UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from
to
Commission file number
0- 11210
Krupp Realty Fund, Ltd.-III
(Exact name of registrant as specified in its
charter)
Massachusetts
04-2763323
(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)
(Registrant's telephone number, including area
code) (617) 523-7722
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act: Units of Investor
Limited Partner
Interests
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
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and
will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities
held by non-affiliates: Not applicable.
Documents incorporated by reference: Part IV,
Item 14.
The exhibit index is located on pages 9-12.
The total number of pages in this document is
29.
PART I
This Form 10-K 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.
ITEM 1.
BUSINESS
Krupp Realty Fund, Ltd.-III ("KRF-III") was
formed on April 23, 1982 by filing a
Certificate of Limited Partnership in The
Commonwealth of Massachusetts. KRF-III issued
all of the General Partner Interest to two
General Partners, The Krupp Company, a
Massachusetts limited partnership, and The
Krupp Corporation, a Massachusetts
corporation. KRF-III also issued all of the
Original Limited Partner Interests to The
Krupp Company. On June 4, 1982, KRF-III
commenced an offering of up to 25,000 units of
Investor Limited Partner Interests (the
"Units") for $1,000 per Unit. As of September
29, 1982, KRF-III received subscriptions for
all 25,000 Units and therefore, the public
offering was successfully completed on that
date. For details, see Note A to Consolidated
Financial Statements included in Item 8
(Appendix A) of this report.
The primary business of KRF-III is to acquire,
operate, and ultimately dispose of real
estate. KRF-III initially acquired five
multi-family apartment complexes (Druid
Valley, Willow Lake, Brookeville, Dorsey's
Forge/Oakland Meadows and Hannibal Grove
Apartments) and an office building (Woodlake
Office Park). KRF-III considers itself to be
engaged in only one industry segment,
investment in real estate.
KRF-III sold Druid Valley and Willow Lake in
1991 and Woodlake Office Park in 1992. On
July, 1, 1993, the General Partners formed
Brookeville Apartments Limited Partnership
("Brookeville L.P.") as a prerequisite for the
refinancing of Brookeville Apartments
("Brookeville") with the Department of Housing
and Urban Development ("HUD"). At the same
time, the General Partners transferred
ownership of Brookeville to Brookeville L.P.
The General Partner of Brookeville L.P. is the
Westcop Corporation ("Westcop") and KRF-III is
the Limited Partner of Brookeville L.P.
Westcop has beneficially assigned its interest
in Brookeville L.P. to KRF-III. KRF-III and
Brookeville L.P. are collectively known as
Krupp Realty Fund, Ltd.-III and Subsidiary
(the "Partnership").
The Partnership's real estate investments are
subject to some seasonal fluctuations due to
changes in utility consumption and seasonal
maintenance expenditures. However, the future
performance of the Partnership will depend
upon factors which cannot be predicted. Such
factors include general economic and real
estate market conditions, both on a national
basis and in those areas where the
Partnership's investments are located, real
estate tax rates, operating expenses, energy
costs, government regulations, and federal and
state income tax laws. The requirements for
compliance with federal, state and local
regulations to date have not had an adverse
effect on the Partnership's operations, and no
adverse effect therefrom is anticipated in the
future.
The Partnership's investments in real estate
are also subject to such risks as (I)
competition from existing and future projects
held by other owners in the areas of the
Partnership's properties, (ii) possible
reduction in rental income due to an inability
to maintain high occupancy levels, (iii)
possible adverse changes in mortgage interest
rates, (iv) possible adverse changes in
general economic and local conditions, such as
competitive over-building, increased
unemployment or adverse changes in real estate
zoning laws, (v) the possible future adoption
of rent control legislation which would not
permit the full amount of increased costs to
be passed on to tenants in the form of rent
increases, and (vi) other circumstances over
which the Partnership may have little or no
control.
As of December 31, 1998, the Partnership did
not employ any personnel.
ITEM 2. PROPERTIES
As of December 31, 1998, the Partnership had
leveraged investments in three apartment
complexes having an aggregate of 990 units.
A summary of the Partnership's real estate
investments is presented below. Schedule III
included in Item 8 (Appendix A) of this report
contains additional detailed information with
respect to individual properties.
<TABLE>
<CAPTION>
Average Occupancy
For the Year Ended
Year December 31,
<S> <C> <C> <C> <C> <C>
Description Acquired Total Units 1998 1997 1996 1995 1994
Brookeville Apartments
Columbus, Ohio 1983 424 Units 99% 98% 95% 94% 94%
Hannibal Grove Apartments
Columbia, Maryland 1983 316 Units 100% 100% 94% 93% 94%
Dorsey's Forge and Oakland
Meadows Apartments
Columbia, Maryland 1983 250 Units 100% 99% 94% 94% 95%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Partnership is a party or of which any of its property is the
subject.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The transfer of Units of Limited Partner
Interest is subject to certain limitations
contained in the Partnership Agreement. There
is no public market for the Units and it is
not anticipated that any such public market
will develop.
The number of Investor Limited Partners as of
December 31, 1998 was approximately 1,500.
One of the objectives of the Partnership is to
generate cash available for distribution,
however, there is no assurance that future
operations will generate cash available for
distribution. The Partnership discontinued
distributions during 1990 because of
insufficient operating cash flow. In 1994,
however, property operations improved and
distributions were reinstituted and paid in
August, 1994 at a rate of $3.97 per Unit and
increased to annual rates of $11.90, $15.86
and $23.79 per Unit in 1995, 1996 and 1998,
respectively. Beginning with the distribution
payable in February, 1999, the General
Partners increased the annual distribution
rate to $31.72 per Unit, as a direct result of
continued successful operations at the
Partnership's properties.
