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 ncluded 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) and mortgage backed securities ("MBS") issued by the Government National Mortgage Association ("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") (see Note E to Financial Statements, included in Item 8 (Appendix A) of this report). The Partnership considers itself to be engaged only in the industry segment of investment in real estate and related assets.
The Partnership's real estate investments are subject to some seasonal fluctuations, resulting from changes in utility consumption, seasonal maintenance expenditures and changes in retail rental income based on the percentage of tenant gross receipts.
On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the General Partners, as agent for the Partnership entered into an Agreement of Sale to sell all of the Partnership's properties to Kejack, Inc. and its permitted assigns, which are unaffiliated third parties. Luria's Plaza, a shopping center containing 156,452 leasable square feet located in Vero Beach, Florida, Tradewinds Shopping Center, a shopping center containing 212,898 leasable square feet located in Hanover Park, Illinois and High Point Furniture Mart, a furniture wholesale center containing 242,722 leasable square feet located in High Point, North Carolina, were included in a package with eleven 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 $31,247,100 for the sale of its properties, less its share of the closing costs. The transaction was consummated subsequent to year end, on January 30, 1998.
The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partners expect to liquidate and distribute the remaining assets of the Partnership in 1998 (see Note L to the Financial Statements, included in Item 8 (Appendix A) of this report).
As of December 31, 1997, there were 7 full and part-time on-site personnel employed by the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1997, the Partnership had unleveraged investments in three retail centers containing an aggregate of 612,072 square feet of leasable area. Additional detailed information with respect to individual properties can be found in Schedule III included in Item 8 (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, 1997.
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, 1997 was approximately 5,100.
The Partnership has made the following distributions to its Partners during the years ended December 31, 1997 and 1996. Year Ended December 31,
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. 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, 1997, 1996, 1995, 1994 and 1993, the Unitholders' average per Unit return of capital calculated based on the Distributable Cash Flow, as defined by Section 17 of the Partnership Agreement, was $0, $0, $0, $.11 and $.68, respectively.
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. Cash flow, if any, as calculated under Section 17 of the Partnership Agreement, will then be available for distribution to the Partners.
The Partnership continuously strives to improve net income, maintain high occupancy and retain quality tenants at its retail centers. However, to attain these objectives, the Partnership has found it necessary to fund a significant portion of tenant buildouts.
The Partnership completed improvements at High Point National Furniture Mart ("High Point")_ in 1996 which were necessary to reconfigure space for new tenants and comply with present building code standards. Enhancements to the exterior of the building were completed during the third quarter of 1997. The refurbished show room spaces and building exterior have enabled the property to command higher rents and maintain 100% occupancy.
At Tradewinds Shopping Center ("Tradewinds"), management has negotiated the expansion of an anchor tenant from its original 50,181 square foot space to 66,000 square feet. The Partnership and the tenant each spent approximately $4,200,000 for the buildout, with the Partnership funding exterior improvements and the tenant funding interior renovation specifications. The project was completed in the fourth quarter of 1997 and the tenant reopened in December 1997. The Partnership utilized its cash reserves to fund the expansion.
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. At December 31, 1997, the Partnership recorded unrealized holding gains on its MBS of $169,521 to adjust the investments to market value (see Note E to the Financial Statements, included in 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 AgeThe Krupp Corporation
Douglas Krupp (51) President and Co-Chairman of the Board George Krupp (53) Co-Chairman of the Board Wayne H. Zarozny (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. 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). 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. 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. Mr. Krupp received his undergraduate education from the University of Pennsylvania and Harvard University Extension School and holds a Master's Degree in History from Brown University.
Wayne H. Zarozny is Vice President of The Berkshire Group. Mr. Zarozny has held several positions within The Berkshire Group since joining the company in 1986 and is currently responsible for accounting and financial reporting, treasury, accounts payable and payroll activities. Prior to joining The Berkshire Group, he was an audit supervisor for Pannell Kerr Forster International and on the audit staff of Deloitte, Haskins and Sells in Boston. He received a B.S. degree from Bryant College, a Master's degree in Business Administration from Clark University 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, 1997, beneficial owners of record owning more than 5% of the Partnership's 4,000,100 outstanding Depositary Receipts are as follows:
Title Name and Address Amount and Nature Percent of of of of Class Beneficial Owner Beneficial Ownership Class
Depositary AP-GP Prom Partners, Receipts Inc. 2 Manhattanville Rd. Purchase, NY 10577 274,125.13 Units 6.85%
Depositary Apollo Real Estate Receipts Advisors II, LP 2 Manhattanville Rd. Purchase, NY 10577 274,125.13 Units 6.85%
Depositary Apollo Real Estate Receipts Investment Fund II, LP 2 Manhattanville Rd. Purchase, NY 10577 274,125.13 Units 6.85%
Depositary Krescent Partners LLC Receipts 2 Manhattanville Rd. Purchase, NY 10577 274,125.13 Units 6.85%
Total 1,096,500.52 Units 27.40%
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, 1997, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units.
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 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 ofhimself 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, 1997, 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 24th day of March, 1998.
KRUPP CASH PLUS LIMITED PARTNERSHIP
By: The Krupp Corporation, a General Partner
By: /s/ Douglas Krupp Douglas Krupp, President, 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 24th day of March, 1998.
Signatures Titles
/s/ Douglas Krupp President, Co-Chairman (Principal Douglas Krupp Executive 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/ Wayne H. Zarozny Treasurer of The Krupp Corporation (a Wayne H. Zarozny 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, 1997
KRUPP CASH PLUS LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Balance Sheets at December 31, 1997 and December 31, 1996
Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995
Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 -
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 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, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 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.
As discussed in Note L, the Partnership's remaining properties were sold on January 30, 1998. As a result, the Partnership will be liquidated in 1998.
