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 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
ITEM 2. PROPERTIES
As of December 31, 1994, the Partnership has unleveraged investments in four retail centers having an aggregate of 365,083 square feet of leasable space and one apartment complex having 222 units, all of which are wholly- owned by the Partnership. In addition, the Partnership has an unleveraged joint venture investment (the "Brookwood Village Joint Venture") in a shopping center with 478,738 square feet of leasable space. Additional detailed information with respect to individual properties is contained in Note D to Financial Statements and Schedule III included in Appendix A to this report.
A summary of the Partnership's real estate investments is presented below.
(1) The Partnership has a 50% joint venture interest in this property.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership is a party or to which any of its property is the subject.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
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, 1994 was approximately 10,100.
The Partnership has made the following distributions to its Partners during the years ended December 31, 1994 and 1993.
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. However, there is no assurance that future operations will continue to generate sufficient cash to maintain the current level of distributions and to provide sufficient liquidity for the Partnership. The Partnership pays a $.20 per unit per quarter distribution to its investors. However, a special distribution of $1 per unit was paid in 1993 due to the high prepayment of MBS principal.
ITEM 6.
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 to this report, respectively.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's liquidity is derived from the operations of the Partnership's properties (Encino Oaks, Alderwood, Canyon Place, Coral Plaza and Cumberland Glen), distributions from the Partnership's interest in Brookwood Village Joint Venture, earnings and 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 pay a larger share of tenant buildouts to attract quality tenants to our retail centers. This policy has proven to be successful in increasing occupancy at properties where it has been undertaken and is expected to continue through 1995. In fact, two of the Partnership's real estate investments are currently at full capacity and are expected to remain so in 1995. In order to remain competitive in their respective markets, the Partnership's properties are anticipated to spend $761,000 for fixed assets in 1995 most of which are tenant buildouts at retail centers. The Joint Venture is expected to spend $599,000 for capital renovations.
Principal collections on MBS reached a high level in 1993 because the mortgage interest rate environment increased refinancing activity, which in turn led to prepayments of the mortgages underlying the MBS. The present rise in interest rates has resulted in a reduction in principal collections on MBS in 1994.
Distributable Cash Flow and Net Cash Proceeds from Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Cash Proceeds from Capital Transactions as defined by Section 17 of the Partnership Agreement for the year ended December 31, 1994 and the period from inception to December 31, 1994.
(a) Represents distributions paid in 1994, except the February, 1994 distribution which relates to 1993 cash flows, and includes an estimate of the distribution to be paid in February, 1995. (b) Includes estimate of the distribution to be paid in February, 1995. (c) Limited Partners average per Unit return of capital as of February, 1995 is $4.49 [$11.71 - $7.22].
Operations
Partnership
1994 versus 1993
Rental Revenues for 1994 as compared to 1993 have remained relatively stable due mainly to consistent occupancy levels at all the Partnership's properties within the period.
Total expenses decreased $242,000 in 1994 as compared to 1993. This was primarily due to a reduction in real estate taxes. Coral Plaza received a refund of approximately $235,000 for prior years' real estate taxes in the second quarter of 1994. Depreciation increased by $108,000 in 1994 as compared to 1993 as a result of higher tenant buildouts at Canyon Place and Encino Oaks in order to attract quality tenants to their respective retail centers.
1993 versus 1992
Rental revenues increased by $189,000 in 1993 as compared to 1992. Revenues increased $105,000 at Cumberland Glen as a result of an increase in occupancy of 4% over 1992 and rental increases on all units. Alderwood's revenues increased $147,000 due to an increase of 3% in tenant occupancy. Encino Oaks experienced an increase in revenues of $60,000 due to savings in bad debt over 1992. This was the result of an improved tenant profile. Revenues were reduced $67,000 and $56,000 at Canyon Place and Coral Plaza, respectively, due to a reduction in occupancy of 4% and 2%, respectively.
Total expenses decreased $64,000 in 1993 as compared to 1992. This was primarily due to a reduction in real estate taxes and depreciation. Encino Oaks experienced a reduction in real estate taxes of $35,000 because of a reassessment by the taxing authority. Depreciation was reduced $60,000 at Cumberland Glen as a result of original appliances being fully depreciated in 1992.
MBS and Other Income
MBS interest income decreased $411,000 in 1994 from 1993, and $575,000 in 1993 from 1992 due to large prepayments of principal which occurred from late 1992 through the first half 1994 as a result of a decline in interest rates. The asset balance on which income is generated has decreased approximately 23% since December of 1993 and 48% since December of 1992. Interest income on short- term investments remained relatively stable in 1994 compared to 1993 and increased in 1993 compared to 1992 due to higher average cash balances.