The Partnership made the following
distributions to its Partners during the years
ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997
Amount Per Unit Amount Per Unit
Limited Partners:
Investor Limited Partners
(25,000 Units
<S> <C> <C> <C> <C>
outstanding) $594,752 $23.79 $396,500 $15.86
Original Limited Partner 25,045 16,697
General Partners 6,261 4,174
$626,058 $417,371
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information
regarding the Partnership's financial position and operating
results. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Consolidated Financial Statements
which are included in Items 7 and 8 of this report, respectively.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Total revenue $ 7,608,315 $7,280,181$ 6,628,658$ 6,352,337 $ 6,215,466
Net income (loss) 536,483 (23,224) (446,360) (547,893) (453,031)
Net income (loss)
allocated to:
Investor Limited
Partners 509,659 (22,063) (424,042) (520,498) (430,380)
Per Unit 20.39 (.88) (16.96) (20.82) (17.22)
Original Limited
Partner 21,459 (929) - - (18,121)
General
Partners 5,365 (232) (22,318) (27,395) (4,530)
Total assets at
December 31 11,982,905 12,354,768 13,224,310 14,384,144 15,702,150
Long-term
obligations
at December 31 18,289,553 18,726,677 19,126,371 19,491,853 19,827,968
Distributions:
Investor Limited
Partners 594,752 396,500 396,500 297,495 99,132
Per Unit 23.79 15.86 15.86 11.90 3.97
Original Limited
Partner 25,045 16,697 16,697 12,526 4,174
General
Partners 6,261 4,174 4,174 3,132 1,043
</TABLE>
The per Unit distributions for the years
ended December 31, 1998, 1997, 1996, 1995
and 1994 were $23.79, $15.86, $15.86,
$11.90 and $3.97, respectively, none of
which represented a return of capital.
Prior performance of the Partnership is
not necessarily indicative of future
operations.
ITEM 7. 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. In 1994,
distributions were reinstituted and paid in
August, 1994 at a rate of $3.97 per Unit and
increased to an annual rate of $11.90 and
$15.86 per Unit in 1995 and 1996,
respectively. Thereafter, the Partnership
continued semiannual distributions at an
annual rate of $15.86 until February, 1998 at
which time the Partnership increased the
annual distribution rate to $23.79 per Unit.
Beginning with the distribution payable in
February, 1999, the General Partners increased
the annual distribution rate to $31.72 per
Unit, as a direct result of continued
successful operations at the Partnership's
properties.
The Partnership is planning to spend
approximately $1,062,000 for capital
improvements at its properties in 1999. The
Partnership believes that the improvements are
necessary to compete in its current markets,
produce quality rental units and absorb excess
market supply at the properties' respective
locations and to both maintain and increase
current occupancy levels. Renovations include
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.
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. Financial
Accounting Standards Board Statement No. 133
("FAS 133") "Accounting for Derivatives" is
effective for fiscal years beginning after
June 15, 1999. FAS 133 establishes standards
related to the accounting and disclosure
requirements of derivative financial
instruments. Emerging Issues Task Force
ruling 97-11 ("EITF 97-11") entitled
"Accounting For Real Estate Property
Acquisitions", is effective March 19, 1998.
EITF 97-11 provides that real estate companies
must expense, as incurred, the internal costs
of identifying and acquiring operating
property. The General Partners believe that
the implementation of FAS 131 and EITF 97-11
do not have a material impact on the
Partnership's financial statements, nor will
the implementation of FAS 133.
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.
Costs incurred by the Partnership are not
significant to date. There are no other
systems or software that the Partnership is
using at the present time.
The General Partners of the Partnership are
currently in the process of identifying,
evaluating and remedying the Partnership's
Year 2000 compliance issues with respect to
its non-financial systems, such as computer
controlled elevators, boilers, chillers or
other miscellaneous systems. The General
Partners are in the process of completing the
Partnership's Year 2000 compliance initiatives
at its properties. Based on their
identification and assessment efforts to date,
the General Partners believe that certain of
the computer equipment and software the
Partnership currently uses will require
modification or replacement. However, the
General Partners do not believe that the
future efforts to achieve the Partnership's
Year 2000 compliance initiatives will result
in material cost to the Partnership or
significantly interrupt services or
operations.
The General Partners 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. However,
if any of the third party service providers
cease to conduct business due to Year 2000
related problems, the General Partners expect
to be able to contract with alternate
providers without experiencing any material
adverse effects on the Partnership's financial
condition and results of operations. The
Partnership is in the process of coordinating
their contingency plan with the property
manager, in charge of operations.
Operations
1998 compared to 1997
Net income increased in 1998 when
compared to 1997, with an increase in
total revenue and a decrease in total
expenses.
Total revenue increased in 1998 when
compared to 1997, primarily due to
rental rate increases implemented at all
of the Partnership's properties.
Total expenses decreased in 1998 when
compared to 1997, with decreases in
operating, general and administrative
and depreciation expenses. Operating
expenses decreased due to a reduction in
liability and workers compensation
expense at the Partnership properties,
due to lower claims experience. General
and administrative expenses decreased as
a result of 1997 legal costs relating to
the unsolicited tender offers to
purchase Partnership Units.
Depreciation expense decreased as fixed
asset additions purchased in previously
years became fully depreciated.
1997 compared to 1996
Net loss decreased in 1997 when compared
to 1996, as the increase in total
revenue more than offset the increase in
total expenses.
Rental revenue increased in 1997 when
compared to 1996, with substantial
increases in average occupancy rates at
all the Partnership's properties.
Total expenses increased slightly in
1997 as compared to 1996. Maintenance
expense increased with landscaping and
exterior building repairs completed at
Brookeville. Real estate taxes
increased due to a rise in the assessed
value
of Dorsey's Forge in addition to a 1995
real estate tax refund for the property
received in 1996. Management fees
increased as a result ofthe increases in
rental revenue, as discussed above.
