UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year end
December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from
to
Commission file number 0-
15816
Krupp Cash Plus-II Limited Partnership
(Exact name of registrant as specified in its
charter)
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)
(Registrant's telephone number, including area
code) (617) 423-2233
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the
Act: Depositary
Receipts
representing Units
of Limited Partner
Interests
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
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and
will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities
held by non-affiliates: Not applicable.
Documents incorporated by reference: Part IV,
Item 14.
The exhibit index is located on pages 11-14.
The total number of pages in this document is
48.
PART I
This Form 10-K 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.
ITEM 1. BUSINESS
Krupp Cash Plus-II Limited Partnership (the
"Partnership") was formed on December 18, 1985
by filing a Certificate of Limited Partnership
in The Commonwealth of Massachusetts. The
Krupp Corporation and The Krupp Company
Limited Partnership-IV are the General
Partners of the Partnership. Krupp Depositary
Corporation is the Corporate Limited Partner.
For details, see Note A to Financial
Statements included in Item 8 (Appendix A) of
this report.
On March 28, 1986, the Partnership commenced
the marketing and sale of 7,500,000 units of
Depositary Receipts ("Units") for a maximum
offering of $150,000,000. The Partnership
raised $149,845,812 from its public offering.
The Partnership invested the net proceeds from
the offering in a portfolio of unleveraged
real estate (see Item 2 - Properties) and
mortgage-backed securities ("MBS") issued by
the Government National Mortgage Association
("GNMA"), the Federal National Mortgage
Association ("FNMA"), or the Federal Home Loan
Mortgage Corporation ("FHLMC") (see Note F to
Financial Statements, included in Item 8
(Appendix A) of this report). The Partnership
considers itself to be engaged only in the
industry segment of investment in real estate
and related assets.
The Partnership's real estate investments are
subject to some seasonal fluctuations,
resulting from changes in utility consumption,
seasonal maintenance expenditures and changes
in retail rental income based on the
percentage of tenant gross receipts.
On March 6, 1997, the Partnership and its
Joint Venture Partner, BRI Texas Apartments
Limited Partnership (collectively referred to
herein as the "Joint Venture Partners")
entered into a Real Estate Exchange Contract
to exchange Brookwood Village Mall and
Convenience Center ("Brookwood Village"), a
shopping center containing 474,083 net
leasable square feet located in Birmingham,
Alabama, with Colonial Realty Limited
Partnership, an unaffiliated third party, for
cash and two multi-family apartment complexes
totaling $32,422,220 less prorations and
closing costs of $863,164. The transaction
was consummated on May 13, 1997 (see Note E to
Financial Statements, included in Item 8
(Appendix A) of this report).
On December 2, 1997, Berkshire Realty
Enterprise Limited Partnership, an affiliate
of the General Partners, as agent for the
Partnership, entered into an Agreement of Sale
to sell all of the Partnership's properties to
Kejack, Inc. and its permitted assigns, which
are unaffiliated third parties. Encino Oaks,
a shopping center containing 52,380 leasable
square feet located in Encino Oaks,
California, Alderwood Towne Center, a shopping
center containing 105,346 leasable square feet
located in Lynnwood, Washington, Canyon Place,
a shopping center containing 157,283 leasable
square feet located in Portland, Oregon, Coral
Plaza, a shopping center containing 49,885
leasable square feet located in Oak Lawn,
Illinois and Cumberland Glen, a multi-family
apartment complex with 222 units located in
Smyrna, Georgia, were included in a package
with nine other properties owned by affiliates
of the General Partners. The total selling
price of the fourteen properties was
$138,000,000, of which the Partnership
received $39,822,700 for the sale of its
properties, less its share of the closing
costs. The transaction was consummated
subsequent to year end on January 30, 1998
(see Note L to Financial Statements, included
in Item 8 (Appendix A) of this report).
The sale is considered a Terminating Capital
Transaction as defined by the Partnership
Agreement. Accordingly, the General Partners
expect to liquidate and distribute the
remaining assets of the Partnership in 1998.
As of December 31, 1997, the Partnership did
not employ any personnel.
ITEM 2. PROPERTIES
As of December 31, 1997, the Partnership had
unleveraged investments in four retail centers
with an aggregate of 364,894 square feet of
leasable space and one apartment complex with
222 units, all of which are wholly-owned by
the Partnership. In addition, the Partnership
had an investment in Brookwood Village, a
shopping center with 474,083 square feet of
leasable space which was sold on May 13, 1997.
Additional detailed information with respect
to individual properties and the sale of
Brookwood Village are contained in Note E to
the Financial Statements, Schedule III and the
Separate Financial Statements for Brookwood
Village Joint Venture included in Item 8
(Appendix A) of this report.
A summary of the Partnership's real estate
investments is presented below.
Average Occupancy
Current Leasable For the YearEnded
Year of Square Footage/ December 31,
Description Acquisition Units 1997
1996 1995 1994 1993 Commercial
Encino Oaks
Shopping Center
Encino, California 1986 52,380 Sq. Ft. 89% 96% 99%100% 97%
Alderwood Towne Center
Lynnwood, Washington 1986 105,346 Sq. Ft. 98% 92% 100% 99% 100%
Canyon Place
Shopping Center
Portland, Oregon 1986 157,283 Sq. Ft. 97% 95% 90% 82% 83%
Coral Plaza
Shopping Center
Oak Lawn, Illinois 1987 49,885 Sq. Ft. 84% 85% 85% 87% 88%
Residential
Cumberland Glen Apartments
Smyrna, Georgia 1987 222 units 96% 94% 96% 97% 96%
The Partnership has no present plans for major
improvements or developments of its
unleveraged real estate. Only improvements
necessary to keep the Partnership's properties
competitive in their respective markets were
completed in 1997.
There were 10 tenants which occupied 10% or
more of their respective leasable space as of
December 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1997, there were no
material pending legal proceedings to which
the Partnership was a party or to which any of
its property was the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public market for the Units and it
is not anticipated that any such public market
will develop. The transfer of Units is
subject to certain limitations contained in
the Partnership Agreement.
The number of Investor Limited Partners
("Unitholders") as of December 31, 1997 was
approximately 9,500.
The Partnership has made the following
distributions to its Partners during the years
ended December 31, 1997 and 1996:
Year Ended December 31,
1997 1996
Amount Per Unit Amount Per Unit
Limited Partners:
Unitholders
(7,499,718 Units) $22,874,140 $3.05 $5,999,775 $.80
Corporate Limited Partner
(100 Units) 305 3.05 80 .80
General Partners 87,724 114,605
$22,962,169 $6,114,460
One of the objectives of the Partnership is to
make partially tax sheltered distributions of
cash flow generated by the Partnership's
properties and MBS. The Partnership made a
distribution of $.20 per Unit in the first
quarter of 1997 to its investors and increased
the distribution rate to $.25 per Unit, per
quarter, for the remainder of 1997.
Additionally, the Partnership made a special
distribution to the Unitholders on August 29,
1997 with funds received from the sale of
Brookwood Village on May 13, 1997 totaling
$15,749,618 or $2.10 per Unit.
As a result of the sale of Brookwood Village,
the Partnership has reduced the quarterly
distribution rate to $.20 per Unit, for the
distribution payable in February, 1998.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected
financial information regarding the
Partnership's financial position and operating
results. This information should be read in
conjunction with Management's Discussion and
Analysis of Financial Condition and Results of
Operations, and the Financial Statements and
Supplementary Data, which are included in
Items 7 and 8 (Appendix A) of this report,
respectively.
1997 1996 1995 1994 1993
Total revenue (a)$ 8,144,918 $ 7,687,269 $ 7,870,510$ 7,521,132 $ 7,944,246
Net income (loss) (3,577,878) (1,455,849) 3,388,472 3,064,617 3,232,087
Net income (loss)
allocated to
Partners:
Unitholders (3,506,273) (1,426,713) 3,320,658 3,003,285 3,167,403
Per Unit (.47) (.19) .44 .40 .42
Corporate Limited
Partner (47) (19) 44 40 42
General
Partners (71,558) (29,117) 67,770 61,292 64,642
Total assets at
December 31 47,654,710 74,063,426 81,423,108 84,349,429 87,285,456
Distributions:
Unitholders 22,874,140 5,999,775 5,999,775 6,012,096 13,495,370
Per Unit(b) 3.05 .80 .80 .80 1.80
Corporate Limited
Partner 305 80 80 80 180
General
Partners 87,724 114,605 109,044 89,729 89,558
(a) For comparison, total revenue for the years 1993 through 1996
has been adjusted to exclude the Partnership's share of Joint
Venture net income (loss) (see the Partnership's Statements of
Operations, included with Financial Statements and
Supplementary Data in Appendix A of this report).
(b) During the years ended December 31, 1997, 1996, 1995, 1994 and
1993 the Unitholders' average per Unit return of capital
based on the Distributable Cash Flow, as defined by
Section 17 of the Partnership Agreement, was $2.42, $.09,
$.04, $.20, and $1.21, respectively.
ITEM 7. 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 Shopping Center, Alderwood Towne
Center, Canyon Place Shopping Center, Coral
Plaza Shopping Center and Cumberland Glen
Apartments), earnings and principal
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 its retail centers. This policy
has proven to be successful in attracting
tenants and maintaining high occupancies at
properties where it has been undertaken.
