-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dz0Xf7LjJ+ICDle2UOEuhIbN8UXIdJxk2dharn26kq8M1RjiyTuDvOh+ODeQNg4P MIJ5tkvGiyh9Q+ebbFfu9g== 0000751570-01-500011.txt : 20020410 0000751570-01-500011.hdr.sgml : 20020410 ACCESSION NUMBER: 0000751570-01-500011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP REALTY LTD PARTNERSHIP VII CENTRAL INDEX KEY: 0000751570 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [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: 1787192 BUSINESS ADDRESS: STREET 1: ONE BEACON STREET STREET 2: SUITE 1500 CITY: BOSTON STATE: MA ZIP: 02108 BUSINESS PHONE: 6175237722 MAIL ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 realty7_q3.txt KRUPP REALTY 7 SEPTEMBER 30, 2001 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 ---------------------------------------- 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 identification no.) incorporation or organization One Beacon Street, Boston, Massachusetts 02108 - ------------------------------------------- ---------------------------------- (Address of principal executive (Zip code) offices) (617) 523-7722 - ------------------------------------------------------------------------------- (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 |_| The total number of pages in this document is 12. PART I. FINANCIAL STATEMENTS Item 1. FINANCIAL STATEMENTS This form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
(Unaudited) September 30, December 31, 2001 2000 ------------- ------------- Multi-family apartment communities, net of accumulated depreciation of $0 and $15,671,250, respectively $ - $ 7,766,297 Multi-family apartment communities held for sale (Note 7) 3,646,893 - Cash and cash equivalents 1,676,328 456,851 Cash restricted for tenant security deposits 27,911 27,800 Replacement reserve escrow - 56,043 Due from affiliates (Note 6) 121,999 31,115 Prepaid expenses and other assets (Note 1) 258,746 476,014 Investment in securities (Note 2) 37,408 65,340 Deferred expenses, net of accumulated amortization of $224,730 and $210,020, respectively 90,922 105,632 ------------- ------------- Total assets $ 5,860,207 $ 8,985,092 ============= ============= LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Liabilities: Mortgage notes payable (Note 3) $ 4,950,582 $ 10,107,446 Accrued expenses and other liabilities 445,205 717,537 ------------- ------------- Total liabilities 5,395,787 10,824,983 Partners' equity (deficit) (Note 5): Investor Limited Partners (27,184 units outstanding) 1,384,779 (946,178) Original Limited Partner (614,081) (569,931) General Partners (306,278) (323,782) ------------- ------------- Total partners' equity (deficit) 464,420 (1,839,891) ------------- ------------- Total liabilities and partners' equity (deficit) $ 5,860,207 $ 8,985,092 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 2 KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended For the Nine Months Ended September 30, September 30, -------------------------- -------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenue: Rental $ 887,186 $ 1,046,455 $ 2,997,020 $ 3,120,757 Interest income 24,992 2,546 30,586 11,049 ------------ ------------ ------------ ------------ Total revenue 912,178 1,049,001 3,027,606 3,131,806 ------------ ------------ ------------ ------------ Expenses: Operating (Note 6) 252,629 270,530 839,784 769,655 Maintenance 62,314 72,144 252,336 240,268 Real estate taxes 93,898 108,937 320,852 313,188 General and administrative (Note 6) 60,206 50,861 218,784 151,950 Management fees (Note 6) 40,761 34,878 133,062 150,387 Depreciation and amortization 266,738 351,620 951,548 1,058,949 Interest 178,199 217,265 637,318 653,589 ------------ ------------ ------------ ------------ Total expenses 954,745 1,106,235 3,353,684 3,337,986 ------------ ------------ ------------ ------------ Loss before gain on sale of property (42,567) (57,234) (326,078) (206,180) Gain on sale of property (Note 4) 9,190,484 - 9,190,484 - ------------ ------------ ------------ ------------ Net income (loss) $ 9,147,917 $ (57,234) $ 8,864,406 $ (206,180) ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. Continued 3 KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS, Continued (Unaudited)