Depreciation expense increased in
conjunction with capital improvement
expenditures.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
See Appendix A to this report.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT
The Partnership has no directors or executive
officers. Information as to the directors and
executive officers of The Krupp Corporation,
which is a General Partner of both the
Partnership and The Krupp Company, the other
General Partner of the Partnership, is as
follows:
Position with
Name and Age The Krupp Corporation
Douglas Krupp (52)President and
Co-Chairman of the Board
George Krupp (54)Co-Chairman of the Board
Wayne H. Zarozny (41)Treasurer
Douglas Krupp co-founded and serves as Co-
Chairman and Chief Executive Officer of The
Berkshire Group, an integrated real estate
financial services firm engaged in real estate
acquisition, mortgage banking, investment
sponsorship, venture capital investing and
financial management. Mr. Krupp has held the
position of Co-Chairman since The Berkshire
Group was established as The Krupp Companies
in 1969 and he has served as the Chief
Executive Officer since 1992. Mr. Krupp
serves as Chairman of the Board and Director
of Berkshire Realty Company, Inc. (NYSE-BRI)
and he is also a member of the Board of
Trustees at Brigham & Women's Hospital. He is
a graduate of Bryant College where he received
an honorary Doctor of Science in Business
Administration in 1989 and was elected trustee
in 1990.
George Krupp is the Co-Founder and Co-
Chairman of The Berkshire Group, an integrated
real estate financial services firm engaged in
real estate acquisition, mortgage banking,
investment sponsorship, venture capital
investing and financial management. Mr.
Krupp has held the position of Co-Chairman
since The Berkshire Group was established as
The Krupp Companies in 1969. Mr. Krupp has
been an instructor of history at the New
Jewish High School in Waltham, Massachusetts
since September of 1997. Mr. Krupp attended
the University of Pennsylvania and Harvard
University and holds a Master's Degree in
History from Brown University.
Wayne H. Zarozny is Vice President of The
Berkshire Group. Mr. Zarozny has held several
positions within The Berkshire Group since
joining the company in 1986 and is currently
responsible for asset management, accounting,
financial reporting and treasury activities.
Prior to joining The Berkshire Group, he was
an audit supervisor for Pannell Kerr Forster
International and on the audit staff of
Deloitte, Haskins and Sells in Boston. He
received a B.S. degree from Bryant College, a
Master's degree in Business Administration
from Clark University and is a Certified
Public Accountant.
ITEM 11. EXECUTIVE
COMPENSATION
The Partnership has no directors or
executive officers.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998, beneficial owners
of record owning more than 5% of the
Partnership's 25,000 Units of Investor Limited
Partner Interests outstanding are as follows:
Title Name and Address Amount and Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
Investor Equity Resource
Limited Fund XVI LP
Partner 14 Story Street
[S] [S] [C]
Units Cambridge, MA 02138 916 Units 3.7%
Investor Equity Resource
Limited Fund XIX LP
Partner 14 Story Street
Units Cambridge, MA 02138 413 Units 1.6%
Investor Equity Resource
Limited Cambridge Fund LP
Partner 14 Story Street
Units Cambridge, MA 02138 95 Units 0.4%
Investor Equity Resource
Limited General Fund LP
Partner 14 Story Street
Units Cambridge, MA 02138 40 Units 0.2%
Investor Equity Resource
Limited Brattle Fund LP
Partner 14 Story Street
Units Cambridge, MA 02138 30 Units 0.1%
Investor Equity Resource
Limited Bridge Fund
Partner 14 Story Street
Units Cambridge, MA 02138 30 Units 0.1%
Total 1,524 Units 6.1%
[/TABLE]
As of December 31, 1998, the General Partners or their
affiliates owned 80 Units (.3% of the total outstanding) of the
Partnership in addition to their General Partner and Original
Limited Partner Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Partnership does not have any
directors, executive officers or nominees for
election as director.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULE AND REPORTS ON FORM 8-K
(a) 1.
Consolidated Financial Statements -
see Index to Consolidated Financial
Statements and Schedule included under
Item 8 (Appendix A) on page F-2 of
this Report.
2.
Consolidated Financial Statement
Schedule - see Index to Consolidated
Financial Statements and Schedule
included under Item 8 (Appendix A) on
page F-2 of this Report. All other
schedules are omitted as they are not
applicable, not required or the
information is provided in the
Consolidated Financial Statements or
the Notes thereto.
(b) Exhibits:
Number and Description Under
Regulation S-K
The following reflects all applicable
Exhibits required under Item
601 of Regulation S-K.
(4) Instruments defining the rights of
security holders including indentures:
(4.1) Agreement of Limited Partnership dated
as of April 23,
1982 [Exhibit A to Prospectus included in
Registrant's Registration Statement on Form
S-11 (File 2-77155)].*
(4.2) Amended Certificate of Limited
Partnership filed with the
Massachusetts Secretary of State on
September 29, 1982 [Exhibit 4.2 to
Registrant's Report on Form 10-K
dated December 31, 1982 (File No.
2-77155)].*
(10) Material Contracts:
Brookeville Apartments
(10.1) Property Management Agreement dated
October 1, 1991 between Brookeville Apartments
Limited Partnership, as Owner, and BRI OP
Limited Partnership, formerly known as
Berkshire Property Management, a subsidiary of
Berkshire Realty Company, Inc. [Exhibit 10.6
to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991 (File No. 0-
11210)].*
(10.2) Contract of Limited Partnership and
Certificate of Limited Partnership of
Brookeville Apartments Limited
Partnership [Exhibit 10.5 to
Registrant's Report on Form 10-Q for
the quarter ended September 30, 1993
(File No. 0-11210)].*
(10.3) Agreement to Hold Title dated July 20,
1993 by and between Brookeville
Apartments Limited Partnership and
Krupp Realty Fund, Ltd. - III.
[Exhibit 10.6 to Registrant's Report
on Form 10-Q for the quarter ended
September 30, 1993 (File No. 0-
11210)].*
(10.4) Quitclaim deed dated July 20, 1993
between Krupp Realty Fund, Ltd.-III
and Brookeville Apartments Limited
Partnership. [Exhibit 10.7 to
Registrant's Report on Form 10-Q for
the quarter ended September 30, 1993
(File No. 0-11210)].*
(10.5) Open-End Mortgage Note dated July 20,
1993 by and between Brookeville
Apartments Limited Partnership and
Sussex Mortgage Company. [Exhibit
10.8 to Registrant's Report on Form
10-Q for the quarter ended September
30, 1993 (File No. 0-11210)].*
(10.6) Open-End Mortgage Deed dated July 20,
1993 by and between Brookeville
Apartments Limited Partnership and
Sussex Mortgage Company. [Exhibit
10.9 to Registrant's Report on Form
10-Q for the quarter ended September
30, 1993 (File No. 0-11210)].*
Dorsey's Forge, Oakland Meadows and Hannibal
Grove Apartments
(10.7)Agreements dated as of November 30,
1982, and related supplemental Agreement dated
as of November 30, 1982 between George Krupp
and Douglas Krupp, on behalf of themselves and
others, and Shelter Corporation of Canada,
Limited and Metropolitan Properties Co.
