-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Pr/79SOl3mrsvhq3wksSpr5upDng2aU6g7vLHx5TxyMhnDG9/otHn3Lrdou8KJzl +X5tg5iGlqQAmU7rluQ3uA== 0000751570-94-000008.txt : 19941117 0000751570-94-000008.hdr.sgml : 19941117 ACCESSION NUMBER: 0000751570-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941107 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP REALTY LTD PARTNERSHIP VII CENTRAL INDEX KEY: 0000751570 STANDARD INDUSTRIAL CLASSIFICATION: 6500 IRS NUMBER: 042842924 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14377 FILM NUMBER: 94557833 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14377 Krupp Realty Limited Partnership-VII Massachusetts 04-2842924 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS KRUPP REALTY LIMITED PARTNERSHIP-VII
BALANCE SHEETS ASSETS September 30, December 31, 1994 1993 Multi-family apartment complexes, net of accumulated depreciation of $8,447,927 and $7,820,288, respectively $ 9,815,305 $10,349,433 Retail center, net of accumulated depreciation of $2,800,086 and $2,513,207, respectively 6,805,314 7,046,517 Total real estate assets 16,620,619 17,395,950 Cash 812,016 840,798 Cash restricted for tenant security deposits 54,801 61,363 Cash restricted for capital improvements 58,015 57,748 Prepaid expenses and other assets (Note 2) 573,561 327,862 Deferred expenses, net of accumulated amortization of $10,300 and $259,055, respectively (Notes 2 and 3) 198,423 45,975 Total assets $18,317,435 $18,729,696 LIABILITIES AND PARTNERS' EQUITY Mortgage notes payable (Notes 3 and 5) $12,852,205 $12,682,032 Other liabilities 756,185 824,861 Total liabilities 13,608,390 13,506,893 Partners' equity (Note 4) 4,709,045 5,222,803 Total liabilities and partners' equity $18,317,435 $18,729,696
The accompanying notes are an integral part of the financial statements. -2- KRUPP REALTY LIMITED PARTNERSHIP-VII
STATEMENTS OF OPERATIONS For the Three Months For the Nine Months Ended September 30, Ended September 30, 1994 1993 1994 1993 Revenue: Rental $1,093,652 $1,050,192 $3,188,206 $3,775,717 Interest income 7,353 9,587 18,652 20,069 Total revenue 1,101,005 1,059,779 3,206,858 3,795,786 Expenses: Operating (including reimbursements to affiliates of $40,769, $40,769, $122,308 and $161,578, respectively) 298,659 293,095 885,770 1,163,902 Maintenance 96,253 47,007 233,492 377,974 Real estate taxes 99,107 99,389 304,333 371,343 Management fees to an affiliate 49,791 44,875 138,172 168,800 Depreciation and amortization 312,875 314,237 970,793 1,070,980 Interest 346,613 318,957 947,132 1,140,696 General and administrative (including reimbursements to affiliates of $13,845, $13,045, $41,278 and $39,067, respectively) 45,738 24,815 89,902 67,252 Total expenses 1,249,036 1,142,375 3,569,594 4,360,947 Net loss before gain on sale of Westbrook Place and Willow Cove Apartments ("Westbrook") (148,031) (82,596) (362,736) (565,161) Gain on sale of Westbrook - 845,746 - 845,746 Net income (loss) $ (148,031) $ 763,150 $ (362,736) $ 280,585 Allocation of net income (loss) (Note 4): Per Unit of Investor Limited Partner Interest (27,184 Units outstanding) $ (5.39) $ 27.79 $ (13.21) $ 10.22 General Partners $ (1,480) $ 7,632 $ (3,627) $ 2,806
The accompanying notes are an integral part of the financial statements. -3- KRUPP REALTY LIMITED PARTNERSHIP-VII
STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1994 1993 Operating activities: Net income (loss) $ (362,736) $ 280,585 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on sale of Westbrook - (845,746) Depreciation and amortization 970,793 1,070,980 Decrease in restricted cash for tenant security deposits 6,562 18,815 Decrease (increase) in prepaid expenses and other assets (245,699) 68,859 Decrease in accrued expenses and other liabilities (68,676) (23,271) Net cash provided by operating activities 300,244 570,222 Investing activities: Additions to fixed assets (139,187) (241,276) Decrease (increase) in cash restricted for capital improvements (267) 91,541 Proceeds from sale of Westbrook - 75,000 Net cash used in investing activities (139,454) (74,735) Financing activities: Principal payments on mortgage notes payable (111,856) (117,113) Proceeds from refinancing mortgage note payable 5,300,000 - Payoff of mortgage note payable (5,017,971) - Increase in deferred expenses (208,723) - Distributions (151,022) - Net cash used in financing activities (189,572) (117,113) Net increase (decrease) in cash (28,782) 378,374 Cash, beginning of period 840,798 387,512 Cash, end of period $ 812,016 $ 765,886 Supplemental schedule of noncash investing and financing activities: The Partnership sold Westbrook on July 1, 1993 for net proceeds of $75,000 and retirement of all related collateralized debt as shown below: First mortgage and accrued interest payable $ 3,799,398 Second mortgage payable 1,600,000 Cash proceeds 75,000 Net book value of property sold (4,628,652) Gain on sale of Westbrook $ 845,746
