-----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, QyXqDYq59ksTaukp10EHy35xM9TeZvFamYqlJDFTY7j8SIhf8a4UKw7aWHUauQY2 8WqqM3CFOkFXdjzggTF6dw== 0000710389-98-000007.txt : 19981113 0000710389-98-000007.hdr.sgml : 19981113 ACCESSION NUMBER: 0000710389-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP REALTY LTD PARTNERSHIP IV CENTRAL INDEX KEY: 0000710389 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042772783 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11987 FILM NUMBER: 98745521 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: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-11987 Krupp Realty Limited Partnership-IV Massachusetts 04-2772783 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The total number of pages in this document is 11. 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 LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
(Unaudited) September 30,December 31, 1998 1997 Multi-family apartment complexes, net of accumulated depreciation of $22,845,549 and $26,859,567, respectively (Note 3) $ 11,791,842$ 14,947,503 Cash and cash equivalents 691,373 402,621 Replacement reserve and repair escrows (Note 3) - 302,985 Prepaid expenses and other assets 652,500 852,446 Deferred expenses, net of accumulated amortization of $240,464 and $218,977, respectively (Notes 2 and 3) 106,574 212,763 Total assets $ 13,242,289$ 16,718,318 LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable (Notes 2 and 3)$ 17,121,424$ 20,327,586 Due to affiliates (Note 5) 35,608 41,571 Other liabilities 831,034 1,212,728 Total liabilities 17,988,066 21,581,885 Partners' deficit (Note 4): Investor Limited Partners (30,000 Units outstanding) (3,067,782) (3,216,956) Original Limited Partner (1,371,986)(1,339,425) General Partners (306,009) (307,186) Total Partners' deficit (4,745,777) (4,863,567) Total liabilities and Partners' deficit $ 13,242,289$ 16,718,318
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Revenue: Rental $1,724,372 $1,935,670$5,343,503$5,726,699 Other income 15,542 10,910 84,641 38,399 Total revenue 1,739,914 1,946,580 5,428,144 5,765,098 Expenses: Operating (Note 5) 395,129 547,691 1,461,661 1,633,227 Maintenance 195,375 161,956 443,932 531,447 Real estate taxes 164,766 195,709 532,291 571,073 Management fees (Note 5) 57,808 73,105 214,359 227,960 General and administrative (Note 5) 33,246 31,799 101,065 113,292 Depreciation and amortization 448,532 545,199 1,328,182 1,569,882 Interest 272,609 333,062 882,728 973,345 Total expenses 1,567,465 1,888,521 4,964,218 5,620,226 Income before minority interest, gain (loss) on sale of property and extraordinary loss 172,449 58,059 463,926 144,872 Minority interest (1,841) (888) (4,213) (2,961) Gain (loss) on sale of property (Note 3) (2,196) - 2,965,743 - Income before extraordinary loss 168,412 57,171 3,425,456 141,911 Extraordinary loss from early extinguishment of debt (Note 3) - - (389,523) - Net income $ 168,412 $ 57,171 $3,035,933$ 141,911 Allocation of net income (Note 4): Investor Limited Partners (30,000 Units outstanding): Income before gain (loss) on sale of property and extraordinary loss $ 162,077 $ 54,313 $ 436,727$ 134,816 Gain (loss) on sale of property (2,174) - 2,936,086 - Extraordinary loss - - (370,047) - Net income $ 159,903$ 54,313 $3,002,766$ 134,816
Continued KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS, Continued (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Investor Limited Partners Per Unit: Income before gain (loss) on sale of property and extraordinary loss$ 5.41 $ 1.81 $ 14.56 $ 4.49 Gain (loss) on sale of property (.07) - 97.87 - Extraordinary loss - - (12.33) - Net income $ 5.34$ 1.81 $ 100.10 $ 4.49 Original Limited Partner (100 Units outstanding): Income before gain (loss) on sale of property and extraordinary loss $ 6,825 $ 2,286 $ 18,389 $ 5,676 Gain (loss) on sale of property - - - - Extraordinary loss - - (15,581) - Net income $ 6,825 $2,286 $ 2,808 $ 5,676 General Partners: Income before gain (loss) on sale of property and extraordinary loss$ 1,706 $ 572 $ 4,597 $ 1,419 Gain (loss) on sale of property (22) - 29,657 - Extraordinary loss - - (3,895) - Net income $ 1,684$ 572 $ 30,359 $ 1,419