Limited [Exhibit to Registrant's Report on
Form 8-K dated January 10, 1983 (File
2-77155)].*
(10.8) Deed dated April 25, 1983 between
Dorsey's Properties, Ltd. and
D.O.H., Inc. relating to Dorsey's
Forge [Exhibit 1 to Registrant's
Amendment No. 1 to Form 8-K dated
January 18, 1983 (File No.
2-77155)].*
(10.9) Deed dated April 25, 1983 between
D.O.H., Inc. and Krupp Realty Fund,
Ltd.-III relating to Dorsey's Forge
[Exhibit 2 to Registrant's
Amendment No. 1 to Form 8-K dated
January 18, 1983 (File No.
2-77155)].*
(10.10) Modification and Restatement of
Promissory Note dated April 28, 1993 by and
between Krupp Realty Fund - III, Ltd. and John
Hancock Mutual Life Insurance Company relating
to Dorsey's Forge. [Exhibit 10.1 to
Registrant's Report on Form 10-Q for the
quarter ended September 30, 1993. (File No.
0-11210)].*
(10.11) Modification and Restatement of
Indemnity Deed of Trust and
Security Agreement dated April 28,
1993 between Krupp Realty Fund,
Ltd.-III and John Hancock Mutual
Life Insurance Company relating to
Dorsey's Forge [Exhibit 10.2 to
Registrant's Report on Form 10-Q
dated September 30, 1993. (File No.
0-11210)].*
(10.12)
Property Management Agreement dated,
December 19, 1986, between Krupp Realty
Fund, Ltd.-III (as "Owner") and BRI OP
Limited Partnership, formerly known as
Berkshire Property Management, a subsidiary
of Berkshire Realty Company, Inc., relating
to Dorsey's Forge [Exhibit 10.15 to
Registrant's Annual Report on Form 10-K
dated December 31, 1986 (File No. 0-
11210)].*
(10.13)
Management Agreement dated December 19,
1986 between Krupp Realty Fund, Ltd.-III
(as "Owner") and BRI OP Limited
Partnership, formerly known as Berkshire
Property Management , a subsidiary of
Berkshire Realty Company, Inc., relating to
Oakland Meadows [Exhibit 10.16 to
Registrant's Annual Report on Form 10-K
dated December 31, 1986 (File No. 0-
11210)].*
(10.14)
Deed dated April 25, 1983 between Dorsey
Properties Ltd., and D.O.H., Inc., relating
to Oakland Meadows [Exhibit 4 to
Registrant's Amendment No. 1 to Form 8-K
dated January 18, 1983 (File No.
2-77155)].*
(10.15)
Deed dated April 25, 1983 between D.O.H.,
Inc., and Krupp Realty Fund, Ltd.-III
relating to Oakland Meadows [Exhibit 5 to
Registrant's Amendment No. 1 to Form 8-K
dated January 18, 1983 (File No.
2-77155)].*
(10.16) Modification and Restatement of
Promissory Note dated April 28,
1993 between Krupp Realty Fund,
Ltd.-III and John Hancock Mutual
Life Insurance Company relating to
Hannibal Grove. [Exhibit 10.3 to
Registrant's Report on Form 10-Q
for the quarter ended September 30,
1993 (File No. 0-11210)].*
(10.17)
Modification and Restatement of Indemnity
Deed of Trust and Security Agreement dated
April 28, 1993 between Krupp Realty Fund,
Ltd.-III and John Hancock Mutual Life
Insurance Company relating to Hannibal
Grove [Exhibit 10.4 to Registrant's Report
on Form 10-Q for the quarter ended
September 30, 1993. (File No. 0-11210)].*
(10.18)
Management Agreement dated December 19,
1986 between Krupp Realty Fund, Ltd.-III
(as "Owner") and BRI OP Limited
Partnership, formerly known as Berkshire
Property Management, a subsidiary of
Berkshire Realty Company, Inc., relating to
Hannibal Grove [Exhibit 10.21 to
Registrant's Annual Report on Form 10-K
dated December 31, 1986 (File No. 0-
11210)].*
(10.19)
Deed dated April 25, 1983 between Dorsey
Properties, Ltd., and D.O.H., Inc.,
relating to Hannibal Grove [Exhibit 7 to
Registrant's Amendment No. 1 to Form 8-K
dated January 18, 1983 (File No.
2-77155)].*
(10.20)
Deed dated April 25, 1983 between D.O.H.,
Inc., and Krupp Realty Fund, Ltd.-III
relating to Hannibal Grove [Exhibit 8 to
Registrant's Amendment No. 1 to Form 8-K
dated January 18, 1983 (File No.
2-77155)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the quarter ended December 31, 1998,
the Partnership did not file any reports on
Form 8-K.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) 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, on the 30th day of
March, 1999.
KRUPP REALTY FUND, LTD.-III
By: The Krupp Corporation, a General
Partner
By: /s/ Douglas Krupp
Douglas Krupp, President, Co-
Chairman
(Principal Executive Officer) and
Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated, on the 30th
day of March, 1999.
Signatures Titles
/s/ Douglas Krupp President, Co-Chairman (Principal
Executive Douglas Krupp Officer) and Director of The Krupp
Corporation, a General Partner.
/s/ George Krupp Co-Chairman (Principal Executive
Officer) and
George Krupp Director of The Krupp Corporation, a
General Partner.
/s/ Wayne H. Zarozny Treasurer of the Krupp Corporation,
a General
Wayne H. Zarozny Partner.
