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 September 30, 1999
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.)
One Beacon Street, Boston, Massachusetts
02108
(Address of principal executive offices)
(Zip Code)
(617) 523-7722
(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 13.<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)
September 30,December 31,
1999 1998
Multi-family apartment complexes,
net of accumulated depreciation of
$24,390,940 and $23,263,961, respectively
<S> <C> <C>
(Note 3) $10,985,781 $ 11,585,489
Cash and cash equivalents 716,489 774,230
Prepaid expenses and other assets 810,855 795,705
Deferred expenses, net of accumulated
amortization of $274,966 and $256,510,
respectively (Notes 2 and 3) 72,633 90,528
Total assets $12,585,758 $ 13,245,952
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Notes 2 and 3)$16,615,351 $ 16,933,049
Due to affiliates (Note 5) 210,479 10,734
Other liabilities 878,323 938,569
Total liabilities 17,704,153 17,882,352
Partners' deficit (Note 4):
Investor Limited Partners
(30,000 Units outstanding) (3,437,549) (2,979,654)
Original Limited Partner (1,371,110) (1,351,830)
General Partners (309,736) (304,916)
Total Partners' deficit (5,118,395) (4,636,400)
Total liabilities and Partners' deficit $12,585,758 $ 13,245,952
</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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Revenue:
<S> <C> <C> <C> <C>
Rental $1,755,053 $1,724,372 $5,229,234$5,343,503
Other income 13,934 15,542 40,143 84,641
Total revenue 1,768,987 1,739,914 5,269,377 5,428,144
Expenses:
Operating (Note 5)484,092 395,129 1,377,294 1,461,661
Maintenance 150,955 195,375 464,150 443,932
Real estate taxes 174,368 164,766 535,865 532,291
Management fees
(Note 5) 79,081 57,808 211,335 214,359
General and administrative
(Note 5) 65,111 33,246 162,665 101,065
Depreciation and
amortization 403,009 448,532 1,175,324 1,328,182
Interest 362,132 272,609 1,042,128 882,728
Total expenses 1,718,748 1,567,465 4,968,761 4,964,218
Income before minority
interest, gain (loss) on
sale of property and
extraordinary loss 50,239 172,449 300,616 463,926
Minority interest (834) (1,841) (3,040) (4,213)
Gain (loss) on sale of
property (Note 3) - (2,196) - 2,965,743
Income before extraordinary
loss 49,405 168,412 297,576 3,425,456
Extraordinary loss from
early extinguishment of
debt (Note 3) - - - (389,523)
Net income $ 49,405 $ 168,412 $ 297,576$3,035,933
Allocation of net income
(Note 4):
Investor Limited Partners
(30,000 Units outstanding):
Income before gain (loss)
on sale of property and
extraordinary loss $46,935 $162,077 $ 282,697 $ 436,727
Gain (loss) on sale of
property - (2,174) - 2,936,086
Extraordinary loss - - - (370,047)
Net income $ 46,935 $ 159,903 $ 282,697$3,002,766
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Investor Limited Partners
Per Unit:
Income before gain (loss)
on sale of property and
<S> <C> <C> <C> <C>
extraordinary loss $1.56 $5.41 $ 9.42 $ 14.56
Gain (loss) on sale of
property - (.07) - 97.87
Extraordinary loss - - - (12.33)
Net income $ 1.56 $ 5.34 $ 9.42 $ 100.10
Original Limited Partner
(100 Units outstanding):
Income before gain (loss)
on sale of property and
extraordinary loss $1,976 $6,825 $11,903 $18,389
Gain (loss) on sale of
property - - - -
Extraordinary loss - - - (15,581)
Net income $ 1,976 $6,825 $ 11,903 $ 2,808
General Partners:
Income before gain (loss)
on sale of
property and
extraordinary loss $494 $1,706 $ 2,976 $ 4,597
Gain (loss) on sale of
property (22) - 29,657
Extraordinary loss - - - (3,895)
Net income$ 494 $ 1,684 $ 2,976$ 30,359
</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 Nine Months
Ended September 30,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $297,576 $3,035,933
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,175,324 1,328,182
Interest earned on repair escrow - (12,898)
Gain on sale of property - (2,965,743)
Extraordinary loss from early extinguishment
of debt - 389,523
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and
other assets (15,150) 165,340
Decrease in other liabilities (58,773) (381,854)
Increase (decrease)in due to affiliates 199,745 (5,963)
Releases from real estate tax and insurance
escrows due to sale of property - 33,722
Net cash provided by operating
activities 1,598,722 1,586,242
Cash flows from investing activities:
Deposits to replacement reserve escrow - (10,769)
Withdrawals from replacement reserve and repair
escrows - 315,159
Release from replacement reserve escrow due to
sale of property - 11,493
Decrease in deferred expenses - 3,191
Increase (decrease) in other liabilities for
fixed asset additions (1,473)
160 Additions to fixed assets (527,271)
(873,924) Proceeds from sale of property, net - 5,717,368
Net cash (used in) provided by
investing activities (528,744) 5,162,678
Cash flows from financing activities:
Principal payments on mortgage notes payable(317,698) (568,120)
Distributions (779,571)(2,918,143)
Repayment of mortgage note payable - (2,638,042)
Increase in deferred expenses (30,450) -
Payment of prepayment premium - (335,863)
Net cash used in financing
activities (1,127,719)(6,460,168)
Net (decrease) increase in cash and cash equivalents
(57,741) 288,752
Cash and cash equivalents, beginning of period774,230 402,621
Cash and cash equivalents, end of period $716,489 $ 691,373
</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, 1998
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 September 30, 1999 and
December 31, 1998, minority interest of
$12,669 and $15,709, respectively, is included
in other assets.
