ITEM 1. BUSINESS
Krupp Cash Plus Limited Partnership (the "Partnership") was formed on April 30, 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 Item 8 (Appendix A) of this report.
On July 12, 1986 the Partnership commenced the marketing and sale of 4,000,000 units of Depositary Receipts ("Units") for a maximum offering of $80,000,000. The Partnership raised $79,934,364 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, 1996, the Partnership had unleveraged investments in three retail centers containing an aggregate of 614,410 square feet of leasable area. Additional detailed information with respect to individual properties can be found in Schedule III included in Appendix A of this report.
A summary of the Partnership's real estate investments is presented below.
There were six tenants which occupied 10% or more of their respective property's leasable space as of December 31, 1996.
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 a 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, 1996 was approximately 5,300.
The Partnership has made the following distributions to its Partners during the years ended December 31, 1996 and 1995.
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 distributes approximately $.14 per Unit per quarter to its investors.
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 (Appendix A) of this report, respectively.
(a) During the years ended December 31, 1996, 1995, 1994, 1993 and 1992, the average per Unit return of capital to the Unitholderswas $0, $0, $.11, $.68 and $.07, respectively.Prior performance of thePartnership is not necessarily indicative of future operations.
ITEM 7.
ITEM 7. 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 operations of its real estate investments. Liquidity is also generated by the MBS portfolio. The Partnership's sources of future liquidity will be used for payment of expenses related to real estate operations, capital expenditures including tenant build-outs to secure quality tenants, and other administrative expenses. Cash Flow, if any, as calculated under Section 17 of the Partnership Agreement, will then be available for distribution to the Partners.
The Partnership's retail centers continue to maintain a relatively consistent level of operating results. However, to attain these results, management has found it necessary to fund a significant portion of tenant build-outs to secure quality tenants in the Partnership's retail centers.
The Partnership completed improvements at High Point National Furniture Mart ("High Point") which were necessary to reconfigure space for new tenants and comply with present building code standards. Renovations to show rooms on three floors of the building were completed during the second quarter of 1996, while renovations to the elevator system were completed in the third quarter of 1996. The refurbished show room spaces have enabled the property to command higher rents and maintain 100% occupancy.
At Tradewinds Shopping Center ("Tradewinds"), improvements to the facade were completed during the second quarter of 1996 in order to remain competitive against newer centers. Management has also negotiated the expansion of an anchor tenant in 1997 and intends to spend approximately $4,000,000 for the tenant buildout. In order to fund the expansion, the Partnership plans to utilize its cash reserves as well as any proceeds received from the possible financing of its mortgage backed securities portfolio in 1997.
At Luria's Plaza, the Partnership is planning to spend approximately $116,000 for capital improvements in 1997, most of which are designated as tenant buildouts which the General Partners believe are necessary to maintain or increase its current occupancy level.
The Partnership holds MBS that are guaranteed by the Government National Mortgage Association ("GNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). The principal risks with respect to MBS are the credit worthiness of GNMA and FHLMC and the risk that the current value of any MBS may decline as a result of changes in market interest rates. Currently, the General Partners believe that the risk is minimal due to the fact that the Partnership has the ability to hold these securities to maturity.
In order to continue to fund the capital improvements noted above, the General Partners, on an ongoing basis, assess the current and future liquidity needs in determining the levels of working capital reserves the Partnership should maintain. Adjustments to distributions are made when appropriate to reflect such assessments. Based on current assessments, the General Partners have determined that retaining the current annualized distribution rate of $0.55 per Unit will allow the Partnership to maintain adequate reserves.
Distributable Cash Flow and Net Proceeds from Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net Proceeds from Capital Transactions as defined by Section 17 of the Partnership Agreement, and the source of cash distributions for the year ended December 31, 1996 and from the Partnership's inception through December 31, 1996. The General Partners provide information below to meet requirements of the Partnership Agreement and because they believe that it is an appropriate supplemental measure of operating performance. However, Distributable Cash Flow and Net Proceeds from Capital Transactions should not be considered by the reader as a substitute to net income, as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity.
(a) Represents distributions paid in 1996, except the February, 1996 distribution, which relates to 1995 cash flow, and includes an estimateof the distribution to be paid in February, 1997. (b) Includes an estimate of the distribution to be paid in February, 1997. (c) Includes a $7,150,000 note which was distributed from the Partnership to the Evergreen Plaza Note-Holding Trust whose beneficiaries were the Partnership's Unitholders on record on May 31, 1990. (d) Unitholders' average per Unit return of capital as of February, 1997 is $6.23 [$14.00-$7.77].
