UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
X For the fiscal year ended December 31, 2000
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File number 0-11987
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Krupp Realty Limited Partnership-IV
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Massachusetts 04-2772783
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization
One Beacon Street, Boston, Massachusetts 02108
- ---------------------------------------- ---------------------------------
(Address of principal executive (Zip code)
offices)
(Registrant's telephone number, including area code) (617) 523-7722
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Investor
Limited Partner
Interest
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 preceeding 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting securities held by non-affiliates: Not
Applicable.
Documents incorporated by reference: Part IV, Item 14.
The exhibit index is located on pages 12-14.
The total number of pages in this document is 33.
PART I
This Form 10-K 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.
ITEM 1. BUSINESS
Krupp Realty Limited Partnership-IV ("KRLP-IV") was formed on December 1,
1982 by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. The Krupp Corporation, a Massachusetts corporation, and The Krupp
Company Limited Partnership-II, a Massachusetts limited partnership, are the
General Partners of KRLP-IV. KRLP-IV has also issued all of the Original Limited
Partner Interests to The Krupp Company Limited Partnership-II. On January 18,
1983, KRLP-IV commenced the offering of up to 30,000 units of Investor Limited
Partner Interests (the "Units"). As of March 31, 1983, KRLP-IV received
subscriptions for all 30,000 Units at $1,000 per Unit and therefore, the public
offering was successfully completed on that date. For details, see Note A to
Consolidated Financial Statements included in Item 8 (Appendix A) of this
report.
The primary business of KRLP-IV is to acquire, operate and ultimately
dispose of real estate. KRLP-IV initially acquired six multi-family apartment
complexes (Copper Creek, Walden Pond (formerly Westbridge), Indian Run, Fenland
Field, Pavillion and Tilbury Woods Apartments), a retail center (Lakeview Plaza)
and invested in a joint venture in Lakeview Tower (the "Joint Venture") with an
affiliated limited partnership. KRLP-IV considers itself to be engaged in only
one industry segment, investment in real estate.
KRLP-IV sold Lakeview Plaza and Tilbury Woods Apartments in 1990 and 1991,
respectively. Additionally, KRLP-IV received a terminating capital distribution
from the Joint Venture with proceeds from the sale of Lakeview Tower in 1992. In
1990, the General Partners formed three limited partnerships: Pavillion
Partners, Ltd., Copper Creek Partners, Ltd. and Westbridge Partners, Ltd. At the
same time, the General Partners transferred ownership of Pavillion Apartments to
Pavillion Partners, Ltd., Copper Creek Apartments to Copper Creek Partners,
Ltd., and Walden Pond Apartments to Westbridge Partners, Ltd. in exchange for a
99% Limited Partner Interest in the new entities. Westcop Corporation, an
affiliate of KRLP-IV, contributed a total of $11,216 in exchange for a 1%
General Partner Interest in the new entities. KRLP-IV, Pavillion Partners, Ltd.,
Copper Creek Partners, Ltd. and Westbridge Partners, Ltd., are collectively
known as Krupp Realty Limited Partnership-IV and Subsidiaries (collectively
referred to herein as the "Partnership"). The Partnership endeavored to
renegotiate the debt on these properties, the negotiations were unsuccessful and
these partnerships subsequently petitioned for relief under federal bankruptcy
laws.
On March 31, 1998, the Partnership sold Indian Run Apartments, a 256-unit
multi-family apartment complex, located in Abilene, Texas, to an unaffiliated
third party (see Note E to Consolidated Financial Statements, included in Item 8
(Appendix A) of this report).
The Partnership's real estate investments are subject to some seasonal
fluctuations resulting from changes in utility consumption and seasonal
maintenance expenditures. However, the future performance of the Partnership
will depend upon factors which cannot be predicted. Such factors include general
economic and real estate market conditions, both on a national basis and in
those areas where the Partnership's real estate investments are located, the
availability and cost of borrowed funds, real estate tax rates, operating
expenses, energy costs, government regulations and federal and state income tax
laws. The requirements for compliance with federal, state and local regulations
to date have not had an adverse effect on the Partnership's operations, and no
adverse effect therefrom is anticipated in the future.
The Partnership's investments in real estate are also subject to such risks
as (i) competition from existing and future projects held by other owners in the
locations of the Partnership's properties, (ii) possible reduction in rental
income due to an inability to maintain high occupancy levels, (iii) possible
adverse changes in mortgage interest rates, (iv) possible adverse changes in
general economic and local conditions, such as competitive over-building,
increases in unemployment, or adverse changes in real estate zoning laws, (v)
possible future adoption of rent control legislation which would not permit the
full amount of increased costs to be passed on to tenants in the form of rent
increases, and (vi) other circumstances over which the Partnership may have
little or no control.
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As of December 31, 2000, the Partnership did not employ any personnel.
ITEM 2. PROPERTIES
As of December 31, 2000, the Partnership had an aggregate of 1,000
apartment units.
A summary of the Partnership's multi-family real estate investments is
presented below. Schedule III included in Item 8 (Appendix A) to this report
contains additional detailed information with respect to individual properties.
Average Occupancy For the Year Ended
December 31,
Year of Total ------------------------------------
Description Acquisition Units 2000 1999 1998 1997 1996
- ------------------------- ----------- ----- ------- ------ ------ ------ -------
Fenland Field Apartments
Columbia, Maryland 1983 234 95% 97% 99% 100% 98%
Pavillion Apartments
Garland, Texas 1983 350 94% 95% 96% 95% 95%
Walden Pond Apartments
Houston, Texas 1983 416 89% 94% 97% 98% 95%
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1,000 Units
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ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership is
a party or to which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The transfer of Units of Limited Partner Interest is subject to certain
limitations contained in the Partnership Agreement. There is no public market
for the Units and it is not anticipated that any such public market will
develop.
The number of Investor Limited Partners as of December 31, 2000 was
approximately 1,634.
The Partnership made the following distributions to its Partners during the
years ended December 31, 2000 and 1999:
Year Ended December 31,
----------------------------------------------
2000 1999
----------------------- --------------------
Amount Per Unit Amount Per Unit
------------- -------- ---------- --------
Limited Partners:
Investor Limited Partners
(30,000 Units Outstanding) $740,589 $24.69 $740,590 $24.69
Original Limited Partner 31,182 31,183
General Partners 7,796 7,796
----------- ----------
$779,567 $779,569
=========== ==========
Due to improvements in the operations of the properties and the
availability of cash flow, the General Partners reinstated distributions in
August, 1994, at a rate of $4.67 per Unit. In 1995 and 1996, the annual
distribution rates were increased to $28.00 and $37.33 per Unit, respectively.
These semiannual distributions continued in 1997 and the first half of 1998 at
an annualized rate of $37.33 per Unit. As a result of the sale of Indian Run
Apartments, the General Partners reduced the distribution rate to $9.33 per Unit
for the distribution paid in August, 1998. However, the General Partners
increased the distribution rate to $24.69 per Unit beginning with the
distribution payable in February, 1999 due to improved operations.
The Partnership made special capital distributions of $67.12 and $43.33 per
Unit during the second quarter of 1998 and the second quarter of 1996,
respectively, with the funds received from the sale of Indian Run Apartments in
1998 and the sale of Lakeview Tower Apartments in 1992, respectively. Pursuant
to the Partnership Agreement, distributions from capital transactions, such as
the sale of a property, are allocated 99% to Investor Limited Partners and 1% to
the General Partners. For details, see Note H to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements and
Supplementary Data, which are included in Items 7 and 8 of this report,
respectively.