For the Three Months Ended For the Nine Months Ended September 30, September 30, -------------------------- -------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Allocation of net loss (Note 5): Investor Limited Partners (27,184 units outstanding): Loss before gain on sale of property $ (42,141) $ (56,662) $ (322,817) $ (204,118) Gain on sale of property 9,098,579 - 9,098,579 - ------------ ------------ ------------ ------------ Net income (loss)$ 9,056,438 $ (56,662) $ 8,775,762 $ (204,118) ============ ============ ============ ============ Investor Limited Partners, Per Unit: Loss before gain on sale of property $ (1.55) $ (2.08) $ (11.88) $ (7.51) Gain on sale of property 334.70 - 334.70 - ------------ ------------ ------------ ------------ Net income (loss)$ 333.15 $ (2.08) $ 322.82 $ (7.51) ============ ============ ============ ============ Original Limited Partner: Loss before gain on sale of property $ - $ - $ - $ - Gain on sale of property - - - - ------------ ------------ ------------ ------------ Net income (loss)$ - $ - $ - $ - ============ ============ ============ ============ General Partners: Loss before gain on sale of property $ (426) $ (572) $ (3,261) $ (2,062) Gain on sale of property 91,905 - 91,905 - ------------ ------------ ------------ ------------ Net income (loss)$ 91,479 $ (572) $ 88,644 $ (2,062) ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 4 KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, ------------------------------- 2001 2000 ------------- ------------- Cash flows from operating activities: Net income (loss) $ 8,864,406 $ (206,180) Adjustment to reconcile net loss to net cash provided by operating activities: Interest earned on replacement reserve escrow - (219) Depreciation and amortization 951,548 1,058,949 Gain on sale of property (Note 4) (9,190,484) - Changes in assets and liabilities: Increase in restricted cash for tenant security deposits (111) (27,860) Decrease in prepaid expenses and other assets 126,384 56,256 Increase (decrease) in accrued expenses and other liabilities (244,400) 80,473 ------------- ------------- Net cash provided by operating activities 507,343 961,419 ------------- ------------- Cash flows from investing activities: Deposits to replacement reserve escrow (29,922) (51,370) Withdrawals from replacement reserve escrow 85,965 67,522 Fixed asset additions (334,400) (274,332) Decrease in accrued expenses and other liabilities related to fixed assets additions - (2,204) Proceeds from sale of property (Note 4) 12,707,450 - ------------- ------------- Net cash provided by (used in) investing activities 12,429,093 (260,384) ------------- ------------- Cash flows from financing activities: Principal payments on mortgage notes payable (80,911) (83,545) Repayment of mortgage note payable (Note 4) (5,075,953) - Distributions (6,560,095) (552,058) ------------- ------------- Net cash used in financing activities (11,716,959) (635,603) ------------- ------------- Net increase in cash and cash equivalents 1,219,477 65,432 Cash and cash equivalents, beginning of period 456,851 120,525 ------------- ------------- Cash and cash equivalents, end of period $ 1,676,328 $ 185,957 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 5 KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted in this report on form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp Realty Limited Partnership-VII and Subsidiaries (the "Partnership"), the disclosures contained in this report are adequate to make the information presented not misleading. See notes to the Consolidated Financial Statements included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000 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 consolidated financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Partnership's consolidated financial position as of September 30, 2001, its results of operation for the three and nine months ended September 30, 2001 and 2000, and its cash flows for the nine months ended September 30, 2001 and 2000. The results of operations for the three and nine months ended September 30, 2001 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. (2) Investment in Securities On August 29, 2001, concurrent with the sale of Courtyards Village Apartments ("Courtyards"), the Partnership wrote down its investment in securities by approximately $28,000. This amount was attributable to the value of the investment related to the master lease agreement ("MLA") signed with respect to Courtyards. The write-down was partially offset by deferred revenue on the book totaling approximately $25,000, which was also attributable to the MLA signed with respect to Courtyards. On October 5, 2000, the Partnership, as a member of an alliance of major multi-family real estate companies, executed a MLA with a provider of high-speed internet, video and voice services to multi-family communities. Pursuant to the MLA, the Partnership granted the provider preferred lease, license and access rights to provide data services, consisting of high-speed broadband internet access and video services, to the residents at some of its multi-family communities for a ten year period. In exchange for these rights, the Partnership received 250,843 shares of common stock which were valued at $.2285 per share or $57,341. In addition, the Partnership will receive 7.5% of the gross revenues that the provider obtains from providing its services as well as a fixed amount for each resident that executes a subscriber agreement. In conjunction with the execution of the MLA, the Partnership made an investment of $5,751 in exchange for 25,164 additional shares of common stock also valued at $.2285 per share. The Partnership incurred