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 March 31, 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 0-15816
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
March 31, December 31,
1996 1995
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of
$4,254,765 and $4,137,678,
respectively $ 6,011,755 $ 6,119,113
Retail centers, less accumulated
depreciation of $12,887,373 and
$12,489,601, respectively 37,275,666 37,613,542
Investment in Joint Venture (Note 2) 20,431,758 20,411,464
Mortgage-backed securities ("MBS"), net of
accumulated amortization (Note 3) 8,140,186 8,501,911
Total real estate assets 71,859,365 72,646,030
Cash and cash equivalents 7,834,776 8,065,906
Other investments (Note 3) 490,725 -
Other assets 651,085 711,172
Total assets $80,835,951 $81,423,108
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 2,941 $ 23,879
Accrued expenses and other liabilities (Note 4) 652,931 657,032
Total liabilities 655,872 680,911
Commitments and contingencies (Note 2)
Partners' equity (Note 5):
Unitholders
(7,499,718 Units outstanding) 80,532,934 81,088,463
Corporate Limited Partner
(100 Units outstanding) 1,279 1,286
General Partners (354,134) (347,552)
Total Partners' equity 80,180,079 80,742,197
Total liabilities and Partners' equity $80,835,951 $81,423,108
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 March 31,
1996 1995
Revenue:
Rental $1,683,311 $1,639,328
Partnership's share of Joint Venture
net income (Note 2) 190,294 189,780
Interest income - MBS (Note 3) 184,210 215,214
Interest income - other 114,163 107,045
Total revenue 2,171,978 2,151,367
Expenses:
Operating (Note 6) 216,766 206,290
Maintenance 102,155 72,389
General and administrative (Note 6) 80,523 71,848
Real estate taxes 199,866 218,799
Management fees (Note 6) 94,107 91,143
Depreciation 514,859 494,853
Total expenses 1,208,276 1,155,322
Net income $ 963,702 $ 996,045
Allocation of net income (Note 5):
Unitholders (7,499,718 Units outstanding) $ 944,415 $ 976,111
Net income per Unit of Depositary Receipt $ .13 $ .13
Corporate Limited Partner
(100 Units outstanding) $ 13 $ 13
General Partners $ 19,274 $ 19,921
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1996 1995
Operating activities:
Net income $ 963,702 $ 996,045
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 514,859 494,853
Partnership's share of Joint Venture
net income (190,294) (189,780)
Distribution received from Joint Venture 170,000 189,780
Amortization of MBS discount, net (1,772) (1,420)
Decrease in other assets 60,087 194,172
Decrease in accounts payable (20,938) (154,146)
Increase (decrease) in accrued expenses
and other liabilities (4,101) 22,401
Net cash provided by operating
activities 1,491,543 1,551,905
Investing activities:
Additions to fixed assets (69,600) (60,047)
Settlement of land easement (25) (239)
Principal collections on MBS 363,497 253,926
Increase in other investments (490,725) (2,386,995)
Distributions received from Joint Venture
in excess of its earnings - 60,220
Net cash used in investing
activities (196,853) (2,133,135)
Financing activity:
Distributions (1,525,820) (1,518,461)
Net decrease in cash and cash equivalents (231,130) (2,099,691)
Cash and cash equivalents, beginning of period 8,065,906 7,072,127
Cash and cash equivalents, end of period $ 7,834,776 $ 4,972,436
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. See Notes to 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 financial statements reflect all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Partnership's financial position as of March 31, 1996 and
their results of operations and cash flows for the three months ended
March 31, 1996 and 1995. Certain prior period balances have been
reclassified to conform with current period financial statement
presentation.
The results of operations for the three months ended March 31, 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) Investment in Joint Venture
The Partnership and an affiliate of the Partnership each have a 50%
interest in the Brookwood Village Joint Venture (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.