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 1998 1997 Operating activities: Net income $ 3,035,933 $ 141,911 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,328,182 1,569,882 Interest earned on repair escrow (12,898) - Gain on sale of property (2,965,743) - Extraordinary loss from early extinguishment of debt 389,523 - Changes in assets and liabilities: Decrease in prepaid expenses and other assets 165,340 103,607 Decrease in other liabilities (381,854) (177,728) Increase (decrease) in due to affiliates (5,963) 21,181 Releases from real estate tax and insurance escrows due to sale of property 33,722 - Net cash provided by operating activities 1,586,242 1,658,853 Investing activities: Deposits to replacement reserve escrow (10,769) (947,146) Withdrawals from replacement reserve and repair escrows 315,159 113,120 Release from replacement reserve escrow due to sale of property 11,493 - Decrease in deferred expenses 3,191 - Additions to fixed assets (873,924) (725,092) Increase in other liabilities for fixed asset additions 160 427 Proceeds from sale of property, net 5,717,368 - Net cash provided by (used in) investing activities 5,162,678(1,558,691) Financing activities: Principal payments on mortgage notes payable(568,120)(571,581) Distributions (2,918,143)(1,178,851) Repayment of mortgage note payable (2,638,042)900,000 Payment of prepayment premium (335,863) (23,110) Net cash used in financing activities (6,460,168) (873,542) Net increase (decrease) in cash and cash equivalents 288,752 (773,380) Cash and cash equivalents, beginning of period402,621 956,012 Cash and cash equivalents, end of period $691,373 $ 182,632
The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES 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 Limited Partnership-IV and Subsidiaries (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, 1997 for additional information relevant to significant accounting policies followed by the Partnership. The consolidated financial statements present consolidated assets, liabilities and operations of Pavillion Partners, Ltd., Westbridge Partners, Ltd., and Krupp Realty Limited Partnership-IV. Westcop Corporation has a 1% interest in the operations of Westbridge Partners, Ltd. and Pavillion Partners, Ltd. At September 30, 1998, minority interest of $17,524 is included in other assets. In the opinion of the General Partners of the Partnership, the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly the Partnership's consolidated financial position as of September 30, 1998, its results of operations for the three and nine months ended September 30, 1998 and 1997 and its cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the three and nine months ended September 30, 1998 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. (2)Mortgage Notes Payable On July 31, 1997, the General Partners secured a $900,000 non-recourse note (the "Note") for Walden Pond Apartments ("Walden Pond") from the same lender which holds the first mortgage note. The Note bears interest at a rate of 9.5% per annum and, commencing September 1, 1997, requires monthly, interest-only payments until the maturity date. The Note matures on February 28, 1999, in conjunction with the first mortgage note, at which time all outstanding principal and any accrued interest is due. The Note may be prepaid in its entirety without penalty, upon 90 days written notice, and simultaneous payment of the first mortgage note. Proceeds from the Note were deposited into an escrow account and were used to fund capital improvements at the property. The Partnership paid closing costs of $23,110 to secure the Note. (3)Sale of Property On March 31, 1998, the Partnership sold Indian Run Apartments ("Indian Run"), a 256-unit multi-family apartment complex, located in Abilene, Texas, to an unaffiliated third party. The Partnership received $5,850,000, less repayment of the mortgage note payable and interest of $2,658,664 and closing costs of $132,632. For financial reporting purposes, the Partnership realized a gain of $2,965,743 on the sale. The gain was calculated as the difference between the property's selling price less net book value of the property and closing costs. Continued KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (3)Sale of Property, Continued In conjunction with the sale of the property on March 31, 1998, the Partnership prepaid the mortgage note. As a result of the retirement of debt, the Partnership incurred a prepayment premium of $335,863. The prepayment premium, as well as unamortized deferred mortgage costs of $53,660, are reported in the Statement of Operations as an extraordinary loss from early extinguishment of debt. (4)Changes in Partners' Deficit A summary of changes in Partners' deficit for the nine months ended September 30, 1998 is as follows:
Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit Balance at December 31, 1997$(3,216,956)$(1,339,425)$(307,186)$(4,863,567) Income before gain on sale of property and extraordinary loss 436,727 18,389 4,597 459,713 Gain on sale of property 2,936,086 - 29,657 2,965,743 Extraordinary loss (370,047) (15,581) (3,895) (389,523) Distributions: Operations (839,932) (35,369) (8,842) (884,143) Capital Transaction(2,013,660) - (20,340) (2,034,000) Balance at September 30, 1998$(3,067,782)$(1,371,986)$(306,009)$(4,745,777)
(5)Related Party Transactions The Partnership pays property management fees to an affiliate of the General Partners for management services. Pursuant to the management agreements, management fees are 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 administrative expenses. Amounts accrued or paid to the General Partners' affiliates were as follows:
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Property management fees $ 57,808 $ 73,105$ 214,359 $ 227,960 Expense reimbursements 70,781 68,177 180,423 198,691 Charged to operations $128,589 $141,282$ 394,782 $ 426,651
Due to affiliates consisted of expense reimbursements of $35,608 and $41,571 at September 30, 1998 and December 31, 1997, respectively. KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management's expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the operations of its remaining real estate investments. Such ability would also be impacted by the future availability of bank borrowings, and upon the future refinancing and sale of the Partnership's real estate investments. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, capital improvements, debt service and other expenses. In order to remain competitive in their respective markets, the Partnership's properties have spent approximately $874,000 to date and are anticipated to spend approximately $1,200,000 for fixed assets in 1998. These capital improvements consist of internal and external enhancements which include the replacement of appliances, carpeting and vinyl flooring at the properties as well as extensive building exterior improvements at Pavillion and Walden Pond Apartments. The Partnership expects to fund these improvements from established reserves and proceeds from the Walden Pond additional note and the sale of Indian Run (see Notes 2 and 3). On March 31, 1998, the Partnership sold Indian Run to an unaffiliated third party. The Partnership received $5,850,000, less repayment of the mortgage note payable and interest of $2,658,664 and closing costs of $132,633 (see Note 3). On June 24, 1998, the General Partners made a special capital distribution of approximately $67.12 per Unit, based on the net proceeds from the sale of Indian Run after funding capital improvements at the Partnership's remaining properties, Partnership liabilities and maintaining reserves for contingent liabilities. As a result of the sale of the property and future capital needs, the General Partners reduced the annual distribution rate to 2% of remaining invested capital, beginning with the distribution payable in August, 1998. Financial Accounting Standards Board Statement No. 130 ("FAS 130") "Reporting Comprehensive Income" is effective for fiscal years beginning after December 31, 1997, although earlier application is permitted. FAS 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. Financial Accounting Standards Board Statement No. 131 ("FAS 131") "Disclosures about Segments of an Enterprise and Related Information" establishes standards for disclosing measures for profit or loss and total assets for each reportable segment. FAS 131 is effective for fiscal years beginning after December 15, 1997. The General Partners do not believe that the implementation of FAS 130 or FAS 131 will have a material impact on the Partnership's financial statements. Continued KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES Liquidity and Capital Resources, Continued The General Partners of the Partnership have conducted an assessment of the Partnership's core internal and external computer information systems and have taken the further necessary steps to understand the nature and extent of the work required to make its systems Year 2000 ready in those situations in which it is required to do so. The Year 2000 readiness issue concerns the inability of computerized information systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and all organizations. In this regard, the General Partners of the Partnership, along with certain affiliates, began a computer systems project in 1997 to significantly upgrade its existing hardware and software. The General Partners completed the