-----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, G4EtDH5Tmku6y1TqXvpUE+0vlAD5duyB2RTSLohOTO/INncbWWKzBw+xSSM7ndI7 8cRBHWAOIVLpIaq+B3uztg== 0000751570-99-000004.txt : 19991117 0000751570-99-000004.hdr.sgml : 19991117 ACCESSION NUMBER: 0000751570-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: SEC FILE NUMBER: 000-14377 FILM NUMBER: 99755803 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 (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 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.) One Beacon Street, Boston, Massachusetts 02108 (Address of principal executive offices) (Zip Code) (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 11. PART I. FINANCIAL INFORMATION Item 1.FINANCIAL STATEMENTS This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
(Unaudited) September 30,December 31, 1999 1998 Multi-family apartment complexes, net of accumulated depreciation of $13,866,544 and $12,751,953, respectively $ 8,918,695 $ 9,510,531 Cash and cash equivalents (Note 2) 33,425 629,483 Cash restricted for tenant security deposits 27,093 26,606 Replacement reserve escrow 59,431 21,160 Prepaid expenses and other assets 894,957 603,914 Deferred expenses, net of accumulated amortization of $161,772 and $132,823, respectively 153,880 182,832 Total assets $10,087,481 $10,974,526 LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Liabilities: Mortgage notes payable (Note 3) $10,246,731 $10,323,428 Accrued expenses and other liabilities 731,326 558,157 Total liabilities 10,978,057 10,881,585 Partners' equity (deficit) (Note 4): Investor Limited Partners (27,184 Units outstanding) (56,041) 867,955 Original Limited Partner (525,767) (481,602) General Partners (308,768) (293,412) Total Partners' equity (deficit) (890,576) 92,941 Total liabilities and Partners' equity (deficit) $10,087,481 $10,974,526
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 Revenue: Rental $1,006,136 $ 951,935 $ 2,938,789 $2,873,403 Interest income (Note 2) 2,165 24,415 16,111 120,211 Total revenue 1,008,301 976,350 2,954,900 2,993,614 Expenses: Operating (Note 5) 256,714 215,706 740,027 734,007 Maintenance 48,796 95,339 271,149 227,350 Real estate taxes 97,617 92,790 327,584 269,677 General and administrative (Note 5) 50,221 30,924 128,342 88,428 Management fees (Note 5) 35,135 40,127 115,278 131,330 Depreciation and amortization 400,725 371,278 1,143,540 1,049,449 Interest 219,597 221,736 660,437 697,350 Total expenses 1,108,805 1,067,900 3,386,357 3,197,591 Loss before gain on sale of property (100,504) (91,550) (431,457) (203,977) Gain on sale of property (Note 3) - - - 676,316 Net income (loss) $ (100,504) $(91,550) $ (431,457)$ 472,339 Allocation of net income (loss) (Note 4): Investor Limited Partners (27,184 Units outstanding): Loss before gain on sale of property $ ( 99,499) $(90,634) $ (427,142)$ (201,937) Gain on sale of property - - - 669,553 Net income (loss) $ ( 99,499) $(90,634) $ (427,142)$ 467,616 Investor Limited Partners, Per Unit: Loss before gain on sale of property $ (3.66) $(3.34) $ (15.71)$ (7.43) Gain on sale of property - - - 24.63 Net income (loss) $ (3.66) $ (3.34) $ (15.71)$ 17.20 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 $ (1,005) $ (916) $ (4,315)$ (2,040) Gain on sale of property - - - 6,763 Net income (loss) $ (1,005) $ (916) $ (4,315)$ 4,723
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 1999 1998 Cash flows from operating activities: Net income (loss) $(431,457)$472,339 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Interest earned on replacement reserve escrow (782) - Depreciation and amortization 1,143,540 1,049,449 Gain on sale of property - (676,316) Changes in assets and liabilities: Increase in restricted cash for tenant security deposits (487) (470) Decrease (increase) in prepaid expenses and other assets (291,040) 206,543 Increase (decrease) in accrued expenses and other liabilities 176,669 (289,437) Net cash provided by operating activities 596,443 762,108 Cash flows from investing activities: Deposits to replacement reserve escrow (37,800) (8,400) Withdrawals from replacement reserve escrow 311 - Additions to fixed assets (522,755)(1,319,324) Decrease in accrued expenses and other liabilities related to fixed asset additions (3,500) - Proceeds from sale of property, net - 6,514,681 Net cash (used in) provided by investing activities (563,744) 5,186,957 Cash flows from financing activities: Repayment of mortgage note payable - (4,084,038) Principal payments on mortgage notes payable(76,697) (70,413) Increase in deferred expenses - (15,496) Distributions (552,060)(2,744,486) Net cash used in financing activities (628,757)(6,914,433) Net decrease in cash and cash equivalents (596,058) (965,368) Cash and cash equivalents, beginning of period629,483 2,254,160 Cash and cash equivalents, end of period $ 33,425 $1,288,792
