-----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, Hd2xrH7cWJogUtpY4qnVigxOXz7G4jO6X9E6MpcQkJ0CwWckHDibzqf+OIB00j5d gNYFIYeFXHbiUAnEnV2iMQ== 0000785988-98-000011.txt : 19981113 0000785988-98-000011.hdr.sgml : 19981113 ACCESSION NUMBER: 0000785988-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP CASH PLUS II LTD PARTNERSHIP CENTRAL INDEX KEY: 0000785988 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042915326 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15816 FILM NUMBER: 98745403 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE STREET 2: C/O THE BERKSHIRE GROUP CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: C/O THE BERKSHIRE GROUP STREET 2: 470 ATLANTIC AVENUE 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, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-15816 Krupp Cash Plus-II Limited Partnership Massachusetts 04-2915326 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The total number of pages in this document is 14. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP CASH PLUS-II LIMITED PARTNERSHIP BALANCE SHEETS ASSETS
(Unaudited) September 30, December 31, 1998 1997 Real estate assets: Multi-family apartment complex (Note 3)$ - $ 5,597,104 Retail centers (Note 3) - 29,622,892 Mortgage-backed securities ("MBS"), net of accumulated amortization and unrealized holding gains (Note 5) - 6,478,988 Total real estate assets - 41,698,984 Cash and cash equivalents (Note 2) 10,778,535 5,325,971 Other assets 92,249 629,755 Total assets $ 10,870,784 $47,654,710 LIABILITIES AND PARTNERS' EQUITY Liabilities: Accrued expenses and other liabilities (Note 6) $ 80,060 $ 660,976 Due to affiliates (Note 8) 17,001 - Total liabilities 97,061 660,976 Partners' equity (deficit) (Note 7): Unitholders (7,499,718 Units outstanding) 11,431,987 47,281,562 Corporate Limited Partner (100 Units outstanding) 357 835 General Partners (658,621) (650,556) Unrealized holding gains on MBS (Note 5) - 361,893 Total Partners' equity 10,773,723 46,993,734 Total liabilities and Partners' equity$10,870,784$47,654,710
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-II LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended For the Nine Months Ended September 30, September 30, 1998 1997 1998 1997 Revenue: Rental $ - $1,746,362$ 459,585 $5,195,006 Interest income - MBS (Note 5) - 142,170 157,398 443,181 Interest income - other 263,114 217,814 1,258,265 525,332 Total revenue 263,114 2,106,346 1,875,248 6,163,519 Expenses: Operating (Note 8) - 209,868 259,062 713,700 Maintenance - 127,227 46,741 348,007 General and administrative (Note 8)142,917 132,579 414,094 473,872 Real estate taxes - 186,344 60,367 613,305 Management fees (Note 8) - 98,939 34,315 287,286 Depreciation - 556,217 44,095 1,627,498 Total expenses 142,917 1,311,174 858,674 4,063,668 Income from operations before gain on sale of properties and gain on sale of MBS 120,197 795,172 1,016,574 2,099,851 Partnership's share of Joint Venture net income (loss) (Note 4) - 14,887 - (858,011) Income before gain on sale of properties and gain on sale of MBS 120,197 810,059 1,016,574 1,241,840 Gain on sale of properties (Note 3) - - 3,725,484 - Gain on sale of MBS (Note 5) - - 302,230 - Net income $ 120,197 $ 810,059$5,044,288 $1,241,840 Allocation of net income (Note 7): Unitholders (7,499,718 Units outstanding): Income before gain on sale of properties and gain on sale of MBS $ 117,792 $ 793,848$ 996,229 $1,216,987 Gain on sale of properties - - 3,725,434 - Gain on sale of MBS - - 302,226 - Net income $ 117,792 $ 793,848$5,023,889 $1,216,987 Per Unit of Depositary Receipt: Income before gain on sale of properties and gain on sale of MBS $ .01 $ .10$ .13 $ .16 Gain on sale of properties - - .50 - Gain on sale of MBS - - .04 - Net income $ .01 $ .10 $ .67$ .16 Continued KRUPP CASH PLUS-II LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS, Continued (Unaudited) For the Three Months Ended For the Nine Months Ended September 30, September 30, 1998 1997 1998 1997 Corporate Limited Partner (100 Units outstanding): Income before gain on sale of properties and gain on sale of MBS $ 1 $ 10 $ 13$ 16 Gain on sale of properties - - 50 - Gain on sale of MBS - - 4 - Net income $ 1 $ 10$ 67 $ 16 General Partners: Income before gain on sale of properties and gain on sale of MBS $ 2,404 $ 16,201$ 20,332 $ 24,837 Gain on sale of properties - - - - Gain on sale of MBS - - - - Net income $ 2,404 $ 16,201$ 20,332 $ 24,837
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 1998 1997 Operating activities: Net income $ 5,044,288 $ 1,241,840 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 44,095 1,627,498 Amortization of MBS discount, net - (396) Gain on sale of properties (3,725,484) - Gain on sale of MBS (302,230) - Partnership's share of Joint Venture net loss - 858,011 Changes in assets and liabilities: Decrease in other assets 527,602 98,723 Increase (decrease) in due to affiliates 17,001 (86,392) Increase (decrease) in accrued expenses and other liabilities (580,916) 92,571 Net cash provided by operating activities 1,024,356 3,831,855 Investing activities: Additions to fixed assets (64,710) (412,808) Principal collections on MBS 495,784 767,603 Capital contribution to Joint Venture - (2,150,000) Distributions received from Joint Venture in excess of its earnings - 199,000 Distribution received from Joint Venture sale of property - 15,691,539 Proceeds from sale of properties, net 38,975,999 - Proceeds from sale of MBS 5,923,541 - Net cash provided by investing activities 45,330,614 14,095,334 Financing activity: Distributions (40,902,406)(21,064,233) Net increase (decrease) in cash and cash equivalents 5,452,564 (3,137,044) Cash and cash equivalents, beginning of period5,325,971 8,953,003 Cash and cash equivalents, end of period $10,778,535 $ 5,815,959
