UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 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 10. 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 ASSETS (Unaudited) March 31, December 31, 2000 1999 ----------- ----------- Multi-family apartment complexes, net of accumulated depreciation of $25,118,714 and $24,736,628, respectively $10,509,321 $10,774,104 Cash and cash equivalents 859,794 856,738 Prepaid expenses and other assets 488,005 901,228 Deferred expenses, net of accumulated amortization of $307,235 and $291,101, respectively (Note 2) 40,364 56,498 ----------- ----------- Total assets $11,897,484 $12,588,568 =========== =========== LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable (Note 2) $16,459,634 $ 6,538,127 Due to affiliates (Note 4) - 33,723 Other liabilities 646,396 968,318 ----------- ----------- Total liabilities 17,106,030 17,540,168 ----------- ----------- Partners' deficit (Note 3): Investor Limited Partners (30,000 Units outstanding) (3,523,193) (3,279,094) Original Limited Partner (1,374,715) (1,364,438) General Partners (310,638) (308,068) ----------- ----------- Total Partners' deficit (5,208,546) (4,951,600) ----------- ----------- Total liabilities and Partners' $11,897,484 $ 2,588,568 deficit =========== =========== The accompanying notes are an integral part of the consolidated financial statements. -2- KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended March 31, -------------------- 2000 1999 ---------- ---------- Revenue: Rental $1,784,075 $1,718,127 Other income 18,100 12,745 ---------- ---------- Total revenue 1,802,175 1,730,872 ---------- ---------- Expenses: Operating (Note 4) 424,242 419,744 Maintenance 123,615 128,997 Real estate taxes 233,483 188,983 Management fees (Note 4) 73,239 65,202 General and administrative (Note 4) 34,557 30,530 Depreciation and amortization 398,220 378,182 Interest 381,176 306,293 ---------- ---------- Total expenses 1,668,532 1,517,931 ---------- ---------- Income before minority interest 133,643 212,941 Minority interest (805) (1,651) ---------- ---------- Net income $ 132,838 $ 211,290 ========== ========== Allocation of net income (Note 3): Investor Limited Partners (30,000 Units outstanding): Net income $ 126,196 $ 200,725 ========== ========== Investor Limited Partners Per Unit: Net income $ 4.21 $ 6.69 ========== ========== Original Limited Partner (100 Units outstanding): Net income $ 5,314 $ 8,452 ========== ========== General Partners: Net income $ 1,328 $ 2,113 ========== ========== The accompanying notes are an integral part of the consolidated financial statements. -3- KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, --------------------- 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 132,838 $ 211,290 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 398,220 378,182 Changes in assets and liabilities: Decrease in prepaid expenses and other assets 413,223 388,500 Decrease in other liabilities (317,775) (399,049) Increase (decrease)in due to affiliates (33,723) 74,417 ----------- ---------- Net cash provided by operating activities 592,783 653,340 ----------- ---------- Cash flows from investing activities: Increase (decrease) in other liabilities for fixed asset additions (4,147) 1,037 Additions to fixed assets (117,303) (195,978) ----------- ---------- Net cash used in investing activities (121,450) (194,941) ----------- ---------- Cash flows from financing activities: Principal payments on mortgage notes payable (78,493) (150,344) Distributions (389,784) (389,783) Increase in deferred expenses - (30,450) ----------- ---------- Net cash used in financing activities (468,277) (570,577) ----------- ---------- Net increase (decrease) in cash and cash equivalents 3,056 (112,178) Cash and cash equivalents, beginning of period 856,738 774,230 ----------- ---------- Cash and cash equivalents, end of period $ 859,794 $ 662,052 =========== ========== The accompanying notes are an integral part of the consolidated financial statements. -4- 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, 1999 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 March 31, 2000 and December 31, 1999, minority interest of $10,466 and $11,271, 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 March 31, 2000, its results of operations and its cash flows for the three months ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 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. During the period ended March 31, 1999 the Partnership paid closing costs of $30,450 for the refinancing. Continued -5- KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (3) Changes in Partners' Deficit A summary of changes in Partners' deficit for the three months ended March 31, 2000 is as follows: Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit -------- -------- -------- -------- Balance at December 31, 1999 $(3,279,094) $(1,364,438) $(308,068) $(4,951,600) Net income 126,196 5,314 1,328 132,838 Distributions (370,295) (15,591) (3,898) (389,784) ----------- ----------- --------- ---------- Balance at March 31, 2000 $(3,523,193) $(1,374,715) $(310,638) $(5,208,546) =========== =========== ========= =========== (4) 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: For the Three Months Ended March 31, 2000 1999 -------- ------- Property management fees $ 73,239 $ 65,202 Expense reimbursements 57,180 27,795 -------- --------- Charged to operations $130,419 $ 92,997 ======== ======== Due to affiliates consisted of expense reimbursements of $0 and $33,723 at March 31, 2000 and December 31, 1999, respectively. -6- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management's expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the operations of its real estate investments. Such ability 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. Year 2000 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 necessary steps to understand the nature and extent of the work required to make its systems Year 2000 ready. They have evaluated Year 2000 compliance issues with respect to its non-financial systems and have received assurances from third-party service providers (including but not limited to its telecommunications providers and banks) with regard to their Year 2000 readiness. The General Partners completed the testing and conversion of the Partnerships 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. To date, the Partnership has not had, and does not expect to have, any Year 2000 related problems. Continued -7- 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 months ended March 31, 2000 and 1999. Net income decreased during the three months ended March 31, 2000 when compared to the three months ended March 31, 1999, as the increase in total expenses more than offset the increase in total revenue. The increase in total revenue is primarily a result of rental rate increases implemented at all of the Partnership's properties at the end of the first quarter of 1999. Interest income increased due to higher cash and cash equivalent balances available for investment when compared to 1999. Total expenses for the three months ended March 31, 2000 increased when compared to the three months ended March 31, 1999 with increases in real estate taxes, depreciation and interest expense. Real estate tax expense increased as a result of a reassessment of property values at Walden by the local taxing authority. Depreciation expense increased in conjunction with increased capital improvements completed at the properties, particularly interior improvements which included new carpet, tile, lighting, appliances and mirrors. Interest expense increased as a result of the refinancing of Walden Pond Apartments' mortgages in February 1999. -8- 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 -9- 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: May 15, 2000 -10-