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 June 30,1997
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
The total number of pages in this document is
10.
<PAGE>
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
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
Multi-family apartment complexes,
less accumulated depreciation of
<S> <C> <C>
$19,221,732 and $18,281,640, respectively$11,026,066 $11,505,230
Cash and cash equivalents 546,272 468,735
Replacement reserve escrow 145,715 110,994
Cash restricted for tenant security deposits 198,128 183,758
Prepaid expenses and other assets 504,008 603,090
Deferred expenses, net of accumulated
amortization of $190,026 and $167,081,
respectively 329,558 352,503
Total assets $12,749,747 $13,224,310
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $19,313,199 $19,491,853
Accrued expenses and other
liabilities (Note 3) 657,234 746,878
Total liabilities 19,970,433 20,238,731
Partners' deficit (Note 2):
Investor Limited Partners
(25,000 Units outstanding) (5,997,755) (5,801,804)
Original Limited Partner (896,776) (888,525)
General Partners (326,155) (324,092)
Total Partners' deficit (7,220,686) (7,014,421)
Total liabilities and
Partners' deficit $12,749,747 $13,224,310
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June30,
1997 1996 1997 1996
Revenue:
<S> <C> <C> <C> <C>
Rental $1,815,168 $1,628,975 3,583,363 $3,252,859
Other income 17,346 15,668 27,162 31,744
Total revenue1,832,514 1,644,643 3,610,525 3,284,603
Expenses:
Operating (Note 3)502,931 472,326 1,014,049 951,831
Maintenance 170,715 140,079 260,767 215,202
Real estate taxes 126,325 120,958 261,166 246,883
General and administrative
(Note 3) 24,829 11,966 78,596 38,023
Management fees
(Note 3) 89,753 81,210 175,151 160,892
Depreciation and
amortization 490,834 450,027 963,037 892,807
Interest 426,671 434,476 855,339 870,778
Total expenses 1,832,058 1,711,042 3,608,105 3,376,416
Net income (loss)$ 456 $ (66,399) $ 2,420 $ (91,813)
Allocation of net income
(loss) (Note 2):
Investor Limited Partner
(25,000 Units
outstanding) $433 $(63,079) $ 2,299 $ (87,222)
Per Unit of Investor
Limited Partner
Interest $.02 $ (2.52) $ .09 $ (3.49)
Original Limited
Partner $19 $(2,656) $ 97 $ (3,673)
General Partners $ 4 $ (664) $ 24 $ (918)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1997 1996
Operating activities:
<S> <C> <C>
Net income (loss) $ 2,420 $ (91,813)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 963,037 892,807
Interest earned on replacement reserve
escrow (3,774) -
Changes in assets and liabilities:
Decrease (increase) in cash restricted
for tenant security deposits (14,370) 30,102
Decrease in prepaid expenses and
other assets 99,082 76,469
Decrease in accrued expenses and
other liabilities (89,644) (85,761)
Net cash provided by operating
activities 956,751 821,804
Investing activities:
Additions to fixed assets (460,928) (346,180)
Deposits to replacement reserve escrow (30,947) (30,947)
Withdrawals from replacement reserve escrow - 10,708
Increase in other investments - (294,435)
Increase in accounts payable related to fixed
asset additions - 830
Net cash used in investing
activities (491,875) (660,024)
Financing activities:
Distributions (208,685) (208,685)
Principal payments on mortgage notes payable
(178,654) (163,369)
Net cash used in financing
activities (387,339) (372,054)
Net increase (decrease) in cash and
cash equivalents 77,537 (210,274)
Cash and cash equivalents, beginning of period
468,735 654,696
Cash and cash equivalents, end of period $ 546,272 $ 444,422
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
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 and Subsidiary (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, 1996 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 consolidated
financial position as of June 30, 1997, its
results of operations for the three and six
months ended June 30, 1997 and 1996, and its
cash flows for six months ended June 30, 1997
and 1996. Certain prior year balances have
been reclassified to conform with current year
consolidated financial statement presentation.
The results of operations for the three and
six months ended June 30, 1997 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 six months ended June 30, 1997 is as
follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1996$(5,801,804)$(888,525)$(324,092)$(7,014,421)
Net income 2,299 97 24 2,420
Distributions (198,250) (8,348) (2,087) (208,685)
Balance at
June 30, 1997 $(5,997,755)$(896,776)$(326,155)$(7,220,686)
</TABLE>
Continued
<PAGE>
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. These management agreements
were sold to BRI OP Limited Partnership, a
subsidiary of Berkshire Realty Company Inc., a
publicly traded real estate investment trust
and an affiliate of the General Partners, on
February 28, 1997. 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 were as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Property management fees
<S> <C> <C> <C> <C>
$ 89,753 $ 81,210 $175,151 $160,892
Expense reimbursements
42,745 50,366 93,823 97,480
Charged to operations
$132,498 $131,576 $268,974 $ 258,322
</TABLE>
Expense reimbursements due to affiliates of
$3,258 is included in accrued expenses and
other liabilities at June 30, 1997.