Operations
1996 compared to 1995
Overall, Distributable Cash Flow, as defined in the Partnership Agreement, increased from 1995 to 1996, due to a decrease in capital improvement expenditures, partially offset by a decrease in net income.
The Partnership experienced a slight decrease in total revenue in 1996, as compared to 1995. Rental revenue decreased primarily due to lower tenant billings as a result of the decline in reimbursable real estate taxes at Tradewinds. MBS interest income also decreased due to repayment and prepayments of principal which occur on the MBS portfolio. These decreases are partially offset by an increase in interest income as a result of higher cash and cash equivalents available for investment in 1996.
During 1996, as compared to 1995, total expenses remained relatively stable, with increases in maintenance and general and administrative expenses, offset by decreases in real estate taxes and management fees. Maintenance expense increased due to increases in both snow removal and exterior repair expenditures as a result of adverse weather conditions in 1996. General and administrative expense rose due to increases in both audit expenditures and charges incurred in connection with the preparation and mailing of Partnership reports and other investor communications. The decrease in real estate taxes is the result of a reassessment of Tradewinds by the local taxing authority. Management fees decreased in conjunction with the decline in revenue. Depreciation expense increased as a result of capital improvement expenditures.
1995 compared to 1994
The Partnership experienced increased rental revenue during 1995 as compared to 1994. The renovations at High Point enabled the Partnership to receive higher rents from the refurbished floors. The renovated and expanded Cobb Theater, a major tenant located at Luria's Plaza, was reopened in February 1994 with six new screens. The theater expansion has attracted new tenants and enabled the center to maintain high occupancy and command higher rents and lease renewals.
MBS interest income decreased in 1995 as compared to 1994 due to lower average MBS balances in 1995 versus 1994 caused by principal repayments. Interest income on short term investments increased during this same period due to higher average cash balances.
Operating and general and administrative expenses decreased in 1995 as compared to 1994 due to management's efforts to reduce reimbursable operating costs. Also, operating expenses decreased in 1995 as compared to 1994 due to decreases in payroll and insurance expense as a result of a favorable claim history.
Real estate taxes decreased in 1995 as compared to 1994 due to refunds received for prior year's real estate taxes at Tradewinds and a decrease in the property's assessed value. These decreases were partially offset by an increase in the taxes at Luria's Plaza due to an increase in the assessed value of the property following the theater expansion.
Management fees increased in 1995 as compared to 1994 due to higher rental income being generated by the three properties.
Depreciation expense increased in conjunction with the fixed asset expenditures in 1995 and 1994.
General
In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate assets.
The investments in properties are carried at cost less accumulated depreciation unless the General Partners believe there is a material impairment in value, in which case a provision to write down investments in properties to fair value will be charged against income. At this time, the General Partners do not believe that any assets of the Partnership are materially impaired.
ITEM 8.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to 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 (50) Co-Chairman of the Board George Krupp (52) Co-Chairman of the Board Laurence Gerber (40) President Robert A. Barrows (39) Treasurer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group. Established in 1969 as the Krupp Companies, this real estate-based firm expanded over the years within its areas of expertise including investment program sponsorship, property and asset management, mortgage banking, healthcare facility ownership and the management of the Company. Today, The Berkshire Group is an integrated real estate, mortgage and healthcare company which is headquartered in Boston with regional offices throughout the country. A staff of approximately 3,400 are responsible for the more than $4 billion under management for institutional and individual clients. Mr. Krupp is a graduate of Bryant College. In 1989 he received an honorary Doctor of Science in Business Administration from this institution and was elected trustee in 1990. Mr. Krupp is Chairman of the Board and a Director of both Berkshire Realty Company, Inc. (NYSE-BRI) and Harborside Healthcare (NYSE-HBR). George Krupp is Douglas Krupp's brother.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group. Established in 1969 as the Krupp Companies, this real estate-based firm expanded over the years within its areas of expertise including investment program sponsorship, property and asset management, mortgage banking and healthcare facility ownership. Today, The Berkshire Group is an integrated real estate, mortgage and healthcare company which is headquartered in Boston with regional offices throughout the country. A staff of approximately 3,400 are responsible for more than $4 billion under management for institutional and individual clients. Mr. Krupp attended the University of Pennsylvania and Harvard University. Mr. Krupp also serves as Chairman of the Board and Trustee of Krupp Government Income Trust and as Chairman of the Board and Trustee of Krupp Government Income Trust II.