In 1997, the Joint Venture Partners and
Brookwood Village Joint Venture were named as
defendants in a lawsuit filed by the previous
owners of Brookwood Village related to a
$5,000,000 lien retained by the seller. On
February 28, 1997, Brookwood Village Joint
Venture paid the discounted amount of
$4,300,000 to the previous owner to release
the lien and settle the lawsuit. The payment
was funded by capital contributions of
$2,150,000 from each of the Joint Venture
Partners.
On May 13, 1997, the Joint Venture Partners
exchanged Brookwood Village with an
unaffiliated third party for net consideration
totaling $32,422,220, less prorations and
closing costs of $863,164. The Partnership
received approximately $15,780,000 of the
proceeds from the exchange, net of its share
of prorations and closing costs. On August
29, 1997, the Partnership made a special
distribution of $15,749,618, or $2.10 per
Unit, with the proceeds received from the sale
of Brookwood Village. As a result of the
exchange, the Joint Venture Partners
liquidated Brookwood Village Joint Venture and
distributed its remaining assets in the fourth
quarter of 1997, in accordance with the Joint
Venture Agreement. At that time, the
Partnership received an additional
distribution of approximately $397,000 for its
share of the remaining net assets of the Joint
Venture. For further discussion of this
matter see Note E to the Financial Statements
included in Item 8 (Appendix A) of this
report. With the dissolution of Brookwood
Village Joint Venture, the Partnership's
liquidity is impacted as it will no longer
receive distributions from its Joint Venture
investment. As a result, the General Partners
have reduced the Partnership's annual
distribution rate, as discussed below.
The Partnership holds MBS that are guaranteed
by the Government National Mortgage
Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the 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. At December 31, 1997, the
Partnership recorded unrealized holding gains
on its MBS of $361,893 to adjust the
investments to market value (see Note F to the
Financial Statements included in Item 8
(Appendix A) of this report).
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. As of
December 31, 1996, the Partnership had
significant liquid resources. Therefore, the
General Partners increased the annual
distribution rate from $.80 per Unit to $1.00
per Unit in 1997, beginning with the
distribution payable in May, 1997. Due to the
sale of Brookwood Village and its impact on
the liquidity of the Partnership, the General
Partners have decreased the annual
distribution rate to $.80 per Unit for the
distribution payable in February, 1998.
Based upon the General Partners' assessment of
the current and future market conditions, the
capital improvements necessary to remain
competitive in the properties' respective
markets and the Partnership's capital
resources, the General Partners determined
that it was in their best interests, and that
of their respective investors, to sell the
Partnership's remaining properties. On
December 2, 1997, Berkshire Realty Enterprise
Limited Partnership, an affiliate of the
General Partners, as agent for the
Partnership, entered into an Agreement of Sale
to sell all of the Partnership's properties to
Kejack, Inc. and its permitted assigns, which
are unaffiliated third parties. Encino Oaks,
a shopping center containing 52,380 leasable
square feet located in Encino Oaks,
California, Alderwood Towne Center, a shopping
center containing 105,346 leasable square feet
located in Lynnwood, Washington, Canyon Place,
a shopping center containing 157,283 leasable
square feet located in Portland, Oregon, Coral
Plaza, a shopping center containing 49,885
leasable square feet located in Oak Lawn,
Illinois and Cumberland Glen, a multi-family
apartment complex with 222 units located in
Smyrna, Georgia, were included in a package
with nine other properties owned by affiliates
of the General Partners. The total selling
price of the fourteen properties was
$138,000,000, of which the Partnership
received $39,822,700 for the sale of its
properties, less its share of the closing
costs. The transaction was consummated
subsequent to year end, on January 30, 1998
(see Note L to Financial Statements, included
in Item 8 (Appendix A) of this report).
Based on the selling prices of the properties
less estimated costs to sell, the Partnership
recorded provisions for losses on its real
estate (see Note D to Financial Statements,
included in Item 8 (Appendix A) of this
report).
The sale is considered a Terminating Capital
Transaction as defined by the Partnership
Agreement. Accordingly, the General Partners
expect to liquidate and distribute the
remaining assets of the Partnership in 1998.
Operations
Partnership
1997 compared to 1996
Net income, net of the Partnership's share of
the Joint Venture net loss and provisions for
losses on real estate, increased in 1997 when
compared to 1996, as the increase in total
revenue more than offset the increase in total
expenses.
Total revenue increased in 1997 when compared
to 1996 primarily as a result of increases in
average occupancy rates at three of the
Partnership's properties. Alderwood Towne
Center ("Alderwood"), Canyon Place ("Canyon")
and Cumberland Glen enjoyed increases in
average occupancy of 6%, 2% and 2%,
respectively. Additionally, Payless Shoes, a
4,391 square foot tenant at Canyon, terminated
their lease at the end of June, 1996. The
space was subsequently released, therefore, as
a result of this termination, the Partnership
recorded approximately $60,000 of rental
revenue in February, 1997, thereby
contributing to the rise in revenue in 1997
when compared to 1996.
Total expenses increased in 1997 when compared
to 1996 primarily due to an increase in
general and administrative expense. This
increase is attributable to costs incurred in
connection with the operation of the
Partnership, including administrative
expenses. Also, the Partnership incurred
legal costs related to the unsolicited tender
offers made to purchase Units of Depositary
Receipts and additional legal fees related to
the settlement of the Brookwood Village Joint
Venture litigation, as discussed in Note E to
the Financial Statements included in Item 8
(Appendix A).
1996 compared to 1995
Net income, net of the Partnership's share of
Joint Venture net income (loss), decreased in
1996 when compared to 1995 as total revenue,
net of the Partnership's share of Joint
Venture net income (loss), decreased and total
expenses increased.
Total revenue decreased in 1996 as compared to
1995 primarily due to a decrease in MBS
interest income as discussed below. Rental
revenue remained stable as the decrease in
occupancy at Alderwood was offset by the
increase in occupancy at Canyon. Alderwood's
decrease in average occupancy was the result
of the eviction of Abodio, a 9,742 square foot
tenant, in the second quarter of 1996.
Additionally, Clothestime, a 3,265 square foot
tenant, chose not to renew its lease in the
third quarter. To offset this decrease, Jo-
Ann Fabrics, a 14,833 square foot tenant,
opened in the first quarter at Canyon,
favorably impacting rental revenue in 1996.
Although market conditions in Atlanta have
somewhat declined, increased rental rates,
instituted during the first half of 1996,
increased revenue at Cumberland Glen.
Total expenses in 1996 increased as compared
to 1995, with increases in maintenance and
general and administrative expenses more than
offsetting the decrease in real estate taxes.
Security increased at Encino in 1996 due to
additional incidents reported at the property.
This, as well as increased landscaping
expenditures at Encino Oaks, Alderwood and
Canyon, and a rise in snow removal costs at
Alderwood and Canyon caused maintenance
expense to increase. Additionally, at
Cumberland Glen the interior of its buildings
were enhanced, including wallpapering and
cabinet repairs, to keep the property
appealing and help maintain occupancy in a
declining real estate market. The increase in
general and administrative expense was the
result of increased costs incurred in
connection with the operation of the
Partnership and its properties, including
administrative expenses. Real estate taxes
decreased as a result of the reassessment of
Canyon and Coral Plaza's value in 1996. In
conjunction with the higher number of capital
improvements performed in 1996, depreciation
expense increased in 1996 when compared to
1995.
MBS and Other Income
MBS interest income decreased approximately
$106,000 in 1997 from 1996, and $129,000 in
1996 from 1995 due to prepayments and
repayments of principal which occurred between
1995 and 1997.
Higher average cash and cash equivalent
balances maintained during 1997, primarily a
result of receiving proceeds of approximately
$15,780,000 from the sale of Brookwood
Village, resulted in higher interest income on
short-term investments in 1997 when compared
to 1996. Interest income on short-term
investments remained relatively stable in 1996
when compared to 1995 as cash balances leveled
off.
Joint Venture
Net income, net of the valuation provisions
for losses on real estate and the loss on the
sale of property, decreased in 1997 when
compared to 1996, as the decrease in total
revenue exceeded the decrease in total
expenses.
Brookwood Village was sold on May 13, 1997 to
an unaffiliated third party. See Note E to
the Financial Statements included in Item 8
(Appendix A) of this report for further
discussion of this matter.
Net income, net of the valuation provisions
for losses on real estate, increased in 1996
when compared to 1995 as the decrease in total
expenses more than offset the decrease in
total revenue. A credit adjustment of
approximately $131,000, during the fourth
quarter of 1996, for Eckerd Drugs's prior
years' rent overpayment, based on a percentage
of its sales, attributed to the Joint
Venture's decline in rental revenue. Interest
income also decreased as the Joint Venture
maintained lower average cash and cash
equivalent balances in 1996. Total expenses,
net of the provisions for losses of real
estate, decreased in 1996 when compared to
1995, a result of decreases in operating and
depreciation expenses. Depreciation expense
decreased as a result of an increase in fully
depreciated assets in 1996 when compared to
1995.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The Partnership has no directors or executive
officers. Information as to the directors and
executive officers of The Krupp Corporation,
which is a General Partner of both the
Partnership and The Krupp Company Limited
Partnership-IV, the other General Partner of
the Partnership, is as follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (51) President and Co-Chairman of the Board
George Krupp (53) Co-Chairman of the Board
Wayne H. Zarozny (39) Treasurer
Douglas Krupp is Co-Chairman and Co-Founder
of The Berkshire Group. Established in 1969
as the Krupp Companies, this real estate-based
firm expanded over the years within its areas
of expertise including investment program
sponsorship, property and asset management,
mortgage banking, health care facility
ownership and the management of the company.
Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science
in Business Administration from this
institution and was elected trustee in 1990.