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (1)Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp Cash Plus-II Limited Partnership (the "Partnership") the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Financial Statements included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1997 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 necessary to present fairly the Partnership's financial position as of September 30, 1998, its results of operations for the three and nine months ended September 30, 1998 and 1997, and cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the three and nine months ended September 30, 1998 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, 1998 1997 Cash and money market accounts$ 774,835 $ 1,725,998 Commercial paper 10,003,700 3,599,973 $10,778,535 $ 5,325,971
(3)Sale of Properties On January 30, 1998, the Partnership sold its remaining properties to unaffiliated third parties. The Partnership's properties 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, less its share of closing costs of $846,701. For financial reporting purposes, the Partnership realized a gain of $3,725,484 on the sale. The gain was calculated as the difference between the properties' selling prices less net book value of the properties and closing costs. Continued KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (4)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 the 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 Partnership and its Joint Venture Partner each made capital contributions of $2,150,000 to fund the settlement payment. 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. Continued KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (5)Mortgage Backed Securities On April 29, 1998, the General Partners sold the Partnership's MBS portfolio to unaffiliated third parties for $5,923,541. For financial reporting purposes, the Partnership recognized a gain of $302,230 on the sale. The gain was calculated as the difference between the selling price and net book value of the MBS. The MBS held by the Partnership were issued by the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and the Government National Mortgage Association. At December 31, 1997, the MBS had a total face value, amortized cost and estimated market value of $6,106,003, $6,117,095 and $6,479,000, respectively. Coupon rates of the MBS ranged from 8.0% to 10.0% per annum and were scheduled to mature in the years 2008 through 2017. At December 31, 1997, the Partnership's MBS portfolio had unrealized holding gains of $361,893 on its MBS investments to adjust to market value, based on quoted market prices. (6) Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following:
September 30,December 31, 1998 1997 Accrued real estate taxes $ - $ 235,000 Other accrued expenses 80,060 229,097 Tenant security deposits - 187,668 Prepaid rent - 9,211 $ 80,060 $ 660,976
Continued KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (7) Changes in Partners' Equity A summary of changes in Partners' equity (deficit) for the nine months ended September 30, 1998 is as follows:
Corporate Unrealized Total Limited General Holding Partners' UnitholdersPartner Partners Gains on MBS Equity Balance at December 31, 1997 $47,281,562 $ 835 $(650,556)$ 361,893 $46,993,734 Income before gain on sale of properties and gain on sale of MBS 996,229 13 20,332 - 1,016,574 Gain on sale of properties 3,725,434 50 - - 3,725,484 Gain on sale of MBS 302,226 4 - - 302,230 Unrealized holding gains on MBS - - - (361,893) (361,893) Distributions: Operations (1,499,944) (20) (28,397) - (1,528,361) Capital transactions (39,373,520) (525) - - (39,374,045) Balance at September 30, 1998$11,431,987$ 357 $(658,621)$ - $10,773,723
(8) Related Party Transactions The Partnership paid property management fees to affiliates of the General Partners for management services. Payment of these fees ended in conjunction with the sale of the Partnership's properties on January 30, 1998 (see Note 3). Pursuant to the management agreements, management fees were payable monthly at a rate up to 6% of the gross receipts, net of leasing commissions, from commercial properties under management and up to 5% of the gross receipts from residential properties under management. The Partnership continues to reimburse affiliates of the General Partners for certain expenses incurred in connection with the operation of the Partnership, including administrative expenses. Continued KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (8) Related Party Transactions, Continued 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, 1998 1997 1998 1997 Property management fees $ - $ 98,939 $ 34,315$287,286 Expense reimbursements 111,221 135,784 329,946 409,049 Charged to operations $111,221 $234,723 $364,261$696,335