approximately $2,248 in closing costs related to the acquisition by the Partnership and the closing costs incurred were recorded as an investment in securities in the financial statements as of September 30, 2001 and December 31, 2000. (3) Mortgage Notes Payable On April 27, 2001, the General Partners signed an agreement extending the mortgage note payable on Windsor Apartments, under the original terms, until May 1, 2002. The Partnership paid an extension fee of $24,962 for this privilege. Continued 6 KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (4) Sale of Property On August 29, 2001, the Partnership sold Courtyards Village Apartments, a 224-unit multi-family apartment community, located in Naperville, Illinois, to an unaffiliated third party. The Partnership received $12,707,450, net of closing costs of $60,550 and repaid the mortgage note payable and accrued interest of $5,075,953 and accrued interest of $30,106. For financial reporting purposes, the Partnership realized a gain of $9,190,484 on the sale. The gain was calculated as the difference between the property's selling price less net book value of the property and closing costs. (5) Changes in Partners' Deficit A summary of changes in Partners' deficit for the nine months ended September 30, 2001 is as follows:
Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit ------------ ------------ ------------ ------------ Balance at December 31, 2000 $ (946,178) $ (569,931) $ (323,782) $ (1,839,891) Loss before gain on sale of property (322,817) - (3,261) (326,078) Gain on sale of property 9,098,579 - 91,905 9,190,484 Distributions: Operations (496,688) (44,150) (11,038) (551,876) Capital Transaction (5,948,117) - (60,102) (6,008,219) ------------ ------------ ------------ ------------ Balance at September 30, 2001 $ 1,384,779 $ (614,081) $ (306,278) $ 464,420 ============ ============ ============ ============
Continued 7 (6) Related Party Transactions The Partnership pays property management fees to an affiliate of the General Partners for management services. Pursuant to the management agreements, management fees are payable monthly at a rate of 5% of gross receipts from residential properties under management. The Partnership also reimburses affiliates of the General Partners for certain expenses incurred in connection with the operation of the Partnership and its properties, including administrative expenses. Amounts accrued or paid to the General Partners' affiliates were as follows:
For the Three Months Ended For the Nine Months Ended September 30, September 30, -------------------------- -------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Property management fees $ 40,761 $ 34,878 $ 133,062 $ 150,387 Expenses reimbursement 69,735 53,877 255,322 149,558 ------------ ------------ ------------ ------------ Charged to operations $ 110,496 $ 88,755 $ 388,384 $ 299,945 ============ ============ ============ ============
Expense reimbursements due from affiliates of $121,999 and $31,115 were included in due from affiliates at September 30, 2001 and December 31, 2000, respectively. (7) Multi-Family Apartment Communities Held For Sale The Partnership classifies assets as available for sale upon the General Partners committing to a formal plan of disposal. Multi-family apartment communities held for sale are stated at the lower of their carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale. In the normal course of business the Partnership may receive offers for sale of its properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually acquire a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. As a result, multi-family apartment communities are classified as `held for sale' once it is likely, in the opinion of management, that a property will be disposed of in the near term. On August 28, 2001, the General Partners signed a purchase and sale agreement on Windsor Apartments, for a price of approximately $12,316,000. The sale is subject to financing and is expected to close on or about November 20, 2001. The property has a carrying value of approximately $3,647,000 on the books of the Partnership at September 30, 2001 and is classified as held for sale. 8 KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning management's expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the successful operations of its real estate investments. Such ability would also be impacted by 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 improvements, debt service and other 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. As previously disclosed, the General Partners have begun an orderly sale of the Partnership's multi-family apartment communities. The Partnership sold its interest in Courtyards Village Apartments on August 29, 2001, and on August 28, 2001, signed a purchase-and-sale agreement to sell its interest in Windsor Apartments. These transactions are more fully discussed below. On April 27, 2001, the General Partners signed