Mr. Krupp is Chairman of the Board and a
Director of both Berkshire Realty Company,
Inc. (NYSE-BRI) and Harborside Health care
(NYSE-HBR). Mr. Krupp also serves as Chairman
of the Board and Trustee of Krupp Government
Income Trust and as Chairman of the Board and
Trustee of Krupp Government Income Trust II.
George Krupp is Douglas Krupp's brother.
George Krupp is the Co-Chairman and Co-
Founder of The Berkshire Group. Established
in 1969 as the Krupp Companies, this real
estate-based firm expanded over the years
within its areas of expertise including
investment program sponsorship, property and
asset management, mortgage banking and
healthcare facility ownership. Mr. Krupp
received his undergraduate education from the
University of Pennsylvania and Harvard
University Extension School and holds a
Master's degree in History from Brown
University.
Wayne H. Zarozny is Vice President of The
Berkshire Group. Mr. Zarozny has held several
positions within The Berkshire Group since
joining the company in 1986 and is currently
responsible for accounting and financial
reporting, treasury, accounts payable and
payroll activities. Prior to joining The
Berkshire Group, he was an audit supervisor
for Pannell Kerr Forster International and on
the audit staff of Deloitte, Haskins and Sells
in Boston. He received a B.S. degree from
Bryant College, a Master's degree in Business
Administration from Clark University and is a
Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or
executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, beneficial owners
of record owning more than 5% of the
Partnership's 7,499,818 outstanding Depositary
Receipts are as follows:
Title Name and Address Amount and NaturePercent
of of of of
Class Beneficial Owner Beneficial Ownership Class
Depositary Krescent Partners LLC
Receipts 2 Manhattanville Rd.
Purchase, NY 10577 561,702.55 Units 7.49%
Depositary AP-GP Prom Partners Inc.
Receipts 2 Manhattanville Rd.
Purchase, NY 10577 561,702.55 Units 7.49%
Depositary Apollo Real Estate Investment
Receipts Fund II, LP
2 Manhattanville Rd.
Purchase, NY 10577 561,702.55 Units 7.49%
Depositary Apollo Real Estate Advisors II, LP
Receipts 2 Manhattanville Rd.
Purchase, NY 10577 561,702.55 Units 7.49%
Depositary American Holdings I, LP
Receipts 100 South Bedford Rd.
Mount Kisco, NY 10549 403,421.83 Units 5.37%
Depositary American Holdings I, GP,Inc.
Receipts 100 South Bedford RD
Mount Kisco, NY 10549 403,421.83 Units 5.37%
Depositary American Property Investors,Inc.
Receipts 100 South Bedford RD
Mount Kisco, NY 10549 403,421.83 Units 5.37%
Title Name and Address Amount and NaturePercent
of of of of
Class Beneficial Owner Beneficial Ownership Class
Depositary Longacre Corp.
Receipts 100 South Bedford RD
Mount Kisco, NY 10549 375.00 Units .01%
Depositary Carl C. Icahn
Receipts 100 South Bedford RD
Mount Kisco, NY 10549 403,796.83 Units 5.38%
Total 3,861,247.52 Units 51.46%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Partnership does not have any directors,
executive officers or nominees for election as
director. Additionally, as of December 31,
1997, no person of record owned or was known
by the General Partners to own beneficially
more than 5% of the Partnership's outstanding
Units.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements - see Index to Financial Statements
and Schedule included under Item 8 (Appendix A) on page
F-2 of this report.
2. Financial Statement Schedule - see Index to Financial
Statements and Schedule included under Item 8 (Appendix
A) on page F-2 of this report. All other schedules are
omitted as they are not applicable, not required or the
information is provided in the Financial Statements or
the Notes thereto.
3. Separate Financial Statements - as required by Rule 3-09
of Regulation S-X. The separate financial statements
and schedule for Brookwood Village Joint Venture (the
"Joint Venture") are included under Item 8 (Appendix A)
on pages F-20 to F-33 of this report.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable Exhibits required under
Item 601 of Regulation S-K:
(4) Instruments defining the rights of security holders
including indentures:
(4.1) Amended Agreement of Limited Partnership dated as
of March 25, 1986 [Exhibit A to Prospectus
included in Amendment No. 1 of Registrant's
Registration Statement on Form S-11 dated March
26, 1986 (File No. 33-2312)].*
(4.2) Subscription Agreement Specimen [Exhibit D to
Prospectus included in Amendment No. 1 of
Registrant's Registration Statement on Form S-11
dated March 26, 1986 (File No. 33-2312)].*
(4.3) Eleventh Amendment and Restatement of Certificate
of Limited Partnership filed with the
Massachusetts Secretary of State as of February
6, 1987. [Exhibit 4.3a to Registrant's Report on
Form 10-K dated December 31, 1986 (File No. 33-
2312)].*
(10) Material Contracts:
Encino Oaks Shopping Center
(10.1) Krupp Standard Purchase Agreement dated July 16,
1986 between Krupp Realty and Development, Inc.,
a Massachusetts corporation and Cal-American
Income Property Fund II, a California limited
partnership. [Exhibit 1 to Registrant's Report
on Form 8-K dated July 31, 1986 (File No. 33-
2312)].*
(10.2) Assignment of Contract between Krupp Realty and
Development, Inc., a Massachusetts corporation
and Krupp Cash Plus-II Limited Partnership, a
Massachusetts limited partnership dated July 28,
1986. [Exhibit 2 to Registrant's Report on Form
8-K dated July 31, 1986 (File No. 33-2312)].*
(10.3) Partnership Grant Deed dated July 31, 1986 from
Cal-American Income Property Fund II a California
limited partnership, to Krupp Cash Plus-II
Limited Partnership, a Massachusetts limited
partnership. [Exhibit 3 to Registrant's Report
on Form 8-K dated July 31, 1986 (File No. 33-
2312)].*
(10.4) Management Agreement dated July 31, 1986 between
Krupp Cash Plus-II Limited Partnership, as Owner
and Krupp Asset Management Company, now known as
Berkshire Property Management ("BPM"), as Agent.
[Exhibit 10.4a to Registrant's Report on Form 10-
K dated December 31, 1986 (File No. 33-2312)].*
Alderwood Towne Center
(10.5) Krupp Standard Option Agreement dated July 16,
1986 between Krupp Realty and Development, Inc.,
a Massachusetts corporation and Alderwood Towne
Center, a Washington tenancy-in-common. [Exhibit
10.5 included in Registrant's Post Effective
Amendment No. 2 to its Form S-11 Registration
Statement dated September 3, 1986 (File No. 33-
2312)].*
(10.6) Escrow Agreement dated August 12, 1986 between
Krupp Realty and Development, Inc., a
Massachusetts corporation and Alderwood Towne
Center, a Washington tenancy-in-common. [Exhibit
10.5 included in Registrant's Post Effective
Amendment No. 2 to its Form S-11 Registration
Statement dated September 3, 1986 (File No. 33-
2312)].*
(10.7) Amendment to Option Agreement dated July 17, 1986
between Krupp Realty and Development, Inc., a
Massachusetts corporation and Alderwood Towne
Center, a Washington tenancy-in-common. [Exhibit
10.5 included in Registrant's Post Effective
Amendment No. 2 to its Form S-11 Registration
Statement dated September 3, 1986 (File No. 33-
2312)].*
(10.8) Assignment of Option Agreement between Krupp
Realty and Development, Inc. a Massachusetts
corporation and Krupp Cash Plus-II Limited
Partnership, a Massachusetts limited partnership
dated August 20, 1986. [Exhibit 4 to
Registrant's Report on Form 8-K dated September
3, 1986 (File No. 33-2312)].*
(10.9) Statutory Warranty Deed dated September 3, 1986
between Krupp Cash Plus-II Limited Partnership,
a Massachusetts limited partnership and Alderwood
Towne Center Associates. [Exhibit 5 to
Registrant's Report on Form 8-K dated September
3, 1986 (File No. 33-2312)].*
(10.10) Property Management Agreement dated September
3, 1986 between Krupp Cash Plus-II Limited
Partnership, as Owner and Krupp Asset
Management Company, now known as Berkshire
Property Management ("BPM"), as Agent.
[Exhibit 6 to Registrant's Report on Form 8-K
dated September 3, 1986 (File No. 33-2312)].*
Canyon Place Shopping Center
(10.11)Krupp Standard Option Agreement dated October 24,
1986 between Krupp Realty and Development, Inc., a
Massachusetts corporation and Canyon Place Associates, a
Washington tenancy-in-common. [Exhibit 1 to Registrant's
Report on Form 8-K dated December 23, 1986 (File No. 33-
2312)].*
(10.12)Amendment to Option Agreement dated December 9,
1986 between Krupp Realty and Development, Inc., a
Massachusetts corporation and Canyon Place Associates, a
Washington tenancy-in-common. [Exhibit 2 to Registrant's
Report on Form 8-K dated December 23, 1986 (File No. 33-
2312)].*
(10.13)Assignment of Option Agreement dated December 17,
1986 between Krupp Realty and Development, Inc., a
Massachusetts corporation and Krupp Cash Plus-II Limited
Partnership, a Massachusetts limited partnership.
[Exhibit 3 to Registrant's Report on Form 8-K dated
December 23, 1986 (File No. 33-2312)].*
(10.14)Warranty Deed dated December 23, 1986 between
Canyon Place Associates, a Washington tenancy-in-common,
as Grantor and Krupp Cash Plus-II Limited Partnership, a
Massachusetts limited partnership, as Grantee. [Exhibit
4 to Registrant's Report on Form 8-K dated December 23,
1986 (File No. 33-2312)].*
(10.15)Property Management Agreement dated December 23,
1986 between Krupp Cash Plus-II Limited Partnership, as
Owner and Krupp Asset Management Company, now known as
Berkshire Property Management ("BPM"), as Agent.
