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 THEx
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-11210
Krupp Realty Fund, Ltd.-III
Massachusetts 04-2763323
(State or other jurisdiction of (IRS employer
incorporation or organization) identification
no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
Multi-family apartment complexes,
less accumulated depreciation of
$16,891,858 and $16,460,550, respectively $11,931,944 $12,329,503
Cash and cash equivalents 480,439 654,696
Other investments (Note 3) 294,435 -
Required repair and replacement reserves 217,608 202,349
Cash restricted for tenant security deposits 169,273 202,950
Prepaid expenses and other assets 541,540 596,254
Deferred expenses, net of accumulated
amortization of $132,664 and $121,192,
respectively 386,920 398,392
Total assets $14,022,159 $14,384,144
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable $19,745,290 $19,826,061
Accounts payable 34,003 54,170
Accrued expenses and other liabilities 627,655 654,603
Total liabilities 20,406,948 20,534,834
Partners' deficit (Note 2):
Investor Limited Partners
(25,000 Units outstanding) (5,203,656) (4,981,262)
Original Limited Partner (881,192) (871,828)
General Partners (299,941) (297,600)
Total Partners' deficit (6,384,789) (6,150,690)
Total liabilities and Partners' deficit $14,022,159 $14,384,144
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1996 1995
Revenue:
Rental $1,623,884 $1,568,534
Other income 16,076 22,454
Total revenue 1,639,960 1,590,988
Expenses:
Operating (Note 4) 479,505 412,754
Maintenance 75,123 79,096
Real estate taxes 125,925 133,956
Management fees (Note 4) 79,682 79,637
Depreciation and amortization 442,780 395,879
General and administrative (Note 4) 26,057 11,121
Interest 436,302 443,381
Total expenses 1,665,374 1,555,824
Net income (loss) $ (25,414) $ 35,164
Allocation of net income (loss) (Note 2):
Investor Limited Partner
Interest (25,000 Units outstanding) $ (24,143) $ 33,405
Per Unit of Investor Limited Partner
Interest $ (.97) $ 1.34
Original Limited Partner $ (1,017) $ 1,407
General Partners $ (254) $ 352
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY FUND, LTD.-III AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
__________
For the Three Months
Ended March 31,
1996 1995
Operating activities:
Net income (loss) $ (25,414) $ 35,164
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 442,780 395,879
Decrease (increase) in cash
restricted for tenant security
deposits 33,677 (4,525)
Decrease in prepaid expenses and
other assets 54,714 63,558
Decrease in accounts payable (20,167) (2,803)
Decrease in accrued expenses and
other liabilities (26,948) (34,063)
Net cash provided by operating
activities 458,642 453,210
Investing activities:
Decrease in accounts payable for
fixed asset additions - (225,308)
Additions to fixed assets (33,749) (140,619)
Funding to replacement reserve (15,259) (15,474)
Decrease in required repair and
replacement reserves - 272,112
Increase in other investments (294,435) (292,197)
Net cash used in investing
activities (343,443) (401,486)
Financing activities:
Distributions (208,685) (156,576)
Principal payments on mortgage
notes payable (80,771) (73,863)
Net cash used in financing
activities (289,456) (230,439)
Net decrease in cash and cash equivalents (174,257) (178,715)
Cash and cash equivalents, beginning
of period 654,696 836,785
Cash and cash equivalents, end of period $ 480,439 $ 658,070
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this report on
Form 10-Q pursuant to the Rules and Regulations of the Securities and
Exchange Commission. In the opinion of the General Partners of Krupp
Realty Fund, Ltd.-III and Subsidiary (the "Partnership"), the
disclosures contained in this report are adequate to make the
information presented not misleading. See Notes to Consolidated
Financial Statements included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1995 for additional information
relevant to significant accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the Partnership's consolidated financial position as of
March 31, 1996 and its results of operations and its cash flows for the
three months ended March 31, 1996 and 1995. Certain prior year balances
have been reclassified to conform with current year consolidated
financial statement presentation.