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
Total revenue $ 7,290,609 $ 7,052,216 $ 7,169,243 $ 7,721,285 $7,307,643
Income (loss) before
gain on sale of
property and extra
ordinary loss 333,985 464,369 574,090 157,116 (156,880)
Gain on sale of
property - - 2,960,743 - -
Extraordinary loss - - (389,523) - -
Net income (loss) 333,985 464,369 3,145,310 157,116 (156,880)
Net income (loss)
allocated to:
Investor Limited
Partners 317,286 441,150 3,090,894 149,260 (149,306)
Per Unit 10.58 14.71 103.03 4.98 (4.97)
Original Limited
Partner 13,359 18,575 22,964 6,285 (6,275)
General Partners 3,340 4,644 31,452 1,571 (1,569)
Total assets at
December 31, 12,017,592 12,588,568 13,245,952 16,718,318 17,605,712
Long-term obligations
at December 31, 9,363,967 12,496,331 10,552,809 19,544,471 19,429,196
Distributions:
Investor Limited
Partners 740,589 740,590 2,853,592 1,119,903 2,419,804
Per Unit 24.69 24.69 95.12 37.33 80.66
Original Limited
Partner 31,182 31,183 35,369 47,158 47,158
General Partners 7,796 7,796 29,182 11,790 24,920
Operating results for the periods presented are not comparable due to the sale
of Indian Run Apartments on March 31, 1998.
The per Unit distributions for the years ended December 31, 2000, 1999, 1998,
1997 and 1996 were $24.69, $24.69, $95.12, $37.33 and $80.66, respectively, of
which $0, $0, $67.12, $0 and $43.33 represented a return of capital.
Prior performance of the Partnership is not necessarily indicative of future
operations.
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ITEM 7. 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.
Over the past several years, real estate markets in general have improved,
and the General Partners feel it 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 or extend 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 12 months. However, there can be
no assurance that such liquidation will occur, or what amounts may be realized
by the Partnership.
On November 9, 2000, the General Partners signed an agreement extending the
mortgage note payable on Walden Pond Apartments until November 1, 2002. The
Partnership paid an extension fee of $29,555 for this privilege. The extension
terms reduced the interest rate from prime + 0.5% to prime - 0.5%.
As of December 31, 2000, the General Partners had signed agreements
extending the mortgage note payable on Fenland Field Apartments, under the
original terms, until June 1, 2002. The Partnership paid an extension fee of
$5,000 for this privilege.
The General Partners are currently negotiating an extension of the mortgage
note payable on Pavillion Apartments. It is anticipated that the mortgage will
be extended under terms that are substantially similar to the current terms.
The Partnership funded approximately $992,000 of capital improvements at
the properties in 2000 for appliances, carpeting and other interior and exterior
building improvements. In an effort to improve the marketability of the
Partnerships' properties, the Partnership expects to spend approximately
$580,000 for improvements in 2001 consisting of internal enhancements which
include the painting and replacement of cabinets at the properties as well as
exterior improvements, including entrance rehab, replacement of sewer pipes, new
signage, and window replacement at Fenland Field Apartments. The Partnership
expects to fund these improvements from established reserves and operations. The
General Partners may need to suspend distributions and/or borrow additional
funds to pay for future capital expenditures.
On March 31, 1998, the Partnership sold Indian Run Apartments 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 further details, see Note E to the Consolidated Financial
Statements included in Item 8 (Appendix A) of this report.
-6-
Due to improvements in the operations of the properties and reduced debt
service, the Partnership had sufficient cash flow in 1995 to increase the annual
distribution rate to $28.00 per Unit and to $37.33 per Unit in 1996. As a result
of the sale of Indian Run Apartments, the General Partners reduced the
distribution rate to $9.33 per Unit for the distribution paid in August 1998.
However, the General Partners increased the distribution rate to $24.69 per Unit
beginning with the distribution payable in February 1999 due to improved
operations during the year.
The Partnership made special distributions of $2,034,000, $67.12 per Unit,
and $1,313,031, $43.33 per Unit, during the second quarter of 1998 and the
second quarter of 1996, respectively, based on the remaining proceeds from the
sale of Indian Run Apartments in 1998 and Lakeview Tower Apartments in 1992,
respectively. Distributions of net cash proceeds from capital transactions are
allocated in accordance with the Partnership Agreement (as described in Note H
to the Consolidated Financial Statements included in Item 8 (Appendix A) of this
report).
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.
On July 31, 1997, the General Partners obtained an additional $900,000 note
for Walden Pond Apartments. The note bears interest at a rate of 9.5% per annum
and matured on February 28, 1999, simultaneous with the first mortgage note. The
proceeds from the note were placed in escrow and were used to fund capital
improvements at the property. The Partnership paid closing costs of $33,082 to
secure the note. (For further details, see Note F to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report.)
On February 28, 1999 the General Partners refinanced the Walden Pond
mortgage notes of $5,500,000 and $900,000 with monthly principal payments of
$6,500 and $1,100, respectively, and interest payments at the Contract rate of
interest equal to the greater of (a) 0.5% per annum in excess of the prime rate,
or (b) 8% per annum. The notes mature on February 28, 2001. The Partnership paid
closing costs of $30,450 for the refinancing.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of fFinancial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires recognition of all derivative instruments as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement will be effective for the Partnership beginning
January 1, 2001. The Partnership did not hold any derivative instruments at
December 31, 2000, and as such, the Partnership does not expect this
pronouncement to have a significant impact on the Partnership's financial
statements.
Operations
The following discussion relates to the operations of the Partnership and
its properties (Fenland Field, Walden Pond and Pavillion Apartments) for the
years ended December 31, 2000, 1999 and 1998. The sale of Indian Run Apartments
in March 1998, significantly impacts the comparability of the Partnership's
operations for the years ended December 31, 1999 and 1998.
2000 compared to 1999
Net income decreased during 2000 when compared to 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 2000. Revenue
also increased due to increases in interest income resulting from higher average
cash and cash equivalent balances available for investment when compared to
1999.
-7-
Total expenses in 2000 increased when compared to 1999 with increases in
real estate tax, depreciation and interest expenses partially offset by a
decrease in maintenance expense. Real estate tax expense increased as a result
of a reassessment of property values at Walden Pond and Pavillion by the local
authority. Depreciation and amortization 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. Maintenance
expense decreased as a result of capital improvements completed during the year.
1999 compared to 1998
Net income, net of Indian Run's activity, decreased during 1999 when
compared to 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 the Partnership's properties at the end of first
quarter. Interest income decreased due to lower average cash and cash equivalent
balances available for investment in 1999, as a result of the sale of Indian Run
Apartments in 1998.
Total expenses in 1999, net of Indian Run's activity, increased as compared
to 1998 with increases in general and administrative and interest expenses.
These increases were partially offset by a decrease in depreciation and
amortization expenses. General and administrative expenses increased due to
higher expenses incurred in connection with preparation and mailing of
Partnership reports and other investor communications. Depreciation and
amortization expense decreased as fixed asset additions purchased in previous
years became fully depreciated. Interest expense increased with the refinancing
of Walden Pond Apartments' mortgage notes payable. For further discussion of
this note, see Note F to the Consolidated Financial Statements included in Item
8 (Appendix A) of this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's future earnings, cash flows and fair values relevant to
financial instruments are dependent upon prevalent market rates. Market risk is
the risk of loss from adverse changes in market prices and interest rates. The
Partnership manages its market risk by matching projected cash inflows from
operating activities, investing activities and financing activities with
projected cash outflows to fund debt payments, acquisitions, capital
expenditures, distributions and other cash requirements. The majority of the
Partnership's outstanding debt (maturing at various times through 2002) has a
fixed interest rate, which minimizes the interest rate risk.