[Exhibit 6 to Registrant's Report on Form 8-K dated
December 23, 1986 (File No. 33-2312)].*
Coral Plaza Shopping Center
(10.16)Purchase and Sale Agreement dated May 8, 1987
between Harris Trust and Savings Bank, as trustee under
Trust No. 42703, and Krupp Realty and Development, Inc.,
a Massachusetts corporation, as assigned to Krupp Cash
Plus-II Limited Partnership. [Exhibit 19.1 to
Registrant's Report on Form 10-Q dated June 30, 1987
(File No. 33-2312)].*
(10.17)Assignment between Coral Plaza Limited Partnership
and Harris Trust and Savings Bank, as Trustee under Trust
No. 42703, collectively as "Assignor," and Krupp Cash Plus-
II Limited Partnership, a Massachusetts limited partnership,
as "Assignee" dated June 2, 1987. [Exhibit 19.2 to
Registrant's Report on Form 10-Q dated June 30, 1987 (File
No. 33-2312)].*
(10.18) Trustee's Deed dated May 28, 1987 from Harris
Trust and Savings Bank, as trustee under Trust
No. 42703, to Krupp Cash Plus-II Limited
Partnership. [Exhibit 19.3 to Registrant's
Report on Form 10-Q dated June 30, 1987 (File No.
33-2312)].*
(10.19) Property Management Agreement, dated June 1,
1987, between Krupp Cash Plus-II Limited
Partnership, as Owner, and Krupp Asset Management
Company, now known as Berkshire Property
Management ("BPM"), as Agent. [Exhibit 19.4 to
Registrant's Report on Form 10-Q dated June 30,
1987 (File No. 33-2312)].*
Cumberland Glen Apartments
(10.20) Agreement of Purchase and Sale, dated August 24,
1987 between FNBC Properties, Inc., a Delaware
corporation, as "Seller," and Krupp Realty and
Development, Inc., a Massachusetts corporation,
as "Purchaser." [Exhibit 19.5 to Registrant's
Report on Form 10-Q dated September 30, 1987
(File No. 0-15816)].*
(10.21) Assignment of Purchase and Sale Agreement, dated
August 24, 1987 between Krupp Realty and
Development, Inc., and Krupp Cash Plus-II Limited
Partnership, a Massachusetts limited partnership.
[Exhibit 19.6 to Registrant's Report on Form 10-Q
dated September 30, 1987 (File No. 0-15816)].*
(10.22) Quit Claim Deed, dated September 3, 1987, between
The First National Bank of Chicago, and Krupp
Cash Plus-II Limited Partnership. [Exhibit 19.7
to Registrant's Report on Form 10-Q dated
September 30, 1987 (File No. 0-15816)].*
(10.23) Property Management Agreement, dated September 3,
1987, between Krupp Cash Plus-II Limited
Partnership, as Owner, and BRI OP Limited
Partnership, formerly known as Berkshire Property
Management, a subsidiary of Berkshire Realty
Company, Inc. [Exhibit 19.8 to Registrant's
Report on Form 10-Q dated September 30, 1987
(File No. 0-15816)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1997
the Partnership did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) 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, on the
24th day of March, 1998.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
By: The Krupp Corporation, a General Partner
By: /s/ Douglas Krupp
Douglas Krupp, President, Co-Chairman
(Principal Executive Officer) and Director
of The Krupp Corporation
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been
signed below by the following persons on
behalf of the registrant and in the capacities
indicated, on the 24th day of March, 1998.
Signatures Titles
/s/ Douglas Krupp, President,
Co-Chairman (Principal Executive Officer)
Douglas Kruppand Director of The Krupp
Corporation, a General Partner of the
Registrant.
/s/ George Krupp,Co-Chairman (Principal
Executive Officer) and George Krupp Director
of The Krupp Corporation, a General Partner of
the Registrant.
/s/ Wayne H. Zarozny ,Treasurer of the Krupp
Corporation, a General Wayne H. Zarozny
Partner of the Registrant.
APPENDIX A
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1997
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Balance Sheets at December 31, 1997 and
December 31, 1996 F-4
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 F-5
Statements of Changes in Partners' Equity for
the Years
Ended December 31, 1997, 1996 and 1995 F-6
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 F-7 - F-8
Notes to Financial Statements F-9 - F-17
Schedule III - Real Estate and Accumulated
Depreciation F-18 - F-19
Separate Financial Statements - Brookwood
Village Joint Venture F-20 - F-33
All other schedules are omitted as they are
not applicable or not required, or the
information is provided in the financial
statements or the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Cash Plus-II Limited Partnership:
We have audited the financial statements and
the financial statement schedule of Krupp Cash
Plus-II Limited Partnership (the
"Partnership") listed in the index on page F-2
of this Form 10-K. These financial statements
and financial statement schedule are the
responsibility of the Partnership's
management. Our responsibility is to express
an opinion on these financial statements and
financial statement schedule based on our
audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as
well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Krupp Cash Plus-II Limited Partnership as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred
to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
As discussed in Note L, all of the Partnership's properties were
sold on January 30, 1998. As a result, the Partnership will be
liquidated in 1998.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 30, 1998
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997
1996
Real estate assets:
Multi-family apartment complex, less
accumulated depreciation of
$4,626,130 at December 31, 1996 $ 5,597,104 $ 5,830,088
Retail centers, less accumulated
depreciation of $14,132,636
at December 31, 1996 (Note D) 29,622,892 36,399,653
Investment in Joint Venture (Note E) - 15,112,894
Mortgage-backed securities ("MBS")
(Note F) 6,478,988 7,134,203
Total real estate assets 41,698,984 64,476,838
Cash and cash equivalents (Note C) 5,325,971 8,953,003
Other assets 629,755 633,585
Total assets $ 47,654,710 $ 74,063,426
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable $ - $ 31,990
Accrued expenses and other
liabilities (Note G) 660,976 698,174
Due to affiliates (Note I) - 161,374
Total liabilities 660,976 891,538
Partners' equity (deficit) (Note H):
Unitholders
(7,499,718 Units outstanding) 47,281,562 73,661,975
Corporate Limited Partner
(100 Units outstanding) 835 1,187
General Partners (650,556) (491,274)
Unrealized holding gains on MBS (Note F) 361,893 -
Total Partners' equity 46,993,734 73,171,888
Total liabilities and Partners' equity $ 47,654,710 $ 74,063,426
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Revenue:
Rental (Note J)$ 6,933,984 $ 6,524,291 $ 6,588,018
Interest income-MBS (Note F) 581,472 687,690 816,210
Interest income-other (Note C) 629,462 475,288 466,282
Total revenue 8,144,918 7,687,269 7,870,510
Expenses:
Operating (Note I) 928,199 948,743 918,694
Maintenance 521,342 545,017 501,083
General and administrative
(Note I) 620,498 440,178 343,761
Real estate taxes 801,802 779,921 815,364
Management fees (Note I)385,273 374,702 374,554
Depreciation 2,202,446 2,131,487 2,025,073
Provisions for losses on real
estate (Note D) 5,375,772 - -
Total expenses 10,835,332 5,220,048 4,978,529
Income (loss) from operations(2,690,414) 2,467,221 2,891,981
Partnership's share of Joint
Venture net income (loss)
(Note E) (887,464) (3,923,070) 496,491
Net income (loss) (Note K) $(3,577,878)$(1,455,849)$ 3,388,472
Allocation of net income (loss)
(Note H):
Unitholders (7,499,718 Units
outstanding)$(3,506,273) $(1,426,713)$ 3,320,658
Net income (loss) per Unit
of Depositary Receipt $ (.47)$ (.19)$ .44
Corporate Limited Partner
(100 Units outstanding)$ (47)$ (19)$ 44
General Partners $ (71,558)$ (29,117)$ 67,770
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
Corporate Unrealized Total
Limited General Holding Gains Partners'
Unitholders Partner Partners on MBS Equity
Balance at
December 31, 1994 $83,767,580 $ 1,322 $(306,278) - $83,462,624
Net income 3,320,658 44 67,770 - 3,388,472
Distributions (5,999,775) (80) (109,044) - (6,108,899)
Balance at
December 31, 1995 81,088,463 1,286 (347,552) - 80,742,197
Net loss (1,426,713) (19) (29,117) - (1,455,849)
Distributions (5,999,775) (80) (114,605) - (6,114,460)
Balance at
December 31, 1996 73,661,975 1,187 (491,274) - 73,171,888
Net loss (Note H) (3,506,273) (47) (71,558) - (3,577,878)
Unrealized holding
gains on MBS
(Note F) - - - 361,893 361,893
Distributions
(Note H) (22,874,140) (305) (87,724) - (22,962,169)
Balance at
December 31, 1997$47,281,562$ 835$(650,556)$ 361,893$46,993,734
The per Unit distributions for the years ended December 31, 1997,
1996 and 1995 were $3.05, $.80 and $.80, respectively, with $2.42,
$.09 and $.04, respectively, representing a return of capital for tax
purposes.
