-----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, PZVEVFuy5rwbXHckYu2N7WLmA52jVpqSTxxygYmVtdgL5MaqNYmH5MaaAROLXc3s rq0cUNAfb+XN65pCjVDZ3g== 0000710389-01-500009.txt : 20020410 0000710389-01-500009.hdr.sgml : 20020410 ACCESSION NUMBER: 0000710389-01-500009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1934 Act SEC FILE NUMBER: 000-11987 FILM NUMBER: 1787181 BUSINESS ADDRESS: STREET 1: ONE BEACON STREET STREET 2: SUITE 1500 CITY: BOSTON STATE: MA ZIP: 02218 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 realty4_q3.txt 10-Q KRUPP REALTY FUND 4 SEPTEMBER 30, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 -------------------------------------------------- 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.) One Beacon Street, Boston, Massachusetts 02108 - --------------------------------------------- ----------------------------- (Address of principal executive offices) (Zip Code) (617) 523-7722 - -------------------------------------------------------------------------------- (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 13. 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, 2001 2000 ------------- ------------- Multi-family apartment communities, net of accumulated depreciation of $0 and $26,362,441, respectively $ - $ 10,139,898 Multi-family apartment communities held for sale (Notes 7 & 8) 7,067,296 - Cash and cash equivalents 3,241,820 740,853 Real estate tax escrows 542,696 723,394 Prepaid expenses and other assets (Notes 1 & 6) 252,886 277,631 Investment in securities (Note 2) 95,516 95,516 Deferred expense, net of accumulated amortization of $363,204 and $341,854, respectively (Note 3) 18,950 40,300 ------------- ------------- Total assets $ 11,219,164 $ 12,017,592 ============= ============= LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable (Note 3) $ 12,367,069 $ 16,224,646 Due to affiliates (Note 6) 88,065 - Other liabilities 1,036,099 1,190,128 ------------- ------------- Total liabilities 13,491,233 17,414,774 ------------- ------------- Partners' deficit (Note 5): Investor Limited Partners (30,000 Units outstanding) (586,300) (3,702,397) Original Limited Partner (1,404,495) (1,382,261) General Partners (281,274) (312,524) ------------- ------------- Total partners' deficit (2,272,069) (5,397,182) ------------- ------------- Total liabilities and partners' deficit $ 11,219,164 $ 12,017,592 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 2 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, ------------------------ ------------------------ 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Revenue: Rental $ 1,504,813 $ 1,817,770 $ 5,150,000 $ 5,408,494 Other income 71,365 17,238 100,084 53,837 ----------- ----------- ----------- ----------- Total revenue 1,576,178 1,835,008 5,250,084 5,462,331 ----------- ----------- ----------- ----------- Expenses: Operating (Note 6) 405,315 453,183 1,399,175 1,330,825 Maintenance 98,427 149,500 371,845 423,094 Real estate taxes 168,348 196,697 547,662 618,465 Management fees (Note 6) 73,787 68,463 227,456 213,838 General and administrative (Note 6) 75,879 61,306 270,777 167,571 Depreciation and amortization 341,632 441,801 1,155,927 1,240,333 Interest 299,962 393,137 1,050,154 1,162,245 ----------- ----------- ----------- ----------- Total expenses 1,463,350 1,764,087 5,022,996 5,156,371 ----------- ----------- ----------- ----------- Income before minority interest and gain on sale of property 112,828 70,921 227,088 305,960 Minority interest (1,918) (626) (3,369) (2,323) Gain on sale of property (Note 4) 12,219,145 - 12,219,145 - ----------- ----------- ----------- ----------- Net income $12,330,055 $ 70,295 $12,442,864 $ 303,637 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. Continued 3 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, ------------------------ ------------------------ 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Allocation of net income (Note 5): Investor Limited Partners (30,000 Units outstanding): Income before gain on sale of property $ 105,365 $ 66,780 $ 212,533 $ 288,455 Gain on sale of property 12,096,954 - 12,096,954 - ----------- ----------- ----------- ----------- Net income $12,202,319 $ 66,780 $12,309,487 $ 288,455 =========== =========== =========== =========== Investor Limited Partners Per Unit: Income before gain on sale of Property $ 3.51 $ 2.23 $ 7.08 $ 9.62 Gain on sale of property 403.23 - 403.23 - ----------- ----------- ----------- ----------- Net income $ 406.74 $ 2.23 $ 410.31 $ 9.62 =========== =========== =========== =========== Original Limited Partner (100 Units outstanding): Income before gain on sale of Property $ 4,436 $ 2,812 $ 8,949 $ 12,146 Gain on sale of property - - - - ----------- ----------- ----------- ----------- Net income $ 4,436 $ 2,812 $ 8,949 $ 12,146 =========== =========== =========== =========== General Partners: Income before gain on sale of Property $ 1,109 $ 703 $ 2,237 $ 3,036 Gain on sale of property 122,191 - 122,191 - ----------- ----------- ----------- ----------- Net income $ 123,300 $ 703 $ 124,428 $ 3,036 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 4 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, ------------------------------- 2001 2000 ------------- ------------- Cash flows from operating activities: Net income $ 12,442,864 $ 303,637 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,155,927 1,240,333 Changes in assets and liabilities: Gain on sale of property (Note 4) (12,219,145) - Decrease in prepaid expenses and other assets 205,442 104,845 Decrease (increase) in other liabilities (154,940) 8,039 Increase in due to affiliates 88,065 18,751 ------------- ------------- Net cash provided by operating activities 1,518,213 1,675,605 ------------- ------------- Cash flows from investing activities: Increase (decrease) in other liabilities related to fixed asset additions 911 (7,105) Fixed asset additions (305,447) (620,441) Proceeds from sale of property (Note 4) 14,462,618 - ------------- ------------- Net cash provided by (used in) investing activities 14,158,082 (627,546) ------------- ------------- Cash flows from financing activities: Principal payments on mortgage notes payable (220,190) (238,908) Distributions (9,317,751) (779,567) Repayment of mortgage note payable (Note 4) (3,637,387) - ------------- ------------- Net cash used in financing activities (13,175,328) (1,018,475) ------------- ------------- Net increase in cash and cash equivalents 2,500,967 29,584 Cash and cash equivalents, beginning of period 740,853 856,738 ------------- ------------- Cash and cash equivalents, end of period $ 3,241,820 $ 886,322 ============= =============
The accompanying notes are an integral part of the consolidated financial statements 5 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, 2000 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, 2001 and December 31, 2000, minority interest of $5,220 and $8,589, respectively, is included in other assets. 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 consolidated financial position as of September 30, 2001, its results of operations for the three and nine months ended September 30, 2001 and 2000 and its cash flows for the nine months ended September 30, 2001 and 2000. The results of operations for the three and nine months ended September 30, 2001 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) Investment in Securities On October 5, 2000, the Partnership, as a member of an alliance of major multi-family real estate companies, executed a master lease agreement ("MLA") with a provider of high-speed internet, video and voice services to multi-family communities. Pursuant to the MLA, the Partnership granted the provider preferred lease, license and access rights to provide data services, consisting of high-speed broadband internet access and video services, to the residents at some of its multi-family communities for a ten year period. In exchange for these rights, the Partnership received 366,691 shares of common stock which were valued at $.2285 per share or $83,823. In addition, the Partnership will receive 7.5% of the gross revenues that the provider obtains from providing its services as well as a fixed amount for each resident that executes a subscriber agreement. In conjunction with the execution of the MLA, the Partnership made an investment of $8,406 in exchange for 36,785 additional shares of common stock also valued at $.2285 per share. The Partnership incurred approximately $3,287 in closing costs related to the acquisition by the Partnership and the closing costs incurred were recorded as an investment in securities in the financial statements as of September 30, 2001 and of December 31, 2000. Continued 6 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (3) Mortgage Notes Payable On April 27, 2001, the General Partners signed an agreement extending the mortgage note payable on Pavillion Apartments, under the original terms, until May 1, 2002. The Partnership paid an extension fee of $32,969 for this privilege. 4) Sale of Property On August 1, 2001, the Partnership sold Fenland Field, a 234-unit multi-family apartment complex, located in Maryland, to an unaffiliated third party. The Partnership received $14,462,618, net of closing costs of $37,382 and repaid the mortgage note payable of $3,637,387 and accrued interest of $28,973. For financial reporting purposes, the Partnership realized a gain of $12,219,145 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. (5) Changes in Partners' Deficit A summary of changes in Partners' deficit for the nine months ended September 30, 2001 is as follows:
Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit ------------ ------------ ------------ ----------- Balance at December 31, 2000 $ (3,702,397) $ (1,382,261) $ (312,524) $(5,397,182) Income before gain on sale of property 212,533 8,949 2,237 223,719 Gain on sale of property 12,096,954 - 122,191 12,219,145 Distributions: Operations (740,589) (31,183) (7,796) (779,568) Capital Transactions (8,452,801) - (85,382) (8,538,183) ------------ ------------ ------------ ----------- Balance at September 30, 2001 $ (586,300) $ (1,404,495) $ (281,274) $(2,272,069) ============ ============ ============ ===========
Continued 7 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (6) 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, --------------------------- -------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ----------- Property management fees $ 73,787 $ 68,463 $ 227,456 $ 213,838 Expense reimbursements 94,090 79,279 364,078 216,226 ------------ ------------ ------------ ----------- Charge to operations $ 167,877 $ 147,742 $ 591,534 $ 430,064 ============ ============ ============ ===========
Due to (from) affiliates consisted of expense reimbursements of $88,065 and $(28,007) at September 30, 2001 and December 31, 2000, respectively. (7) Multi-family Apartment Communities Held for Sale The Partnership classifies assets as available for sale upon the General Partners' committing to a formal plan of disposition. Multi-family apartment communities held for sale are stated at the lower of their carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale. In the normal course of business the Partnership may receive offers for sale of its properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually acquire a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. As a result, multi-family apartment communities are classified as `held for sale' once it is likely, in the opinion of management, that a property will be disposed of in the near term. On August 28, 2001, the General Partners signed a purchase and sale agreement on Pavillion Apartments for a price of approximately $15,573,000. The sale is subject to financing and is expected to close on or about November 20, 2001. The property has a carrying value of approximately $3,190,000 on the books of the Partnership at September 30, 2001 and is classified as held for sale. On August 8, 2001, the Partnership filed Schedule 13E-3 as amended on September 21, 2001 as further amended on October 3, 2001 indicating the intent of Walden Pond Limited Partnership, an entity related to the General Partners, to purchase Walden Pond Apartments. The purchase is subject to unit holder approval. The property has a carrying value of approximately $3,877,000 on the books of the Partnership at September 30, 2001 and is classified as held for sale. Continued 8 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (8) Subsequent Event On October 11, 2001, the Partnership mailed to unitholders of record on October 10, 2001 a solicitation proxy asking unitholders to approve a modification to the Partnership Agreement authorizing the Partnership to enter into a purchase and sale agreement between Walden Pond Limited Partnership, an entity related to the General Partners, and Westbridge Partners, Ltd., the owner of Walden Pond Apartments, to sell Walden Pond Apartments. On November 12, 2001 a majority of the unitholders voted in favor of the modification and sale. 9 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 risks 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 would also be impacted by the future availability of bank borrowings, and upon the future 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 improvements, debt service and other 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. As previously disclosed, the General Partners have begun an orderly sale of the Partnership's multi-family apartment communities. The Partnership sold its interest in Fenland Field Apartments ("Fenland Field") on August 1, 2001, and on August 28, 2001, signed a purchase-and-sale agreement to sell its interest in Pavillion Apartments. These transactions are more fully discussed below. The Partnership has filed a solicitation proxy with the Securities Exchange Commission requesting that unitholders authorize the Partnership to sell its interest in Walden Pond Apartments to an affiliate of the General Partner, Walden Pond Limited Partnership. On April 27, 2001, the General Partners signed an agreement extending the mortgage notes payable on Pavillion Apartments, under the original terms, until May 1, 2002. The Partnership paid an extension fee of $32,969 for this privilege. On August 1, 