Condensed financial statements of the Joint Venture are as follows:
Brookwood Village Joint Venture
Condensed Balance Sheets
ASSETS
March 31, December 31,
1996 1995
Property, at cost $ 55,781,575 $ 55,478,818
Accumulated depreciation (15,657,011) (15,164,143)
40,124,564 40,314,675
Other assets 1,203,425 867,242
Total assets $ 41,327,989 $ 41,181,917
LIABILITIES AND PARTNERS' EQUITY
Total liabilities $ 464,473 $ 358,989
Partners' equity
The Partnership 20,431,758 20,411,464
Joint Venture Partner 20,431,758 20,411,464
Total Partners' equity 40,863,516 40,822,928
Total liabilities and Partners' equity $ 41,327,989 $ 41,181,917
Brookwood Village Joint Venture
Condensed Statements of Operations
For the Three Months
Ended March 31,
1996 1995
Revenue $ 1,545,604 $ 1,585,868
Property operating expenses (672,148) (715,444)
Depreciation (492,868) (490,864)
Net income $ 380,588 $ 379,560
(3) Mortgage Backed Securities and Other Investments
The MBS held by the Partnership are issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association and
the Government National Mortgage Association. Additional information
on the MBS held is approximated as follows:
March 31, December 31,
1996 1995
Face Value $8,131,475 $8,494,972
Amortized Cost $8,140,186 $8,501,911
Estimated Market Value $8,537,000 $9,004,000
Coupon rates of the MBS range from 8.0% to 10.0% per annum and
mature in the years 2008 through 2017. The Partnership's MBS
portfolio had gross unrealized gains of approximately $406,000
and $542,000 at March 31, 1996 and December 31, 1995,
respectively and unrealized losses of approximately $9,000 and
$0, respectively. The Partnership does not expect to realize
these gains or losses as it has the intention and ability to
hold the MBS until maturity.
At March 31, 1996, the Partnership held investments in
commercial paper maturing within one year. The cost
approximates the market value.
(4) Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at:
March 31, December 31,
1996 1995
Accrued real estate taxes $272,774 $264,996
Other accrued expenses 193,730 194,249
Tenant security deposits 174,259 186,242
Prepaid rent 12,168 11,545
$652,931 $657,032
(5) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the three
months ended March 31, 1996 is as follows:
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
Balance at
December 31, 1995 $81,088,463 $ 1,286 $(347,552) $80,742,197
Net income 944,415 13 19,274 963,702
Distributions (1,499,944) (20) (25,856) (1,525,820)
Balance at
March 31, 1996 $80,532,934 $ 1,279 $(354,134) $80,180,079
(6) 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 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 or their affiliates
were as follows:
For the Three Months
Ended March 31,
1996 1995
Property management fees $ 94,107 $ 91,143
Expense reimbursements 82,462 69,814
Charged to operations $176,569 $160,957
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 Center, Canyon
Place, Coral Plaza and Cumberland Glen), distributions from the
Partnership's interest in the Joint Venture, earnings and collections on
MBS, and interest earned on its short-term investments. 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 have the Partnership
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 in 1996. In order to remain
competitive in their respective markets, the Partnership's properties are
anticipated to spend approximately $620,000 for fixed assets in 1996, most
of which are tenant buildouts at retail centers. The Joint Venture is
expected to spend approximately $306,000 for capital improvements.
The Partnership holds MBS that are guaranteed by Government National
Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA"), and Federal Home Loan 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.
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.