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Operating activities:
Net income (loss) $(3,577,878)$(1,455,849) $ 3,388,472
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation 2,202,446 2,131,487 2,025,073
Provisions for losses on real
estate 5,375,772 - -
Amortization of MBS discount,
net (1,946) (2,207) (3,943)
Partnership's share of Joint
Venture net loss (income) 887,464 3,923,070 (496,491)
Distributions received from
Joint Venture - - 496,491
Changes in assets and
liabilities:
Decrease in other assets 3,830 77,587 127,734
Increase (decrease) in
accounts payable (31,990) 8,111 (197,631)
Increase (decrease) in
due to affiliates (161,374) 161,374 -
Increase (decrease) in
accrued expenses and
other liabilities (37,198) 41,142 (8,263)
Net cash provided by
operating activities 4,659,126 4,884,715 5,331,442
Investing activities:
Additions to fixed assets (590,217) (628,548) (471,770)
Settlement of land easement 21,744 (25) (2,658)
Principal collections on MBS 1,019,054 1,369,915 1,317,155
Capital contribution to Joint
Venture (2,150,000) - -
Distributions received from Joint
Venture in excess of its net
income 595,902 1,375,500 928,509
Distribution received from Joint
Venture sale of property, net 15,779,528 - -
Net cash provided by
investing
activities 14,676,011 2,116,842 1,771,236
Financing activity:
Distributions (22,962,169) (6,114,460) (6,108,899)
Net increase (decrease) in cash and
cash equivalents (3,627,032) 887,097 993,779
Cash and cash equivalents,
beginning of year 8,953,003 8,065,906 7,072,127
Cash and cash equivalents,
end of year $ 5,325,971 $ 8,953,003 $ 8,065,906
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1997, 1996 and 1995
Supplemental schedule of noncash investing and financing activities:
1997 1996 1995
Unrealized holding gains on MBS
(Note F) $ 361,893 $ - $ -
The accompanying notes are an integral
part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A.Organization
Krupp Cash Plus-II Limited Partnership (the
"Partnership") was formed on December 18, 1985
by filing a Certificate of Limited Partnership
in The Commonwealth of Massachusetts. The
Partnership issued all of the General Partner
Interests to The Krupp Corporation and The
Krupp Company Limited Partnership-IV in
exchange for capital contributions aggregating
$3,000. Except under certain limited
circumstances upon termination of the
Partnership, the General Partners are not
required to make any additional capital
contributions.
The Partnership issued 100 Limited Partner
Interests to Krupp Depositary Corporation (the
"Corporate Limited Partner") in exchange for a
capital contribution of $2,000. The Corporate
Limited Partner, in turn, issued Depositary
Receipts ("Units") to the investors and
assigned all of its rights and interest in the
Limited Partner Interests (except for its
$2,000 Limited Partner's interest) to the
holders of Depositary Receipts. As of January
21, 1987, the Partnership completed its public
offering having sold 7,499,818 Units for
$149,845,812, net of $150,548 of purchase
volume discounts.
On December 2, 1997, Berkshire Realty
Enterprise Limited Partnership, an affiliate
of the General Partners, as agent for the
Partnership, entered into an Agreement of Sale
to sell all of the Partnership's remaining
properties to Kejack, Inc. and its permitted
assigns, which are unaffiliated third parties.
The Partnership's properties were included in
a package with nine other properties owned by
affiliates of the General Partners. The
transaction was consummated subsequent to year
end, on January 30, 1998 (see Note L).
The sale is considered a Terminating Capital
Transaction as defined by the Partnership
Agreement. Accordingly, the General Partners
expect to liquidate and distribute the
remaining assets of the Partnership in 1998.
All distributions of net cash proceeds from
the Terminating Capital Transaction shall be
governed by Section 8.3 (b) of the Partnership
Agreement.
B.Significant Accounting Policies
The Partnership uses the following accounting
policies for financial reporting purposes,
which may differ in certain respects from
those used for federal income tax purposes
(see Note K).
Risks and Uncertainties
The Partnership invests its cash primarily in
deposits and money market funds with
commercial banks. The Partnership has not
experienced any losses to date on its invested
cash.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amount of assets and liabilities,
contingent assets and liabilities and revenues
and expenses during the reporting period.
Actual results could differ from those
estimates.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
Cash and Cash Equivalents
The Partnership includes all short-term
investments with maturities of three months or
less from the date of acquisition in cash and
cash equivalents. The cash equivalents are
recorded at cost, which approximates current
market values.
Rental Revenues
Leases require the payment of base rent
monthly in advance. Rental revenues are
recorded on the accrual basis. Commercial
leases generally contain provisions for
additional rent based on a percentage of
tenant sales and other provisions which are
also recorded on the accrual basis, but are
billed in arrears. Minimum rental revenue for
long term commercial leases is recognized on a
straight-line basis over the life of the
related lease.
Leasing Commissions
Leasing commissions on commercial properties
are deferred and amortized over the life of
the related lease.
Depreciation
Depreciation is provided for by the use of the
straight-line method over the estimated useful
lives of the related assets as follows:
Buildings and improvements 2
to 25 years
Appliances, carpeting and equipment 3
to 5 years
Tenant improvements for commercial tenants are
depreciated over the life of the related
lease.
Investment in Joint Venture
The Partnership had a 50% interest in the
Joint Venture. This investment was accounted
for using the equity method of accounting as
the Partnership Agreement required a simple
majority vote for all major decisions
regarding the Joint Venture. As such, the
Partnership did not have control of the
operations of the underlying assets. Under
the equity method of accounting, the
Partnership's equity investment in the net
income of the Joint Venture is included in the
Partnership's net income (loss). Cash
distributions received from the Joint Venture
reduced the Partnership's investment (see Note
E).
Impairment of Long-Lived Assets
Real estate assets and equipment are stated at depreciated cost. Pursuant
to Statement of Financial Accounting Standards Opinion No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of", impairment losses are recorded on long-lived assets used in
operations on a property by property basis, when events and circumstances
indicate that the assets might be impaired and the estimated undiscounted cash
flows to be generated by those assets are less than the carrying amount of
those assets.Upon determination that an impairment has occurred, those assets
shall be reduced to fair value less estimated costs to sell (see Note D).
Mortgage-Backed Securities
At December 31, 1997, MBS are classified as
available-for-sale securities and are carried
at market value due to the forthcoming sale of
all the Partnership's properties (see Notes F
and L). The market value of MBS is determined
based on quoted market prices. At December
31, 1996, MBS were classified as held-to-
maturity securities and carried at amortized
cost. Premiums or discounts are amortized
over the life of the underlying mortgages
using the effective yield method.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
Income Taxes
The Partnership is not liable for federal or
state income taxes as Partnership income is
allocated to the Partners for income tax
purposes. In the event that the Partnership's
tax returns are examined by the Internal
Revenue Service or state taxing authority and
the examination results in a change in the
Partnership's taxable income, such change will
be reported to the Partners.
C.Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1997
and 1996 consisted of the following:
December 31,
1997 1996
Cash and money market accounts$1,725,998 $2,038,686
Commercial paper 3,599,973 6,914,317
$5,325,971 $8,953,003
D.Provisions for Losses on Real Estate
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", the
Partnership recorded valuation provisions for
losses on its real estate assets of $5,375,772
at December 31, 1997. These provisions
represent the difference between carrying
values and selling prices less estimated costs
to sell as a result of the forthcoming sale of
the Partnership's properties subsequent to
year end (see Note L). As these assets are
held for sale, the Partnership discontinued
depreciation.
E.Investment in Joint Venture
The Partnership and an affiliate of the
Partnership (collectively referred to herein
as the "Joint Venture Partners") each had 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, a
shopping center containing 474,083 net
leasable square feet and located in
Birmingham, Alabama, was sold on May 13, 1997
to an unaffiliated third party.
Under the purchase and sale agreement entered
into by the Partnership, its affiliates and
the seller, the seller retained a lien on the
premises related to the future sale of the
property or development of unimproved land at
Brookwood Village. The lien entitled the
seller to receive $5,000,000 of proceeds from
the sale of Brookwood Village and potentially
additional amounts related to expansion and
development. On February 28, 1997, Brookwood
Village paid the discounted amount of
$4,300,000 to settle a lawsuit filed by the
previous owner, thereby releasing the lien.
The Joint Venture Partners each made capital
contributions of $2,150,000 to fund the
settlement payment.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
E.Investment in Joint Venture, Continued
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", the Joint
Venture recorded cumulative valuation
provisions for losses on its real estate asset
of $10,472,096 and $9,000,000 as of May 13,
1997, the date Brookwood Village was sold (see
discussion below), and December 31, 1996,
respectively, which represents the difference
between carrying value and estimated fair
value less costs to sell.
Based upon the Joint Venture Partners'
assessment of the current and future market
conditions, the capital improvements necessary
to remain competitive in its market, its
capital resources and the differing strategies
of the Joint Venture Partners, the Joint
Venture Partners determined that it was in
their best interests, and that of their
respective investors, to sell Brookwood
Village. On May 13, 1997, the Joint Venture
Partners exchanged Brookwood Village with an
unaffiliated third party for net consideration
totaling $32,422,220, less prorations and
closing costs of $863,164, which included two
multi-family properties and cash. Each Joint
Venture Partner was allocated 50% of the net
consideration received. The Partnership
received cash totaling $15,779,528, net of the
Partnership's share of prorations and closing
costs. For financial reporting purposes, the
Joint Venture realized a loss of $721,760 on
the exchange. The loss was calculated as the
difference between net consideration received
less net book value of the property and
closing costs.
As a result of the sale of Brookwood Village,
the Joint Venture Partners liquidated the
Joint Venture and distributed its remaining
assets in the fourth quarter of 1997. In
accordance with the Joint Venture Agreement,
each Joint Venture Partner received 50% of the
remaining net assets of $793,804. Subsequent
to the final distribution, the Joint Venture
was dissolved.