<PAGE>
APPENDIX A
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1998
<PAGE>
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets for December 31,
1998 and December 31, 1997 F-4
Consolidated Statements of Operations For the
Years Ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Changes in
Partners' Deficit
For the Years Ended December 31, 1998, 1997
and
1996 F-6
Consolidated Statements of Cash Flows For the
Years Ended
December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial StatementsF-8 - F-14
Schedule III - Real Estate and Accumulated
Depreciation F-15 - F-16
All other schedules are omitted as they are
not applicable or not required, or the
information is provided in the consolidated
financial statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Krupp Realty Fund, Ltd.-III
and Subsidiary:
In our opinion, the consolidated financial
statements and the financial statement
schedule listed in the index on page F-2
present fairly, in all material respects, the
financial position of Krupp Realty Fund, Ltd.-
III and its Subsidiary (the "Partnership") at
December 31, 1998 and December 31, 1997, and
the results of their operations and their cash
flows for each of the three years in the
period ended December 31, 1998, in conformity
with generally accepted accounting principles.
These financial statements and financial
statement schedule are the responsibility of
the Partnership's management; our
responsibility is to express an opinion on
these financial statements and financial
statement schedule based on our audits. We
conducted our audits of these statements in
accordance with generally accepted auditing
standards, which require that we plan and
perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements,
assessing the accounting principles used and
significant estimates made by management, and
evaluating the overall financial statement
presentation. We believe that our audits
provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts /s/
PricewaterhouseCoopers LLP
February 10, 1999
<PAGE>
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
Multi-family apartment complexes,
net of accumulated depreciation of
$21,977,268 and $20,216,642,
<S> <C> <C>
respectively (Note D) $ 9,784,836$ 10,519,769
Cash and cash equivalents (Note C) 932,065 552,221
Replacement reserve escrow (Note D) 160,954 177,778
Cash restricted for tenant
security deposits 229,416 202,691
Prepaid expenses and other assets 614,911 595,696
Deferred expenses, net of accumulated
amortization of $258,861 and $212,971,
respectively 260,723 306,613
Total assets $ 11,982,905$ 12,354,768
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note D) $ 18,726,677$ 19,126,371
Accrued expenses and other liabilities
(Note E) 601,319 683,413
Due to affiliates (Note G) 199,500 -
Total liabilities 19,527,496 19,809,784
Commitment (Note F)
Partners' deficit (Note F):
Investor Limited Partners
(25,000 Units outstanding) (6,305,460)(6,220,367)
Original Limited Partner (909,737) (906,151)
General Partners (329,394) (328,498)
Total Partners' deficit (7,544,591)(7,455,016)
Total liabilities and Partners' deficit $ 11,982,905$ 12,354,768
</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
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
Revenue:
<S> <C> <C> <C>
Rental $7,541,280$7,224,085 $6,568,309
Other income 67,035 56,096 60,349
Total revenue 7,608,315 7,280,181 6,628,658
Expenses:
Operating (Note G) 2,004,219 2,041,820 1,991,923
Maintenance 591,235 578,869 556,909
Real estate taxes 559,440 539,978 504,867
General and administrative (Note G)66,012 101,687 93,995
Management fees (Note G) 376,570 357,766 326,363
Depreciation and amortization 1,806,516 1,980,892 1,866,979
Interest (Note D) 1,667,840 1,702,393 1,733,982
Total expenses 7,071,832 7,303,405 7,075,018
Net income (loss) (Note H) $ 536,483$(23,224) $(446,360)
Allocation of net income (loss)
(Note F):
Investor Limited Partners
(25,000 Units outstanding) $ 509,659$(22,063) $(424,042)
Investor Limited Partners
Per Unit $ 20.39 $ (.88) $ (16.96)
Original Limited Partner $ 21,459$ (929) $ -
General Partners $ 5,365$ (232) $ (22,318)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.<PAGE>
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1995$(4,981,262) $(871,828)$(297,600)$(6,150,690)
Net loss (424,042) - (22,318) (446,360)
Distributions (396,500) (16,697) (4,174) (417,371)
Balance at
December 31, 1996 (5,801,804)(888,525) (324,092) (7,014,421)
Net loss (22,063) (929) (232) (23,224)
Distributions (396,500)(16,697) (4,174) (417,371)
Balance at
December 31, 1997 (6,220,367) (906,151) (328,498) (7,455,016)
Net income (Note F) 509,659 21,459 5,365 536,483
Distributions (Note F) (594,752) (25,045) (6,261) (626,058)
Balance at
December 31, 1998$(6,305,460)$(909,737)$(329,394) $(7,544,591)
</TABLE>
The per Unit distribution for the years ended December 31, 1998,
1997 and 1996 were $23.79, $15.86 and $15.86, respectively, none
of which represented a return of capital.
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
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $536,483 $(23,224)$(446,360)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,806,516 1,980,892 1,866,979
Interest earned on replacement reserve
escrow (7,392) (4,889) -
Changes in assets and liabilities:
Decrease (increase) in cash
restricted for tenant security
deposits (26,725) (18,933) 19,192
Decrease (increase) in prepaid
expenses and other assets (19,215) 7,394 (6,836)
Increase (decrease) in due to
affiliates 199,500 - (10,790)
Increase (decrease) in accrued
expenses and other liabilities (82,094) (54,465) 39,895
Net cash provided by
operating activities 2,407,073 1,886,775 1,462,080
Cash flows from investing activities:
Additions to fixed assets (1,025,693)(949,541) (996,817)
Increase (decrease) in accrued expenses
and other liabilities related to
fixed asset additions - (9,000) 9,000
Withdrawals from replacement reserve
escrow 86,111 - 153,250
Deposits to replacement reserve escrow(61,895) (61,895) (61,895)
Net cash used in investing
activities (1,001,477)(1,020,436) (896,462)
Cash flows from financing activities:
Principal payments on mortgage
notes payable (399,694)(365,482) (334,208)
Distributions (626,058)(417,371) (417,371)
Net cash used in
financing activities (1,025,752)(782,853) (751,579)
Net increase (decrease) in cash and
cash equivalents 379,844 83,486 (185,961)
Cash and cash equivalents, beginning
of the year 552,221 468,735 654,696
Cash and cash equivalents, end of the year$932,065$552,221$ 468,735
</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
A.Organization
Krupp Realty Fund, Ltd.-III ("KRF-III") was formed on April 23,
1982 by filing a Certificate of Limited Partnership in The
Commonwealth of Massachusetts. KRF-III terminates on December
31, 2020, unless earlier terminated upon the sale of the last of
KRF-III's properties or the occurrence of certain other events as
set forth in the Partnership Agreement.