2001, the Partnership sold Fenland Field to an unaffiliated third party. The Partnership received $14,462,618, net of closing costs of $37,382 and repaid the mortgage note payable of $3,637,387 and accrued interest of $28,973. (See Note 4). August 28, 2001, the Partnership signed a purchase-and-sale agreement with Alexon Ventures LLC, an unrelated third party, to sell Pavillion Apartments, a 350-unit apartment community located in Garland, Texas, for a price of approximately $15,573,000. The sale is expected to close on or about November 20, 2001. The property has a carrying value of approximately $3,190,000 on the books of the Partnership at September 30, 2001. On September 25, 2001, the General Partners made a special distribution of approximately $282 per Investor Limited Partner Unit, based on the net proceeds from the sale of Fenland Field, after providing for Partnership liabilities, and maintaining reserves for contingent liabilities. As of the August 14, 2001 distribution and as a result of the sale and impending sales of the Partnership's real estate holdings, the Partnership does not expect sufficient funds to make any further distributions from operations. The Partnership does expect to make future distributions of the net proceeds from the sale of the Partnership's properties during the next six to twelve months. Per the Partnership agreement, any distributions from capital transactions will be distributed 1% to the General Partners and 99% to the Investor Limited Partners. Continued 10 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES Operations The following discussion relates to the operation of the Partnership and its properties (Pavillion and Walden Pond Apartments) for the three and nine months ended September 30, 2001 and 2000. The sale of Fenland Field on August 1, 2001, significantly impacts the comparability of the Partnership's operations between these periods. Net income, net of Fenland Field's activity, increased during the three and nine months ended September 30, 2001 when compared to the three and nine months ended September 30, 2000, as the increase in total revenue exceeded the increase in total expenses. The increase in total revenue is primarily a result of rental rate increases implemented at all of the Partnership's properties at the end of the first quarter of 2001. Total expenses, net of Fenland Field's activity, for the three months ended September 30, 2001 decreased when compared to the three months ended September 30, 2000, due to decreases in operating expense, maintenance and interest expense. Operating expenses decreased primarily as a result of decreases in utilities expense. Maintenance expense decreased with a reduction in painting and decorating expenditures. Interest expense decreased as a result of decreases in the prime-lending rate. Total expenses, net of Fenland Field's activity, for the nine months ended September 30, 2001 increased when compared to the nine months ended September 30, 2000 due to increases in operating and general and administrative expenses. These increases were partially offset by decreases in real estate taxes and interest expense. Operating expenses increased due to increases in payroll, insurance and utilities. General and administrative expenses increased as a result of increased investor communication costs, which includes printing and mailing of quarterly and annual reports. Real estate tax expense decreased as a result of an adjustment to the prior year accrual for Walden Pond to correct historical under accruals. Interest expense decreased due to reasons discussed above. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. The Partnership manages its market risk by matching projected cash inflows from operating activities, investing activities and financing activities with projected cash outflows to fund debt payments, acquisitions, capital expenditures, distributions and other cash requirements. The majority of the Partnership's outstanding debt (maturing at various times through 2002) has a fixed interest rate, which minimizes the interest rate risk. A detailed analysis of quantitative and qualitative market risk exposures was provided in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000. There have been no material changes in market risk subsequent to that date. 11 KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Exhibits: None Reports on Form 8-K: Form 8-K filed on August 6, 2001 regarding the sale of Fenland Field Apartments 12 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/ David C. Quade --------------------------------------------- Treasurer (Principal Financial and Accounting Officer) of The Krupp Corporation, a General Partner DATE: November 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----