Laurence Gerber is the President and Chief Executive Officer of The Berkshire Group. Prior to becoming President and Chief Executive Officer in 1991, Mr. Gerber held various positions with The Berkshire Group which included overall responsibility at various times for: strategic planning and product development, real estate acquisitions, corporate finance, mortgage banking, syndication and marketing. Before joining The Berkshire Group in 1984, he was a management consultant with Bain & Company, a national consulting firm headquartered in Boston. Prior to that, he was a senior tax accountant with Arthur Andersen & Co., an international accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics 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 also serves as Director of Berkshire Realty Company, Inc. (NYSE-BRI) and Harborside Healthcare Corporation (NYSE-HBR) as well as President and Trustee of Krupp Government Income Trust and President and Trustee of Krupp Government Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer of The Berkshire Group. Mr. Barrows has held several positions within The Berkshire Group since joining the company in 1983 and is currently responsible for accounting and financial reporting, treasury, tax, payroll and office administrative activities. Prior to joining The Berkshire Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in Boston. He received a B.S. degree from Boston College and is a Certified Public Accountant.
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, 1996, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's 4,000,100 outstanding Units. The only interests held by management or its affiliates consist of its General Partner and Corporate Limited Partner Interests.
PART IV
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or nominees for election as director. Additionally, as of December 31, 1996, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units. 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 thisreport.
2. Financial Statement Schedule - see Index to Financial Statements and Schedules 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 FinancialStatements 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 July 3, 1985 [Exhibit A to Prospectus included in Amendment No. 1 of Registrant's Registration Statement on Form S-11 (File 2-97467)].*
(4.2)13th Amendment of Certificate of Limited Partnership filed with the Massachusetts Secretary of State on March 14, 1986. [Exhibit 4.2 to Registrant's Report on Form 10-K for the year ended December 31, 1985 (File 2-97467)].*
(10) Material Contracts:
Luria's Plaza
(10.1) Purchase and Sale Agreement, dated August 27, 1985, between Douglas Krupp and Florida Vero Beach Ltd., Altman/Ranzau & Associates No. II, Northwest Military Associates Joint Venture, and Lockhill-Selma Associates Joint Venture and related exhibits [Exhibit 1 to Registrant's Report on Form 8-K dated October 31, 1985 (File No. 2-97467)].*
(10.2) Assignment of Purchase and Sale Agreement from Douglas Krupp to VB Holding Company [Exhibit 2 to Registrant's Report on Form 8-K dated October 31, 1985 (File No. 2-97467)].*
(10.3) Special Warranty Deed between Florida Vero Beach Ltd. and VB Holding Company dated September 12, 1985 [Exhibit 3 to Registrant's Report on Form 8-K dated October 31, 1985 (File No. 2-97467)].*
(10.4) Special Warranty Deed between VB Holding Company and George Krupp and Douglas Krupp dated September 13, 1985 [Exhibit 4 to Registrant's Report on Form 8-K dated October 31, 1985 (File No. 2-97467)].*
(10.5) Special Warranty Deed between George Krupp and Douglas Krupp and Krupp Cash Plus Limited Partnership dated November 1, 1985 [Exhibit 5 to Registrant's Report on Form 8-K dated October 31, 1985 (File No. 2-97467)].*
(10.6) Management Agreement dated November 1, 1985 between Krupp Cash Plus 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 October 31, 1985 (File No. 2-97467)].*
(10.7) Ground Lease Agreement dated September 16, 1987 between Krupp Cash Plus Limited Partnership, as Lessee and Donald G. Robinson, Sr., Ruth M. Robinson, Donald G. Robinson, Jr. and Lisa H. Robinson, collectively as Lessor. [Exhibit 10.7 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 0- 14393)].*
(10.8) Purchase and Sale Agreement between VB Holding Company and Gilbert Bieger dated September 21, 1993 [Exhibit 10.8 to Registrant's report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-14393)].*
High Point National Furniture Mart
(10.9) Purchase and Sale Agreement, dated April 25, 1986 between Douglas Krupp on behalf of himself and others and Byron Investments, Inc. [Exhibit 1(c) to Registrant's Report on Form 8-K dated May 16, 1986 (File No. 2-97467)].*
(10.10)Assignment of Purchase and Sale Agreement from Douglas Krupp to Krupp Cash Plus Limited Partnership [Exhibit 2(c) to Registrant's Report on Form 8-K dated May 16, 1986 (File No. 2-97467)].*
(10.11)North Carolina Special Warranty Deed from Byron Investments, Inc. to Krupp Cash Plus Limited Partnership [Exhibit 3(c) to Registrant's Report on Form 8-K dated May 16, 1986 (File No. 2- 97467)].*