Boston, Massachusetts COOPERS & LYBRAND L.L.P. January 30, 1998
KRUPP CASH PLUS LIMITED PARTNERSHIP
BALANCE SHEETS December 31, 1997 and 1996
The accompanying notes are an integral part of the financial statements.
KRUPP CASH PLUS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS For the Years Ended December 31, 1997, 1996 and 1995
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 1997, 1996 and 1995
The per Unit distributions for each of the years ended December 31, 1997, 1996, and 1995 was $.55, none of which represents a return of capital for tax purposes.
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1997, 1996 and 1995
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS, Continued For the Years Ended December 31, 1997, 1996 and 1995
Supplemental schedule of noncash investing and financing activities:
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 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.
On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the General Partners, as agent for the Partnership entered into an Agreement of Sale to sell all of the remaining Partnership's properties to Kejack, Inc. and its permitted assigns, which are unaffiliated third parties. The Partnership's properties were included in a package with eleven other properties owned by affiliates of the General Partners. The transaction was consummated subsequent to year end, on January 30, 1998 (see Note L).
The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partners expect to liquidate and distribute the remaining assets of the Partnership in 1998. All distributions of net cash proceeds from the Terminating Capital Transaction shall be governed by Section 8.3 (b) of the Partnership Agreement.
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).
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.
Continued
KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
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 equipment 3 to 8 years
Tenant improvements are depreciated over the life of the related lease.
Mortgage-Backed Securities
At December 31, 1997, MBS are classified as available-for-sale securities and are carried at market value due to the forthcoming sale of all the Partnership's properties (see Notes E and L). The market value of MBS is determined based on quoted market prices. At December 31, 1996, MBS were classified as held-to-maturity securities and carried at amortized cost. Premiums or discounts are amortized over the life of the underlying mortgages using the effective yield method.
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.
C. Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1997 and 1996 consisted of the following:
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
D. Provisions for Losses on Real Estate
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", the Partnership recorded valuation provisions for losses on its real estate assets of $4,689,099 at December 31, 1997. These provisions represent the difference between carrying values and selling prices less estimated costs to sell as a result of the forthcoming sale of the Partnership's properties subsequent to year end (see Note L). As these assets are held for sale, the Partnership discontinued depreciation.
E.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, 1997 and 1996:
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 $169,521 and $142,952 at December 31, 1997 and 1996, respectively and no unrealized losses.
In accordance with Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities", unrealized holding gains and losses for available-for-sale securities are reported as a separate component of equity until realized. At December 31, 1997, the Partnership recorded unrealized holding gains of $169,521 on its MBS investments to adjust to market value, based on quoted market prices.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following at December 31, 1997 and 1996:
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
G. 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.
Upon the occurrence of a terminating 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 each class of Partners, the aggregate of the then positive balances in the capital accounts of the Partners of such class, second, to the Limited Partners until the aggregate of the positive balances in the capital accounts of the Limited Partners is equal to their invested capital, third, to the General Partners until the aggregate of the positive balances in the capital accounts of the General Partners is equal to their invested capital, fourth, 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 terminating capital transaction, fifth, 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 sixth, 85% to the Limited Partners and 15% to the General Partners.
As of December 31, 1997, the following cumulative Partner contributions and allocations have been made since inception of the Partnership:
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
H.Related Party Transactions
The Partnership pays property management fees to an affiliate of the General Partners for management services. Pursuant to the agreements, management fees are payable monthly at a 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 administrative expenses.
Amounts accrued or paid to the General Partners' affiliates during the years ended December 31, 1997, 1996 and 1995 were as follows:
Due to affiliates consisted of expense reimbursements of $26,735 at December 31, 1996.
I. Future Base Rents Due Under Commercial Operating Leases
As a result of the sale of the Partnership's properties subsequent to year end, all commercial operating leases were assumed by the buyer (see Note L).
J. Ground Lease
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 the years ended December 31, 1997, 1996 and 1995 was $25,098, $24,048 and $24,048, respectively. Under the terms of the ground lease, the lessee may assign its rights to a subsequent purchaser of the property (see Note L).
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
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 (loss) for each year reported in the accompanying Statement of Operations with the income reported in the Partnership's 1997, 1996 and 1995 federal income tax return is as follows:
For the years ended December 31, 1997, 1996 and 1995 the average per Unit income to the Unitholders for federal income tax purposes was $.33, $.42 and $.45, respectively.
The basis of the Partnership's assets for financial reporting purposes is less than its tax basis by approximately $5,497,000 and $656,900 at December 31, 1997 and 1996, respectively. The basis of the Partnership's liabilities for financial reporting purposes exceeds its tax basis by approximately $85,000 and $0 at December 31, 1997 and 1996, respectively.
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, Continued
L. Subsequent Events
The sale of the Partnership's remaining properties, as discussed in Note A, was consummated on January 30, 1998. The total selling price of the fourteen properties was $138,000,000, of which the Partnership received $31,247,100 for the sale of its properties, less its share of the closing costs. The ground lease, discussed in Note J, was assigned to the buyer in conjunction with the sale.
The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partners expect to liquidate and distribute the remaining assets of the Partnership in 1998. All distributions of net cash proceeds from the Terminating Capital Transaction shall be governed by Section 8.3(b)of the Partnership Agreement as discussed above in Note G.
As a result of the sale of all the Partnership's properties on January 30, 1998, the Partnership filed a report on Form 8-K on February 2, 1998.
KRUPP CASH PLUS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1997
Continued KRUPP CASH PLUS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued December 31, 1997
The aggregate cost for federal income tax purposes at December 31, 1997 is $51,228,677 and the aggregate accumulated depreciation for federal income tax purposes was $18,896,993 for the year ended December 31, 1997.