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 30,1998
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 0-11987
Krupp Realty Limited
Partnership-IV
Massachusetts
04-2772783
(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 11.<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 LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
Unaudited
June 30, December 31,
1998 1997
Multi-family apartment complexes,
net of accumulated depreciation of
$22,412,895 and $26,859,567, respectively
<S> <C> <C>
(Note 3) $12,024,566 $ 14,947,503
Cash and cash equivalents 884,894 402,621
Replacement reserve and repair escrows
(Note 3) - 302,985
Prepaid expenses and other assets 503,066 852,446
Deferred expenses, net of accumulated
amortization of $224,586 and $218,977,
respectively (Notes 2 and 3) 122,452 212,763
Total assets $13,534,978 $ 16,718,318
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Notes 2 and 3) $17,308,668$ 20,327,586
Accounts payable 8,120 -
Due to affiliates (Note 5) 63,231 41,571
Other liabilities 774,430 1,212,728
Total liabilities 18,154,449 21,581,885
Partners' deficit (Note 4):
Investor Limited Partners
(30,000 Units outstanding) (2,947,705) (3,216,956)
Original Limited Partner (1,367,021) (1,339,425)
General Partners (304,745) (307,186)
Total Partners' deficit (4,619,471) (4,863,567)
Total liabilities and Partners' deficit $13,534,978 $ 16,718,318
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenue:
<S> <C> <C> <C> <C>
Rental $1,668,950$1,902,205$3,619,131$3,791,029
Other income 45,701 13,656 69,099 27,489
Total revenue 1,714,651 1,915,861 3,688,230 3,818,518
Expenses:
Operating (Note 5) 501,386 531,268 1,066,532 1,085,536
Maintenance 144,239 253,304 248,557 369,491
Real estate taxes 160,948 192,410 367,525 375,364
Management fees (Note 5) 74,890 80,562 156,551 154,855
General and administrative
(Note 5) 37,481 40,291 67,819 81,493
Depreciation and
amortization 392,876 517,274 879,650 1,024,683
Interest 273,476 319,549 610,119 640,283
Total expenses 1,585,2961,934,658 3,396,753 3,731,705
Income (loss) before minority
interest, gain (loss) on
sale of property and
extraordinary loss 129,355(18,797) 291,477 86,813
Minority interest (925) (396) (2,372) (2,073)
Gain (loss) on sale of
property (Note 3) (11,391) - 2,967,939 -
Income (loss) before
extraordinary loss 117,039(19,193) 3,257,044 84,740
Extraordinary loss from
early extinguishment of
debt (Note 3) - - (389,523) -
Net income (loss) $ 117,039$(19,193) $2,867,521$ 84,740
Allocation of net income (loss)
(Note 4):
Investor Limited Partners
(30,000 Units outstanding):
Income (loss) before gain
(loss) on sale of
property and
extraordinary loss $ 122,009 $(18,234)$ 274,650 $ 80,503
Gain (loss) on sale of
property (11,277) - 2,938,260 -
Extraordinary loss - - (370,047) -
Net income (loss) $ 110,732$ (18,234)$2,842,863$ 80,503
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Investor Limited Partners
Per Unit:
Income (loss) before gain
(loss) on sale of
property and
<S> <C> <C> <C> <C>
extraordinary loss $ 4.07$ (.61) $ 9.15$ 2.68
Gain (loss) on sale of
property (.38) - 97.94 -
Extraordinary loss - - (12.33) -
Net income (loss) $ 3.69$ (.61) $ 94.76$ 2.68
Original Limited Partner
(100 Units outstanding):
Income (loss) before gain
(loss) on sale of
property and
extraordinary loss $ 5,137 $ (767) $ 11,564$ 3,390
Gain (loss) on sale of
property - - - -
Extraordinary loss - - (15,581) -
Net income (loss) $ 5,137$ (767) $ (4,017)$ 3,390
General Partners:
Income (loss) before gain
(loss) on sale of
property and
extraordinary loss $ 1,284 $ (192) $ 2,891 $ 847
Gain (loss) on sale of
property (114) - 29,679 -
Extraordinary loss - - (3,895) -
Net income (loss) $ 1,170$ (192) $ 28,675$ 847
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
Operating activities:
<S> <C> <C>
Net income $2,867,521 $ 84,740
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 879,650 1,024,683
Interest earned on repair escrow (12,898) -