The accompanying notes are an integral part of the financial statements. -4- KRUPP REALTY LIMITED PARTNERSHIP-VII NOTES TO FINANCIAL STATEMENTS 1. Significant 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 Krupp Corporation and The Krupp Company Limited Partnership-II, the General Partners of Krupp Realty Limited Partnership-VII (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, 1993 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Partnership's financial position as of September 30, 1994, its results of operations for the three and nine months ended September 30, 1994 and 1993 and its cash flows for the nine months ended September 30, 1994 and 1993. Certain prior period balances have been reclassified to reflect current year financial statement presentation. The results of operations for the three and nine months ended September 30, 1994 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. Related Party Transactions In addition to the amounts presented on the face of the Statement of Operations, amounts paid to affiliates of the General Partners during the nine months ended September 30, 1994 and for the year ended December 31, 1993 for costs related to refinancing activities of the Partnership's mortgage notes were $14,235 and $7,568, respectively. 3. Mortgage Notes Payable On April 13, 1994, the Partnership completed the refinancing of Windsor Apartments. The property was refinanced with a $5,300,000 non-recourse mortgage note payable at the rate of 9.25% per annum with monthly principal and interest payments of $43,602, based on a 30-year amortization schedule. The mortgage note, which is collateralized by the property, matures on May 1, 2001 at which time the remaining principal (approximately $5,021,000) and any accrued interest are due. After October 13, 1997, the note may be prepaid subject to a prepayment penalty. The Partnership utilized the proceeds to repay the prior mortgage note with a remaining balance of $5,017,971 and to pay refinancing costs of $157,297. Continued -5- KRUPP REALTY LIMITED PARTNERSHIP-VII NOTES TO FINANCIAL STATEMENTS, Continued 4. Changes in Partners' Equity A summary of changes in partners' equity (deficit) for the nine months ended September 30, 1994 is as follows:
Investor Original Total Limited Limited General Partners' Partners Partner Partners Equity Balance at December 31, 1993 $5,716,673 $(277,053) $(216,817) $5,222,803 Distribution (135,920) (12,082) (3,020) (151,022) Net loss (359,109) - (3,627) (362,736) Balance at September 30, 1994 $5,221,644 $(289,135) $(223,464) $4,709,045
5. Subsequent Event On October 6, 1994, the Partnership successfully completed the refinancing of Nora Corners. The property was refinanced with a $4,250,000 non-recourse mortgage note payable at the rate of 9% per annum, with monthly principal and interest payments of $35,666. The mortgage note, which is collateralized by the property, matures on October 1, 2004 at which time the remaining principal (approximately $3,516,000) and any accrued interest is due. The note may be prepaid after October 1, 1998, subject to a prepayment penalty. The Partnership utilized the proceeds to repay the prior mortgage note balance plus interest totaling $4,226,538. Estimated closing costs of the refinancing are $66,000. -6- KRUPP REALTY LIMITED PARTNERSHIP-VII Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the successful operations of its real estate investments. Such ability is also dependent upon the future availability of bank borrowings and the future refinancing and sale of the Partnership's remaining real estate investments. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, capital expenditures, debt service and expenses. Cash Flow, if any, as calculated under Section 8.2(a) of the partnership agreement, will then be available for distribution to the Partners. The Partnership's status has improved over the past years. This improvement is due to the sale of Westbrook/Willow Cove in 1993, which had a negative cash flow, thus favorably impacting future cash flows. In addition, the Partnership has taken advantage of the low interest rates by refinancing Windsor Apartments in April 1994 and Nora Corners in October 1994. Due to these events, the General Partners have determined that there is sufficient Distributable Cash Flow in 1994 to reinstate distributions. These distributions commenced in August 1994 and thereafter are to be paid semi-annually. The next distribution is scheduled for February 1995. On April 13, 1994, the Partnership successfully completed the refinancing of Windsor Apartments mortgage note payable. The new $5,300,000 note requires decreased debt service payments due to a lower interest rate of 9.25% per annum from the previous rate of 10.3% per annum. The Partnership also refinanced the Nora Corners mortgage note payable on October 6, 1994. The new $4,250,000 note requires decreased debt service payments due to a lower interest rate of 9% per annum from the previous rate of 10.5% per annum. The reduced mortgage payments will provide additional liquidity to the Partnership that may be used to fund capital improvements at its properties or for distributions. Cash Flow Shown below, as required by the Partnership Agreement, is the calculation of Cash Flow for the nine months ended September 30, 1994:
