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 September 30, 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) September 30, December 31, 2000 1999 ------------- ------------- Multi-family apartment complexes, net of accumulated depreciation of $25,935,707 and $24,736,628, respectively $ 10,195,466 $ 10,774,104 Cash and cash equivalents 886,322 856,738 Prepaid expenses and other assets 796,380 901,228 Deferred expense, net of accumulated amortization of $332,354 and $291,101, respectively (Note 2) 15,247 56,498 ------------- ------------- Total assets $ 11,893,415 $ 12,588,568 ============= ============= LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable (Note 2) $ 16,299,219 $ 16,538,127 Due to affiliates (Note 4) 52,474 33,723 Other liabilities 969,252 968,318 ------------- ------------- Total liabilities 17,320,945 17,540,168 ------------- ------------- Partners' deficit (Note 3): Investor Limited Partners (30,000 Units outstanding) (3,731,228) (3,279,094) Original Limited Partner (1,383,474) (1,364,438) General Partners (312,828) (308,068) ------------- ------------- Total partners' deficit (5,427,530) (4,951,600) ------------- ------------- Total liabilities and partners' deficit $ 11,893,415 $ 12,588,568 ============= ============= The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Revenue: Rental $1,817,770 $1,755,053 $5,408,494 $5,229,234 Other income 17,238 13,934 53,837 40,143 ---------- ---------- ---------- ---------- Total revenue 1,835,008 1,768,987 5,462,331 5,269,377 ---------- ---------- ---------- ---------- Expenses: Operating (Note 4) 453,183 484,092 1,330,825 1,377,294 Maintenance 149,500 150,955 423,094 464,150 Real estate taxes 196,697 174,368 618,465 535,865 Management fees (Note 4) 68,463 79,081 213,838 211,335 General and administrative (Note 4) 61,306 65,111 167,571 162,665 Depreciation and amortization 441,801 403,009 1,240,333 1,175,324 Interest 393,137 362,132 1,162,245 1,042,128 ---------- ---------- ---------- ---------- Total expenses 1,764,087 1,718,748 5,156,371 4,968,761 ---------- ---------- ---------- ---------- Income before minority interest 70,921 50,239 305,960 300,616 Minority interest (626) (834) (2,323) (3,040) ---------- ---------- ---------- ---------- Net income $ 70,295 $ 49,405 $ 303,637 $ 297,576 ========== ========== ========== ========== Allocation of net income (Note 3): Investor Limited Partners (30,000 Units outstanding): Net income $ 66,780 $ 46,935 $ 288,455 $ 282,697 ========== ========== ========== ========== Investor Limited Partners Per Unit: Net Income $ 2.23 $ 1.56 $ 9.62 $ 9.42 ========== ========== ========== ========== Original Limited Partner (100 Units outstanding): Net income $ 2,812 $ 1,976 $ 12,146 $ 11,903 ========== ========== ========== ========== General Partners Net income $ 703 $ 494 $ 3,036 $ 2,976 ========== ========== ========== ========== The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP - IV SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, ------------------------ 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 303,637 $ 297,576 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,240,333 1,175,324 Changes in assets and liabilities: Decrease (increase) in prepaid expenses and other assets 104,845 (15,150) Increase (decrease) in other liabilities 8,039 (58,773) Increase in due to affiliates 18,751 199,745 ---------- ---------- Net cash provided by operating activities 1,675,605 1,598,722 ---------- ---------- Cash flows from investing activities: Decrease in other liabilities for fixed asset additions (7,105) (1,473) Fixed asset additions (620,441) (527,271) ---------- ---------- Net cash used in investing activities (627,546) (528,744) ---------- ---------- Cash flows from financing activities: Principal payments on mortgage notes payable (238,908) (317,698) Distributions (779,567) (779,571) Increase in deferred expenses - (30,450) ---------- ---------- Net cash used in financing activities (1,018,475) (1,127,719) ---------- ---------- Net increase (decrease) in cash and cash equivalents 29,584 (57,741) Cash and cash equivalents, beginning of period 856,738 774,230 ---------- ---------- Cash and cash equivalents, end of period $ 886,322 $ 716,489 ========== ========== 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 principals 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 September 30, 2000 and December 31, 1999, minority interest of $8,948 and $11,271, respectively, is included in prepaid and 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, 2000, its results of operations for the three and nine months ended September 30, 2000 and 1999 and its cash flows for the nine months ended September 30, 2000 and 1999. The results of operations for the three and nine months ended September 30, 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 Apartment' 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 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 nine months ended September 30, 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 288,455 12,146 3,036 303,637 Distributions (740,589) (31,182) (7,796) (779,567) ----------- ----------- ---------- ----------- Balance at September 30, 2000 $(3,731,228) $(1,383,474) $ (312,828) $(5,427,530) =========== =========== ========== =========== (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 For the Nine Months Ended September 30, Ended September 30, ------------------------ ----------------------- 2000 1999 2000 1999 ----------- ----------- ---------- ----------- Property management fees $ 68,463 $ 79,081 $ 213,838 $ 211,335 Expense reimbursements 79,279 80,418 216,226 188,670 ----------- ----------- ---------- ----------- Charge to operations $ 147,742 $ 159,499 $ 430,064 $ 400,005 =========== =========== ========== =========== Due to the affiliates consisted of expense reimbursements of $52,474 and $33,723 at September 30, 2000 and December 31, 1999, 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 risks 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 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. Over the past several years real estate markets in general have improved, and the General Partners feel this is an opportune time to formulate a liquidation strategy for the Partnership. As such, the General Partners intend to begin the process of more thoroughly assessing the property sales market in the Partnership's market areas and developing a disposition strategy which will yield the highest value to investors through an efficient and orderly liquidation of the Partnership. In keeping with this strategy, the General Partners intend to refinance mortgage loans which mature in the next 6 months with financing that leaves flexibility for the property sales. Assuming market conditions do not change, the assessment of the property sales market is consistent with the General Partners' expectations, and an acceptable disposition plan can be implemented the General Partners expect to complete the liquidation process over the next 15 months. However, there can be no assurance that such liquidation will occur, or what amounts may be realized by the Partnership. The General Partners, on an ongoing basis, assess the current and future liquidity needs in determining the level of working capital reserves the Partnership should maintain. Adjustments to the distribution 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. Operations The following discussion relates to the operation of the Partnership and its properties (Fenland Field, Pavillion and Walden Pond Apartments) for the three and nine months ended September 30, 2000 and 1999. Net income increased during the three and nine months ended September 30, 2000 when compared to the three and nine months ended September 30, 1999 with increases in total revenue more than offsetting increases in total expenses. The increase in total revenue is primarily as a result of rental rate increases implemented at all of the Partnership's properties at the end of the first quarter of 2000. Other income increased due to increases in interest income resulting from higher average cash and cash equivalent balances available for investment when compared to 1999. Continued KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES Operations, Continued Total expenses for the three and nine months ended September 30, 2000 increased when compared to the three and nine months ended September 30, 1999 with increases in real estate tax, depreciation and interest expenses offset by decreases in operating and maintenance expenses. Real estate tax expense increased as a result of a reassessment of property values at Walden Pond and Pavillion by the local tax authority. Depreciation expense increased in conjunction with increased capital improvements completed at the properties. Interest expense increased as a result of increases in the prime lending rate. Operating expense decreased primarily as a result of reductions in salary and payroll expense. Maintenance expense decreased as a result of improvements completed during the year. 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 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 14, 2000