(10.12)Management Agreement dated May 16, 1986 between Krupp Cash Plus Limited Partnership, as Owner and BPM, as Agent [Exhibit 10.14 to Registrant's Report on Form 10-K dated December 31, 1986 (File No. 0-14393)].*
Tradewinds Shopping Center
(10.13)Purchase and Sale Agreement dated May 16, 1986 between Douglas Krupp on behalf of himself and others and Ronald J. Benach and Stewart L. Grill, as liquidating agents under a Liquidating Trust Agreement dated May 15, 1986 [Exhibit 1(c) to Registrant's Report on Form 8-K dated May 30, 1986 (File No. 2-97467)].*
(10.14)Assignment of Purchase and Sale Agreement from Douglas Krupp to Krupp Cash Plus Limited Partnership dated May 27, 1986. [Exhibit 2(c) to Registrant's Report on Form 8-K dated May 30, 1986 (File No. 2-97467)].*
(10.15)Trustee's Deed dated May 27, 1986 from First Bank of Oak Park to Krupp Cash Plus Limited Partnership [Exhibit 3(c) to Registrant's Report on Form 8-K dated May 30, 1986 (File No. 2-97467)].*
(10.16)Management Agreement dated September 1, 1986 between Krupp Cash Plus Limited Partnership, as Owner and BPM, as Agent. [Exhibit 10.18 to Registrant's Report on Form 10-K dated December 31, 1986 (File No. 0-14393)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996, 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 27th day of March, 1997.
KRUPP CASH PLUS LIMITED PARTNERSHIP
By:The Krupp Corporation,a General Partner
By:/s/ Douglas Krupp Douglas 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 27th day of March, 1997.
Signatures Titles
/s/ Douglas Krupp Co-Chairman (Principal Executive Douglas Krupp Officer) and Director of The Krupp Corporation (a General Partner of the Registrant)
/s/ George Krupp Co-Chairman (Principal Executive George Krupp Officer)and Director of The Krupp Corporation (a General Partner of the Registrant)
/s/ Laurence Gerber President of The Krupp Corporation (a Laurence Gerber General Partner of the Registrant)
/s/ Robert A. Barrows Treasurer of The Krupp Corporation (a Robert A. Barrows General Partner of the Registrant)
APPENDIX A
KRUPP CASH PLUS 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, 1996
KRUPP CASH PLUS LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Balance Sheets at December 31, 1996 and December 31, 1995
Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994
Statements of Changes in Partners' Equity for the Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements -
Schedule III - Real Estate and Accumulated DepreciationF-13 -
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 Limited Partnership:
We have audited the financial statements and the financial statement schedule of Krupp Cash Plus 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 Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 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 January 31, 1997
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The per Unit distributions for the years ended December 31, 1996, 1995, and 1994 were $.55, $.55 and $.54, respectively.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A.Organization
Krupp Cash Plus Limited Partnership (the "Partnership") was formed on April 30, 1985 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. The Partnership 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 issued 100 Limited Partner Interests to the Corporate Limited Partner, Krupp Depositary Corporation (the "Depositary"/"Corporate Limited Partner") in exchange for a capital contribution of $2,000. The Partnership also issued an additional 4,000,000 Limited Partner Interests to the Corporate Limited Partner, who, in turn, issued Depositary Receipts ("Units") to the investors and assigned all of its rights and interest in the Limited Partner Interests (except for its $2,000 Limited Partners Interest) to the holders of Depositary Receipts ("Unitholders"). As of March 14, 1986, the Partnership completed its public offering having sold 4,000,000 Units for $79,934,364, net of purchase volume discounts of $65,636.
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 J). Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market funds with commercial banks. The Partnership has not experienced any losses to date on its invested cash.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and 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
Leases require the payment of base rent monthly in advance. Rental revenues are recorded on the accrual basis. 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 for long term commercial leases is recognized on a straight-line basis over the life of the related lease.
Leasing Commissions Leasing commissions 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 estimated useful lives as follows:
Buildings and improvements 3 to 25 years Appliances, carpeting and equipment3 to 5 years
Tenant improvements are depreciated over the life of the related lease.
Impairment of Long-Lived Assets
In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate assets.
