-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AkPww1e/+PvDRVo1ELpnO1G0XpYkz6DMbgVsb6wBj3UIesM8wFWoN9x9RL5BpEfv EQ1aVFoIzJ4HG+DxWA8mOA== 0000702117-96-000014.txt : 19961107 0000702117-96-000014.hdr.sgml : 19961107 ACCESSION NUMBER: 0000702117-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP REALTY FUND LTD III CENTRAL INDEX KEY: 0000702117 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042763323 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11210 FILM NUMBER: 96654891 BUSINESS ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVENUE STREET 2: C/O BERKSHIRE REALTY AFFILIATES CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-11210 Krupp Realty Fund, Ltd.-III Massachusetts 04-2763323 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I. FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS
September 30, December 31, 1996 1995 Multi-family apartment complexes, less accumulated depreciation of $17,796,589 and $16,460,550, respectively $11,685,669 $12,329,503 Cash and cash equivalents 434,138 654,696 Required repair and replacement reserves 208,499 202,349 Cash restricted for tenant security deposits 172,115 202,950 Prepaid expenses and other assets 549,066 596,254 Deferred expenses, net of accumulated amortization of $155,609 and $121,192, respectively 363,975 398,392 Total assets $13,413,462 $14,384,144 LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable $19,578,227 $19,826,061 Accounts payable 8,215 54,170 Accrued expenses and other liabilities 659,471 654,603 Total liabilities 20,245,913 20,534,834 Partners' deficit (Note 2): Investor Limited Partners (25,000 Units outstanding) (5,628,933) (4,981,262) Original Limited Partner (899,100) (871,828) General Partners (304,418) (297,600) Total Partners' deficit (6,832,451) (6,150,690) Total liabilities and Partners' deficit $13,413,462 $14,384,144
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 Revenue: Rental $1,642,708 $1,555,939 $4,895,567 $4,708,791 Other income 15,061 4,950 46,805 44,704 Total revenue 1,657,769 1,560,889 4,942,372 4,753,495 Expenses: Operating (Note 3) 516,207 420,282 1,468,038 1,240,487 Maintenance 163,400 147,596 378,602 400,060 General and administrative (Note 3) 21,236 60,499 59,259 91,699 Real estate taxes 136,452 127,272 383,335 385,744 Management fees (Note 3) 82,819 79,256 243,711 237,497 Depreciation and amortization 477,649 434,880 1,370,456 1,282,763 Interest 432,583 461,835 1,303,361 1,325,039 Total expenses 1,830,346 1,731,620 5,206,762 4,963,289 Net loss $ (172,577) $ (170,731) $ (264,390) $ (209,794) Allocation of net loss (Note 2): Investor Limited Partner (25,000 Units outstanding) $ (163,949) $ (162,195) $ (251,171) $ (199,304) Per Unit of Investor Limited Partner Interest $ (6.56) $ (6.48) $ (10.05) $ (7.97) Original Limited Partner $ (6,902) $ (6,829) $ (10,575) $ (8,392) General Partners $ (1,726) $ (1,707) $ (2,644) $ (2,098)
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 1995 Operating activities: Net loss $ (264,390) $ (209,794) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,370,456 1,282,763 Decrease (increase) in cash restricted for tenant security deposits 30,835 (6,627) Decrease (increase) in prepaid expenses and other assets 47,188 (44,780) Decrease in accounts payable (48,699) (21,479) Increase (decrease) in accrued expenses and other liabilities 4,868 (35,472) Net cash provided by operating activities 1,140,258 964,611 Investing activities: Additions to fixed assets (692,205) (831,740) Funding to replacement reserve (6,150) (46,422) Decrease in required repairs and replacement reserves - 316,195 Increase in accounts payable related to fixed asset additions 2,744 - Net cash used in investing activities (695,611) (561,967) Financing activities: Distributions (417,371) (313,150) Principal payments on mortgage notes payable (247,834) (226,636) Net cash used in financing activities (665,205) (539,786) Net decrease in cash and cash equivalents (220,558) (137,142) Cash and cash equivalents, beginning of the period 654,696 836,785 Cash and cash equivalents, end of the period $ 434,138 $ 699,643
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp Realty Fund, Ltd.-III, (the "Partnership"), the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Consolidated Financial Statements included in the Partnership's annual Report on Form 10-K for the year ended December 31, 1995 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Partnership's financial position as of September 30, 1996, its results of operations for the three and nine months ended September 30, 1996 and 1995 and its cash flows for the nine months ended September 30, 1996 and 1995. Certain prior year balances have been reclassified to conform with the current year consolidated financial statement presentation. The results of operations for the three and nine months ended September 30, 1996 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. (2) Summary of Changes in Partners' Deficit A summary of changes in Partners' Deficit for the nine months ended September 30, 1996 is as follows:
Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit Balance at December 31, 1995 $(4,981,262) $(871,828) $(297,600) $(6,150,690) Net loss (251,171) (10,575) (2,644) (264,390) Distributions (396,500) (16,697) (4,174) (417,371) Balance at September 30, 1996 $(5,628,933) $(899,100) $(304,418) $(6,832,451)
Continued KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (3) 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 a rate of 5% of the gross receipts from the 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 Limited Partners. Amounts accrued or paid to the General Partners or their affiliates are as follows:
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 Property management fees $ 82,819 $ 79,256 $243,711 $237,497 Expense reimbursements 48,456 41,685 145,936 87,542 Charged to operations $131,275 $120,941 $389,647 $325,039