Joint Venture
Brookwood's revenues increased in 1994 primarily due to an increase in occupancy of 4% over 1993. Depreciation expense increased due to a large number of tenant buildouts and capital renovations completed in 1994 and 1993.
Brookwood's revenues increased in 1993 due to an increase in occupancy of 7% over 1992 and the collection of rent from former tenants of $70,000 which had previously been estimated to be uncollectible. Revenues also increased due to higher tenant reimbursements of utilities and maintenance as result of increased tenant occupancy. Depreciation expense increased due to the large number of tenant buildouts and improvements completed in 1993 and 1992.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A of this Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
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 (48) Co-Chairman of the Board George Krupp (50) Co-Chairman of the Board Laurence Gerber (38) President Marianne Pritchard (45) Treasurer Ross V. Keeler (46) Executive Vice President Frank Apeseche (37) Executive Vice President
Douglas Krupp has been Co-Chairman of The Berkshire Group (a group of affiliated companies which includes The Krupp Corporation) since its formation in 1969. He has been primarily responsible for overseeing the acquisition, disposition and financing of properties by the entities sponsored by The Berkshire Group and their affiliates. In addition, since 1987 Mr. Krupp has been responsible for founding and overseeing through the start-up phase certain new business ventures including the healthcare and construction businesses of The Berkshire Group. He is a graduate of Bryant College in Rhode Island. In 1989, he received an honorary Doctor of Science in Business Administration degree from Bryant College and he also serves as a Trustee of Bryant College. Douglas Krupp is the brother of George Krupp.
George Krupp has been Co-Chairman of The Berkshire Group since its formation in 1969. His efforts over the years have encompassed the broad spectrum of The Berkshire Group's activities including responsibility for the real estate operations of The Berkshire Group through mid-1991, and he continues to be involved in strategic planning. He attended the University of Pennsylvania prior to joining his brother, Douglas Krupp, in the real estate business in 1966. Mr. Krupp currently serves as Chairman of the Board and a Trustee of Krupp Government Income Trust and Krupp Government Income Trust II, and Chairman of the Board and a director of Berkshire Realty Company, Inc.
Laurence Gerber has been President and Chief Executive Officer of The Berkshire Group since 1991. He previously served from 1987 to 1991 as President of Berkshire Financial Company with overall responsibility for marketing, mortgage banking, product development and corporate financing, and also worked on strategic planning. Prior to that, he served as Executive Vice President, Acquisitions and, prior to that, as Senior Vice President and Chief Planning Officer since joining the firm in January 1984. Before joining the firm, Mr. Gerber was a management consultant with Bain & Co. headquartered in Boston, since July 1982. Prior to that, he was a Senior Tax Accountant with Arthur Andersen & Co., an international accounting and consulting firm, in New York. He has a B.S. degree in economics with high honors from the University of Pennsylvania Wharton School and an M.B.A. degree with High Distinction from Harvard Business School. He is a Certified Public Accountant. Mr. Gerber serves as President and a Trustee of Krupp Government Income Trust and Krupp Government Income Trust II, and as President and a director of Berkshire Realty Company, Inc.
Marianne Pritchard, Treasurer of The Krupp Corporation and Senior Vice-President, has been Chief Financial and Accounting Officer of Berkshire Realty Affiliates since rejoining The Berkshire Group in August, 1991. Prior to rejoining The Berkshire Group, she was Vice President and Controller for Liberty Real Estate Group, a subsidiary of Liberty Mutual Insurance Company from July 1989 to August 1991. Prior to Liberty, Ms. Pritchard held the position of Controller/Treasurer of Berkshire Mortgage Finance from April 1987 to July 1989. Prior to that, Ms. Pritchard was Senior Audit Manager with Deloitte and Touche, an international accounting and consulting firm. She is a Certified Public Accountant and received her B.B.A. degree in Accounting from the University of Texas.
Ross V. Keeler is President of Berkshire Investment Advisors and an Executive Vice-President of The Berkshire Group. Prior to joining The Berkshire Group in November 1984, he served as Executive Vice President of Marketing and a member of the Board of Directors at First Capital Companies, a national syndicator of real estate investments. Prior to that, Mr. Keeler served as President of State Financial Corporation, a company which originated specialized leases on major equipment for municipalities. He received a B.S. degree in finance with honors from the University of Florida and received an M.B.A. degree with scholastic honors from the University of Southern California.