Financial statements for Brookwood Village
Joint Venture are included on pages F-20 to F-
33 of this report.
F.Mortgage-Backed Securities
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:
December 31, December 31,
1997 1996
Face Value $ 6,106,003 $ 7,125,057
Amortized Cost $ 6,117,095 $ 7,134,203
Estimated Market Value$ 6,479,000$ 7,476,000
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 $361,893 and
$350,890 and unrealized losses of
approximately $0 and $8,980 at December 31,
1997 and December 31, 1996, respectively.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
F.Mortgage-Backed Securities, Continued
In accordance with Financial Accounting
Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities",
unrealized holding gains and losses for
available-for-sale securities are reported as
a separate component of equity until realized.
At December 31, 1997, the Partnership recorded
unrealized holding gains of $361,893 on its
MBS investments to adjust to market value
based on quoted market prices.
G.Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities
consisted of the following at December 31,
1997 and 1996:
1997 1996
Accrued real estate taxes $ 235,000 $ 245,000
Tenant security deposits 187,668 169,849
Other accrued expenses 229,097 206,436
Prepaid rent 9,211 76,889
$ 660,976 $ 698,174
H.Partners' Equity
Profits or losses from Partnership operations
and Distributable Cash Flow are allocated 98%
to the Unitholders and Corporate Limited
Partner (the "Limited Partners") (based on
Units held) and 2% to the General Partners.
Profits and net cash flow arising from capital
transactions will be allocated in the manner
described below. Losses from a capital
transaction are allocated 98% to the Limited
Partners and 2% to the General Partners.
Upon the occurrence of a capital transaction,
as defined in the Partnership Agreement,
proceeds will be applied to the payment of all
debts and liabilities of the Partnership then
due and then fund any reserves for contingent
liabilities. Remaining net cash proceeds will
then be distributed first, to the Limited
Partners until they have received a return of
their total invested capital, second, to the
General Partners until they have received a
return of their total invested capital, third,
to the Limited Partners until they have
received any deficiency in the 12% cumulative
return on invested capital through fiscal
years prior to the date of the capital
transaction, fourth, to the General Partners
until they have received an amount necessary
so that the amounts of net cash proceeds
whenever allocated under number three and
number four are in the ratio of 85 to 15, and
fifth, 85% to the Limited Partners and 15% to
the General Partners.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
H.Partners' Equity, Continued
Upon the occurrence of a terminating capital
transaction, as defined in the Partnership
Agreement, proceeds will be applied to the
payment of all debts and liabilities of the
Partnership then due and then fund any
reserves for contingent liabilities.
Remaining net cash proceeds will then be
distributed first, to each class of Partners,
the aggregate of the then positive balances in
the capital accounts of the Partners of such
class, second, to the Limited Partners until
the aggregate of the positive balances in the
capital accounts of the Limited Partners is
equal to their invested capital, third, to the
General Partners until the aggregate of the
positive balances in the capital accounts of
the General Partners is equal to their
invested capital, fourth, to the Limited
Partners until they have received any
deficiency in the 12% cumulative return on
invested capital through fiscal years prior to
the date of the terminating capital
transaction, fifth, to the General Partners
until they have received an amount necessary
so that the amounts of net cash proceeds
whenever allocated under number three and
number four are in the ratio of 85 to 15, and
sixth, 85% to the Limited Partners and 15% to
the General Partners.
As of December 31, 1997, the following cumulative partner
contributions and allocations have been made since inception of the
Partnership:
Corporate Unrealized Total Limited General
Holding Gains Partners'
Unitholders Partner Partners on MBS Equity
Capital
contributions $ 149,845,812$ 2,000 $ 3,000 $ - $ 149,850,812
Syndication costs (17,865,372) - - - (17,865,372)
Net income 36,492,240 511 744,750 - 37,237,501
Unrealized holding
gains on MBS - - - 361,893 361,893
Distributions:
Operations (105,441,710) (1,466) (1,398,306) - (106,841,482)
Capital
transactions (15,749,408) (210) - - (15,749,618)
Total at
December 31,
1997 $ 47,281,562$ 835 $ (650,556)$ 361,893$ 46,993,734
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
I.Related Party Transactions
The Partnership pays property management fees
to affiliates of the General Partners for
management services. Pursuant to the
management agreements, management fees are
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
affiliate of the General Partners sold its
residential management agreement to BRI OP
Limited Partnership, a subsidiary of Berkshire
Realty Company Inc., a publicly traded real
estate investment trust and an affiliate of
the General Partners, on February 28, 1997.
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
administrative expenses.
Amounts accrued or paid to the General
Partners or their affiliates were as follows:
1997 1996 1995
Property management fees$385,273 $374,702 $374,554
Expense reimbursements 543,090 462,290 322,733
Charged to operations$928,363 $836,992 $697,287
Due to affiliates consisted of expense reimbursements of $161,374 at
December 31, 1996.
J. Future Base Rents Due Under Commercial Operating Leases
As a result of the sale of the Partnership's properties, subsequent to
year end, all commercial operating leases were assumed by the buyer (see
Note L).
K. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating its
property using the accelerated cost recovery system ("ACRS") and the
modified accelerated cost recovery system ("MACRS") depending on which
is applicable.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
K. Federal Income Taxes, Continued
The reconciliation of the net income (loss) for each year reported in
the accompanying Statements of Operations with the net income reported
in the Partnership's federal income tax return for the years ended
December 31, 1997, 1996 and 1995 is as follows:
1997 1996 1995
Net income (loss) per Statement
of Operations $(3,577,878) $(1,455,849) $ 3,388,472
Difference in book to tax
depreciation 433,612 378,160 303,088
Difference in Joint Venture
book to tax depreciation 173,928 505,859 833,854
Difference in book to tax
valuation provision 5,375,772 - -
Difference in Joint Venture
book to tax valuation
provision 736,048 4,500,000 -
Difference between Joint
Venture book and tax loss
on sale of property (8,217,469) - -
Rental adjustment required
by Generally Accepted
Accounting Principles (29,601) 5,881 (50,659)
Rental adjustment required
by Generally Accepted
Accounting Principles
for Joint Venture 1,220,051 117,836 (110,747)
Net income (loss) for federal
income tax purposes $(3,885,537)$ 4,051,887$ 4,364,008
The allocation of the net loss for federal income tax purposes for 1997
is as follows:
Passive Portfolio Portfolio
Loss Income Expense Total
Unitholders $(4,013,101)$ 205,326 $ - $(3,807,775)
Corporate Limited
Partner (54) 3 - (51)
General Partners (81,901) 4,190 - (77,711)
$(4,095,056)$ 209,519 $ - $(3,885,537)
For the years ended December 31, 1997, 1996
and 1995 the average per Unit income (loss) to
the Unitholders for federal income tax
purposes was ($.51), $.53, and $.57
respectively.
The basis of the Partnership's assets for
financial reporting purposes is less than its
tax basis by approximately $7,642,000 and
$3,929,000 at December 31, 1997 and 1996,
respectively. The tax and book basis of the
Partnership's liabilities for financial
reporting purposes are the same.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
L. Subsequent Events
The sale of the Partnership's remaining
properties, as discussed in Note A, was
consummated on January 30, 1998. The total
selling price of the fourteen properties was
138,000,000, of which the Partnership received
$39,822,700 for the sale of its properties,
less its share of the closing costs.
The sale is considered a Terminating Capital
Transaction as defined by the Partnership
Agreement. Accordingly, the General Partners
expect to liquidate and distribute the
remaining assets of the Partnership in 1998.
All distributions of net cash proceeds from
the Terminating Capital Transaction shall be
governed by Section 8.3(b)of the Partnership
Agreement as discussed above in Note H.
As a result of the sale of all the
Partnership's properties on January 30, 1998,
the Partnership filed a report on Form 8-K on
February 2, 1998.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Costs Capitalized
Subsequent to
Initial Costs to Partnership Acquisition
Buildings Buildings
and and
Description Land Improvements Improvements
Encino Oaks Shopping Center
Encino, California $ 6,331,972 $ 2,110,657 $ 858,295
Alderwood Towne Center
Lynnwood, Washington 4,011,588 8,462,256 515,064
Canyon Place Shopping Center
Portland, Oregon 4,175,701 15,684,340 1,043,394
Coral Plaza Shopping Center
Oak Lawn, Illinois 1,296,760 6,027,818 366,053
Cumberland Glen Apartments
Smyrna, Georgia 680,781 8,996,474 1,067,952
Total $16,496,802 $41,281,545 $3,850,758
Gross Amounts Carried at End of Year
Buildings
and
Land Improvements Total
(a)
Encino Oaks Shopping Center
Encino, California $ 6,331,972 $ 2,968,952 $ 9,300,924
Alderwood Towne Center
Lynnwood, Washington 4,011,588 8,977,320 12,988,908
Canyon Place Shopping Center
Portland, Oregon 4,103,576(b) 16,727,734 20,831,310
Coral Plaza Shopping Center
Oak Lawn, Illinois 1,296,760 6,393,871 7,690,631
Cumberland Glen Apartments
Smyrna, Georgia 680,781 10,064,426 10,745,207
Total $16,424,677 $45,132,303 $ 61,556,980
(a) The aggregate cost for federal income tax
purposes at December 31, 1997 is $61,697,681 and the aggregate
accumulated depreciation for federal income tax purposes is
$(18,311,571).