The Partnership has total outstanding debt of approximately $16,225,000 at
December 31, 2000, of which approximately $5,903,000, or 36%, is variable rate
debt. If market rates of interest on the Partnership's variable rate debt
increase by ten percent (or approximately 90 basis points), the increase in
interest expense on the Partnership's variable rate debt would decrease future
earnings and cash flows by approximately $100,000. If market rates of interest
increase by ten percent, the fair value of the Partnership's total outstanding
debt would decrease by approximately $51,000. If market rates of interest on the
Partnership's variable rate debt decrease by ten percent (or approximately 90
basis points), the decrease in interest expense on the Partnership's variable
rate debt would increase future earnings and cash flows by approximately
$100,000. If market rates of interest decrease by ten percent, the fair value of
the Partnership's total outstanding debt would increase by approximately
$51,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index to
Financial Statements and Financial Statement Schedule appearing on Page F-2 of
this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-8-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to
the directors and executive officers of The Krupp Corporation, which is a
General Partner of KRLP-IV, and The Krupp Company Limited Partnership-II, the
other General Partner of KRLP-IV, is as follows:
Name and Age Position with The Krupp Corporation
Douglas Krupp (54) Co-Chairman of the Board
George Krupp (56) Co-Chairman of the Board
Frank Apeseche (43) President
David Quade (57) Treasurer
Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive
Officer of The Berkshire Group, an integrated real estate financial services
firm engaged in real estate acquisitions, property management, mortgage banking,
investment sponsorship, venture capital investing and financial management. Mr.
Krupp has held the position of Co-Chairman since The Berkshire Group was
established as The Krupp Companies in 1969 and he has served as the Chief
Executive Officer since 1992. Mr. Krupp serves as a member of the Board of
Trustees at Brigham & Women's Hospital. He is a graduate of Bryant College where
he received an honorary Doctor of Science in Business Administration in 1989 and
was elected trustee in 1990.
George Krupp is the Co-Founder and Co-Chairman of The Berkshire Group, an
integrated real estate financial services firm engaged in real estate
acquisitions, property management, mortgage banking, investment sponsorship,
venture capital investing and financial management. Mr. Krupp has held the
position of Co-Chairman since The Berkshire Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High School in Waltham, Massachusetts since September of 1997. Mr. Krupp
attended the University of Pennsylvania and Harvard University and holds a
Master's Degree in History from Brown University.
Frank Apeseche is the President of The Berkshire Group. Mr. Apeseche joined
The Berkshire Group in 1986. He served as Chief Financial Officer and Chief
Planning Officer from 1992 to 1995. Mr. Apeseche was the founding Managing
Partner of BG Affiliates, a private equity investment firm. Prior to joining The
Berkshire Group he served as a manager with Andersen Consulting where he
specialized in providing technology solutions to Fortune 500 clients. Mr.
Apeseche received a BA with distinction from Cornell University and an MBA with
Honors from the University of Michigan.
David C. Quade is the Treasurer and Executive Vice President of The
Berkshire Group. Mr. Quade joined The Berkshire Group in 1998. Prior to joining
The Berkshire Group, he was a Principal and Executive V.P./CFO at Leggat McCall
Properties for eighteen years. At Leggatt McCall, Mr. Quade had extensive
experience in business strategic planning, financial workouts, funds management,
and corporate financing regarding asset management. Prior to that, Mr. Quade
worked in senior financial capacities for two NYSE companies, North American
Mortgage Investors and Equitable Life Mortgage & Realty Investors, and he also
worked at Coopers & Lybrand. He has a P.A.P. from the Northwestern University
Graduate School of Business, and a B.S. degree and a Master's degree in Business
Administration from Central Michigan University.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
-9-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 15, 2001, beneficial owners of record owning more than 5% of
the Partnership's 30,000 outstanding Units were as follows:
Title Name and Address Amount and Nature Percent
of Of of Of
Class Beneficial Owner Beneficial Ownership Class
------------- -------------------------- ---------------------- ----------
Investor Madison Avenue Investment 1,671.38 Units (1)(2) 5.60%
Limited Partners, LLC
Partner Units P.O. Box 7533
Incline Village, NV 89452
Investor First Equity Realty, LLC
Limited 555 Fifth Avenue, 9th Floor
Partner Units New York, NY 10017 1,671.38 Units (1)(3) 5.60%
Investor The Harmony Group II, LLC
Limited P.O. Box 7533
Partner Units Incline Village, NV 89452 1,671.38 Units (1)(4) 5.60%
Investor Ronald M. Dickerman
Limited 555 Fifth Avenue, 9th Floor
Partner Units New York, NY 10017 1,671.38 Units (1)(5) 5.60%
Investor Bryan E. Gordon
Limited P.O. Box 7533
Partner Units Incline Village, NV 89452 1,671.38 Units (1)(6) 5.60%
Investor Equity Resources Group,
Limited Incorporated
Partner Units 14 Story Street
Cambridge, MA 02138 1,704.50 Units (7) 5.70%
<FN>
(1) According to the statement on Schedule 13G originally filed on December 6,
1999 by Madison Avenue Investment Partners, LLC("MAIP"), First Equity
Realty , LLC ("First Equity"), The Harmony Group II, LLC ("Harmony Group"),
Ronald M. Dickerman and Bryan E. Gordon (collectively, the "Reporting
Persons"), as amended by Amendment No. 1 thereto dated February 11, 2000
(as amended, the "Madison Schedule 13G"), each of MAIP, First Equity,
Harmony Group and Reporting Persons may be deemed to constitute a "group"
within the meaning of Section 13(d)(3) of the Exchange Act. According to
the Madison Schedule 13D, MAIP is the controlling person of various
entities which are the nominee owners of, or the successors by merger to
the assets of nominee owners of, Limited Partner Interest (the "Units") of
the Issuer. As stated in the Madison Schedule 13D, these nominees, none of
which beneficially own 5% or more of the Units, are ISA Partnership
Liquidity Investors, Madison/AG Partnership Value Partners III and Cobble
Hill Investments, LP.
According to the Madison Schedule 13D, the controlling members of MAIP are
The Harmony Group II, LLC, a Delaware limited liability company of which
Bryan E. Gordon is the Managing Member, and First Equity Realty, LLC, a New
York limited liability company of which Ronald M. Dickerman is the Managing
Member.
(2) According to the Madison Schedule 13G, Madison Avenue Investment Partners,
LLC has sole voting and dispositive power with respect to 1,671.38 units of
the Partnership.
(3) According to the Madison Schedule 13G, First Equity Realty, LLC has shared
voting and dispositive power with respect to 1,671.38 units of the
Partnership.
(4) According to the Madison Schedule 13G, The Harmony Group II, LLC has shared
voting and dispositive power with respect to 1,671.38 units of the
Partnership.
-10-
(5) According to the Madison Schedule 13G, Ronald M. Dickerman has shared
voting and dispositive power with respect to 1,671.38 units of the
Partnership.
(6) According to the Madison Schedule 13G, Bryan E. Gordon has shared voting
and dispositive power with respect to 1,671.38 units of the Partnership.