Gain on sale of property (2,967,939) -
Extraordinary loss from early extinguishment
of debt 389,523 -
Changes in assets and liabilities:
Decrease in prepaid expenses and
other assets 314,774 269,320
Decrease in other liabilities (438,298) (287,156)
Increase (decrease) in accounts payable 6,215 (6,802)
Increase (decrease) in due to affiliates 21,660 (190)
Releases from real estate tax and insurance
escrows due to sale of property 33,722 -
Net cash provided by operating
activities 1,093,930 1,084,595
Investing activities:
Deposits to replacement reserve escrow (10,769) (31,430)
Withdrawals from replacement reserve and repair
escrows 315,159 48,982
Release from replacement reserve escrow due to
sale of property 11,493 -
Decrease in deferred expenses 3,191 -
Increase in accounts payable for fixed asset
additions 1,905 54
Additions to fixed assets (673,994)(319,283)
Proceeds from sale of property, net 5,719,564 -
Net cash provided by (used in)
investing activities 5,366,549 (301,677)
Financing activities:
Principal payments on mortgage notes payable(380,876)(379,851)
Distributions (2,623,425)(589,425)
Repayment of mortgage note payable (2,638,042) -
Payment of prepayment premium (335,863) -
Net cash used in financing
activities (5,978,206) (969,276)
Net increase (decrease) in cash and
cash equivalents 482,273 (186,358)
Cash and cash equivalents, beginning of period402,621 956,012
Cash and cash equivalents, end of period $884,894 $ 769,654
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)Accounting Policies
Certain information and footnote disclosures
normally included in financial statements
prepared in accordance with generally accepted
accounting principles have been condensed or
omitted in this report on Form 10-Q pursuant
to the Rules and Regulations of the Securities
and Exchange Commission. In the opinion of
the General Partners of Krupp Realty Limited
Partnership-IV and Subsidiaries (the
"Partnership"), the disclosures contained in
this report are adequate to make the
information presented not misleading. See
Notes to Consolidated Financial Statements
included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1997
for additional information relevant to
significant accounting policies followed by
the Partnership.
The consolidated financial statements present
consolidated assets, liabilities and
operations of Pavillion Partners, Ltd.,
Westbridge Partners, Ltd., and Krupp Realty
Limited Partnership-IV. Westcop Corporation
has a 1% interest in the operations of
Westbridge Partners, Ltd. and Pavillion
Partners, Ltd. At June 30, 1998, minority
interest of $19,365 is included in other
assets.
In the opinion of the General Partners of the
Partnership, the accompanying unaudited
consolidated financial statements reflect all
adjustments necessary to present fairly the
Partnership's consolidated financial position
as of June 30, 1998, its results of operations
for the three and six months ended June 30,
1998 and 1997 and its cash flows for the six
months ended June 30, 1998 and 1997.
The results of operations for the three and
six months ended June 30, 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)Mortgage Notes Payable
On July 31, 1997, the General Partners secured
a $900,000 non-recourse note (the "Note") for
Walden Pond Apartments ("Walden Pond") from
the same lender which holds the first mortgage
note. The Note bears interest at a rate of
9.5% per annum and, commencing September 1,
1997, requires monthly, interest-only payments
until the maturity date. The Note matures on
February 28, 1999, in conjunction with the
first mortgage note, at which time all
outstanding principal and any accrued interest
is due. The Note may be prepaid in its
entirety without penalty, upon 90 days written
notice, and simultaneous payment of the first
mortgage note. Proceeds from the Note were
deposited into an escrow account and were used
to fund capital improvements at the property.