Frank Apeseche was appointed Executive Vice President and Chief Financial Officer of The Berkshire Group on January 1, 1993. He oversees strategic planning, tax planning, corporate finance and product development for The Berkshire Group. Before joining the firm in 1986, Mr. Apeseche was a manager at Arthur Andersen & Co., an international accounting and consulting firm. Mr. Apeseche holds a B.A. degree with High Distinction from Cornell University and an M.B.A. degree with honors from the University of Michigan.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1994, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's 7,499,818 outstanding Depositary Receipts. The only interests held by management or its affiliates consist of its General Partner and Corporate Limited Partner Interests.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in Note H to Financial Statements included in Appendix A of this report.
PART IV
ITEM 14.
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 of this report.
2. Financial Statement Schedule - See Index to Financial Statements and Schedule included under Item 8, Appendix A, on page 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.
(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 Plaza
(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 corpora- tion 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)].*
Brookwood Village Shopping Center and Convenience Center
(10.11) Purchase and Sale Agreement dated December 5, 1986 between Krupp Realty and Development Inc., a Massachusetts corporation and Everett Shepherd, Jr. et al as assigned to Brookwood Village Joint Venture. [Exhibit 1 to Registrant's Report on Form 8-K dated December 16, 1986 (File No. 33-2312)].*
(10.12) Statutory Warranty Deed with Vendors' Lien dated December 16, 1986 between Brookwood Village Joint Venture and Everett Shepherd, Jr. et al. [Exhibit 2 to Registrant's Report on Form 8-K dated December 16, 1986 (File No. 33-2312)].*
(10.13) Business Certificate dated December 11, 1986 establishing Brookwood Village Joint Venture. [Exhibit 3 to Registrant's Report on Form 8-K dated December 16, 1986 (File No. 33-2312)].*
(10.14) Brookwood Village Joint Venture Agreement dated December 15, 1986 between Krupp Cash Plus-II Limited Partnership, a Massachusetts limited partnership and Krupp Cash Plus-III Limited Partnership, a Massachusetts limited partnership, now known as Berkshire Realty Company, Inc. [Exhibit 10.14 to Registrant's Report on Form 10-K dated December 31, 1986 (File No. 33-2312)].*
(10.15) Property Management Agreement dated December 16, 1986 between Brookwood Village Joint Venture, as Owner and Krupp Asset Management Company, now known as Berkshire Property Management ("BPM"), as Agent. [Exhibit 4 to Registrant's Report on Form 8-K dated December 16, 1986 (File No. 33- 2312)].*
Canyon Place Shopping Center
(10.16) 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)].*
(10.17) 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)].*
(10.18) 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)].*
(10.19) 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)].*
(10.20) 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
(10.21) 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)].*
(10.22) 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)].*
(10.23) 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)].*
(10.24) 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
(10.25) 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)].*
(10.26) 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)].*
(10.27) 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)].*
(10.28) Property Management Agreement, dated September 3, 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 19.8 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, 1994 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 day of March, 1995.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
By: The Krupp Corporation, a General Partner
By: George Krupp, 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 day of March, 1995.
Signatures Title(s)
Co-Chairman (Principal Executive Officer) and Douglas KruppDirector of The Krupp Corporation (a General Partner of the Registrant)
Co-Chairman (Principal Executive Officer) and George Krupp Director of The Krupp Corporation (a General Partner of the Registrant)
President of The Krupp Corporation (a Laurence Gerber General Partner of the Registrant)
Treasurer of The Krupp Corporation (a General Marianne Pritchard 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, 1994
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Balance Sheets at December 31, 1994 and 1993
Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992
Statements of Changes in Partners' Equity for the Years Ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992
Notes to Financial Statements -
Schedule III - Real Estate and Accumulated Depreciation -
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 financial statement schedule of Krupp Cash Plus-II Limited Partnership (the "Partnership") listed in the index on page 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, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 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.
Boston, Massachusetts COOPERS & LYBRAND L.L.P. January 31, 1995
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
The accompanying notes are an integral part of the financial statements.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
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, 1994, 1993 and 1992
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, 1994, 1993 and 1992
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 has 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 will continue to exist until December 31, 2025, unless earlier terminated upon occurrence of certain events as set forth in the Partnership Agreement.
The Partnership has 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, has issued Depositary Receipts ("Units") to the investors and has 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.
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).