Rounded to $1,000 Net loss for tax purposes $ (416,000) Items not requiring (requiring) the use of operating funds: Tax basis depreciation and amortization 1,024,000 Principal payments on mortgage notes payable (112,000) Capital improvement expenditures (139,000) Cash Flow $ 357,000
-7- KRUPP REALTY LIMITED PARTNERSHIP-VII Operations The following discussion relates to the operations of the Partnership and its properties (Courtyards Village, Nora Corners and Windsor Apartments) for the three and nine months ended September 30, 1994 and 1993. The sale of Westbrook Place/Willow Cove Apartments ("Westbrook"), in July 1993, significantly impacts the comparability of the Partnership's operations for the nine months ended September 30, 1994 and 1993. During the first nine months of 1994, as compared to 1993, the Partnership's rental revenues (net of Westbrook's rental revenues) increased by $133,000. This increase was primarily due to rental increases at Courtyards and Windsor as well as occupancy increases at Windsor. Interior and exterior painting improvements and carpentry renovations, started in 1993 at Courtyards and Windsor, were completed in the first quarter of 1994. Landscaping and parking lot upgrades were also implemented at Courtyards in 1993. These improvements allowed the Partnership to obtain the rental increases at both properties. Occupancy at Windsor increased due to the stabilization of the Dallas economy, with home purchasing levelling off. As a result, all rental concessions at Windsor were eliminated in the first quarter of 1994. The Partnership's commercial property, Nora Corners, signed a new tenant, Food King, a Chinese restaurant, in the first quarter of 1994. Property operations for the three months ended September 30, 1994, as compared to the same period in 1993 have remained relatively stable, with the exception of interest expense. Interest expense is higher due to the prepayment penalty recorded in the third quarter of 1994 as a result of the Windsor Apartments mortgage note refinancing. This prepayment was offset in part by the reduced debt service payments made by the Partnership due to the lower interest rate of 9.25% per annum since April 1994 on the Windsor mortgage. For the nine months ended September 30, 1994, as compared to the same period in 1993, property expenses (excluding Westbrook) increased by $99,000. The increase was primarily due to higher operating expenses for the snow removal costs incurred as a result of the heavy snow storms last winter. In addition, a slight increase was incurred due to the employment of an in-house painter to maintain the appearance of Courtyards. Overall, year to date, operations at all of the Partnerships properties have improved, as compared to the first nine months of 1993. The General Partners believe that this improvement will be sustained through the end of 1994. -8- KRUPP REALTY LIMITED PARTNERSHIP-VII PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6. Exhibits and Reports on Form 8-K Response: None -9- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Realty Limited Partnership-VII (Registrant) BY: /s/Marianne Pritchard Marianne Pritchard Treasurer and Chief Accounting Officer of the Krupp Corporation, a General Partner. DATE: November 3, 1994 -10- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 1994 AND IS QUALIFITED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1994 SEP-30-1994 924,832 0 158,541 0 0 415,020 28,077,355 (11,258,313) 18,317,435 756,185 12,852,205 4,709,045 0 0 0 18,317,435 3,206,858 3,206,858 0 0 2,622,462 0 947,132 (362,736) 0 (362,736) 0 0 0 (362,736) 0 0 Includes apartment complexes of $18,263,232, retail centre of $9,605,400 & deferred expenses of $208,723. Includes depreciation of $11,248,013 & amoritization of deferred expenses $10,300. Represents mortgage note payable. Represents to the equity of general partners and limited partners of $(223,464) and $4,932,509, respectively. Includes operating expenses $1,347,336, real estate tax expenses $304,333 & depreciation & amortization $970,793. Net loss allocated $(3,627) to general partners and $(359,109) to limited partners for the 9 months ended 9/30/94. Average net income per unit of limited partners interest is $(13.21) on 27,184 units outstanding.
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