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 March 31,
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 0-11210
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
9.
<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,
1998 1997
Multi-family apartment complexes,
less accumulated depreciation of
$20,616,197 and $20,216,642,
<S> <C> <C>
respectively $10,380,510 $10,519,769
Cash and cash equivalents 248,228 552,221
Replacement reserve escrow 143,820 177,778
Cash restricted for tenant security deposits 528,324 202,691
Prepaid expenses and other assets 542,683 595,696
Deferred expenses, net of accumulated
amortization of $224,444 and $212,971,
respectively 295,140 306,613
Total assets $12,138,705$12,354,768
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $19,029,776$19,126,371
Accounts payable 57,373 -
Accrued expenses and other liabilities 618,996 683,413
Total liabilities 19,706,145 19,809,784
Partners' deficit (Note 2):
Investor Limited Partners
(25,000 Units outstanding) (6,327,170)(6,220,367)
Original Limited Partner (910,648) (906,151)
General Partners (329,622) (328,498)
Total Partners' deficit (7,567,440)(7,455,016)
Total liabilities and Partners'deficit$12,138,705$12,354,768
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1998 1997
Revenue:
<S> <C> <C>
Rental $1,871,136 $1,768,195
Other income 14,835 9,816
Total revenue 1,885,971 1,778,011
Expenses:
Operating (Note 3) 499,326 511,118
Maintenance 85,952 90,052
Real estate taxes 139,447 134,841
Management fees (Note 3) 92,816 85,398
General and administrative (Note 3) 33,508 53,767
Depreciation and amortization 411,028 472,203
Interest 423,290 428,668
Total expenses 1,685,367 1,776,047
Net income $ 200,604 $ 1,964
Allocation of net income (Note 2):
Investor Limited Partners
(25,000 Units outstanding) $ 190,574 $ 1,866
Investor Limited Partners
Per Unit $ 7.62 $ .07
Original Limited Partner $ 8,024 $ 78
General Partners $ 2,006 $ 20
</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,
1998 1997
Operating activities:
<S> <C> <C>
Net income $ 200,604 $ 1,964
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 411,028 472,203
Interest earned on replacement
reserve escrow (1,070) -
Changes in assets and liabilities:
Increase in cash restricted for
tenant security deposits (325,633) (1,580)
Decrease in prepaid expenses and
other assets 53,013 32,800
Increase (decrease) in accounts
payable 33,183 (9,100)
Increase in due to affiliates - 24,517
Decrease in accrued expenses and
other liabilities (64,417) (71,996)
Net cash provided by operating
activities 306,708 448,808
Investing activities:
Increase (decrease) in accounts
payable for fixed asset additions 24,190 (9,000)
Additions to fixed assets (260,296) (117,396)
Deposits to replacement reserve escrow (15,474) (15,474)
Withdrawals from replacement reserve
escrow 50,502 -
Net cash used in investing
activities (201,078) (141,870)
Financing activities:
Distributions (313,028) (208,685)
Principal payments on mortgage
notes payable (96,595) (88,329)
Net cash used in financing
activities (409,623) (297,014)
Net increase (decrease) in cash and cash
equivalents (303,993) 9,924
Cash and cash equivalents, beginning
of period 552,221 468,735
Cash and cash equivalents, end of period$ 248,228 $ 478,659
</TABLE>
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 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, 1997 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, 1998 and
its results of operations and its cash flows
for the three months ended March 31, 1998 and
1997.
The results of operations for the three months
ended March 31, 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)Summary of Changes in Partners' Deficit
A summary of changes in Partners' deficit for
the three months ended March 31, 1998 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, 1997 $(6,220,367) $(906,151)$(328,498)$(7,455,016)
Net income 190,574 8,024 2,006 200,604
Distributions (297,377) (12,521) (3,130) (313,028)
Balance at
March 31, 1998 $(6,327,170)$(910,648)$(329,622)$(7,567,440)
</TABLE>
Continued
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(3)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 affiliate of the General Partners sold its
management agreements 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
administrative expenses.
Amounts accrued or paid to the General
Partners' affiliates were as follows:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Property management fees $ 92,816 $ 85,398
Expense reimbursements 19,944 51,078
Charged to operations $112,760 $136,476
</TABLE>
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 has spent approximately
$260,000 to date and is expected to spend
approximately $995,000 for capital
improvements at its properties in 1998. The
Partnership believes that the improvements
are necessary to compete in its current
markets, produce quality rental units and
absorb excess demands at the properties'
respective locations and to both maintain and
increase current occupancy levels.
Renovations include the replacement of
countertops, carpeting, appliances, pavement
upgrades and both interior and exterior
building improvements. The Partnership
expects to fund these improvements from
established reserves and cash generated from
property operations.
Operations
Net income increased for the three months
ended March 31, 1998, as compared to the
three months ended March 31, 1997, with an
increase in total revenue and a decrease in
total expenses.
Total revenue increased for the three months
ended March 31, 1998, as compared to the
three months ended March 31, 1997, due to
increases in average occupancy rates at all
of the Partnership's properties. Occupancy
rates for the first quarters of 1998 and 1997
at Brookeville, Hannibal Grove, and Dorsey's
Forge Apartments averaged 100%, 100%, and
99%, and 98%, 99%, and 98%, respectively.
Other income increased as a result of higher
interest earned on the replacement reserve
escrow account.
Total expenses decreased for the three months
ended March 31, 1998, as compared to the
three months ended March 31, 1997, as a
result of lower maintenance, general and
administrative and depreciation expenses.
Maintenance expense decreased due to
completion of landscaping, snow removal
expenditures and interior building repairs
completed at the Partnership's properties
during 1997. General and administrative
expense decreased as a result of 1997 legal
costs relating to the unsolicited tender
offer to purchase Partnership Units.
Depreciation expense decreased as fixed asset
additions purchased in previous years became
fully depreciated.
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, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 3 Financial Statements for the quarter ended March 31, 1998 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-31-1998
<CASH> 248,228
<SECURITIES> 0
<RECEIVABLES> 27,923<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,186,904
<PP&E> 31,516,291<F2>
<DEPRECIATION> (20,840,641)<F3>
<TOTAL-ASSETS> 12,138,705
<CURRENT-LIABILITIES> 676,369
<BONDS> 19,029,776<F4>
0
0
<COMMON> (7,567,440)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,138,705
<SALES> 0
<TOTAL-REVENUES> 1,885,971<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,262,077<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 423,290
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,604<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<FN>
<F1>Includes all receivables grouped in "Prepaid Expenses and Other Assets" on the
Balance Sheet.
<F2>Includes apartment complexes of $30,996,707 and deferred expenses of $519,584.
<F3>Includes depreciation of $20,616,197 and amortization of deferred expenses of
$224,444.
<F4>Represents mortgage note payable.
<F5>Represents total deficit of the General Partners ($329,622) and the Limited
Partners ($7,237,818).
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $711,602, real estate taxes of $139,447 and
depreciation and amortization of $411,028.
<F8>Net Income allocated $2,006 to General Partners and $198,598 to Limited
Partners. Net income of $7.62 per unit on 25,000 units outstanding.
</FN>
</TABLE>