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
Residential and commercial 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 from 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
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies, Continued
Investment in Joint Venture
The Partnership has a 50% interest in Brookwood Village Joint Venture. This investment is accounted for using the equity method of accounting as the Partnership Agreement requires a simple majority vote for all major decisions regarding the Joint Venture. As such, the Partnership does 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 Brookwood Village Joint Venture is included currently in the Partnership's net income. Cash distributions received from the Brookwood Village Joint Venture reduce the Partnership's investment.
MBS
MBS are held for long-term investment and are carried at amortized cost. Premiums or discounts are amortized over the life of the underlying securities using the effective yield method. The market value of MBS is determined based on quoted market prices.
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.
Reclassifications
Certain prior year balances have been reclassified to conform with current year financial statement presentation.
C. Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1994 and 1993 consist of the following:
At December 31, 1994, commercial paper represents corporate issues complying with Section 6.2(a) of the Partnership Agreement purchased through a corporate issuer maturing in the first quarter of 1995.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
D. Investment in Joint Venture
The Partnership and an affiliate of the Partnership each have 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 is a shopping center containing 478,738 net leasable square feet located in Birmingham, Alabama.
Under the purchase and sale agreement entered into by the Partnership, its affiliates and the previous owner, the previous owner retained an interest related to the future development at Brookwood Village. The seller is entitled to receive up to $5,000,000 of proceeds from the sale of Brookwood Village and potentially additional amounts related to expansion and development. The Joint Venture holds title to Brookwood Village free and clear from all other material liens or encumbrances.
Condensed financial statements of the Joint Venture are as follows:
Brookwood Village Joint Venture Condensed Balance Sheets December 31, 1994 and 1993
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
D. Investment in Joint Venture - Continued
E. Mortgage Backed Securities
At December 31, 1994, the Partnerships's MBS Portfolio had an approximate market value of $9,902,000 with unrealized gains of $217,000 and unrealized losses of $130,000. The portfolio consists of Federal Home Loan Mortgage Corporation holdings with coupon rates ranging from 8.0% to 10.0% per annum maturing in the years 2009 through 2017, Federal National Mortgage Association holdings with coupon rates ranging from 9.5% to 10.0% per annum maturing in the year 2016, and Government National Mortgage Association holdings with a coupon rate of 9.0% per annum maturing in the years 2008 and 2009. The Partnership has the intention and ability to hold the MBS until maturity.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at December 31, 1994 and 1993:
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
G. 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 arising from a capital transaction will be allocated in the same manner as related cash distributions which is described below. Losses from a capital transaction will be 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.
As of December 31, 1994, the following cumulative partner contributions and allocations have been made since inception of the Partnership:
H. Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties, the Partnership entered into agreements for the payment of property management fees to an affiliate of the General Partners for services as management agent. Such agreements provide for management fees payable monthly at the rate of up to 6% of the gross receipts for commercial properties and up to 5% of the 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 properties including accounting, computer, insurance, travel, legal and payroll, as well as the preparation and mailing of reports and other communications to the Unitholders. Any such amounts relating to the foregoing are presented on the face of the statement of operations.
Continued
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
I. Future Base Rents Due Under Commercial Operating Leases
Future base rents receivable under commercial operating leases for the years 1995 through 1999 are as follows:
J. Real Estate Taxes
During the second quarter of 1994, the Partnership successfully petitioned for the reassessment of prior years' real estate taxes on Coral Plaza. The Partnership received a tax refund for the 1987, 1988 and 1989 real estate tax years of approximately $235,000, which was reflected as a reduction in the 1994 real estate tax expense.
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.
The reconciliation of the income reported in the accompanying statement of operations with the income reported in the Partnership's 1994 federal income tax return follows:
The allocation of the net income for federal income tax purposes for 1994 is as follows:
During the years ended December 31, 1994, 1993 and 1992 the average per Unit income to the Unitholders for federal income tax purposes was $.48, $47, and $.52, respectively.
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1994
(a) The Partnership uses the cost basis for property valuation for both income tax and financial statement purposes. The Partnership holds title to its properties free and clear from all mortgage indebtedness or other material liens or encumbrances.
(b) Canyon Place received a cash settlement of $53,064, net of legal costs, 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, 1994
Reconciliation of Real Estate and Accumulated Depreciation for each of the three years in the period ended December 31, 1994:
KRUPP CASH PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
ERISA Valuation
For ERISA purposes, the General Partners currently report the value of each unit at $11.17 based upon the average price paid by the dividend reinvestment plan for such units during the four quarters of 1994.