The results of operations for the three months ended March 31, 1996 are
not necessarily indicative of the results which may be expected for the
full year. See Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this report.
(2) Summary of Changes in Partners' Deficit
A summary of changes in Partners' deficit for the three months ended
March 31, 1996 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
December 31, 1995 $(4,981,262) $(871,828) $(297,600) $(6,150,690)
Net loss (24,143) (1,017) (254) (25,414)
Distributions (198,251) (8,347) (2,087) (208,685)
Balance at
March 31, 1996 $(5,203,656) $(881,192) $(299,941) $(6,384,789)
(3) Other Investments
On March 31, 1996, the Partnership held investments in commercial paper
maturing within one year. Cost approximates the market value.
(4) Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties,
the Partnership entered into agreements under which property management
fees are paid to an affiliate of the General Partners for services as
management agent. Such agreements provide for management fees payable
monthly at a rate of 5% of the gross receipts from the properties under
management. The Partnership also reimburses affiliates of the General
Partners for certain expenses incurred in connection with the operation
of the Partnership and its properties including accounting, computer,
insurance, travel, legal and payroll; and with the preparation and
mailing of reports and other communications to the Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates were
as follows:
For the Three Months
Ended March 31,
1996 1995
Property management
fees $ 79,682 $79,637
Expense
reimbursements 47,114 19,672
Charged to
operations $126,796 $99,309
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. Due to improvements in
the operations of the properties, the Partnership has sufficient Cash Flow
to increase semi-annual distributions from an annual rate of $11.90 per
Unit in 1995, to an annual rate of $15.86 per Unit in 1996.
Improvements at the Partnership's properties continue in 1996. The
Partnership believes that the improvements are necessary to compete with
current market conditions, produce quality rental units and absorb excess
market supply at the properties' respective locations. Renovations include
the replacement of countertops, carpeting and appliances.
Cash Flow
Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow of the Partnership for the three months ended March 31, 1996.
The General Partners provide certain of the information below to meet
requirements of the Partnership Agreement and because they believe that it
is an appropriate supplemental measure of operating performance. However,
Cash Flow should not be considered by the reader as a substitute to net
income(loss), as an indicator of the Partnership's operating performance or
to cash flows as a measure of liquidity.
Rounded to $1,000
Net income for tax purposes $ 69,000
Items not requiring or (requiring) the use
of operating funds:
Tax basis depreciation and amortization 347,000
Principal payments on mortgage notes payable (81,000)
Expenditures for capital improvements (34,000)
Working capital reserves (196,000)
Cash Flow $ 105,000
Operations
The Cash Flow increase in the first quarter of 1996, as compared to the
first quarter of 1995 is primarily due to a decrease in capital improvement
expenditures. Increased rental revenue during the first quarter of 1996,
as compared to the first quarter of 1995, is a result of increased rental
rates at the Partnerships' properties instituted in 1995. Also, in the
first quarter of 1996, interest income decreased as a result of lower cash
and cash equivalents available for investment in commercial paper.
During the first three months of 1996, as compared to the first three
months of 1995, operating expenses increased due to an increase in utility
consumption as a result of adverse weather conditions. Real estate taxes
decreased in the first quarter of 1996, as compared to the first quarter of
1995, due to a 1995 real estate tax refund for Dorsey's Forge received in
1996. General and administrative expenses increased in the first three
months of 1996, as compared to the first three months of 1995, as a result
of higher audit expenditures. Depreciation expense also increased in
conjunction with the increase in fixed asset expenditures.
General
In accordance with Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", which is effective for fiscal years beginning after December
15, 1995, the Partnership has implemented policies and practices for
assessing impairment of its real estate assets.
The investments in properties are carried at cost less accumulated
depreciation unless the General Partners believe there is a significant
impairment in value, in which case a provision to write down investments in
properties to fair value will be charged against income. At this time, the
General Partners do not believe that any assets of the Partnership are
significantly impaired.
KRUPP REALTY FUND, LTD. - III AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Krupp Realty Fund, Ltd. - III
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting
Officer of The Krupp Corporation, a
General Partner.
DATE: May 2, 1996