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 March 31, 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
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
<S> <C> <C>
Multi-family apartment complexes,
less accumulated depreciation of
$18,742,370 and $18,281,640, respectively $11,161,896 $11,505,230
Cash and cash equivalents 478,659 468,735
Replacement reserve escrow 126,468 110,994
Cash restricted for tenant security deposits 185,338 183,758
Prepaid expenses and other assets 570,290 603,090
Deferred expenses, net of accumulated
amortization of $178,554 and $167,081,
respectively 341,030 352,503
Total assets $12,863,681 $13,224,310
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $19,403,524 $19,491,853
Accounts payable 4,297 22,397
Due to affiliates (Note 3) 24,517 -
Accrued expenses and other liabilities 652,485 724,481
Total liabilities 20,084,823 20,238,731
Partners' deficit (Note 2):
Investor Limited Partners
(25,000 Units outstanding) (5,998,188) (5,801,804)
Original Limited Partner (896,795) (888,525)
General Partners (326,159) (324,092)
Total Partners' deficit (7,221,142) (7,014,421)
Total liabilities and Partners' deficit $12,863,681 $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
Ended March 31,
1997 1996
<S> <C> <C>
Revenue:
Rental $1,768,195 $1,623,884
Other income 9,816 16,076
Total revenue 1,778,011 1,639,960
Expenses:
Operating (Note 3) 511,118 479,505
Maintenance 90,052 75,123
Real estate taxes 134,841 125,925
Management fees (Note 3) 85,398 79,682
General and administrative (Note 3) 53,767 26,057
Depreciation and amortization 472,203 442,780
Interest 428,668 436,302
Total expenses 1,776,047 1,665,374
Net income (loss) $ 1,964 $ (25,414)
Allocation of net income (loss) (Note 2):
Investor Limited Partner
Interest (25,000 Units outstanding) $ 1,866 $ (24,143)
Per Unit of Investor Limited Partner
Interest $ .07 $ (.97)
Original Limited Partner $ 78 $ (1,017)
General Partners $ 20 $ (254)
</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 Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,964 $ (25,414)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 472,203 442,780
Changes in assets and liabilities:
Decrease (increase) in cash
restricted for tenant security
deposits (1,580) 33,677
Decrease in prepaid expenses and
other assets 32,800 54,714
Decrease in accounts payable (9,100) (20,167)
Increase in due to affiliates 24,517 -
Decrease in accrued expenses and
other liabilities (71,996) (26,948)
Net cash provided by operating
activities 448,808 458,642
Investing activities:
Decrease in accounts payable for
fixed asset additions (9,000) -
Additions to fixed assets (117,396) (33,749)
Funding to replacement reserve escrow (15,474) (15,259)
Increase in other investments - (294,435)
Net cash
used in investing
activities (141,870) (343,443)
Financing activities:
Distributions (208,685) (208,685)
Principal payments on mortgage
notes payable (88,329) (80,771)
Net cash
used in financing
activities (297,014) (289,456)
Net increase (decrease) in cash and cash
equivalents 9,924 (174,257)
Cash and cash equivalents, beginning
of period 468,735 654,696
Cash and cash equivalents, end of period $ 478,659 $ 480,439
</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
March 31, 1997 and its results of operations and its cash flows for the
three months ended March 31, 1997 and 1996. Certain prior period
balances have been reclassified to conform with current period financial
statement preparation.
The results of operations for the three months ended March 31, 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 three months ended
March 31, 1997 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
<S> <C> <C> <C> <C>
Balance at
December 31, 1996 $(5,801,804) $(888,525) $(324,092) $(7,014,421)
Net income 1,866 78 20 1,964
Distributions (198,250) (8,348) (2,087) (208,685)
Balance at
March 31, 1997 $(5,998,188) $(896,795) $(326,159) $(7,221,142)
</TABLE>
(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 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
Ended March 31,
1997 1996
<S> <C> <C>
Property management fees $ 85,398 $ 79,682
Expense reimbursements 51,078 47,114
Charged to operations $136,476 $126,796
</TABLE>
Due to affiliates consisted of expense reimbursements of $24,517 at
March 31, 1997.
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 $1,043,000 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 with current
market conditions, produce quality rental units and absorb excess demand
at the properties' respective locations and to both maintain and increase
its current occupancy levels. 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 three months ended March 31,
1997. The General Partners provide 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 flows as a measure of liquidity.
Rounded to $1,000
Net income for tax purposes $ 66,000
Items not requiring or (requiring) the use
of operating funds:
Tax basis depreciation and amortization 408,000
Principal payments on mortgage notes payable (88,000)
Expenditures for capital improvements (117,000)
Additions to working capital reserves (60,000)
Cash Flow $ 209,000
Operations
Cash Flow, as calculated by Section 8.2(a) of the Partnership Agreement,
before additions to working capital reserves, decreased during the three
months ended March 31, 1997, as compared to the three months ended March
31, 1996, primarily due to an increase in capital improvement
expenditures.
Total revenue for the first quarter of 1997, as compared to the first
quarter of 1996, increased due to increases in rental rates and average
occupancy rates at all the Partnership's properties. Occupancy rates for
the first quarter of 1997 and 1996 for Brookeville, Hannibal Grove
("Hannibal"), and Dorsey's Forge ("Dorsey's") Apartments averaged 98%,
99%, and 98%, and 95%, 93%, and 93%, respectively. Interest income,
during the same time period, decreased as a result of lower cash and cash
equivalents available for investment.
During the three months ended March 31, 1997, as compared to the three
months ended March 31, 1996, total expenses increased, with higher
operating expenses, real estate taxes, 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. Real estate taxes increased
due to higher property assessments at Brookeville and Hannibal and also
because of a real estate tax refund received in 1996 for Dorsey's.
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 recent unsolicited tender offer 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>
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
DATE: May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the financial
statements for the quarter ended March 31, 1997 and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 790,465
<SECURITIES> 0
<RECEIVABLES> 20,322
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 549,968
<PP&E> 30,423,850<F1>
<DEPRECIATION> (18,920,924)<F2>
<TOTAL-ASSETS> 12,863,681
<CURRENT-LIABILITIES> 681,299
<BONDS> 19,403,524<F3>
0
0
<COMMON> (722,142)<F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,863,681
<SALES> 1,778,011
<TOTAL-REVENUES> 1,778,011
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,347,379<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428,668
<INCOME-PRETAX> 1,964
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,964
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes apartment complexes of $29,904,266 and deferred expenses of $519,584.
<F2>Includes depreciation of $18,742,370 and amortization of deferred expenses of
$178,554.
<F3>Represents mortgage note payable.
<F4>Represents total equity of General Partners ($326,159) and Limited Partners
($6,894,983).
<F5>Includes operating expesnes of $740,335, real estate taxes of $134,841 and
depreciation and amortization of $472,203.
<F6>Net income allocated 20 to general partners, 1944 to limited partners for
three months ended 3/31/97 average net gain $.07 per unit for $25,000 units
outstanding.
</FN>
</TABLE>