(b) Canyon Place received a cash settlement of $72,125, net of
legal costs, of which $21,744 was received in 1997 for the
granting of a railroad easement in 1994. For financial
reporting purposes, the carrying value of land has been
reduced accordingly.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION -
Continued
December 31, 1997
Accumulated
Depreciation Year
and Valuation Construction Date
Provisions Completed Acquired Depreciable Life
Encino Oaks Shopping Center
Encino, California $ 4,935,923 1974 07/31/86 2 to 25 Years
Alderwood Towne Center
Lynnwood, Washington 4,100,162 1985 09/03/86 2 to 25 Years
Canyon Place Shopping Center
Portland, Oregon 7,469,165 1986 12/23/86 2 to 25 Years
Coral Plaza Shopping Center
Oak Lawn, Illinois 4,683,631 1985 06/02/87 2 to 25 Years
Cumberland Glen Apartments
Smyrna, Georgia 5,148,103 1985 09/03/87 3 to 25 Years
Total $ 26,336,984
Reconciliation of Real Estate and Accumulated Depreciation for each
of the three years in the period ended December 31, 1997:
1997 1996 1995
Real Estate
Balance at beginning of year$60,988,507 $60,359,934 $59,885,506
Improvements 590,217 628,548 471,770
Settlement of land easement (21,744) 25 2,658
Balance at end of year $61,556,980 $60,988,507 $60,359,934
1997 1996 1995
Accumulated Depreciation
and Valuation Provisions
Balance at beginning of year$ 18,758,766 $16,627,279 $14,602,206
Depreciation expense 2,202,446 2,131,487 2,025,073
Provisions for losses on real
estate 5,375,772 - -
Balance at end of year $ 26,336,984 $18,758,766 $16,627,279
BROOKWOOD VILLAGE JOINT VENTURE
FINANCIAL STATEMENTS AND SCHEDULE
For the Year Ended December 31, 1997
BROOKWOOD VILLAGE JOINT VENTURE
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-22
Balance Sheets at December 31, 1997 and December 31, 1996 F-23
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 F-24
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1997, 1996 and 1995 F-25
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 F-26 - F-27
Notes to Financial Statements F-28 - F-31
Schedule III - Real Estate and Accumulated Depreciation
F-32 - F-33
All other schedules are omitted as they are not applicable or not
required, or the information is provided in the financial
statements or the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Joint Venture Partners of
Brookwood Village Joint Venture:
We have audited the financial statements and
financial statement schedule of Brookwood
Village Joint Venture (the "Joint Venture")
listed in the index on page F-21 of this Form
10-K. These financial statements and
financial statement schedule are the
responsibility of the Joint Venture's
management. Our responsibility is to express
an opinion on these financial statements and
financial statement schedule based on our
audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as
well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of
the Joint Venture as of December 31, 1997 and
1996, and the results of its operations and
its cash flows for each of the three years in
the period ended December 31, 1997 in
conformity with generally accepted accounting
principles. In addition, in our opinion, the
financial statement schedule referred to
above, when considered in relation to the
basic financial statements taken as a whole,
presents fairly, in all material respects, the
information required to be included therein.
As discussed in Note C, the Joint Venture's
only property was sold on May 13, 1997. As a
result of the sale, the Joint Venture was
liquidated in 1997.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 30, 1997
BROOKWOOD VILLAGE JOINT VENTURE
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1996 1997
Real estate assets:
Land (Note C) $ - $ 15,895,139
Building and improvements (Note C) - 44,635,153
Less accumulated depreciation (Notes C and G) -
(26,190,274)
Total real estate assets - 34,340,018
Cash (Note C) - 166,919
Other assets (Note C) - 512,031
Total assets $ - $ 35,018,968
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable $ - $ 44,762
Accrued expenses and other liabilities
(Note D) - 440,067
Due to affiliates (Note F) - 8,351
Accrued legal settlement (Note A) - 4,300,000
Total liabilities - 4,793,180
Partners' equity (Note E) - 30,225,788
Total liabilities and Partners' equity $ - $ 35,018,968
The accompanying notes are an integral
part of the financial statements.
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Revenue:
Rental $ 2,388,205 $ 6,118,192 $ 6,243,206
Interest income 47,741 28,503 50,656
Total revenue 2,435,946 6,146,695 6,293,862
Expenses:
Operating (Note F)784,889 1,586,415 1,689,116
Maintenance 226,703 631,241 590,110
Real estate taxes133,320 373,856 335,475
Management fees (Note F)140,197 375,192 376,424
Depreciation 731,909 2,026,131 2,309,755
Provisions for losses on real
estate (Note G) 1,472,096 9,000,000 -
Total expenses 3,489,114 13,992,835 5,300,880
Income (loss) before loss on
sale of property (1,053,168) (7,846,140) 992,982
Loss on sale of property (Note C) (721,760) - -
Net income (loss) (Note H) $(1,774,928)$(7,846,140)$ 992,982
Allocation of net income (loss):
(Note E)
Krupp Cash Plus-II Limited
Partnership $ (887,464)$(3,923,070)$ 496,491
BRI Texas Apartments Limited
Partnership $ (887,464)$(3,923,070)$ 496,491
The accompanying notes are an integral
part of the financial statements.
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
BRI
Krupp Texas
Cash Plus-II Apartments Total
Limited Limited Partners'
Partnership Partnership Equity
Balance at
December 31, 1994 $21,339,973 $21,339,973 $42,679,946
Net income 496,491 496,491 992,982
Distributions (1,425,000) (1,425,000) (2,850,000)
Balance at
December 31, 1995 20,411,464 20,411,464 40,822,928
Net loss (3,923,070) (3,923,070) (7,846,140)
Distributions (1,375,500) (1,375,500) (2,751,000)
Balance at
December 31, 1996 15,112,894 15,112,894 30,225,788
Capital contributions
(Note A) 2,150,000 2,150,000 4,300,000
Loss on sale of
property (Note C) (360,880) (360,880) (721,760)
Net loss (Note E) (526,584) (526,584) (1,053,168)
Distributions (Note E)(16,375,430) (16,375,430) (32,750,860)
Balance at
December 31, 1997 $ - $ - $ -
The accompanying notes are an integral
part of the financial statements.
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Operating activities:
Net income (loss) $(1,774,928)$(7,846,140) $ 992,982
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation 731,909 2,026,131 2,309,755
Provisions for losses
on real estate 1,472,096 9,000,000 -
Loss on sale of
property 721,760 - -
Changes in assets and
liabilities:
Decrease in other
assets 512,031 120,550 177,170
Increase (decrease)
in accounts
payable (44,762) 30,349 (14,741)
Increase (decrease)
in due to affiliates(8,351) (4,217) 12,568
Increase (decrease)
in accrued
expenses and
other liabilities (440,067) 108,059 (432,851)
Net cash provided
by
operating
activities 1,169,688 3,434,732 3,044,883
Investing activities:
Additions to fixed assets (144,803) (751,474) (580,348)
Decrease in accrued legal
settlement (4,300,000) - -
Net consideration received
from sale of property 31,559,056 - -
Net cash provided
by (used in)
investing
activities 27,114,253 (751,474) (580,348)
Financing activities:
Distributions (32,750,860) (2,751,000) (2,850,000)
Capital contributions from
Joint Venture Partners 4,300,000 - -
Net cash used in
financing
activities (28,450,860) (2,751,000) (2,850,000)
Net decrease in cash and cash
equivalents (166,919) (67,742) (385,465)
Cash and cash equivalents,
beginning of year 166,919 234,661 620,126
Cash and cash equivalents,
end of year $ - $ 166,919 $ 234,661
Continued
BROOKWOOD VILLAGE JOINT VENTURE
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1997, 1996 and 1995
Supplemental schedule of noncash investing and financing
activities:
1997 1996 1995
Adjustment to real estate
asset basis for release
of lien (Note A)$ - $ 4,300,000 $ -
Accrued legal settlement
(Note A) $ - $(4,300,000) $ -
The accompanying notes are an integral
part of the financial statements.
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
A.Organization
On December 16, 1986, Brookwood Village Joint
Venture (the "Joint Venture") acquired
Brookwood Village Mall and Convenience Center
("Brookwood Village"), a retail development
located in Birmingham, Alabama. Brookwood
Village consisted of a covered mall, a covered
garage and a detached strip shopping center
with an aggregate net leasable square footage
of 474,083. The Joint Venture was 50% owned
by Krupp Cash Plus-II Limited Partnership and
BRI Texas Apartments Limited Partnership (the
"Joint Venture Partners"), both with similar
investment objectives. The express purpose of
entering into the Joint Venture was to
purchase, own, manage and operate Brookwood
Village.
Under the original purchase and sale agreement
entered into by the Joint Venture, its
affiliates and the seller, the seller retained
a lien on the premises related to the future
sale of the property or development of
unimproved land at Brookwood Village. The
lien entitled the seller to receive $5,000,000
of the proceeds from the sale of Brookwood
Village and potentially additional amounts
related to expansion and development. The
Joint Venture held title to Brookwood Village
free and clear from all other material liens
or encumbrances. On January 24, 1997, the
previous owner filed suit in the Circuit Court
of Jefferson County, Alabama against the Joint
Venture Partners and Brookwood Village Joint
Venture, among others. In the suit, the
plaintiff claimed that the defendants had
effectively sold Brookwood Village on June 27,
1991, when one of the original Joint Venture
Partners exchanged its assets for an ownership
interest in an affiliated real estate
investment trust. The defendants sought
damages of approximately $7,200,000, which
included the $5,000,000 payment stipulated in
the original purchase and sale agreement and
interest accrued thereon from the date of the
exchange. On February 28, 1997, the Joint
Venture Partners paid the discounted amount of
$4,300,000 to the previous owner to release
the lien and settle the lawsuit. The payment
was funded by capital contributions of
$2,150,000 from each of the Joint Venture
Partners. For financial reporting purposes,
the settlement payment of $4,300,000 related
to the release of the previous owner's lien
was included in the asset basis of the
property.