The Partnership paid closing costs of $23,110
to secure the Note.
(3)Sale of Property
On March 31, 1998, the Partnership sold Indian
Run Apartments ("Indian Run"), a 256-unit
multi-family apartment complex, located in
Abilene, Texas, to an unaffiliated third
party. The Partnership received $5,850,000,
less repayment of the mortgage note payable
and interest of $2,658,664 and closing costs
of $130,436. For financial reporting
purposes, the Partnership realized a gain of
$2,967,939 on the sale. The gain was
calculated as the difference between the
property's selling price less net book value
of the property and closing costs.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(3)Sale of Property, Continued
In conjunction with the sale of the property
on March 31, 1998, the Partnership prepaid the
mortgage note. As a result of the retirement
of debt, the Partnership incurred a prepayment
premium of $335,863. The prepayment premium,
as well as unamortized deferred mortgage costs
of $53,660, are reported in the Statement of
Operations as an extraordinary loss from early
extinguishment of debt.
(4) Changes in Partners' Deficit
A summary of changes in Partners' deficit for the six months
ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1997$(3,216,956)$(1,339,425)$(307,186)$(4,863,567)
Income before gain on
sale of property and
extraordinary loss 274,650 11,564 2,891 289,105
Gain on sale of
property 2,938,260 - 29,679 2,967,939
Extraordinary loss (370,047) (15,581) (3,895) (389,523)
Distributions:
Operations (559,952) (23,579) (5,894) (589,425)
Capital Transaction(2,013,660) - (20,340) (2,034,000)
Balance at
June 30, 1998 $(2,947,705)$(1,367,021)$(304,745)$(4,619,471)
</TABLE>
(5)Related Party Transactions
The Partnership pays property management fees
to an affiliate of the General Partners for
management services. Pursuant to the
management agreements, management fees are
payable monthly at a rate of 5% of the gross
receipts from the properties under management.
The Partnership also reimburses affiliates of
the General Partners for certain expenses
incurred in connection with the operation of
the Partnership and its properties, including
administrative expenses.
Amounts accrued or paid to the General
Partners' affiliates were as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Property management fees $ 74,890 $ 80,562$ 156,551$ 154,855
Expense reimbursements 70,690 68,177 109,642 130,514
Charged to operations $145,580 $148,739$ 266,193$ 285,369
</TABLE>
Due to affiliates consisted of expense reimbursements of
$63,231 and $41,571 at June 30, 1998 and December 31, 1997,
respectively.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of
Financial Condition and Results of Operations
contains forward-looking statements including
those concerning Management's expectations
regarding the future financial performance and
future events. These forward-looking
statements involve significant 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 remaining
real estate investments. Such ability would
also be impacted by the future availability of
bank borrowings, and upon the future
refinancing and sale of the Partnership's real
estate investments. These sources of
liquidity will be used by the Partnership for
payment of expenses related to real estate
operations, capital improvements, debt service
and other expenses.
In order to remain competitive in their
respective markets, the Partnership's
properties have spent approximately $674,000
to date and are anticipated to spend
approximately $1,200,000 for fixed assets in
1998. These capital improvements consist of
internal and external enhancements which
include the replacement of appliances,
carpeting and vinyl flooring at the properties
as well as extensive building exterior
improvements at Pavillion and Walden Pond
Apartments. The Partnership expects to fund
these improvements from established reserves
and proceeds from the Walden Pond additional
note and the sale of Indian Run (see Notes 2
and 3).
On March 31, 1998, the Partnership sold Indian
Run to an unaffiliated third party. The
Partnership received $5,850,000, less
repayment of the mortgage note payable and
interest of $2,658,664 and closing costs of
$130,436 (see Note 3).
On June 24, 1998, the General Partners made a
special capital distribution of approximately
$67.12 per Unit, based on the net proceeds
from the sale of Indian Run after funding
capital improvements at the Partnership's
remaining properties, Partnership liabilities
and maintaining reserves for contingent
liabilities.