(7) According to the statement on Schedule 13D originally filed on December 12,
1996 by Equity Resources Group, Incorporated, Equity Resource Cambridge
Fund Limited Partnership, Equity Resource General Fund Limited Partnership,
Equity Resource Fund XVI Limited Partnership, Equity Resource Fund XVII
Limited Partnership, Equity Resource Fund XIX Limited Partnership, James E.
Brooks, Marks S. Thompson and Eggert Dagbjartsson as amended by Amendment
No. 1 thereto dated April 14, 1997 (as amended, the "Equity Resources
Schedule 13D"), Equity Resources Group, Incorporated, James E. Brooks, Mark
S. Thompson and Eggert Dagbjartsson, in their capacities as general
partners of each of Equity Resource Cambridge Fund Limited Partnership,
Equity Resource General fund Limited Partnership, Equity Resource Fund XVI
Limited Partnership, Equity Resource Fund XVII Limited Partnership and
Equity Resource Fund XIX Limited Partnership, respectively, share the power
to vote or direct the vote and to dispose of or direct the disposition of
1,704.5 units..
</FN>
The only interests held by management or its affiliates consist of its
General Partner and Original Limited Partner Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or nominees
for election as director. Please see Note I to the Consolidated Financial
Statements (Appendix A).
-11-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - see Index to Consolidated
Financial Statements and Schedule included under Item 8 (Appendix A),
on page F-2 of this Report.
2. Consolidated Financial Statement Schedule - see Index to Consolidated
Financial Statements and Schedule included under Item 8 (Appendix A),
on page F-2 of this Report. All other schedules are omitted as they
are not applicable or not required or the information is provided in
the Consolidated Financial Statements or the Notes thereto.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable Exhibits required under Item 601
of Regulation S-K:
(4) Instruments defining the rights of security holders including
indentures:
(4.1)Amended Agreement of Limited Partnership dated as of January 12, 1983
[Exhibit A to Prospectus included in Registrant's Registration
Statement on Form S-11 (File 2-80650)].*
(4.2)Amended Certificate of Limited Partnership filed with the
Massachusetts Secretary of State on March 31, 1983 [Exhibit 4.2 to
Registrant's Annual Report on Form 10-K dated December 31, 1983 (File
No. 2-80650)].*
(10) Material Contracts
Fenland Field Apartments
(10.1) Management Agreement dated December 19, 1986 between Krupp Realty
Limited Partnership-IV, as Owner, and BRI OP Limited Partnership,
formerly known as Berkshire Property Management, a subsidiary of
Berkshire Realty Company, Inc. [Exhibit 10.3 to Registrant's Annual
Report on Form 10-K dated December 31, 1986 (File No. 0-11987)].*
(10.2) Modification and Restatement of Promissory Note dated April 28, 1993
between Krupp Realty Limited Partnership-IV and John Hancock Mutual
Life Insurance Company [Exhibit 10.2 to Registrant's Annual Report on
Form 10-K dated December 31, 1993 (File No. 0-11987)].*
(10.3) Modification and Restatement of Indemnity Deed of Trust and Security
Agreement dated April 28, 1993 between Krupp Realty Limited
Partnership-IV and John Hancock Mutual Life Insurance Company [Exhibit
10.3 to Registrant's Annual Report on Form 10-K dated December 31,
1993 (File No. 0-11987)].*
Walden Pond Apartments
(10.4) Management Agreement dated June 2, 1983 between Krupp Realty Limited
Partnership-IV, as Owner, and BRI OP Limited Partnership, formerly
known as Berkshire Property Management, a subsidiary of Berkshire
Realty Company, Inc. [Exhibit 10.19 to Registrant's Annual Report on
Form 10-K dated December 31, 1983 (File No. 2-80650)].*
-12-
(10.5) Certificate of Limited Partnership of Westbridge Partners, Ltd.,
executed March 1, 1990. [Exhibit 19.9 to Registrant's Report on Form
10-Q dated June 30, 1990 (File No. 0-11987)].*
(10.6) Westbridge Partners, Ltd. Agreement of Limited Partnership executed
March 1, 1990. [Exhibit 20.1 to Registrant's Report on Form 10-Q dated
June 30, 1990 (File No. 0-11987)].*
(10.7) Bill of Sale Agreement between Krupp Realty Limited Partnership-IV
and Westbridge Partners, Ltd., executed March 1, 1990. [Exhibit 20.2
to Registrant's Report on Form 10-Q dated June 30, 1990 (File No.
0-11987)].*
(10.8) Westbridge Partners, Ltd. First Amendment to Agreement of Limited
Partnership, executed April 9, 1990. [Exhibit 20.3 to Registrant's
Report on Form 10-Q dated June 30, 1990 (File No. 0-11987)].*
(10.9) Order Granting Motion of First Boston Mortgage Capital Corp. for
Relief from the Automatic Stay dated January 28, 1992. [Exhibit C to
Registrant's Report on Form 8-K dated March 3, 1992 (File No.
0-11987)].*
(10.10) Modification Agreement dated February 28, 1992 between Westbridge
Partners, Ltd. and University Mortgage Acquisition Corp. [Exhibit
10.14 to Registrant's Annual Report on Form 10-K dated December 31,
1993 (File No. 0-11987)].*
(10.11) Renewal Multifamily Note dated February 28, 1992 between Westbridge
Partners, Ltd. and University Mortgage Acquisition Corp. [Exhibit
10.15 to Registrant's Annual Report on Form 10-K dated December 31,
1993 (File No. 0-11987)].*
(10.12) Renewal Multifamily Deed of Trust, Assignment of Rents and Security
Agreement dated February 28, 1992 by Westbridge Partners, Ltd. and
John M. Walker, Jr., as Trustee, and University Mortgage Acquisition
Corp. [Exhibit 10.16 to Registrant's Annual Report on Form 10-K dated
December 31, 1993 (File No. 0-11987)].*
(10.13) First Renewal, Extension and Modification Agreements dated February
28, 1999 between Westbridge Partners, Ltd. and First Trust Savings
Bank. [Exhibit 10.1 to Registrant's Report on Form 10-Q dated March
31, 1999 (File No. 0-11987)].
Pavillion Apartments
(10.14) Management Agreement dated June 2, 1983 between Krupp Realty
Limited Partnership-IV, as Owner, and BRI OP Limited Partnership,
formerly known as Berkshire Property Management, a subsidiary of
Berkshire Realty Company, Inc. [Exhibit 10.25 to Registrant's Annual
Report on Form 10-K dated December 31, 1983 (File No. 2-80650)].*
(10.15) Certificate of Limited Partnership of Pavillion Partners, Ltd.,
executed March 1, 1990. [Exhibit 19.1 to Registrant's Report on Form
10-Q dated June 30, 1990 (File No. 0-11987)].*
(10.16) Pavillion Partners, Ltd. Agreement of Limited Partnership executed
March 1, 1990. [Exhibit 19.2 to Registrant's Report on Form 10-Q dated
June 30, 1990 (File No. 0-11987)].*
-13-
(10.17) Bill of Sale Agreement between Krupp Realty Limited Partnership-IV
and Pavillion Partners, Ltd., executed March 1, 1990. [Exhibit 19.3 to
Registrant's Report on Form 10-Q dated June 30, 1990 (File No.
