash Flow and Net Cash Proceeds from
Capital Transactions should not be considered by the reader as a substitute to
net income as an indicator of the Partnership's operating performance or to
cash flow as a measure of liquidity.
(In $1,000 except per Unit amounts)
For the Nine Months Inception to
Ended September 30, September 30,
1995 1995
Distributable Cash Flow:
Net income for tax purposes $3,244 $43,956
Items providing/not requiring or (not
providing) the use of operating funds:
Tax basis depreciation and amortization 1,261 14,365
Acquisition expenses paid from offering
proceeds charged to operations - 248
Partnership's share of Joint Venture
taxable net income (817) (5,661)
Distributions from Joint Venture 1,045 8,152
Additions to fixed assets (207) (2,320)
Amounts released from reserves
for capital improvements - 1,020
Total Distributable Cash Flow ("DCF") $4,526 $59,760
Limited Partners' Share of DCF $4,435 $58,564
Limited Partners' Share of DCF per Unit $ .59 $ 7.81
General Partners' Share of DCF $ 91 $ 1,196
Net Proceeds from Capital Transactions:
Principal collections on MBS $ 907 $36,226
Reinvestment of MBS principal collections - (3,687)
Total Net Proceeds from Capital
Transactions $ 907 $32,539
Distributions:
Limited Partners $4,500(a) $ 92,318(b)
Limited Partners' Average per Unit $ .60(a) $ 12.31(b)
General Partners $ 91(a) $ 1,196(b)
Total Distributions $4,591(a) $ 93,514(b)
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
(a) Represents distributions paid in 1995, except the February, 1995
distribution, which relates to 1994 cash flows and includes an estimate
of the distribution to be paid in November, 1995.
(b) Includes an estimate of the distribution to be paid in November, 1995.
(c) Limited Partners average per Unit return of capital as of November, 1995
is $4.50 [$12.31 - $7.81].
Operations
Partnership
Rental revenues for the three and nine months ended September 30, 1995 as
compared to the same periods in 1994, have increased due mainly to increases
in occupancy at Canyon Place and to a rise in rental rates at Cumberland
Glen. Canyon Place experienced a 7% increase for the three months and an
8% increase for the nine months ended September 30, 1995 as compared to the
same periods in 1994. The increase in occupancy at Canyon is due to the
expansion of several tenants and to the opening of the 4,391 square foot
Payless Shoes in the fourth quarter of 1994. The increase in rental rates
at Cumberland Glen is due mainly to the strong economic environment in the
Atlanta, Georgia area.
MBS interest income decreased for the three and nine months ended September
30, 1995 as compared to the same period in 1994. Interest rates declined
going into 1994 resulting in large prepayments of mortgages underlying the
MBS throughout 1994 and the first half of 1995. However, during 1995,
interest rates began to rise and inversely, prepayments of principal
decreased. Currently, these prepayments have stabilized and the interest
income on MBS has decreased compared to 1994. Interest income on other
investments increased during these same periods due to higher average cash
balances and higher interest rates.
With the exception of real estate taxes, total expenses of the Partnership
for the three and nine months ended September 30, 1995 as compared to the
same periods in 1994 have decreased $82,000 and $258,000, respectively. The
decrease in operating expenses is due to management's efforts to reduce
reimbursable operating expenses and general and administrative expenses.
Certain of these costs savings are anticipated to continue for the remainder
of 1995. Maintenance expense decreased for the three months ended September
30, 1995 as compared to the same period in 1994 due to improvements made to
Cumberland Glen's parking lot in the third quarter of 1994. The decrease
in maintenance expense for the first nine months of 1995 as compared to the
same period in 1994 is due to preventive maintenance at Encino Oaks, roof
repairs at Canyon Place, and improvements to the parking lot and building
interiors at Cumberland Glen, all performed in 1994. The increase in real
estate taxes is due primarily to a refund of approximately $270,000 recorded
in the second quarter of 1994 for the prior years' real estate taxes at
Coral Plaza.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
Operations - Continued
Joint Venture
Brookwood's revenues for the three and nine months ended September 30, 1995
as compared to the same periods in 1994 have increased due to an increase
in reimbursable tenant billings.
Total operating expenses for the three and nine months ended September 30,
1995 as compared to the same periods in 1994 have decreased as a result of
an abatement of 1994 real estate taxes in the third quarter of 1995. This
reduction is due to the revaluation of the Joint Venture by the local taxing
authority.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Change 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 Cash Plus-II Limited Partnership
(Registrant)
BY: /s/Marianne Pritchard
Marianne Pritchard
Treasurer and Chief Accounting
Officer of The Krupp Corporation,
a General Partner
DATE: November 8, 1995