KRF-III issued all of the General Partner Interests to The Krupp
Company, a Massachusetts limited partnership, and The Krupp
Corporation, a Massachusetts corporation, in exchange for capital
contributions aggregating $1,000. Except under certain limited
circumstances upon termination of KRF-III, the General Partners
are not required to make any additional capital contributions.
KRF-III also issued all of the Original Limited Partner Interests
to The Krupp Company in exchange for a capital contribution of
$4,000. The Original Limited Partner is not required to make any
additional capital contributions to KRF-III.
On June 4, 1982, KRF-III commenced an offering of up to 25,000
units of Investor Limited Partner Interests (the "Units") for
$1,000 per Unit. As of September 29, 1982, KRF-III received
subscriptions for all 25,000 Units and therefore, the public
offering was successfully completed on that date.
In 1993, the General Partners formed Brookeville Apartments
Limited Partnership ("Brookeville L.P.") as a prerequisite for
the refinancing of Brookeville Apartments ("Brookeville") with
the Department of Housing and Urban Development ("HUD"). At the
same time, the General Partners transferred ownership of
Brookeville to Brookeville L.P. The General Partner of
Brookeville L.P. is the Westcop Corporation ("Westcop") and KRF-
III is the Limited Partner in Brookeville L.P. Westcop has
beneficially assigned its interest in Brookeville L.P. to KRF-
III. KRF-III and Brookeville L.P. are collectively known as
Krupp Realty Fund, Ltd.-III and Subsidiary (the "Partnership").
B.Significant Accounting Policies
The Partnership uses the following accounting policies for
financial reporting purposes, which may differ in certain
respects from those used for federal income tax purposes (see
Note H).
Basis of Presentation
The consolidated financial statements present the consolidated
assets, liabilities and operations of the Partnership. All
intercompany balances and transactions have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money
market funds with commercial banks. The Partnership has not
experienced any losses to date on its invested cash.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities, contingent assets and liabilities and
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B.Significant Accounting Policies, Continued
Cash and Cash Equivalents
The Partnership includes all short-term
investments with maturities of three months
or less from the date of acquisition in cash
and cash equivalents. The cash investments
are recorded at cost, which approximates
current market values.
Rental Revenues
Leases require the payment of rent monthly in
advance. Rental revenues are recorded on the
accrual basis.
Depreciation
Depreciation is provided for by the use of
the straight-line method over estimated
useful lives as follows:
Buildings and improvements 5 to 25 years
Appliances, carpeting and equipment 3 to 8
years
Impairment of Long-Lived Assets
Real estate assets and equipment are stated
at depreciated cost. Pursuant to Statement
of Financial Accounting Standards Opinion No.
121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be
Disposed of", impairment losses are recorded
on long-lived assets used in operations on a
property by property basis, when events and
circumstances indicate that the assets might
be impaired and the estimated undiscounted
cash flows to be generated by those assets
are less than the carrying amount of those
assets. Upon determination that an
impairment has occurred, those assets shall
be reduced to fair value.
Deferred Expenses
Costs of obtaining and recording mortgages
are amortized over the life of the related
mortgage notes using the straight-line method
which approximates the effective interest
method.
Income Taxes
The Partnership is not liable for federal or
state income taxes as Partnership income or
loss is allocated to the Partners for income
tax purposes. In the event the Partnership's
tax returns are examined by the Internal
Revenue Service or state taxing authority and
the examination results in a change in
Partnership taxable income or loss, such
change will be reported to the Partners.
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies, Continued
Descriptive Information About Reportable Segments
During the fourth quarter of 1998, the
Partnership adopted the Financial Accounting
Standards Board's Statement of Financial
Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related
Information ("Statement No. 131"). Statement
No. 131 superseded FASB Statement No. 14,
"Financial Reporting for Segments of a
Business Enterprise". Statement No. 131
establishes standards for the way that public
business enterprises report information
regarding reportable operating segments. The
adoption of Statement No. 131 did not affect
the results of operations or financial
position of the Partnership.
The Partnership operates and develops
apartment communities which generate rental
and other income through the leasing of
apartment units. The General Partners
separately evaluate the performance of each
of the Partnership's apartment communities.
However, because each of the apartment
communities have similar economic
characteristics, facilities, services and
tenants, the apartment communities have been
aggregated into a single dominant apartment
communities segment.
All revenues are from external customers and
no revenues are generated from transactions
with other segments. There are no tenants
which contributed 10% or more of the
Partnership's total revenue during 1998, 1997
or 1996.
Reclassifications
Certain prior year balances have been
reclassified to conform with current year
consolidated financial statement
presentation.
C.Cash and Cash Equivalents
Cash and cash equivalents consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Cash and money market accounts $ 682,656 $ 402,783
Commercial paper 249,409 149,438
$932,065 $ 552,221
</TABLE>
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
D. Mortgage Notes Payable
The properties owned by the Partnership are pledged as
collateral for the non-recourse mortgage notes outstanding at
December 31, 1998 and 1997. Mortgage notes payable consisted
of the following:
<TABLE>
<CAPTION>
Annual
Principal Interest
Property 1998 1997 Rate Maturity Date
Brookeville
<S> <C> <C> <C> <C>
Apartments $ 8,428,579 $ 8,499,549 7.75% August 1, 2028
Dorsey's Forge
Apartments and
Oakland Meadows
Apartments 4,363,601 4,502,891 9.25% May 3, 2000
Hannibal Grove
Apartments 5,934,497 6,123,931 9.25% May 3, 2000
Total $18,726,677 $19,126,371
</TABLE>
Brookeville Apartments
The property is subject to a non-recourse
mortgage note in the original amount of
$8,755,000, payable to the Department of
Housing and Urban Development ("HUD"). The
mortgage note requires monthly payments of
$60,600 consisting of principal and
interest at the rate of 7.75% per annum.