0-11987)].*
(10.18) Pavillion Partners, Ltd. First Amendment to Agreement of Limited
Partnership, executed April 9, 1990. [Exhibit 19.4 to Registrant's
Report on Form 10-Q dated June 30, 1990 (File No. 0-11987)].*
(10.19) Pavillion Partners, Ltd. Chapter 11 Voluntary Petition executed
June 4, 1990 in The United States Bankruptcy Court for the Northern
District of Texas, Dallas Division. [Exhibit 10.51 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990 (File
No. 0-11987)].*
(10.20) Pavillion Partners, Ltd., Debtor's First Amended Plan of
Reorganization executed January 16, 1991 in The United States
Bankruptcy Court for the Northern District of Texas, Dallas Division.
[Exhibit 10.52 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990 (File No. 0-11987)].*
(10.21) Promissory Note dated April 13, 1994 by and between Pavillion
Partners, Ltd. and Sunlife Insurance Company of America. [Exhibit 10.1
to Registrant's Report on Form 10-Q dated June 30, 1994 (File No.
0-11987)].*
(10.22) Deed of Trust and Security Agreement dated April 13, 1994 between
Pavillion Partners, Ltd. and Sunlife Insurance Company of America.
[Exhibit 10.2 to Registrant's Report on Form 10-Q dated June 30, 1994
(File No. 0-11987)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 2000 the
Partnership did not file any reports on Form 8-K.
-14-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 30th day of
March, 2001.
Krupp Realty Limited Partnership-IV
----------------------------------------
(Registrant)
BY: The Krupp Corporation, a General Partner
----------------------------------------
BY: /s/ Douglas Krupp
----------------------------------------
Douglas Krupp
Co-Chairman (Principal Executive Officer)
and Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 30th day of March, 2001.
Signatures Titles
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer) and
- --------------------------- Director of The Krupp Corporation, a General
Douglas Krupp Partner.
/s/ George Krupp Co-Chairman (Principal Executive Officer) and
- --------------------------- Director of the Krupp Corporation, a General
George Krupp Partner.
/s/ Frank Apeseche President of the Krupp Corporation, a General
- --------------------------- Partner.
Frank Apeseche
/s/ David Quade Treasurer (Principal Financial and Accounting
- --------------------------- Officer) of the Krupp Corporation, a General
David Quade Partner.
-15-
APPENDIX A
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 2000
F-1
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 2000 and
December 31, 1999 F-4
Consolidated Statements of Operations For the Years Ended
December 31, 2000, 1999 and 1998 F-5 - F-6
Consolidated Statements of Changes in Partners' Deficit
For the Years Ended December 31, 2000, 1999 and 1998 F-7
Consolidated Statements of Cash Flows For the Years Ended
December 31, 2000, 1999 and 1998 F-8
Notes to Consolidated Financial Statements F-9 - F-16
Schedule III - Real Estate and Accumulated Depreciation F-17 - F-18
All other schedules are omitted as they are not applicable, not required, or the
information is provided in the consolidated financial statements or the notes
thereto.
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-IV and Subsidiaries:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Krupp Realty Limited Partnership-IV and Subsidiaries (the
"Partnership") at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United
States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 2001
F-3
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
ASSETS
2000 1999
-------------- --------------
Multi-family apartment complexes,
net of accumulated depreciation
of $26,362,441 and $24,736,628,
respectively (Note F) $10,139,898 $10,774,104
Cash and cash equivalents (Note C) 740,853 856,738
Real estate tax escrows 723,394 679,584
Prepaid expenses and other assets
(Notes B & I) 277,631 221,644
Investment in Securities (Note D) 95,516 -
Deferred expenses, net of accumulated
amortization of $341,854 and
$291,101, respectively 40,300 56,498
-------------- --------------
Total assets $12,017,592 $12,588,568
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note F) $16,224,646 $16,538,127
Due to affiliates (Note I) - 33,723
Other liabilities (Note G) 1,190,128 968,318
-------------- --------------
Total liabilities 17,414,774 17,540,168
Partners' deficit (Note H):
Investor Limited Partners
(30,000 Units outstanding) (3,702,397) (3,279,094)
Original Limited Partner (1,382,261) (1,364,438)
General Partners (312,524) (308,068)
-------------- --------------
Total partners' deficit (5,397,182) (4,951,600)
-------------- --------------
Total liabilities and
partners' deficit $12,017,592 $12,588,568
============== ==============
The accompanying notes are an integral part of
the consolidated financial statements.
F-4
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended
December 31, 2000, 1999, and 1998
-----
2000 1999 1998
-------------- -------------- -------------
Revenue:
Rental $7,213,565 $6,989,114 $7,066,401
Interest income (Note C) 77,044 63,102 102,842
-------------- -------------- -------------
Total revenue 7,290,609 7,052,216 7,169,243
-------------- -------------- -------------
Expenses:
Operating (Notes E and I) 1,846,098 1,830,422 1,916,491
Maintenance 557,813 594,780 606,271
Real estate taxes 816,275 701,956 724,018
Management fees (Note I) 291,677 271,555 287,049
General and administrative
(Note I) 222,339 225,045 138,201
Depreciation and amortization 1,676,566 1,537,145 1,762,642
Interest (Note F) 1,543,174 1,422,506 1,154,453
-------------- -------------- -------------
Total expenses 6,953,942 6,583,409 6,589,125
-------------- -------------- -------------
Income before minority interest,
gain on sale of property
and extraordinary loss 336,667 468,807 580,118
Minority interest (2,682) (4,438) (6,028)
Gain on sale of property (Note E) - - 2,960,743
-------------- --------------- ------------
Income before extraordinary loss 333,985 464,369 3,534,833
Extraordinary loss from early
extinguishment of debt (Note E) - - (389,523)
-------------- --------------- ------------
Net income (Note J) $333,985 $464,369 $3,145,310
============== =============== ============
Allocation of net income (Note H):
Investor Limited Partners
(30,000 Units outstanding):
Income before gain on sale
of property and
extraordinary loss $317,286 $441,150 $545,386
Gain on sale of property - - 2,931,136
Extraordinary loss - - (385,628)
-------------- --------------- ------------
Net income $317,286 $441,150 $3,090,894
============== =============== ============
Continued
F-5
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Continued For the Year
Ended December 31, 2000, 1999, and 1998
-----
2000 1999 1998
-------------- --------------- ------------
Investor Limited Partners,
Per Unit:
Income before gain on sale
of property and
extraordinary loss $10.58 $14.71 $18.18
Gain on sale of property - - 97.70
Extraordinary loss - - (12.85)
-------------- --------------- ------------
Net income $10.58 $14.71 $103.03
============== =============== ============
Original Limited Partner:
Income before gain on sale
of property and
extraordinary loss $13,359 $18,575 $22,964
Gain on sale of property - - -
Extraordinary loss - - -
-------------- --------------- ------------
Net income $13,359 $18,575 $22,964
============== =============== ============
General Partners:
Income before gain on sale
of property and
extraordinary loss $3,340 $4,644 $5,740
Gain on sale of property - - 29,607
Extraordinary loss - - (3,895)
-------------- --------------- ------------
Net income $3,340 $4,644 $31,452
============== =============== ============
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT For the
Year Ended December 31, 2000, 1999, and 1998
-----
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
----------- ------------ ----------- ------------
Balance at $(3,216,956) $(1,339,425) $(307,186) $(4,863,567)
December 31, 1997
Net income 3,090,894 22,964 31,452 3,145,310
Distributions (2,853,592) (35,369) (29,182) (2,918,143)
Balance at ----------- ------------ ----------- ------------
December 31, 1998 (2,979,654) (1,351,830) (304,916) (4,636,400)
Net income 441,150 18,575 4,644 464,369
Distributions (740,590) (31,183) (7,796) (779,569)
----------- ------------ ----------- ------------
Balance at
December 31,1999 (3,279,094) (1,364,438) (308,068) (4,951,600)
Net income (Note H) 317,286 13,359 3,340 333,985
Distributions
(Note H) (740,589) (31,182) (7,796) (779,567)
----------- ------------ ----------- ------------
Balance at
December 31, 2000 $(3,702,397) $(1,382,261) $(312,524) $(5,397,182)
=========== ============ =========== ============
The per Unit distributions for the years ended December 31, 2000, 1999 and 1998
were $24.69, $24.69 and $95.12, respectively, of which $0, $0 and $67.12
represented a return of capital, respectively.