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 September 30, 1999,
its results of operations for the three and
nine months ended September 30, 1999 and 1998
and its cash flows for the nine months ended
September 30, 1999 and 1998. Certain prior
period balances have been reclassified to
conform with current period consolidated
financial statement presentation.
The results of operations for the three and
nine months ended September 30, 1999 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 February 28, 1999, the Partnership
completed the refinancing of Walden Pond
Apartments' mortgage notes payable of
$5,500,000 and $900,000. Monthly principal
payments on the new mortgage notes are $6,500
and $1,100, respectively, with interest
payments at the contract rate of interest
equal to the greater of (a) 0.5% per annum in
excess of prime rate, or (b) 8% per annum.
The mortgage notes mature on February 28, 2001
and may be prepaid in whole, but not in part,
without a prepayment premium with 45 days
prior written notice. The Partnership paid
closing costs of $30,450 for the refinancing.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(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 $138,518. For financial reporting
purposes, the Partnership realized a gain of
$2,979,330 on the sale as of March 31, 1998.
The Partnership realized a final gain of
$2,960,743 on the sale as of December 31,
1998. The gain was calculated as the
difference between the property's selling
price less net book value of the property and
closing costs.
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 $53,660, are reported in the Consolidated
Statement of Operations as an extraordinary
loss from early extinguishment of debt.
(4)Changes in Partners' Deficit
A summary of changes in Partners' deficit for
the nine months ended September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1998$(2,979,654)$(1,351,830)$(304,916)$(4,636,400)
Net income 282,697 11,903 2,976 297,576
Distributions (740,592) (31,183) (7,796) (779,571)
Balance at
September 30, 1999 $(3,437,549)$(1,371,110)$(309,736)$(5,118,395)
</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.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
(5) Related Party Transactions, Continued
Amounts accrued or paid to the General Partners' affiliates
were as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Property management fees$79,081 $ 57,808 $ 211,335 $214,359
Expense reimbursements 80,418 70,781 188,670 180,423
Charged to operations$159,499 $128,589 $ 400,005$ 394,782
</TABLE>
Due to affiliates consisted of expense reimbursements of
$210,479 and $10,734 at September 30, 1999 and December 31, 1998,
respectively.
<PAGE>
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. 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 General Partners, on an ongoing basis,
assess the current and future liquidity needs
in determining the levels of working capital
reserves the Partnership should maintain.
Adjustments to distributions are made when
appropriate to reflect such assessments. The
current annual distribution rate is $24.69 per
Unit, and is paid semiannually in February and
August.
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
$138,518. Proceeds from the sale were
retained to fund liabilities of the
Partnership and reserves for contingent
liabilities. The balance of the reserves
remaining after satisfaction of such
contingencies were distributed in accordance
with the Partnership Agreement (see Note 3).
On February 28, 1999, the Partnership
completed the refinancing of Walden Pond
Apartments' mortgage notes payable of
$5,500,000 and $900,000 which mature on
February 28, 2001. The Partnership paid
closing costs of $30,450 for the refinancing
(see Note 2).
The Partnership's apartment market in Houston
(Walden Pond) is facing increased competition
primarily as a result of new construction in
the area. The General Partners are in the
process of evaluating strategies to improve
the competitiveness, which currently includes
some rental concessions on select units and
may include the possibility of additional
capital expenditures to modernize the
Partnership's properties.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
Year 2000
The General Partners of the Partnership
conducted an assessment of the Partnership's
core internal and external computer
information systems and have taken the
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 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.
As a result, the General Partners have
generated operating efficiencies and believe
their financial accounting operating systems
are Year 2000 ready. The General Partners
incurred hardware costs as well as consulting
and other expenses related to the
infrastructure and facilities enhancements
necessary to complete the upgrade and prepare
for the Year 2000. There are no other
significant internal systems or software that
the Partnership is using at the present time.