The accompanying notes are an integral part of the consolidated financial statements. 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 principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp 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, 1998 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, 1999, its results of operations for the three and nine months ended September 30, 1999 and 1998, and its cash flows for the nine months ended September 30, 1999 and 1998. The results of operations for the three and nine months ended September 30, 1999 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)Cash and Cash Equivalents Cash and cash equivalents consisted of the following: September 30, December 31, 1999 1998 Cash and money market accounts $33,425 $ 479,625 Commercial paper - 149,858 $ 33,425$ 629,483 (3)Sale of Property On January 30, 1998, the Partnership sold Nora Corners Shopping Center ("Nora Corners") to unaffiliated third parties. Nora Corners was included in a package with thirteen 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 $6,604,300, less repayment of the existing mortgage note and interest of $4,114,668 and its share of closing costs of $224,512. For financial reporting purposes, the Partnership realized a gain of $676,316 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. Nora Corners was situated on 11.21 acres of land, seven acres of which were owned by certain non-affiliated third parties. These seven acres of land were leased to the Partnership subject to a 99-year land lease which expired in 2061. The land lease required annual rental payments of $17,280 from 1987 through 2012. On January 30, 1998, in conjunction with the sale of Nora Corners, the land lease was assigned to the purchaser of the property, under the terms of the land lease. Continued KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (4) Changes in Partners' Equity A summary of changes in Partners' equity (deficit) for the nine months ended September 30, 1999 is as follows:
Total Investor Original Partners' Limited Limited General Equity Partners Partner Partners (Deficit) Balance at December 31, 1998$867,955$(481,602) $(293,412)$ 92,941 Distributions (496,854)(44,165) (11,041) (552,060) Net loss (427,142) - (4,315) (431,457) Balance at September 30, 1999$ ( 56,041)$(525,767)$(308,768)$ (890,576)
(5)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 4% of the gross receipts, net of leasing commissions from the commercial property which was under management until January 30, 1998 (see Note 3), and 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 For the Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 Property management fees$35,135 $40,127 $115,278 $ 131,330 Expense reimbursements 54,606 37,127 142,951 102,958 Charged to operations$ 89,741$ 77,254 $258,229 $ 234,288
Expense reimbursements due from affiliates of $429,768 and $239,514 were included in prepaid expenses and other assets at September 30, 1999 and December 31, 1998, respectively. In addition to the amounts above, costs paid to the General Partners' affiliates associated with the sale of Nora Corners were $4,171 during the nine months ended September 30, 1998. 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. Due to the special distribution in 1998, a result of the sale of Nora Corners, and the subsequent decrease in the Investor Limited Partners' capital, the semiannual distributions were decreased from $20.00 per Unit in 1998 to $18.28 per Unit, beginning with the distribution paid in February, 1999. On January 30, 1998, the General Partners sold Nora Corners to unaffiliated third parties. The property was included in a package with thirteen 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 $6,604,300 for the sale of its property, less the payoff of the mortgage note and its share of the closing costs of $224,512 (see Note 3). The Partnership's apartment market of Naperville, Illinois (Courtyards Village) is currently experiencing an increase in competition from new construction. Although Courtyards Village has recently been renovated, it is competing against over 3,000 new units added to the market in the past two years. The General Partners are in the process of evaluating strategies to improve the competitiveness of the Partnership's properties. Year 2000 The General Partners of the Partnership conducted an assessment of the Partnership's core internal and external computer information systems and have taken the necessary steps to understand the nature and extent of the work required to make its systems Year 2000 ready in those situations in which it is required to do so. The Year 2000 readiness issue concerns the inability of computerized information systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and organizations. Continued KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES Year 2000, Continued In this regard, the General Partners of the Partnership, along with certain affiliates, began a computer systems project in 1997 to significantly upgrade its existing hardware and software. The General Partners completed the testing and conversion of the financial accounting operating systems in February 1998. As a result, the General Partners have generated operating efficiencies and believe their financial accounting operating systems are Year 2000 ready. The General Partners incurred hardware costs as well as consulting and other expenses related to the infrastructure and facilities enhancements necessary to complete the upgrade and prepare for the Year 2000. There are no other significant internal systems or software that the Partnership is using at the present time. The General Partners of the Partnership have evaluated Year 2000 compliance issues with respect to its non-financial systems, such as computer controlled elevators, boilers, chillers and other miscellaneous systems. The General Partners do not anticipate any problems in its non-financial systems. The General