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 three months ended March 31, 1996 and the
period from inception to March 31, 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, 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's except per Unit amounts)
For the Three Months Inception to
Ended March 31, March 31,
1996 1996
Distributable Cash Flow:
Net income for tax purposes $1,183 $46,259
Items providing/not requiring or (not
providing) the use of operating funds:
Tax basis depreciation and amortization 431 15,260
Acquisition expenses paid from offering
proceeds charged to operations - 248
Partnership's share of Joint Venture
taxable net income (315) (6,379)
Distributions from Joint Venture 170 8,702
Additions to fixed assets (70) (2,657)
Amounts released from reserves
for capital improvements - 1,020
Total Distributable Cash Flow ("DCF") $1,399 $62,453
Limited Partners' Share of DCF $1,371 $61,204
Limited Partners' Share of DCF per Unit $ .18 $ 8.16
General Partners' Share of DCF $ 28 $ 1,249
Net Proceeds from Capital Transactions:
Principal collections on MBS, net $ 362 $36,994
Reinvestment of MBS principal collections - (3,687)
Total Net Proceeds from Capital
Transactions $ 362 $33,307
Distributions:
Limited Partners $1,500(a) $95,318(b)
Limited Partners' Average per Unit $ .20(a) $ 12.71(b)(c)
General Partners $ 28(a) $ 1,249(b)
Total Distributions $1,528(a) $96,567(b)
(a) Represents an estimate of the distribution to be paid in May, 1996.
(b) Includes an estimate of the distribution to be paid in May, 1996.
(c) Limited Partners average per Unit return of capital as of May, 1996
is $4.55 [$12.71 - $8.16].
Operations
Partnership
Distributable Cash Flow decreased $90,000 for the three months ended
March 31, 1996 as compared to the same period in 1995 which was
primarily attributable to the lower distributions received from the
Joint Venture within these periods. Overall, net income for the
Partnership decreased as the increase in total expenses more than offset
the 2% increase in total revenues. The increase in revenue is due
mainly to rental increases for tenants renewing their leases at the
Partnership's retail centers in the first quarter of 1996. Cumberland
Glen's excellent location in the Atlanta, Georgia area allowed
management to increase rents an average of 4% on all units in a market
where there is a strong demand for multi-family housing due to the
upcoming Olympics. Canyon Place's occupancy increased 11% in the three
months ended March 31, 1996 as compared to the same period in 1995 due
to the opening of the 14,833 square foot Jo-Ann Fabrics late in the
first quarter of 1996. The favorable impact from this opening and the
rise in rents at Cumberland should help to improve the Partnership's
rental revenue in the future.
MBS interest income decreased for the three months ended March 31, 1996
as compared to the same period in 1995 due to the large prepayments
of principal which took place from 1993 through the first half
of 1995. As interest rates rose in 1995, these prepayments
declined. However, interest income will continue to decrease as
the principal balance of this portfolio continues to decline as
a result of repayments and prepayments. Currently, the
prepayments have stabilized and the interest income on the MBS
has decreased compared to the same period in 1995. Interest
income on short-term investments has increased during these same
periods due to higher average cash and cash equivalent balances.
Total expenses for the three months ended March 31, 1996 as compared to
the same period in 1995 remained relatively flat with the exception of
maintenance expense. Maintenance expense increased due to electrical
repairs to install display lights at Alderwood. Additionally,
landscaping work was done at Canyon, Encino and Alderwood to enhance
their appearances, attract a greater number of customers and remain
competitive in their respective markets.
Joint Venture
The Joint Venture's net income increased 10% for the three months ended
March 31, 1996 as compared to the same period in 1995, as a decrease in
property operating expenses more than offset a slight decrease in
revenue. Although rental rates on lease renewals increased, a 2%
decrease in occupancy coupled with a decrease in reimbursable tenant
billings, derived from lower reimbursable operating expenses, resulted
in the decrease in revenue.
Property operating expenses decreased 12% for the three months ended
March 31, 1996 as compared to the same period in 1995. This decrease is
attributable to fees paid by the Joint Venture for an appraisal
associated with a possible anchor tenant expansion in the first quarter
of 1995. In addition, real estate taxes decreased as a result of a
revaluation of the Joint Venture by the local taxing authority in the
third quarter of 1995.
General
In accordance with Financial Accounting Standards 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 Partnership's investments in properties and the Joint Venture 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 and the Joint
Venture 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 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/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting officer of the Krupp
Corporation, a General Partner
DATE: April 30, 1996