testing and conversion of the financial accounting operating systems in February 1998. As a result, the General Partners have generated operating efficiencies and believe their financial accounting operating systems are Year 2000 ready. The Partnership incurred hardware costs as well as consulting and other expenses related to the infrastructure and facilities enhancements necessary to complete the upgrade and prepare for the Year 2000. There are no other systems or software that the Partnership is using at the present time. The General Partners of the Partnership are in the process of evaluating the potential adverse impact that could result from the failure of material third-party service providers (including but not limited to its banks and telecommunications providers) and significant vendors to be Year 2000 ready. No estimate can be made at this time as to the impact of the readiness of such third parties. Operations The following discussion relates to the operations of the Partnership and its properties (Fenland Field, Pavillion and Walden Pond Apartments) for the three and nine months ended September 30, 1998 and 1997. The sale of Indian Run on March 31, 1998, significantly impacts the comparability of the Partnership's operations between these periods. Net income, net of Indian Run's activity, increased during the three and nine months ended September 30, 1998 when compared to the three and nine months ended September 30, 1997, with an increase in total revenue and a decrease in total expenses. The increase in total revenue is a result of rental rate increases implemented at all of the Partnership's properties. Interest income also increased due to higher cash and cash equivalent balances available for investment. Total expenses for the three months ended September 30, 1998, net of Indian Run's activity, decreased as compared to the three months ended September 30, 1997, with decreases in operating, maintenance and depreciation and amortization expenses. Operating expense decreased as a result of a reduction in contingent insurance premiums at the Partnership's properties. Maintenance expense decreased due to exterior building repairs completed in 1997. Depreciation expense decreased as fixed asset additions purchased in previous years became fully depreciated. Total expenses for the nine months ended September 30, 1998, net of Indian Run's activity, decreased as compared to the nine months ended September 30, 1997, with decreases in operating, maintenance and depreciation and amortization expenses, partially offset by a rise in interest expense. Operating expense decreased as a result of a reduction in insurance premiums, as discussed above. Maintenance expense decreased due to exterior building repairs, paving repairs and landscaping work completed in 1997. Depreciation expense decreased as fixed asset additions purchased in previous years became fully depreciated. Interest expense increased as a result of the Walden Pond additional note (see Note 2). KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES 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 Limited Partnership-IV (Registrant) BY:/s/Wayne H. Zarozny Wayne H. Zarozny Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner DATE: November 10, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Krupp Realty Fund 4 Financial Statements for the nine months ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 691,373 0 11,989 0 0 640,511 34,984,429 (23,086,013) 13,242,289 866,642 17,121,424 0 0 (4,745,777) 0 13,242,289 0 5,428,144 0 0 4,081,490 0 882,728 0 0 0 0 2,572,007 0 3,035,933 0 0 Includes all receivables grouped in "prepaid expenses and other assets" on the Balance Sheet. Multi-family complexes of $34,637,391 and deferred expenses of $347,038. Accumulated depreciation of $22,845,549 and accumulated amortization of deferred expenses of $240,464. Represents mortgage notes payable. Represents total deficit of the General Partners and Limited Partners of ($306,009) and ($4,439,768), respectively. Includes all revenue of the Partnership. Includes operating expenses of $2,221,017, real estate taxes of $532,291 and depreciation and amortization of $1,328,182. Includes gain on sale of property of $2,965,743, loss from extinguishment of debt of ($389,523) and minority interest of ($4,213). Net income allocated $30,359 to the General Partners and $3,005,574 to the Limited Partners. Average net income per Unit of Limited Partners interest is $100.10 on 30,000 Units outstanding.
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