The General Partners of the Partnership have
evaluated Year 2000 compliance issues with
respect to its non-financial systems, such as
computer controlled elevators, boilers,
chillers and other miscellaneous systems. The
General Partners do not anticipate any
problems in its non-financial systems.
The General Partners of the Partnership
surveyed the Partnership's material third-
party service providers (including but not
limited to its banks and telecommunications
providers) and significant vendors and
received assurances that such providers and
vendors are to be Year 2000 ready. The
General Partners do not anticipate any
problems with such providers and vendors that
would materially impact its results of
operations, liquidity or captial resources.
In addition, the Partnership is also subject
to external forces that might generally affect
industry and commerce, such as utility and
transportation company Year 2000 readiness
failures and related service interruptions.
However, the General Partners do not
anticipate these would materially impact its
results of operations, liquidity or capital
resources.
To date, the Partnership has not incurred, and
does not expect to incur, any significant cost
associated with being Year 2000 ready.
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 nine
months ended September 30, 1999 and 1998. The
sale of Indian Run on March 31, 1998,
significantly impacts the comparability of the
Partnership's operations between these
periods.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND
SUBSIDIARIES
Operations, Continued
Net income, net of Indian Run's activity,
decreased during the three and nine months
ended September 30, 1999 when compared to the
three and nine months ended September 30,
1998, as the increase in total expenses more
than offset the increase in total revenue.
The increase in total revenue is a result of
rental rate increases implemented at all of
the Partnership's properties at the end of the
first quarter, as well as an increase in
occupancy at Pavillion Apartments during the
year. Interest income decreased due to lower
cash and cash equivalent balances available
for investment when compared to 1998, a result
of the sale of Indian Run Apartments in 1998.
Total expenses for the three months ended
September 30, 1999 increased when compared to
the three months ended September 30, 1998 with
increases in operating, general and
administrative and interest expenses.
Operating expense increased in 1999 as a
result of an increase in workmen's
compensation expense due to an adjustment to
the workmen's compensation reserve in 1998.
General and administrative expense increased
due to higher expenses incurred in connection
with preparation and mailing of Partnership
reports and other investor communications.
Interest expense increased with the
refinancing of Walden Pond Apartments'
mortgage notes payable (see Note 2).
Total expenses for the nine months ended
September 30, 1999 increased when compared to
the nine months ended September 30, 1998, net
of Indian Run's activity, with increases in
operating, maintenance, general and
administrative real estate taxes and interest
expenses. Operating expense increased in 1999
as a result of an increase in workmen's
compensation expense due to an adjustment to
the workmen's compensation reserve in 1998.
Maintenance expense increased due to
landscaping and other exterior beautification
upgrades at Pavallion and Walden Pond
Apartments, including parking lot repairs and
re-stripping during the second quarter.
General and administrative expenses increased
due to higher expenses incurred in connection
with preparation and mailing of Partnership
reports and other investor communications.
Real estate taxes increased at both Walden
Pond and Pavillion apartment complexes.
Interest expense increased with the
refinancing of Walden Pond Apartments'
mortgage notes payable (see Note 2).
<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
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 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: November 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp Realty
Fund 4 Financial Statements for the nine months ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 716,489
<SECURITIES> 0
<RECEIVABLES> 12,817<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 798,038
<PP&E> 35,724,320<F2>
<DEPRECIATION> (24,665,906)<F3>
<TOTAL-ASSETS> 12,585,758
<CURRENT-LIABILITIES> 1,088,802
<BONDS> 16,615,351<F4>
0
0
<COMMON> (5,118,395)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,585,758
<SALES> 0
<TOTAL-REVENUES> 5,269,377<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,926,633<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,042,128
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 3,040<F8>
<CHANGES> 0
<NET-INCOME> 297,576<F9>
<EPS-BASIC> 0<F9>
<EPS-DILUTED> 0<F9>
<FN>
<F1>Includes all receivables grouped in "prepaid expenses and other assets"
the Balance Sheet.
<F2>Multi-family complexes of $35,376,721 and deferred expenses of $347,599.
<F3>Accumulated depreciation of $24,390,940 and accumulated amortization of
deferred expenses of $274,966.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($309,736) and ($4,808,659), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $2,215,444, real estate taxes of $535,865
and depreciation and amortization of $1,175,324.
<F8>Includes minority interest of ($3,040).
<F9>Net income allocated $2,976 to the General Partners and $294,600 to the
Limited Partners. Average net income per Unit of Limited Partners
interest is $9.42 on 30,000 Units outstanding.
</FN>
</TABLE>