Partners of the Partnership surveyed the Partnership's material third- party service providers (including but not limited to its banks and telecommunications providers) and significant vendors and received assurances that such providers and vendors are to be Year 2000 ready. The General Partners do not anticipate any problems with such providers and vendors that would materially impact its results of operations, liquidity or captial resources. In addition, the Partnership is also subject to external forces that might generally affect industry and commerce, such as utility and transportation company Year 2000 readiness failures and related service interruptions. However, the General Partners do not anticipate these would materially impact its results of operations, liquidity or capital resources. To date, the Partnership has not incurred, and does not expect to incur, any significant cost associated with being Year 2000 ready. Operations The following discussion relates to the operations of the Partnership and its properties (Courtyards Village and Windsor Apartments) for the three and nine months ended September 30, 1999 and 1998. The sale of Nora Corners on January 30, 1998, significantly impacts the comparability of the Partnership's operations between these periods. Net income, net of Nora Corners's activity, decreased during the three and nine months ended September 30, 1999 when compared to the three and nine months ended September 30, 1998 as increases in total expenses more than offset increases in total revenue. Total revenue increased due to increases in rental revenue resulting from residential rental rate increases implemented at both Courtyards and Windsor Apartments in 1998 and during the first quarter of 1999. However this was more that offset by decreases in interest income during the three and nine months ended September 30, 1999 due to lower average cash and cash equivalent balances available for investment when compared to 1998, resulting from the sale of Nora Corners. Continued KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES Operations, Continued Total expenses for the three months ended September 30, 1999 increased when compared to the same period in 1998, due primarily to increases in operating, general and administrative and depreciation expenses. These increases were partially offset by decreases in maintenance expense. Operating expense increased in 1999 as a result of an increase in workmen's compensation expense due to an adjustment to the workmen's compensation reserve in 1998. General and administrative expenses increased due to higher expenses incurred in connection with preparation and mailing of Partnership reports and other investor communications. Depreciation expense increased in conjunction with increased capital improvements completed at Courtyards Village, particularly the rehab of eleven apartments during the first quarter. Maintenance is down as a result of additional capital improvements completed during the third quarter at Windsor and Courtyards. Total expenses for the nine months ended September 30, 1999, net of Nora Corner's activity increased when compared to the same period in 1999, due primarily to increases in maintenance, general and administrative, real estate tax, and depreciation. Re-stripping of the parking lot and interior painting of the buildings during the second quarter at Windsor have resulted in the increases in maintenance expenses. General and administrative expenses increased due to higher expenses incurred in connection with preparation and mailing of Partnership reports and other investor commnications. Real estate tax expense increased as a result of a reassessment of Windsor Apartments's property value in 1998 by the local taxing authority. Depreciation expense increased in conjunction with increased capital improvements completed at Courtyards Village, particularly the rehab of eleven apartments during the first quarter. KRUPP REALTY LIMITED PARTNERSHIP-VII AND SUBSIDIARIES 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 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/Wayne H. Zarozny Wayne H. Zarozny Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner. DATE: November 15, 1999 EX-27 2
5 This schedule contains summary financial information extracted from Krupp Realty Fund 7 Financial Statements for the nine months ended September 30, 1999 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1999 SEP-30-1999 33,425 0 583,278 0 0 398,203 23,100,891 (14,028,316) 10,087,481 731,326 10,246,731 0 0 (890,576) 0 10,087,481 0 2,954,900 0 0 2,725,920 0 660,437 0 0 0 0 0 0 (431,457) 0 0 Includes all receivables included in "prepaid expenses and other assets" on the Balance Sheet. Multi-family complexes of $22,785,239 and deferred expenses of $315,652. Accumulated depreciation of $13,866,544 and accumulated amortization of $161,772. Represents mortage notes payable. Total deficit of the General Partners of ($308,768) and of the Limited Partners of ($581,808). Includes all revenue of the Partnership. Includes operating expenses of $1,254,796, real estate taxes of $327,584 and depreciation and amortization of $1,143,540. Net loss allocated $(4,315) to the General Partners and $(427,142) to the Limited Partners. Average net loss per Unit of Limited Partner interest is $(15.71) on 27,184 Units outstanding.
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