In addition, the Partnership is required to
fund a monthly deposit of $5,158 to an
escrow account to be used for future
property replacements and improvements and
a mortgage insurance premium deposit equal
to .5% per annum of the outstanding
principal balance. The note matures on
August 1, 2028. In accordance with HUD
regulations, distributions are limited to
the extent of Surplus Cash, as defined by
the Regulatory Agreement. The mortgage
note payable is collateralized by the
property and may be prepaid during the five
years beginning August 1, 1998, subject to
an annual declining prepayment penalty of
5% to 1%, respectively. After August 1,
2003, there is no prepayment penalty.
Based on the borrowing rates currently
available to the Partnership for bank loans
with similar terms and average maturities,
the fair value of long-term debt is
approximately $9,446,000 at December 31,
1998. At December 31, 1997, the fair market
value could not be determined since the
mortgage note could not be prepaid.
Hannibal Grove Apartments ("Hannibal") and
Dorsey's Forge and Oakland
Meadows Apartments ("Dorsey's")
The properties are subject to non-recourse
mortgage notes for Hannibal and Dorsey's in
the original amounts of $6,800,000 and
$5,000,000, respectively, payable at a rate
of 9.25% per annum. Monthly principal and
interest payments are $62,333 for Hannibal
and $45,833 for Dorsey's. The notes mature on
May 3, 2000 at which time all unpaid
principal, $5,653,175 (Hannibal) and
$4,156,746 (Dorsey's), and any accrued
interest are due. The mortgage notes payable
are collateralized by the respective
properties and may be prepaid subject to a
prepayment penalty. The prepayment penalty
will be the greater of 1) the principal
balance multiplied by the difference between
9.4301% and the yield rate on publicly traded
U.S. Treasury Securities having the closest
matching maturity date as reported in the
Wall Street Journal, or 2) one percent of the
then outstanding principal.
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued
D.Mortgage Notes Payable, Continued
Based on the borrowing rates currently
available to the Partnership for bank loans
with similar terms and average maturities,
the fair value of long-term debt for Hannibal
and Dorsey's is approximately $6,118,000 and
$4,449,000, respectively at December 31,
1998. At December 31, 1997, the fair market
value could not be determined since the
mortgage notes could not be prepaid.
Due to restrictions on transfers and
prepayment, the Partnership may be unable to
refinance certain mortgage notes payable at
such calculated fair value.
The aggregate scheduled principal amounts of
long-term borrowings due during the five
years ending December 31, 2003 are $437,124,
$10,020,473, $89,480, $96,667 and $104,430.
During 1998, 1997 and 1996 the Partnership
paid $1,625,506, $1,659,719 and $1,690,992
of interest, respectively, on its mortgage
notes.
E. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the
following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accounts payable $ 1,016 $ -
Accrued real estate taxes 161,258 162,030
Other liabilities 191,934 288,703
Tenant security deposits 219,272 186,065
Prepaid rent 27,839 46,615
$601,319 $683,413
</TABLE>
F.Partners' Deficit
Under the terms of the Partnership Agreement,
profits and losses from operations are
allocated 95% to the Investor Limited
Partners, 4% to the Original Limited Partner
and 1% to the General Partners until such
time that the Investor Limited Partners have
received a return of their total invested
capital plus a 9% per annum Cumulative Return
on Investment thereon and thereafter, 65% to
the Investor Limited Partners, 28% to the
Original Limited Partner and 7% to the
General Partners.
Also, under the Partnership Agreement, cash
distributions from operations are generally
made on the same basis as the allocations of
profits and losses described above. Net cash
proceeds, as determined by the General
Partners, resulting from transactions such as
refinancing or sale of a property, are to be
distributed as follows: 1) to the Investor
Limited Partners until they have received a
return of their total Invested Capital; 2) to
the Investor Limited Partners until they have
received an amount equal to their Cumulative
Return on Investment in respect of all fiscal
years of the Partnership; 3) to the Original
Limited Partner and General Partners until
they have received a return of their total
Invested Capital; 4) to an unaffiliated
brokerage firm (the "Sales Agent") to the
extent of any subordinated Financial
Consulting Fee then due, and; 5) any
remaining Cash Proceeds shall be distributed
65% to the Investor Limited Partners, 28% to
the Original Limited Partner and 7% to the
General Partners. Notwithstanding anything
above, the General Partners shall, under all
circumstances, receive at least 1% of all
distributions of net cash proceeds from a
capital transaction.
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued
F.Partners' Deficit, Continued
Per the Partnership Agreement, profits from
capital transactions are to be allocated to
the extent of cash distributions described
above, first to the Investor Limited Partners
until they have received a return of their
total Invested Capital. Losses from capital
transactions are to be allocated to the
extent of cash distributions described above,
first to the Investor Limited Partners until
they have received a return of their total
Invested Capital plus their Cumulative Return
on Investment. Thereafter, profits and
losses from capital transactions are to be
allocated in accordance with the Partnership
Agreement. Notwithstanding anything above,
the General Partners shall be allocated,
under all circumstances, at least 1% of all
profits and losses from capital transactions.
For income tax purposes, the allocation of
Partnership items is determined according to
the Partnership Agreement, to the extent that
each allocation has "substantial economic
effect" pursuant to the Internal Revenue
Code, Section 704. In the event that an
allocation does not meet these statutory
requirements, Partnership items will be
reallocated according to these provisions.
For 1996, reallocation was necessary. The
consolidated financial statements presented
herein reflect the allocation of net loss in
accordance with the rules of the Internal
Revenue Code for the year ended December 31,
1996.