The accompanying notes are an integral part of the
consolidated financial statements.
F-7
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended
December 31, 2000, 1999, and 1998
-----
2000 1999 1998
--------- --------- ----------
Cash flows from operating activities:
Net income $ 333,985 $ 464,369 $3,145,310
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,676,566 1,537,145 1,762,642
Interest earned on repair escrow - - (12,898)
Gain on sale of property - - (2,960,743)
Extraordinary loss from early
extinguishment of debt - - 389,523
Changes in assets and liabilities:
Decrease (increase) in prepaid
expenses and other assets (99,797) (105,521) 23,019
Increase (decrease) in other
liabilities 134,187 23,850 (276,153)
Increase (decrease) in due to
affiliates (33,723) 22,989 (30,837)
Releases from real estate tax
and insurance escrows due to
sale of property - - 33,722
--------- --------- ----------
Net cash provided by
operating activities 2,011,218 1,942,832 2,073,585
--------- --------- ----------
Cash flows from investing activities:
Deposits to replacement reserve escrow - - (10,769)
Withdrawals from replacement reserve
escrow - - 315,159
Release from replacement reserve
escrows due to sale of property - - 11,493
Additions to fixed assets (991,607) (661,282) (1,085,983)
Increase (decrease) in other
liabilities for fixed asset additions (7,893) 5,899 1,994
Proceeds from sale of property, net - - 5,711,482
--------- --------- ----------
Net cash (used in)
provided by investing
activities (999,500) (655,383) 4,943,376
--------- --------- ----------
Cash flows from financing activities:
Principal payments on mortgage notes
payable (313,481) (394,922) (756,495)
Repayment of mortgage notes payable - - (2,638,042)
Decrease (increase) in deferred
expenses (34,555) (30,450) 3,191
Payment of prepayment premium - - (335,863)
Distributions (779,567) (779,569) (2,918,143)
--------- --------- ----------
Net cash used in financing
activities (1,127,603) (1,204,941) (6,645,352)
--------- --------- ----------
Net (decrease) increase in cash and cash
equivalents (115,885) 82,508 371,609
Cash and cash equivalents, beginning of the
year 856,738 774,230 402,621
--------- --------- ----------
Cash and cash equivalents, end of year $ 740,853 $ 856,738 $ 774,230
========= ========= ==========
Non-cash investing activities:
Investment in securities $95,516 - -
The accompanying notes are an integral part of the
consolidated financial statements.
F-8
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----
A. Organization
Krupp Realty Limited Partnership-IV ("KRLP-IV") was formed on December 1,
1982 by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. KRLP-IV terminates on December 31, 2020, unless earlier
terminated upon the sale of the last of KRLP-IV and Subsidiaries'
properties or the occurrence of certain other events as set forth in the
Partnership Agreement.
KRLP-IV issued all of the General Partner Interests to The Krupp
Corporation, a Massachusetts corporation, and The Krupp Company Limited
Partnership-II, a Massachusetts limited partnership, in exchange for
capital contributions aggregating $1,000. Except under certain limited
circumstances upon termination of KRLP-IV, the General Partners are not
required to make any additional capital contributions. KRLP-IV also issued
all of the Original Limited Partner Interests to The Krupp Company Limited
Partnership-II in exchange for a capital contribution of $4,000. The
Original Limited Partner is not required to make any additional capital
contributions to KRLP-IV. On January 18, 1983, KRLP-IV commenced the
offering of up to 30,000 Units of Investor Limited Partner Interests (the
"Units"). As of March 31, 1983, KRLP-IV received subscriptions for all
30,000 Units at $1,000 per Unit and therefore, the public offering was
successfully completed on that date.
In 1990, the General Partners on behalf of KRLP-IV formed three limited
partnerships: Pavillion Partners, Ltd., Copper Creek Partners, Ltd. and
Westbridge Partners, Ltd. At the same time, the General Partners
transferred ownership of Pavillion Apartments to Pavillion Partners, Ltd.,
Copper Creek Apartments to Copper Creek Partners, Ltd., and Walden Pond
Apartments to Westbridge Partners, Ltd. in exchange for KRLP-IV's 99%
Limited Partner Interest in the new entities. Westcop Corporation, an
affiliate of the General Partners, contributed a total of $11,216 in cash
to the entities and is the General Partner in each, with a 1% interest. On
March 3, 1992, Copper Creek was foreclosed upon by the holder of the first
and second mortgage notes pursuant to an agreement approved by the
Bankruptcy Court.
KRLP-IV, Pavillion Partners, Ltd., and Westbridge Partners, Ltd. are
collectively known as Krupp Realty Limited Partnership-IV and Subsidiaries
(collectively the "Partnership").
As of December 31, 2000, the Partnership owned three multi-family apartment
complexes.
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those used
for federal income tax purposes (see Note J).
Basis of Presentation
The consolidated financial statements present the consolidated assets,
liabilities and operations of Pavillion Partners, Ltd., Westbridge
Partners, Ltd. and KRLP-IV (see Note A). All intercompany balances and
transactions have been eliminated. At December 31, 2000 and 1999, minority
interest of $8,589 and $11,271, respectively, were included in other
assets.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market
funds with commercial banks. The Partnership has not experienced any losses
to date on its invested cash.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities, contingent assets and liabilities and
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Continued
F-9
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
B. Significant Accounting Policies, Continued
Cash and Cash Equivalents
The Partnership includes all short-term investments with maturities of
three months or less from the date of acquisition in cash and cash
equivalents. The cash investments are recorded at cost, which approximates
current market values.
Rental Revenue
Leases require the payment of base rent monthly in advance. Rental revenues
are recorded on the accrual basis. Real Estate Real estate assets and
equipment are stated at depreciated cost. Pursuant to Statement of
Financial Accounting Standards Opinion No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", impairment losses are recorded on long-lived assets used in operations
on a property by property basis, when events and circumstances indicate
that the real estate assets might be impaired and the estimated
undiscounted cash flows, without interest charges, to be generated by those
assets are less than the carrying amount of those assets. Upon
determination that an impairment has occurred, those assets shall be
reduced to fair value.
Expenditures for ordinary maintenance and repairs are expensed to
operations as they are incurred. Significant renovations and improvements
which improve or extend the useful life of the assets are capitalized.
Except for amounts attributed to land, rental property and improvements are
depreciated over their estimated useful lives using the straight-line
method. The estimated useful lives by asset category are:
Buildings and improvements 3 to 25 years
Appliances, carpeting and equipment 3 to 8 years
The Partnership classifies assets as available for sale upon the General
Partners committing to a formal plan of disposal. The Partnership is in the
process of determining the marketability of the Partnership's real estate
assets but the General Partners have not committed to a formal plan of
disposition and therefore no properties have been classified as available
for sale.