The investments in properties are carried at cost less accumulated depreciation unless the General Partners believe there is a material impairment in value, in which case a provision to write down investments in properties to fair value will be charged against income. At this time, the General Partners do not believe that any assets of the Partnership are materially impaired.
Mortgage-Backed Securities
MBS are held for long-term investment and are carried at amortized cost. Premiums and 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 Partnership 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, 1996 and 1995 consist of the following:
At December 31, 1996, 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 1997. At December 31, 1996, the carrying value of the Partnership's investment in commercial paper approximates fair value.
D.Mortgage-Backed Securities
The MBS held by the Partnership are issued by both the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The following is additional information on the MBS held as of December 31, 1996 and 1995:
Coupon rates of the MBS range from 8.5% to 9.0% per annum and mature in the years 2008 through 2017. The Partnership's MBS portfolio had gross unrealized gains of approximately $143,000 and $283,500 at December 31, 1996 and 1995, respectively and no unrealized losses. Currently, the Partnership does not expect to realize these gains as it has the ability to hold the MBS until maturity.
E.Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following at December 31, 1996 and 1995:
F. Partners' Equity
Under the Partnership Agreement, 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 net cash proceeds (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, net cash proceeds will be distributed as follows: 1) to the Limited Partners until they have received a return of their total invested capital; 2) to the General Partners until they have received a return of their total invested capital; 3) to the Limited Partners until the Limited Partners have received any deficiency in their 12% cumulative return on invested capital through fiscal years prior to the date of the capital transaction; 4) to the General Partners until amounts allocated under items three and four have been paid in an 85% - 15% ratio, and 5) 85% to the Limited Partners and 15% to the General Partners.
As of December 31, 1996, the following cumulative Partner contributions and allocations have been made since inception of the Partnership:
G. Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties, the Partnership entered into agreements under which property management fees are paid 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, net of leasing commissions from commercial 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 accounting, computer, insurance, travel, legal and payroll; and with the preparation and mailing of reports and other communications to the Unitholders.
Amounts paid to the General Partners or their affiliates during the years ended December 31, 1996, 1995 and 1994 were as follows:
Due to affiliates consists of expense reimbursements of $26,735 amd $0, as of December 31, 1996 and 1995, respectively.
H. Future Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases for the years 1997 through 2001 and thereafter are as follows:
1997 $4,146,100 1998 3,152,300 1999 2,271,800 2000 1,896,500 2001 1,628,200 Thereafter 5,864,600 I. Leases
The Partnership is subject to a ground lease for a parcel of land adjoining Luria's Plaza. The initial term of the non-cancelable operating lease is twenty years commencing October 1, 1987. During the first ten-year period of the lease, annual rent will be $24,048, payable in equal monthly installments, and during the second ten-year period the annual rent will be $28,248, payable in equal monthly installments. The lease also provides for its renewal under four five-year option periods. Total rental expense related to the ground lease, charged to operations for each of the three years ended December 31, 1996, 1995 and 1994 was $24,048.
J. 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 for each year reported in the accompanying Statement of Operations with the income reported in the Partnership's 1996, 1995 and 1994 federal income tax return is as follows:
The allocation of the net income for federal income tax purposes for 1996 is as follows:
For the years ended December 31, 1996, 1995 and 1994 the average per Unit income to the Unitholders for federal income tax purposes was $.42, $.45 and $.29, respectively. The basis of the Partnership's assets for financial reporting purposes is less than its tax basis by approximately $656,900 and $248,900 at December 31, 1996 and 1995, respectively. The tax and book bases of the Partnership's liabilities are the same.
KRUPP CASH PLUS LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1996
Continued
KRUPP CASH PLUS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued December 31, 1996
Reconciliation of Real Estate and Accumulated Depreciation for each of the three years in the period ended December 31, 1996:
1996 1995 1994 Real Estate
Balance at beginning of year$45,380,739$44,284,245 $43,319,125
Disposal - - (72,585)
Improvements 870,133 1,096,494 1,037,705
Balance at end of year $46,250,872 $45,380,739 $44,284,245
1996 1995 1994
Accumulated Depreciation
Balance at beginning of year$15,298,268$13,258,690 $11,397,015
Disposal - - (72,585)
Depreciation expense 2,044,485 2,039,578 1,934,260
Balance at end of year $17,342,753 $15,298,268 $13,258,690
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 and other material liens or encumbrances. The aggregate cost for federal income tax purposes at December 31, 1996 is $46,680,522 and the aggregate accumulated depreciation for federal income tax purposes was $17,115,507 for the year ended December 31, 1996.