Due to affiliates consisted of expense reimbursements of $17,001 at September 30, 1998. In addition to the amounts above, costs paid to the General Partners' affiliates associated with the sale of the Partnership's remaining properties were $319,839 during the nine months ended September 30, 1998. KRUPP CASH PLUS-II LIMITED PARTNERSHIP 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 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 January 30, 1998, the General Partners sold all of the Partnership's properties to unaffiliated third parties. The properties 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 of $846,701 (see Note 3). The sale of the properties is considered a Terminating Capital Transaction, as defined by the Partnership Agreement. On May 15, 1998, the Partnership made a special distribution of $5.25 per Unit based upon approximately 80% of the proceeds of the sale and estimated liquidation value of remaining Partnership assets. Once all necessary reserves and contingent liabilities are funded, the remaining proceeds will be distributed. All Partnership affairs are expected to be completed by year-end. The Partnership held MBS that were guaranteed by the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation. On April 29, 1998, the General Partners sold the Partnership's MBS portfolio to unaffiliated third parties. For financial reporting purposes, the Partnership recognized a gain of $302,230 from the sale. 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 5). On May 13, 1997, Brookwood Village was sold to an unaffiliated third party. Prior to the sale, the Partnership, its Joint Venture Partner 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 (see Note 4). KRUPP CASH PLUS-II LIMITED PARTNERSHIP Operations Partnership The following discussion relates to the operations of the Partnership for the three and nine months ended September 30, 1998 and 1997. The sale of the Partnership's properties (Encino Oaks Shopping Center, Alderwood Towne Center, Canyon Place Shopping Center, Coral Plaza Shopping Center and Cumberland Glen Apartments) on January 30, 1998 and the sale of the Partnership's MBS portfolio on April 29, 1998, significantly impact the comparability of the Partnership's operations between the periods. Net income for the three months ended September 30, 1998 as compared to the three months ended September 30, 1997, net of activity of the Partnership's sold properties and MBS portfolio, decreased as the decrease in total revenue more than offset the decrease in total expenses. Total revenue decreased due to lower average cash and cash equivalent balances available for investment, a result of proceeds received from the sale of Brookwood Village in 1997 (see Note 4). Total expenses for the three months ended September 30, 1998, net of activity of the Partnership's sold properties, remained relatively stable. Net income for the nine months ended September 30, 1998 as compared to the nine months ended September 30, 1997, net of activity of the Partnership's sold properties and MBS portfolio, increased as total revenue increased and total expenses decreased. Total revenue increased due to higher average cash and cash equivalent balances available for investment, a result of proceeds received from the sale of the Partnership's properties and MBS portfolio. Total expenses for the nine months ended September 30, 1998, net of activity of the Partnership's sold properties, decreased when compared to the same period in 1997, due to a decrease in general and administrative expense. This decrease is the result of legal costs incurred in 1997 which related to the unsolicited tender offers to purchase Units of Depositary Receipts and the settlement of the Brookwood Village Joint Venture litigation (see Note 4). Joint Venture Brookwood Village was sold on May 13, 1997 to an unaffiliated third party. See Note 4 for further discussion of this matter. KRUPP CASH PLUS-II LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1.Legal Proceedings Response: None Item 2.Change in Securities Response: None Item 3.Defaults upon Senior Securities Response: None Item 4.Submission of Matters to a Vote of Security Holders Response: None Item 5.Other Information Response: None Item 6.Exhibits and Reports on Form 8-K Response: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Cash Plus-II Limited Partnership (Registrant) BY: /s/Wayne H. Zarozny Wayne H. Zarozny Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner. DATE: November 10, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Cash Plus II Financial Statements for the nine months ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 10,778,535 0 92,249 0 0 0 0 0 10,870,784 97,061 0 0 0 10,773,723 0 10,870,784 0 1,875,248 0 0 858,674 0 0 0 0 0 0 (4,027,714) 0 5,044,288 0 0 Includes all receivables included in "other assets" on the Balance Sheet. The Partnership's properties were sold on January 30, 1998 to unaffiliated third parties. The total selling price of the fourteen properties sold was $138,000,000 of which the Partnership received $39,822,700, less closing costs of $846,701. For financial reporting purposes, the Partnership realized a gain of $3,725,484 on the sale. On April 29,1998 the General Partners sold the Partnership recognized a gain of $302,230 on the sale. Deficit of the General Partners of ($658,621) and equity of Limited Partners of $11,432,344. Includes all revenue of the Partnership. Includes all operating expenses of the Partnership. Net income allocated $5,023,956 to the Limited Partners and $20,332 to the General Partners.
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