As of December 31, 1998, the following
cumulative partner contributions and
allocations have been made since the
inception of the Partnership:
Investor Original
Limited Limited General
Partners Partner Partners Total
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Capital contributions$ 25,000,000$4,000 $1,000 $ 25,005,000
Syndication costs (3,486,600) - - (3,486,600)
Cash distributions
from operations (10,706,873)(450,813) (112,701) (11,270,387)
Cash distributions from
refinancing proceeds(5,173,000) - (52,252) (5,225,252)
Net loss from operations (21,341,654)(858,825) (264,417) (22,464,896)
Net income from capital
transaction 9,402,667 395,901 98,976 9,897,544
Balance at
December 31, 1998$ (6,305,460)$(909,737)$(329,394)$ (7,544,591)
</TABLE>
G.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.
Continued
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G. Related Party Transactions, Continued
Amounts paid to the General Partners' affiliates during the years
ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Property management fees $ 376,570$ 357,766 $ 326,363
Expense reimbursements 163,891 179,032 173,132
Charged to operations $ 540,461$ 536,798 $ 499,495
</TABLE>
Due to affiliates consisted of expense reimbursements of $199,500 at
December 31, 1998.
H.Federal Income Taxes
For federal income tax purposes, the
Partnership is depreciating property under
the Accelerated Cost Recovery System ("ACRS")
and the Modified Accelerated Cost Recovery
System ("MACRS"), depending on which is
applicable.
The reconciliation of the net income (loss)
reported in the accompanying Consolidated
Statement of Operations with the net loss
reported in the Partnership's 1998, 1997 and
1996 federal income tax returns is as
follows:
1998 1997 1996
Net income (loss) per Consolidated
[S] [C] [C] [C]
Statement of Operations $ 536,483 $(23,224) $(446,360)
Difference in book to tax
depreciation and amortization 1,164,574 557,885 221,435
Net income (loss) for federal
income tax purposes $1,701,057 $534,661 $(224,925)
[/TABLE]
The allocation of the net income for federal income tax purposes for
the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Portfolio Passive
Income Income Total
<S> <C> <C> <C>
Investor Limited Partners $ 63,141 $1,552,863 $1,616,004
Original Limited Partner 2,658 65,384 68,042
General Partners 665 16,346 17,011
$ 66,464 $1,634,593 $1,701,057
</TABLE>
During the years ended December 31, 1998,
1997 and 1996 the per Unit net income (loss)
to the Investor Limited Partners for federal
income tax purposes was $64.64, $21.17 and
$(8.55), respectively.
The basis of the Partnership's assets for
financial reporting purposes exceeds its tax
basis by approximately $2,288,000 and
$3,451,000 at December 31, 1998 and 1997,
respectively. The tax and book basis of the
Partnership's liabilities are the same.<PAGE>
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
Costs Capitalized
Subsequent to
Initial Costs to Partnership Acquisition
Buildings Buildings
and and Depreciable
Description Encumbrances Land Improvements Improvements Life
<TABLE>
<CAPTION>
Brookeville
Apartments
<S> <C> <C> <C> <C> <C>
Columbus, OH $8,428,579 $623,126 $8,312,134 $4,158,128 3 to 25 years
Hannibal Grove
Apartments
Columbia, MD 5,934,497 518,519 6,883,945 4,198,244 3 to 25 years
Dorsey's Forge &
Oakland Meadows
Apartments
Columbia, MD 4,363,601 340,956 4,521,895 2,205,1573 to 25 years
Total $ 18,726,677$ 1,482,601$ 19,717,974$ 10,561,529
</TABLE>
Gross Amounts Carried at
End of Year
Buildings Year
and Accumulated Year
Construction
Description LandImprovements Total Depreciation Acquired Completed
<TABLE>
<CAPTION>
Brookeville
Apartments
<S> <C> <C> <C> <C> <C> <C>
Columbus, OH $ 623,126 $ 12,470,262 $13,093,388 $9,015,376 1983 1975
Hannibal Grove
Apartments
Columbia, MD 518,519 11,082,189 11,600,708 8,213,191 1983 1970
Dorsey's Forge &
Oakland Meadows
Apartments
Columbia, MD 340,956 6,727,052 7,068,008 4,748,701 1983 1970
Total $1,482,601 $ 30,279,503$31,762,104$21,977,268
</TABLE>
Continued<PAGE>
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
December 31, 1998
Reconciliation of Real Estate and Accumulated Depreciation for
each of the three years in the period ended December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
Real Estate
<S> <C> <C> <C>
Balance at beginning of year$30,736,411 $29,786,870 $28,790,053
Acquisition and improvements1,025,693 949,541 996,817
Balance at end of year $31,762,104 $30,736,411$29,786,870
Accumulated Depreciation 1998 1997 1996
Balance at beginning of year$20,216,642 $18,281,640 $16,460,550
Depreciation expense 1,760,626 1,935,002 1,821,090
Balance at end of year $21,977,268 $20,216,642 18,281,640
</TABLE>
Note:The Partnership uses the cost basis for
property valuation for both income tax and
financial statement purposes. The aggregate
cost for federal income tax purposes at
December 31, 1998 is $31,775,676, and the
aggregate accumulated depreciation for
federal income tax purposes is $24,267,669.
<PAGE>
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 III Financial Statements for the tweleve months ended December 31, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 932,065
<SECURITIES> 0
<RECEIVABLES> 37,660<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 967,621
<PP&E> 32,281,688<F2>
<DEPRECIATION> (22,236,129)<F3>
<TOTAL-ASSETS> 11,982,905
<CURRENT-LIABILITIES> 800,819
<BONDS> 18,726,677<F4>
0
0
<COMMON> (7,544,591)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,982,905
<SALES> 0
<TOTAL-REVENUES> 7,608,315<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,403,992<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,667,840
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 536,483<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> Inclues apartment complexes of $31,762,104 and deferred expenses of
$519,584.
<F3> Includes depreciaton of $21,977,268 and amortization of deferred expenses
of $258,861.
<F4>Represents mortgage note payable
<F5> Represents total deficit of the General Partners ($329,394) and the Limited
Partners ($7,215,197).
<F6>Includes all revenue of the Partnership.
<F7> Includes operating expenses of $3,038,036, real estate taxes of $559,440
and depreciation and amortization of $1,086,516.
<F8> Net Income allocated $5,365 to General Partners and $531,118 to Limited
Partners. Net Income of $20.39 per unit on 25,000 units outstanding.
</TABLE>