an agreement extending the mortgage notes payable on Windsor Apartments, under the original terms, until May 1, 2002. The Partnership paid an extension fee of $24,962 for this privilege. On August 28, 2001, the Partnership signed a purchase-and-sale agreement with Alexon Ventures LLC, an unrelated third party, to sell Windsor Apartments, a 300-unit apartment community located in Garland, Texas, for a price of approximately $12,316,000. The sale is expected to close on or about November 20, 2001. The property has a carrying value of approximately $3,647,000 on the book of the Partnership at September 30, 2001. On August 29, 2001, the Partnership sold Courtyards to an unaffiliated third party. The Partnership received $12,707,450, net of closing costs of $60,550 and repaid the mortgage note payable and accrued interest of $5,075,953 and accrued interest of $30,106. (See Note 4) On September 25, 2001, the General Partners made a special distribution of approximately $219 per Investor Limited Partner Unit, based on the net proceeds from the sale of Courtyards, after providing for Partnership liabilities, and maintaining reserves for contingent liabilities. As of the August 14, 2001 distribution and as a result of the sale and impending sales of the Partnership's real estate holdings, the Partnership does not expect sufficient funds to make any further distributions from operations. The Partnership does expect to make future distributions of the net proceeds from the sale of the Partnership's properties during the next six to twelve months. Per the Partnership agreement, any distributions from capital transactions will be distributed 1% to the General Partners and 99% to the Investor Limited Partners. Continue 9 KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES Operations The following discussion relates to the operations of the Partnership and its property (Windsor Apartments) for the three and nine months ended September 30, 2001 and 2000. The sale of Courtyards Village on August 29, 2001 significantly impacts the comparability of the Partnership's operations between these periods. Net income, net of Courtyards Village's activity, increased during the three months ended September 30, 2001 when compared to the same period in 2000, as the increase in total revenue exceeded the increase in total expenses. Net loss, net of Courtyards Village's activity, increased during the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000, as the increase in total revenue was not sufficient to offset the increase in total expenses. Total expenses, net of Courtyards Village's activity, for the three months ended September 30, 2001 increased when compared to the same period in 2000. Operating expenses increased as a result of increases in payroll and property insurance, but were partially offset by decreases in advertising, leasing, and utilities costs. General and administrative costs increased primarily as a result of increased costs associated with investor communication costs, including costs associated with copying and mailing investor letters and annual reports. Total expenses, net of Courtyards Village's activity, for the nine months ended September 30, 2001 increased when compared to the nine months ended September 30, 2000. Operating expenses increased due to the reasons discussed above. General and administrative expenses increased as a result of increases in investor communication costs including the annual look-back adjustment which totaled approximately $43,000, recorded during the three months ended March 31, 2001. Interest expense also increased due to a lower amortization in 2001 when compared to 2000. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. The Partnership manages its market risk by matching projected cash inflows from operating activities, investing activities and financing activities with projected cash outflows to fund debt payments, acquisitions, capital expenditures, distributions and other cash requirements. All of the Partnership's debt has a fixed interest rate, which minimizes the interest rate risk. A detailed analysis of quantitative and qualitative market risk exposures was provided in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000. There have been no material changes in market risk subsequent to that date. 10 KRUPP REALTY LIMITED PARTNERSHIP - VII AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other information None Item 6. Exhibits and Reports on Form 8-K Exhibits: None Reports on Form 8-K: Form 8-K filed on September 13, 2001 regarding the sale of Courtyards Village Apartments. 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Realty Limited Partnership-VII -------------------------------------- (Registrant) BY: /s/ David C. Quade -------------------------------------- David C. Quade Treasurer (Principal Financial and Accounting Officer) of The Krupp Corporation, a General Partner DATE: November 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----