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 June 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 0-15816
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
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 CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of $4,372,965
and $4,137,678, respectively $ 5,911,507 $ 6,119,113
Retail centers, less accumulated
depreciation of $13,292,174 and $12,489,601,
respectively 36,945,083 37,613,542
Investment in Joint Venture (Note 2) 20,036,909 20,411,464
Mortgage-backed securities ("MBS"), net of
accumulated amortization (Note 3) 7,806,545 8,501,911
Total real estate assets 70,700,044 72,646,030
Cash and cash equivalents 6,071,235 8,065,906
Other investments (Note 3) 2,755,238 -
Other assets 591,515 711,172
Total assets $80,118,032 $81,423,108
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 2,560 $ 23,879
Accrued expenses and other liabilities (Note 4) 727,312 657,032
Total liabilities 729,872 680,911
Commitments and contingencies (Note 2)
Partners' equity (Note 5):
Unitholders
(7,499,718 Units outstanding) 79,754,276 81,088,463
Corporate Limited Partner
(100 Units outstanding) 1,268 1,286
General Partners (367,384) (347,552)
Total Partners' equity 79,388,160 80,742,197
Total liabilities and Partners' equity $80,118,032 $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 For the Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenue:
Rental $1,617,923 $1,606,838 $3,301,234 $3,246,166
Partnership's share of Joint Venture
net income (Note 2) 67,651 115,003 257,945 304,783
Interest income - MBS (Note 3) 176,982 207,446 361,192 422,660
Interest income - other 113,920 116,010 228,083 223,055
Total revenue 1,976,476 2,045,297 4,148,454 4,196,664
Expenses:
Operating (Note 6) 243,008 198,808 459,774 405,098
Maintenance 134,120 124,493 236,275 196,882
General and administrative (Note 6) 43,844 88,998 124,367 160,846
Real estate taxes 199,195 209,635 399,061 428,434
Management fees (Note 6) 97,293 92,281 191,400 183,424
Depreciation 523,001 496,069 1,037,860 990,922
Total expenses 1,240,461 1,210,284 2,448,737 2,365,606
Net income $ 736,015 $ 835,013 $1,699,717 $1,831,058
Allocation of net income (Note 5):
Unitholders (7,499,718 Units
outstanding) $ 721,286 $ 818,302 $1,665,701 $1,794,413
Net income per Unit of Depositary
Receipt $ .09 $ .11 $ .22 $ .24
Corporate Limited Partner (100
Units outstanding) $ 9 $ 11 $ 22 $ 24
General Partners $ 14,720 $ 16,700 $ 33,994 $ 36,621
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
1996 1995
Operating activities:
Net income $ 1,699,717 $ 1,831,058
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,037,860 990,922
Partnership's share of Joint Venture
net income (257,945) (304,783)
Distributions received from Joint
Venture 257,945 304,783
Amortization of MBS discount, net (3,440) (1,539)
Decrease in other assets 119,657 313,556
Decrease in accounts payable (21,319) (186,708)
Increase in accrued expenses and other
liabilities 70,280 81,519
Net cash provided by operating
activities 2,902,755 3,028,808
Investing activities:
Additions to fixed assets (161,770) (107,035)
Settlement of land easement (25) (239)
Principal collections on MBS 698,806 613,828
Increase in other investments (2,755,238) (3,222,357)
Distributions received from Joint Venture
in excess of its earnings 374,555 402,717
Net cash used in investing activities (1,843,672) (2,313,086)
Financing activity:
Distributions (3,053,754) (3,047,808)
Net decrease in cash and cash equivalents (1,994,671) (2,332,086)
Cash and cash equivalents, beginning of period 8,065,906 7,072,127
Cash and cash equivalents, end of period $ 6,071,235 $ 4,740,041
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 June 30, 1996, its
results of operations for the three and six months ended June 30, 1996
and 1995, and cash flows for the six months ended June 30, 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 and six months ended June 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) 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.
(2) Investment in Joint Venture, Continued
Condensed financial statements of the Joint Venture are as follows:
Brookwood Village Joint Venture
Condensed Balance Sheets
ASSETS
June 30, December 31,
1996 1995
Property, at cost $ 55,799,649 $ 55,478,818
Accumulated depreciation (16,159,133) (15,164,143)
39,640,516 40,314,675
Other assets 981,598 867,242
Total assets $ 40,622,114 $ 41,181,917
LIABILITIES AND PARTNERS' EQUITY
Total liabilities $ 548,296 $ 358,989
Partners' equity
The Partnership 20,036,909 20,411,464
Joint Venture Partner 20,036,909 20,411,464
Total Partners' equity 40,073,818 40,822,928
Total liabilities and Partners' equity $ 40,622,114 $ 41,181,917
Brookwood Village Joint Venture
Condensed Statements of Operations
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenue $1,401,853 $1,470,629 $ 2,947,457 $ 3,056,497
Property operating expenses (764,429) (731,135) (1,436,577) (1,446,579)
Depreciation (502,122) (509,488) (994,990) (1,000,352)
Net income $ 135,302 $ 230,006 $ 515,890 $ 609,566
(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 as follows:
June 30, December 31,
1996 1995
Face Value $7,796,166 $8,494,972
Amortized Cost $7,806,545 $8,501,911
Estimated Market Value $8,120,000 $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 $340,000 and $542,000 at June
30, 1996 and December 31, 1995, respectively and unrealized losses of
approximately $27,000 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 June 30, 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:
June 30, December 31,
1996 1995
Accrued real estate taxes $336,173 $264,996
Other accrued expenses 208,939 194,249
Tenant security deposits 174,987 186,242
Prepaid rent 7,213 11,545
$727,312 $657,032
(5) Changes in Partners' Equity
A summary of changes in Partners' equity (deficit) for the six months
ended June 30, 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 1,665,701 22 33,994 1,699,717
Distributions (2,999,888) (40) (53,826) (3,053,754)
Balance at
June 30, 1996 $79,754,276 $ 1,268 $(367,384) $79,388,160
(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
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 Unitholders.