Deferred Expenses
Costs of obtaining and recording mortgages on the properties are amortized
over the term of the related mortgage notes using the straight-line method
which approximates the effective interest method.
Income Taxes
The Partnership is not liable for federal or state income taxes as
Partnership's income or loss is allocated to the Partners for income tax
purposes. In the event that the Partnership's tax returns are examined by
the Internal Revenue Service or state taxing authority and the examination
results in a change in Partnership taxable income or loss, such change will
be reported to the Partners.
Continued
F-10
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
B. Significant Accounting Policies, Continued
Descriptive Information About Reportable Segments
The Partnership operates and develops apartment communities which generate
rental and other income through the leasing of apartment units. The General
Partners separately evaluate the performance of each of the Partnership's
apartment communities. However, because each of the apartment communities
have similar economic characteristics, facilities, services and tenants,
the apartment communities have been aggregated into a single dominant
apartment communities segment.
All revenue is from external customers and no revenue are generated from
transactions with other segments. There are no tenants which contributed
10% or more of the Partnership's total revenue during 2000, 1999 or 1998.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of financial Accounting standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. It requires recognition of all derivative
instruments as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement will
be effective for the Partnership beginning January 1, 2001. The Partnership
did not hold any derivative instruments at December 31, 2000, and as such,
the Partnership does not expect this pronouncement to have a significant
impact on the Partnership's financial statements.
Investment in Securities
The investment in securities is carried at its original issuance valuation
as the common stock is not listed or traded on an exchange and is not
considered a marketable security pursuant to Statement of Financial
Standards Opinion No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115").
C. Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
December 31, December 31,
2000 1999
----------------- ------------------
Cash and money market accounts $740,853 $856,738
================= ==================
Continued
F-11
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
D. Investment in Securities
On October 5, 2000, the Partnership, as a member of an alliance of major
multifamily real estate companies, executed a master lease agreement
("MLA") with a provider of high-speed internet, video and voice services to
multifamily communities. Pursuant to the MLA, the Partnership granted the
provider preferred lease, license and access rights to provide data
services, consisting of high-speed broadband internet access, and video
services, to the residents at some of its multifamily communities for a ten
year period. In exchange for these rights, the Partnership received 366,691
shares of common stock which were valued at $.2285 per share or $83,823. In
addition, the Partnership will receive 7.5% of the gross revenues that the
provider obtains from providing its services as well as a fixed amount for
each resident that executes a subscriber agreement. In conjunction with the
execution of the MLA, the Partnership made an investment of $8,406 in
exchange for 36,785 additional shares of common stock also valued at $.2285
per share. The Partnership incurred approximately $3,287 in closing costs
related to the acquisition by the Partnership and the closing costs
incurred were recorded as an investment in securities in the financial
statements as of December 31, 2000.
E. Sale of Indian Run Apartments
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 $2,960,743 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.
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.
F. Mortgage Notes Payable
The properties owned by the Partnership are pledged as collateral for the
respective non-recourse mortgage notes payable outstanding at December 31,
2000 and 1999. Mortgage notes payable consisted of the following:
Principal Annual
----------------------- Interest
Property 2000 1999 Rate Maturity Date
----------------------- ------------ ----------- ---------- ---------------
Fenland Field Apartments $ 3,720,715 $ 3,873,996 9.25% June 1, 2002
Walden Pond Apartments 5,903,327 5,986,927 See below November 1, 2002
Pavillion Apartments 6,600,604 6,677,204 9.25% May 1, 2001
----------- -----------
Total $16,224,646 $16,538,127
=========== ===========
Continued
F-12
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
F. Mortgage Notes Payable, Continued
Fenland Field Apartments
The property is subject to a non-recourse mortgage note payable, based on a
20-year amortization, in equal monthly installments of principal and
interest of $42,167. At maturity, all unpaid principal ($3,824,206) and any
accrued and unpaid interest are due. The note may be prepaid subject to
certain prepayment premiums. The mortgage note is collateralized by the
property.
Based on the borrowing rates currently available to the Partnership for
bank loans with similar terms and average maturities, the fair value of
long-term debt is approximately $3,863,000 and $3,903,000 at December 31,
2000 and 1999, respectively.
As of December 31, 2000 the General Partners had signed agreements
extending the mortgage note payable, under the original terms, until June
1, 2002. The Partnership paid an extension fee of $5,000 for this
privilege.
Walden Pond Apartments
On February 28, 1992, the prior wrap-around mortgage note was modified in
bankruptcy court. The modified first mortgage note with a principal balance
of $5,500,000, which has a stated rate of 9.5%, is being amortized over a
30-year period and requires monthly payments of $46,247. For financial
reporting purposes, generally accepted accounting principles required the
Partnership to reduce the outstanding principal balance of the mortgage to
the sum of the future cash flow payments required under the terms of the
mortgage, including a final payment on February 28, 1999 of approximately
$5,200,000. All cash payments made subsequent to the restructure are
recorded as a reduction of the principal balance with no interest expense
recognized by the Partnership. The note may be prepaid at any time, subject
to certain prepayment premiums.
On July 31, 1997, the General Partners obtained a $900,000 non-recourse
note (the "Note") for Walden Pond Apartments from the same lender that
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, simultaneous with the first mortgage note, at which time
all outstanding principal and any accrued interest are 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 will be used to fund capital
improvements at the property. The Partnership paid closing costs of $33,082
to obtain the Note.
On February 28, 1999 the General Partners refinanced the Walden Pond
mortgage notes of $5,500,000 and $900,000 with monthly principal payments
of $6,500 and $1,100, respectively, and interest payments at the contract
rate of interest equal to the greater of (a) 0.5% per annum in excess of
the prime rate, or (b) 8% per annum. The notes mature on February 28, 2001.
On November 9, 2000, the General Partners signed an agreement extending the
mortgage note payable, until November 1, 2002. Under the terms of the
extension agreement the interest rate on the debt is reduced from prime +
0.5% to prime - 0.5%, 9% as of December 31, 2000. The Partnership paid an
extension fee of $29,555 for this privilege.
Because the interest rate on Walden Pond's debt fluctuates with market
rates, the book value of the mortgages approximates fair market value.
Continued
F-13
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
F. Mortgage Notes Payable, Continued
Pavillion Apartments
The property is subject to a non-recourse mortgage note payable, based on a
30-year amortization, in equal monthly installments of principal and
interest of $57,587. At maturity, all unpaid principal ($6,580,326) and any
accrued and unpaid interest are due. The note may be prepaid at any time,
subject to certain prepayment premiums.
Based on the borrowing rates currently available to the Partnership for
bank loans with similar terms and average maturities, the fair value of
long-term debt is approximately $6,654,000 and $6,771,000 at December 31,
2000 and 1999, respectively.
The General Partners are currently negotiating an extension of this
mortgage note payable. It is anticipated that the mortgage will be extended
under terms that are substantially similar to the current terms.
Due to restrictions on transfers and prepayment, the Partnership may be unable
to refinance certain mortgage notes payable at such calculated fair value.
The aggregate scheduled principal amounts of long-term borrowings due during the
five years ending December 31, 2005 are $6,860,678, $9,363,967, $0, $0, and $0,
respectively.
The Partnership paid interest on its mortgage notes of $1,542,659, $1,422,506
and $1,154,453 during the years ended December 31, 2000, 1999 and 1998,
respectively.