On May 13, 1997, the Joint Venture Partners
exchanged Brookwood Village for cash and two
multifamily properties. As a result of the
sale and in accordance with Joint Venture
Agreement, the Joint Venture Partners
liquidated and distributed the remaining
assets of the Joint Venture and subsequently
dissolved the Joint Venture in the fourth
quarter of 1997 (see Note C for further
discussion of this matter).
B.
Significant Accounting Policies
The Joint Venture used the following
accounting policies for financial reporting
purposes, which may differ in certain respects
from those used for federal income tax
purposes (see Note H):
Cash and Cash Equivalents
The Joint Venture included all short-term
investments with maturities of three months or
less from the date of acquisition in cash and
cash equivalents.
Rental Revenues
Commercial leases require the payment of base
rent monthly in advance. Rental revenues were
recorded on the accrual basis. Commercial
leases generally contain provisions for
additional rent based on a percentage of
tenant sales and other provisions which are
recorded as income when received. Minimum
rental revenue from long-term commercial
leases was recognized on a straight-line basis
over the life of the related lease.
Continued
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
Depreciation
Depreciation of building and improvements was
provided for by the use of the straight-line
method over estimated useful lives of 3 to 25
years. Tenant improvements were depreciated
over the life of the lease.
Impairment of Long-Lived Assets
Real estate assets and equipment are stated at depreciated cost. Pursuant
to Statement of Financial Accounting Standards Opinion No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of", impairment losses are recorded on long-lived assets used in
operations on a property by property basis, when events and circumstances
indicate that the assets might be impaired and the estimated undiscounted
cash flows to be generated by those assets are less than the carrying
amount of those assets. Upon determination that an impairment has occurred,
those assets shall be reduced to fair value less estimated costs to sell
(see Note G).
Leasing Commissions
Leasing commissions were deferred and
amortized over the life of the related lease.
Income Taxes
The Joint Venture is not liable for federal or
state income taxes because Joint Venture
income or loss is allocated to the Joint
Venture Partners for income tax purposes. In
the event the Joint Venture's tax returns are
examined by the Internal Revenue Service or
state taxing authority and such an examination
results in a change in the Joint Venture
taxable income or loss, such change will be
reported to the Joint Venture Partners.
C.Disposition of Real Estate Asset and
Dissolution of Joint Venture
Based upon the Joint Venture Partners'
assessment of the current and future market
conditions, the capital improvements necessary
to remain competitive in its market, its
capital resources and the differing strategies
of the Joint Venture Partners, the Joint
Venture Partners determined that its was in
their best interests, and that of their
respective investors, to sell Brookwood
Village. On May 13, 1997, the Joint Venture
Partners exchanged Brookwood Village with an
unaffiliated third party for net consideration
totaling $32,422,220 less prorations and
closing costs of $863,164 which included two
multifamily properties and cash. Each Joint
Venture Partner was allocated 50% of the net
consideration received. For financial
reporting purposes, the Joint Venture realized
a loss of $721,760 on the exchange. The loss
was calculated as the difference between net
consideration received less net book value of
the property and closing costs.
As a result of the sale of Brookwood Village,
the Joint Venture Partners liquidated the
Joint Venture and distributed its remaining
assets in the fourth quarter of 1997. In
accordance with the Joint Venture Agreement,
each Joint Venture Partner received 50% of the
remaining net assets of $793,804. Subsequent
to the final distribution, the Joint Venture
was dissolved.
D.Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following at
December 31, 1997 and 1996:
1997 1996
Accrued real estate taxes $ - $ 95,932
Tenant security deposits - 34,890
Other accrued expenses - 211,834
Prepaid rent - 97,411
$ - $440,067
Continued
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
E. Partners' Equity
Under the terms of the Brookwood Village Joint Venture
Agreement, profits, losses and distributions are allocated 50%
to each Joint Venture Partner.
As of December 31, 1997, the following cumulative Joint Venture
Partner contributions and allocations have been made since
inception of the Joint Venture:
BRI
Krupp Texas
Cash Plus-II Apartments Total
Limited Limited Partners'
Partnership Partnership Equity
Capital contributions$ 25,993,095$ 25,993,095 $ 51,986,190
Net income 650,362 650,362 1,300,724
Loss on sale of
property (360,880) (360,880) (721,760)
Distributions:
Operations (10,503,049) (10,503,049) (21,006,098)
Capital transaction (15,779,528) (15,779,528) (31,559,056)
Total at
December 31, 1997$ - $ - $ -
F. Related Party Transactions
The Joint Venture paid property management fees to an affiliate
of the Joint Venture Partners for management services. Pursuant
to the management agreement, management fees were payable
monthly at a rate up to 6% of the gross receipts, net of leasing
commissions. The Joint Venture also reimbursed affiliates of
the Joint Venture Partners for certain expenses incurred in
connection with the operation of Brookwood Village including
administrative expenses.
Amounts accrued or paid to affiliates of the Joint Venture
Partners during the years ended December 31, 1997, 1996 and 1995
were as follows:
1997 1996 1995
Property management fees $ 140,197 $375,192 $376,424
Expense reimbursements 28,858 165,611 137,455
Charged to operations $ 169,055 $540,803 $513,879
Due to affiliates consisted of expense reimbursements of $8,351
at December 31, 1996.
Continued
BROOKWOOD VILLAGE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS, Continued
G. Provisions for Losses on Real Estate
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", the Joint Venture recorded
cumulative valuation provisions for losses on its real estate
assets of $10,472,096 and $9,000,000 as of May 13, 1997, the date
Brookwood Village was sold (see Note C), and December 31, 1996,
respectively, which represent the difference between carrying value
and estimated fair value less costs to sell.
H. Federal Income Taxes
The reconciliation of the net income (loss) for each year
reported in the accompanying Statement of Operations with the
net income reported in the Joint Venture's 1997, 1996 and 1995
federal income tax return follows:
1997 1996 1995
Net income (loss) per Statement
of Operations $ (1,774,928) $(7,846,140) $ 992,982
Difference in book to tax
depreciation 347,845 1,011,716 1,299,910
Difference in book to tax
valuation provisions 1,472,096 9,000,000 -
Difference between book and
tax loss on sale of
property (16,434,937) - -
Rental adjustment required
By Generally Accepted
Accounting Principles 68,336 141,808 63,257
Difference in book to tax
bad debt (4,181) 15,534 -
Net income (loss) for federal
income tax purposes$(16,325,769) $ 2,322,918$ 2,356,149
The allocation of the 1997 net loss for federal income tax
purposes is as follows:
Passive Portfolio
Loss Income Total
Krupp Cash Plus-II Limited
Partnership$ (5,974,042) $ 23,870 $ (5,950,172)
BRI Texas Apartments Limited
Partnership (10,399,467) 23,870 (10,375,597)
$(16,373,509) $ 47,740 $(16,325,769)
Passive loss differs due to individual Joint
Venture Partner depreciation elections.
The basis of the Joint Venture's assets for
financial reporting purposes was less than its
tax basis by approximately $7,689,000 at
December 31, 1996. The tax and book basis of
the Joint Venture's liabilities were the same.
BROOKWOOD VILLAGE JOINT VENTURE
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Costs Capitalized Subsequent
Initial Costs to Joint Venture to Acquisition(a)
Buildings Buildings
and and
Description Land Improvements Improvements Land
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama$14,569,321$32,713,684$ 12,066,272$1,325,818
Gross Amounts Carried at End of Year
Disposition
Buildings of Buildings,
and Improvements
Land (a)Improvement (a) and Land (b) Total (b)
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama $15,895,139 $ 44,779,956$ (60,675,095)$ -
Accumulated Depreciation
and Year
Valuation Construction Date Depreciable
Provisions (b) Completed Acquired Life
Brookwood Village Mall
and Convenience Center
Birmingham, Alabama$ - 1973 12/16/863 to 25 Years
(a) For financial reporting purposes, the carrying value of the
properties was increased ($1,325,818 to land and $2,974,182 to
buildings and improvements), based on the settlement of the previous
owner's lien for $4,300,000 (see Note A).
(b) On May 13, 1997, Brookwood Village Mall and Convenience Center
was sold (see Note C).
Continued
BROOKWOOD VILLAGE JOINT VENTURE
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION -
Continued
December 31, 1997
Reconciliation of Real Estate and Accumulated Depreciation for each
of the three years in the period ended December 31, 1997:
1997 1996 1995
Real Estate
Balance at beginning of year $ 60,530,292 $55,478,818$54,898,470
Adjustment to basis based on
previous owner's lien - 4,300,000 -
Improvements 144,803 751,474
580,348
Sale of property (60,675,095 - -
Balance at end of year$ - $60,530,292$55,478,818
1997 1996 1995
Accumulated Depreciation
and Valuation Provisions
Balance at beginning of year $26,190,274 $15,164,143 $12,854,388
Depreciation expense 731,909 2,026,131 2,309,755
Provisions for losses on real
estate 1,472,096 9,000,000 -
Sale of property (28,394,279) - -
Balance at end of year $ - $26,190,274$15,164,143