Amounts accrued or paid to the General Partners or their affiliates are
as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Property management fees $ 97,293 $ 92,281 $191,400 $183,424
Expense reimbursements 63,532 82,819 145,994 152,633
Charged to operations $160,825 $175,100 $337,394 $336,057
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 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 $722,000 for fixed assets in 1996, most
of which are tenant buildouts at retail centers. The Joint Venture is
expected to spend approximately $846,000 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 six months ended June 30, 1996 and the period
from inception to June 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, 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 Six Months Inception to
Ended June 30, June 30,
1996 1996
Distributable Cash Flow:
Net income for tax purposes $2,150 $47,226
Items providing/not requiring or (not
providing) the use of operating funds:
Tax basis depreciation and amortization 863 15,692
Acquisition expenses paid from offering
proceeds charged to operations - 248
Partnership's share of Joint Venture
taxable net income (512) (6,576)
Distributions from Joint Venture 633 9,165
Additions to fixed assets (162) (2,749)
Amounts released from reserves
for capital improvements - 1,020
Total Distributable Cash Flow ("DCF") $2,972 $64,026
Unitholders' Share of DCF $2,913 $62,746
Unitholders' Share of DCF per Unit $ .39 $ 8.37 (c)
General Partners' Share of DCF $ 59 $ 1,280
Net Proceeds from Capital Transactions:
Principal collections on MBS, net $ 695 $37,327
Reinvestment of MBS principal collections - (3,687)
Total Net Proceeds from Capital
Transactions $ 695 $33,640
Distributions:
Unitholders $3,000 (a) $96,818 (b)
Unitholders' Average per Unit $ .40 (a) $ 12.91(b)(c)
General Partners $ 59 (a) $ 1,280 (b)
Total Distributions $3,059 (a) $98,098 (b)
(a) Represents distributions paid in 1996, except the February, 1996
distribution, which relates to 1995 cash flows and includes an
estimate of the distribution to be paid in August, 1996.
(b) Includes an estimate of the distribution to be paid in August, 1996.
(c) Unitholders' average per Unit return of capital as of August, 1996 is
$4.54 [$12.91-$8.37].
Operations
Partnership
Distributable Cash Flow decreased $106,000 for the six months ended June
30, 1996 as compared to the same period in 1995 as a result of decreased
distributions received from the Joint Venture and an increase in capital
improvements at the Partnership's properties. Net income of the
Partnership decreased for the three and six months ended June 30, 1996
as compared to the same periods in 1995 as a rise in total expenses
offset relatively stable revenue. Alderwood Towne Center ("Alderwood")
and Canyon Place ("Canyon") experienced swings in occupancy during these
three and six month periods. Alderwood's decrease in occupancy was a
result of the eviction and write off of Abodio, a 9,742 square foot
tenant, in the second quarter of 1996. At Canyon, the 14,833 square
foot Jo-Ann Fabrics opened late in the first quarter of 1996, favorably
impacting revenue for the remainder of 1996. Rental revenue at
Cumberland Glen remained relatively stable during the three and six
months ended June 30, 1996 as compared to the same periods in 1995. A
strong demand for multi-family housing as a result of a rise in
population and jobs in Atlanta, allowed management to increase rents
during the first quarter of 1996. These rental increases were offset,
however, by a 2% decrease in occupancy during the second quarter of
1996.
MBS interest income decreased for the three and six months ended June
30, 1996 as compared to the same period in 1995 due to the large
prepayments and repayments of principal. Interest income on short-term
investments remained relatively stable during these same periods as cash
balances begin to level off.
Total expenses increased for the three and six months ended June 30,
1996 as compared to the same periods in 1995. The increase in total
expenses is attributable to a rise in operating and maintenance expenses
offset by a decline in general and administrative expense. Operating
expense increased as a result of prior years' insurance refunds
received in the second quarter of 1995. Maintenance expense increased
due to landscaping work at Alderwood, Canyon and Encino completed in the
first and second quarters of 1996 and electrical repairs to install
display lights at Alderwood in the first quarter of 1996.
Joint Venture
Joint Venture net income decreased for the three and six months ended
June 30, 1996 as compared to the same periods in 1995, as the Joint
Venture experienced both a decrease in revenue and an increase in
property operating expenses within these two periods. The decrease in
revenue is due to lower occupancy as a result of the move out of The Ox
Restaurant, a 13,484 square foot tenant, in the second quarter of 1996,
which more than offset the increase in rental rates on certain lease
renewals. Additionally, revenue was impacted by a decrease in
reimbursable tenant billings derived from lower reimbursable operating
expenses between the two periods.
Property operating expenses for the three months ended June 30, 1996
increased when compared to the same period of 1995, as operating and
maintenance expense increases more than offset a decrease in real estate
taxes. The increase in operating expense is due to prior years'
insurance refunds received in the second quarter of 1995 and increased
reimbursable expenses incurred in connection with the operation of the
Joint Venture, including computer, accounting, travel, insurance, legal
and payroll costs. Maintenance expense increased as the Joint Venture
performed preventive maintenance in the second quarter of 1996,
including repairs to the mall parking lot. 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. This decrease is expected to
make a positive impact for the remainder of 1996.
For the six months ended June 30, 1996, property operating expenses
decreased as compared to the same period in 1995. These expenses
changed for the same reasons as discussed above. However, the decrease
in real estate taxes more than offset the increase in operating and
maintenance expenses.
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 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: July , 1996