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources 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. Such ability is also dependent upon the future availability of bank borrowings and the potential refinancing and sale of the Partnership's remaining real estate investments. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, capital expenditures, debt service and expenses. Cash Flow, if any, as calculated under Section 8.2(a) of the Partnership Agreement, will then be available for distribution to the Partners. Due to improvements in the operations of the properties, the Partnership has sufficient Cash Flow to increase semi-annual distributions from an annual rate of $11.90 per Unit in 1995, to an annual rate of $15.86 per Unit in 1996. The Partnership has spent approximately $692,000 for capital improvements at its properties to date this year. The Partnership believes that the improvements are necessary to compete with current market conditions, produce quality rental units and absorb excess market supply at the properties' respective locations. Renovations have included the replacement of countertops, carpeting, appliances, and exterior painting and paving at Hannibal Grove. Improvements are expected to continue throughout the remainder of the year. Cash Flow Shown below, as required by the Partnership Agreement, is the calculation of Cash Flow of the Partnership for the nine months ended September 30, 1996. The General Partners provide certain of the information below to meet requirements of the Partnership Agreement and because they believe that it is an appropriate supplemental measure of operating performance. However, Cash Flow should not be considered by the reader as a substitute to net income (loss), as an indicator of the Partnership's operating performance or to cash flow as a measure of liquidity.
Rounded to $1,000 Net income for tax purposes $ 62,000 Items not requiring or (requiring) the use of operating funds: Tax basis depreciation and amortization 1,044,000 Principal payments on mortgage notes payable (248,000) Expenditures for capital improvements (692,000) Releases from working capital reserves 251,000 Cash Flow $ 417,000
Continued KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY Operations Cash Flow, net of working capital reserves, increased during the nine months ended September 30, 1996 as compared to the nine months ended September 30, 1995, primarily due to a decrease in capital improvement expenditures. Rental revenue increased for the three and nine months ended September 30, 1996, as compared to the three and nine months ended September 30, 1995, as a result of increased rental rates at the Partnership's properties. During the same periods, other income also increased due to higher cash and cash equivalent balances available for investment. During the three months ended September 30, 1996, total expenses increased as compared to the three months ended September 30, 1995, due to increases in operating and real estate tax expenses, partially offset by a decrease in general and administrative expense. The increase in operating expense is due to an adjustment of 1994 reimbursable expenses recorded in 1995, relating to the operation of the Partnership and its properties. Real estate taxes increased due to higher property assessments. General and administrative expense decreased as a result of costs incurred in 1995 relating to the valuation of the Partnership's properties. For the nine months ended September 30, 1996, total expenses increased, as compared to the same period in 1995, due to an increase in operating expense, partially offset by decreases in both real estate tax and general and administrative expenses. Operating expense increased due to greater utility consumption as a result of the unusually harsh winter weather, prior years' insurance refunds received in 1995, and an increase in reimbursable expenses, as described above. The decrease in real estate tax expense is the result of a 1995 real estate tax refund for Dorsey's Forge received in 1996, partially offset by a rise in property assessments. General and administrative expenses also decreased as discussed above. Depreciation expense for the three and nine months ended September 30, 1996, as compared to the three and nine months ended September 30, 1995, increased in conjunction with capital improvement expenditures. 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 significant 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 significantly impaired. KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6. Exhibits and Reports on Form 8-K Response: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Realty Fund, Ltd. - III (Registrant) BY: /s/Robert A. Barrows Robert A. Barrows Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner. DATE: November 5, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Krupp Realty Fund III Financial Statement for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1996 SEP-30-1996 814,752 0 32,278 0 0 516,788 30,001,842 17,952,198 13,413,462 677,686 19,578,227 0 0 (6,832,451) 0 13,413,462 4,942,372 4,942,372 0 0 3,903,401 0 1,303,361 (264,390) 0 (264,390) 0 0 0 (264,390) 0 0 Includes apartment complexes of $29,482,258 and deferred expenses of $519,584. Includes depreciation of $17,796,589 and amortization of deferred expenses of $155,609. Represents mortgage note payable. Represents total equity of general partners ($304,418) and limited partners ($6,528,033). Includes operating expenses of $2,149,610, real estate taxes of $383,335 and depreciation/amortization of $1,370,456. Net loss allocated ($2,644) to general partners and ($261,746) to limited partners for the nine months ended 9/30/96. Average net loss ($10.05) per unit for 25,000 units outstanding.
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