G. Other Liabilities
Other liabilities consisted of the following at December 31, 2000 and 1999:
2000 1998
----------------- -----------------
Accounts payable $ 30,998 $ 39,845
Accrued real estate taxes 608,519 523,496
Other liabilities 392,943 255,300
Tenant security deposits 157,668 149,677
----------------- -----------------
$1,190,128 $ 968,318
================= =================
H. Partners' Deficit
Under the terms of the Partnership Agreement, profits and losses from
operations are allocated 95% to the Investor Limited Partners, 4% to the
Original Limited Partner and 1% to the General Partners until such time
that the Investor Limited Partners have received a return of their total
invested capital plus a 9% per annum cumulative return thereon. Thereafter,
profits and losses will be allocated 65% to the Investor Limited Partners,
28% to the Original Limited Partner and 7% to the General Partners.
In accordance with the Partnership Agreement, distributions are generally
made on the same basis as the allocations of profits and losses described
above. Upon the occurrence of a capital transaction, as defined in the
Partnership Agreement, proceeds will be applied to the payment of all debts
and liabilities of the Partnership then due and then fund any reserves for
contingent liabilities. Remaining net cash proceeds will then be
distributed 99% to the Investor Limited Partners until they have received a
return of their total invested capital and 1% to the General Partners,
thereafter net cash proceeds will be distributed in accordance with the
Partnership Agreement.
Continued
F-14
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
H. Partners' Deficit, Continued
As of December 31, 2000, the following cumulative partner contributions and
allocations have been made since inception of KRLP-IV:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners (Deficit)
----------- ----------- --------- -----------
Capital contributions $30,000,000 $ 4,000 $ 1,000 $30,005,000
Syndication costs (4,050,000) - - (4,050,000)
Distributions:
Operations (9,455,227) (398,127) (99,530) (9,952,884)
Capital transaction (5,313,560) - (53,673) (5,367,233)
Income (loss):
Operations (26,706,702 (1,286,056) (282,756) (28,275,514)
Capital transaction 11,823,092 297,922 122,435 12,243,449
----------- ----------- --------- -----------
Balance at
December 31, 2000 $(3,702,397) $(1,382,261) $(312,524) $(5,397,182)
=========== =========== ========= ===========
I. 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 for the years
ended December 31, 2000, 1999 and 1998 were as follows:
2000 1999 1998
----------- ---------- -----------
Property management fees $291,677 $271,555 $287,049
Expense reimbursements 295,476 269,037 275,788
----------- ---------- -----------
Charged to operations $587,153 $540,592 $562,837
=========== ========== ===========
Due from affiliates consisted of expense reimbursements of $28,007 and is
included in prepaid expenses and other assets at December 31, 2000. Due to
affiliates consisted of expense reimbursements of $33,723 at December 31,
1999.
Continued
F-15
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----
J. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating property
using the Accelerated Cost Recovery System ("ACRS") and the Modified
Accelerated Cost Recovery System ("MACRS") depending on which is
applicable.
The reconciliation of the net income for each year reported in the
accompanying Consolidated Statement of Operations with the net loss
reported in the Partnership's federal income tax return for the years ended
December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
----------- ------------ -----------
Net income per
Consolidated Statement of
Operations $333,985 $464,369 $3,145,310
Difference in book and tax
depreciation for Fenland
Field and Indian Run 213,609 172,556 200,671
Difference in Partnership's
share of Pavillion Partners
net income for tax purposes 289,727 255,803 172,490
Difference in Partnership's
share of Westbridge
Partners net income for tax
purposes 533,554 390,020 (128,156)
Difference between book and
tax gain on sale of
property - - 1,742,577
----------- ------------ -----------
Net income for federal income tax
purposes $1,370,875 $1,282,748 $5,132,892
=========== ============ ===========
The allocation of the net income for federal income tax purposes for 2000
is as follows:
Portfolio Passive
Income Income Total
----------- ------------ -----------
Investor Limited Partners $ 72,668 $1,229,663 $1,302,331
Original Limited Partner 3,060 51,775 54,835
General Partners 765 12,944 13,709
----------- ------------ -----------
$76,493 $1,294,382 $1,370,875
=========== ============ ===========
During the years ended December 31, 2000, 1999 and 1998 the per Unit net
income to the Investor Limited Partners for federal income tax purposes was
$43.41, $40.62 and $168.82, respectively.
The basis of the Partnership's assets for financial reporting purposes
exceeded its tax basis by approximately $2,829,000 and $3,594,000 at
December 31, 2000 and 1999, respectively. The basis of the Partnership's
liabilities for financial reporting purposes is less than its tax basis by
approximately $4,492,000 and $5,868,000 at December 31, 2000 and 1999,
respectively.
F-16
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
-----
Initial Cost to Costs Capitalized
Partnership Subsequent to Acquisition
----------------------- -----------------------------
Buildings Buildings Depreciable
& &
Description Encumbrances Land Improvements Land Improvements Life
- ------------ ------------ ---------- ------------ ------- ------------ ---------
Fenland Field
Apartments
Columbia, MD $3,720,715 $ 365,262 $ 4,852,767 $ 407 $3,508,073 3 to 25 yrs
Walden Ponds
Apartments
Houston, TX 5,903,327 906,253 12,040,217 1,211 2,886,938 3 to 25 yrs
Pavillion
Apartments
Garland, TX 6,600,604 680,621 9,042,535 1,199 2,216,856 3 to 25 yrs
------------ ---------- ----------- ------- ----------
Total $16,224,646 $1,952,136 $25,935,519 $2,817 $8,611,867
============ ========== =========== ======= ==========
Gross Amounts Carried at
End of Year
------------------------------------
Buildings Year
and Accumulated Construction Year
Description Land Improvements Total Depreciation Completed Acquired
- ------------ -------- ----------- ----------- ------------ --------- --------
Fenland Field
Apartments
Columbia, MD $ 365,669 $ 8,360,840 $ 8,726,509 $ 6,313,603 1970 1983
Walden Ponds
Apartments
Houston, TX 907,464 14,927,155 15,834,619 11,531,153 1982 1983
Pavillion
Apartments
Garland, TX 681,820 11,259,391 11,941,211 8,517,685 1983 1983
---------- ----------- ----------- -----------
Total $1,954,953 $34,547,386 $36,502,339 $26,362,441
========== =========== =========== ===========
Continued
F-17
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
December 31, 2000
-----
Reconciliation of Real Estate and Accumulated Depreciation for each of the three
years in the period ended December 31, 2000:
2000 1999 1998
----------- ----------- -----------
Real Estate
-----------
Balance at beginning of year $35,510,732 $34,849,450 $41,807,070
Acquisition and improvements 991,607 661,282 1,085,983
Sale of property - - (8,043,603)
----------- ----------- -----------
Balance at end of year $36,502,339 $35,510,732 $34,849,450
=========== =========== ===========
2000 1999 1998
----------- ----------- -----------
Accumulated Depreciation
------------------------
Balance at beginning of year $24,736,628 $23,263,961 $26,859,567
Depreciation expense 1,625,813 1,472,667 1,697,258
Sale of property - - (5,292,864)
----------- ----------- -----------
Balance at end of year $26,362,441 $24,736,628 $23,263,961
=========== =========== ===========
The Partnership uses the cost basis for property valuation for both income tax
and financial statement purposes. The aggregate cost of the Partnership's real
estate for federal income tax purposes at December 31, 2000 is $36,507,288 and
the aggregate accumulated depreciation for federal income tax purposes is
$29,885,169.
F-18