As a result of the sale of the property and
future capital needs, the General Partners
reduced the annual distribution rate to 2% of
remaining invested capital, beginning with the
distribution payable in August, 1998.
Financial Accounting Standards Board Statement
No. 130 ("FAS 130") "Reporting Comprehensive
Income" is effective for fiscal years
beginning after December 31, 1997, although
earlier application is permitted. FAS 130
establishes standards for reporting and
display of comprehensive income and its
components in financial statements. 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. The Partnership does not believe that
the implementation of FAS 130 or FAS 131 will
have a material impact on the Partnership's
financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND
SUBSIDIARIES
Operations
The following discussion relates to the
operations of the Partnership and its
properties (Fenland Field, Pavillion and
Walden Pond Apartments) for the three and six
months ended June 30, 1998 and 1997. The sale
of Indian Run on March 31, 1998,
significantly impacts the comparability of the
Partnership's operations between these
periods.
Net income, net of Indian Run's activity,
increased during the three and six months
ended June 30, 1998 when compared to the three
and six months ended June 30, 1997, as the
increase in total revenue more than offset the
increase in total expenses. The increase in
total revenue is a result of rental rate
increases implemented at all of the
Partnership's properties. Interest income
increased due to higher cash and cash
equivalent balances available for investment.
Total expenses for the three and six months
ended June 30, 1998, net of Indian Run's
activity, increased as compared to the three
and six months ended June 30, 1997, with a
rise in management fees and interest expense,
partially offset by decreases in maintenance,
general and administrative and depreciation
and amortization expenses. Management fees
increased in conjunction with the increase in
revenue, as discussed above. Interest expense
increased as a result of the Walden Pond
additional note (see Note 2). Maintenance
expense decreased due to paving repairs and
landscaping work completed in 1997. General
and administrative expense decreased due to
lower expenses incurred in connection with the
preparation and mailing of Partnership reports
and other investor communications.
Depreciation expense decreased as fixed asset
additions purchased in previous years became
fully depreciated.<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-IV AND
SUBSIDIARIES
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
(a)Exhibits
Response: None
(b)Reports on Form 8-K
Date Event Reported Financial
Statements Filed
April 16, 1998 Disposition
of
Indian Run ProForma
Balance Sheet at Apartments. December 31,
1997.
Pro Forma Statement of Operations for the year
ended December 31, 1997.
<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 Limited
Partnership-IV
(Registrant)
BY:/s/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief Accounting Officer of The
Krupp Corporation, a General Partner
DATE: August 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 4 Financial Statements for the six months ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 884,894
<SECURITIES> 0
<RECEIVABLES> 17,978<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 485,088
<PP&E> 34,784,499<F2>
<DEPRECIATION> (22,637,481)<F3>
<TOTAL-ASSETS> 13,534,978
<CURRENT-LIABILITIES> 845,781
<BONDS> 17,308,668<F4>
0
0
<COMMON> (4,619,471)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,534,978
<SALES> 0
<TOTAL-REVENUES> 3,688,230<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,786,634<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 610,119
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,576,044<F8>
<CHANGES> 0
<NET-INCOME> 2,867,521<F9>
<EPS-PRIMARY> 0<F9>
<EPS-DILUTED> 0<F9>
<FN>
<F1>Includes all receivables grouped in "prepaid expenses and other assets" on the
Balance Sheet.
<F2>Multi-family complexes of $34,437,461 and deferred expenses of $347,038.
<F3>Accumulated depreciation of $22,412,895 and accumulated amortization of
deferred expenses of $334,586.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($304,745) and ($4,314,726), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $1,539,459, real estate taxes of $367,525 and
depreciation and amortization of $879,650.
<F8>Includes gain on sale of property of $2,967,939, loss from extinguishment of
debt of ($389,523) and minority interest of ($2,372).
<F9>Net income allocated $28,675 to the General Partners and $2,838,846 to the
Limited Partners. Average net income per Unit of Limited Partners interest is
$94.76 on 30,000 Units outstanding.
</FN>
</TABLE>