<PAGE>
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
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 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.
The Partnership is planning to spend
approximately $1,083,000 for capital
improvements at its properties in 1997. In
order to fund the improvements, the
Partnership will use its existing cash
reserves, reserves for replacement and cash
flow from operations. The Partnership
believes that the improvements are necessary
to compete in the current marketplace.
Renovations include the replacement of
countertops, carpeting, appliances, asphalt
repairs, and both interior and exterior
building improvements.
Cash Flow
Shown below, as required by the Partnership
Agreement, is the calculation of Cash Flow of
the Partnership for the six months ended June
30, 1997. The General Partners provide the
information below to meet requirements of the
Partnership Agreement. 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 flows as a measure of
liquidity.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net income for tax purposes $ 149,000
Items not requiring (requiring) the use
of operating funds:
Tax basis depreciation and amortization 817,000
Principal payments on mortgage notes payable (179,000)
Expenditures for capital improvements (461,000)
Additions to working capital reserves (117,000)
Cash Flow $ 209,000
</TABLE>
Continued
<PAGE>
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
Operations
Cash Flow, as calculated by Section 8.2(a)of
the Partnership Agreement, before additions to
working capital reserves, increased during the
six months ended June 30, 1997, as compared to
the six months ended June 30, 1996, as the
increase in net income, plus depreciation and
amortization, more than offset the increase in
capital improvements.
Rental revenue during the three and six months
ended June 30, 1997 as compared to the same
periods in 1996, increased as a result of
increased rental rates and average occupancy
rates at all of the Partnership's properties.
Occupancy rates at Brookeville Apartments averaged
98% and 95% for the six months ended June 30, 1997
and June 30, 1996, respectively. At Hannibal
Grove Apartments ("Hannibal"), occupancy rates
averaged 99% and 93% for the six months ended June
30, 1997 and June 30, 1996, respectively. Occupancy
rates at Dorsey's Forge Apartments ("Dorsey's")
averaged 99% and 92% for the six months ended
June 30, 1997 and June 30, 1996, respectively.
During the six months ended June 30, 1997, as
compared to the six months ended June 30,
1996, total expenses increased, primarily due to
operating expenses maintenance, general and
administrative and depreciation expenses.
Operating expense increased due to an increase
in advertising and leasing expenses which resulted
in the higher occupancy rates discussed above.
Maintenance expense increased as landscaping,
parking lot repairs, and interior building repairs
were completed at the Partnership's properties.
General and administrative expense increased as a
result of legal costs related to the unsolicited
tendor offers made to purchase Partnership Units.
Depreciation expense increased in conjunction with
capital improvement expenditures.
<PAGE>
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
<PAGE>
<PAGE>
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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief
Accounting Officer of
The Krupp Corporation,
a General Partner
<PAGE>
DATE: August 11, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp
Realty Fund LTD.III financial statements for the six months ended June 30, 1997
and is clasified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> 12-31-1997
<PERIOD-END> 06-30-97
<CASH> 546,272
<SECURITIES> 0
<RECEIVABLES> 43,575<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 804,276
<PP&E> 30,767,382<F2>
<DEPRECIATION> <19,411,758><F3>
<TOTAL-ASSETS> 12,749,747
<CURRENT-LIABILITIES> 657,234
<BONDS> 19,313,199<F4>
0
0
<COMMON> <7,220,686><F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,749,747
<SALES> 0
<TOTAL-REVENUES> 3,610,525<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,752,766<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 855,339
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,420<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<F1>Includes all receivables grouped in "Prepaid Expenses and other assets" on
the balance sheet.
<F2>Includes apartment complexes of $30,247,798 and deferred expenses of
$519,584.
<F3>Includes depreciation of $19,221,732 and amortization of deferred expenses
of $190,026.
<F4>Represents mortgage note payable.
<F5>Represents total deficit of the General Partners <326,155> and limited
partners <6,894,531>.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $,528,563, real estate taxes of $261,166 and
depreciation and amortization of $963,037.
<F8>Net income allocated $24 to general partners and $2,396 to limited partners.
Average net income of $.09 per unit on $25,000 units outstanding.
</FN>
/TABLE>
</TABLE>
