UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11987
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Krupp Realty Limited Partnership -IV
Massachusetts 04-2772783
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(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
One Beacon Street, Boston, Massachusetts 02108
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(Address of principal executive offices) (Zip Code)
(617) 523-7722
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(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 11.
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
This form 10 - Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
2001 2000
------------ ------------
Multi-family apartment communities, net of
accumulated depreciation of $26,757,553 and
$26,362,441, respectively $ 9,855,383 $ 10,139,898
Cash and cash equivalents 617,580 740,853
Real estate tax escrows 359,222 723,394
Prepaid expenses and other assets (Note 1) 172,886 277,631
Investment in securities (Note 2) 95,516 95,516
Deferred expense, net of accumulated amortization
of $353,467 and $341,854, respectively (Note 3) 28,687 40,300
------------ ------------
Total assets $ 11,129,274 $ 12,017,592
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note 3) $ 16,133,595 $ 16,224,646
Due to affiliates (Note 5) 20,749 --
Other liabilities 762,370 1,190,128
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Total liabilities 16,916,714 17,414,774
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Partners' deficit (Note 4):
Investor Limited Partners
(30,000 Units outstanding) (4,073,142) (3,702,397)
Original Limited Partner (1,397,871) (1,382,261)
General Partners (316,427) (312,524)
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Total partners' deficit (5,787,440) (5,397,182)
------------ ------------
Total liabilities and partners' deficit $
$ 11,129,274 12,017,592
============ ============
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
Ended March 31,
--------------------------
2001 2000
----------- -----------
Revenue:
Rental $ 1,796,106 $ 1,784,075
Other income 18,222 18,100
----------- -----------
Total revenue 1,814,328 1,802,175
----------- -----------
Expenses:
Operating (Note 5) 512,105 424,242
Maintenance 118,599 123,615
Real estate taxes 184,035 233,483
Management fees (Note 5) 75,404 73,239
General and administrative (Note 5) 122,824 34,557
Depreciation and amortization 406,725 398,220
Interest 394,689 381,176
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Total expenses 1,814,381 1,668,532
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(Loss) income before minority interest (53) 133,643
Minority interest (421) (805)
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Net (loss) income $ (474) $ 132,838
=========== ===========
Allocation of net (loss) income (Note 4):
Investor Limited Partners
(30,000 Units outstanding):
Net (loss) income $ (450) $ 126,196
=========== ===========
Investor Limited Partners
Per Unit:
Net (loss) income $ (.02) $ 4.21
=========== ===========
Original Limited Partner
(100 Units outstanding):
Net (loss) income $ (19) $ 5,314
=========== ===========
General Partners:
Net (loss) income $ (5) $ 1,328
=========== ===========
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 Three Months
Ended March 31,
----------------------
2001 2000
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Cash flows from operating activities:
Net (loss) income $ (474) $ 132,838
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 406,725 398,220
Changes in assets and liabilities:
Decrease in prepaid expenses and other assets 468,917 413,223
Decrease in other liabilities (428,135) (317,775)
Increase in due to affiliates 20,749 (33,723)
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Net cash provided by operating activities 467,782 592,783
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Cash flows from investing activities:
Decrease in other liabilities for
fixed asset additions 377 (4,147)
Fixed asset additions (110,597) (117,303)
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Net cash used in investing activities (110,220) (121,450)
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Cash flows from financing activities:
Principal payments on mortgage notes payable (91,051) (78,493)
Distributions (389,784) (389,784)
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Net cash used in financing activities (480,835) (468,277)
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Net (decrease) increase in cash and cash equivalents (123,273) 3,056
Cash and cash equivalents, beginning of period 740,853 856,738
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Cash and cash equivalents, end of period $ 617,580 $ 859,794
========= =========
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,
2000 for additional information relevant to significant accounting policies
followed by the Partnership.
The consolidated financial statements present consolidated assets,
liabilities and operations of Pavillion Partners, Ltd., Westbridge
Partners, Ltd., and Krupp Realty Limited Partnership-IV. Westcop
Corporation has a 1% interest in the operations of Westbridge Partners,
Ltd. and Pavillion Partners, Ltd. At March 31, 2001 and December 31, 2000,
minority interest of $8,167 and $8,589, 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 March 31, 2001 and
its results of operations and cash flows for the three months ended March
31, 2001 and 2000.
The results of operations for the three months ended March 31, 2001 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) Investment in Securities
On October 5, 2000, the Partnership, as a member of an alliance of major
multi-family real estate companies, executed a master lease agreement
("MLA") with a provider of high-speed internet, video and voice services to
multi-family 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.
Continued
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(3) Mortgage Notes Payable
On November 9, 2000, the General Partners signed an agreement extending the
mortgage note payable on Walden Pond Apartments, 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%. The Partnership paid an
extension fee of $29,555 for this privilege.
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.
On April 27, 2001, the General Partners signed an agreement extending the
mortgage note payable on Pavillion Apartments, under the original terms,
until May 1, 2002. The Partnership paid an extension fee of $32,969 for
this privilege.
(4) Changes in Partners' Deficit
A summary of changes in Partners' deficit for the three months ended March
31, 2001 is as follows:
Original Investor Total
Limited Limited General Partners'
Partner Partners Partners Deficit
----------- ----------- ----------- -----------
Balance at
December 31, 2000 $(3,702,397) $(1,382,261) $ (312,524) $(5,397,182)
Net loss (450) (19) (5) (474)
Distributions (370,295) (15,591) (3,898) (389,784)
----------- ----------- ----------- -----------
Balance at
March 31, 2001 $(4,073,142) $(1,397,871) $ (316,427) $(5,787,440)
=========== =========== =========== ===========
Continued
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(5) Related Party Transactions
The Partnership pays property management fees to an affiliate of the
General Partners for management services. Pursuant to the management
agreements, management fees are payable monthly at a rate of 5% of the
gross receipts from the properties under management. The Partnership also
reimburses affiliates of the General Partners for certain expenses incurred
in connection with the operation of the Partnership and its properties,
including administrative expenses.
Amounts accrued or paid to the General Partners' affiliates were as
follows:
For the Three Months
Ended March 31,
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2001 2000
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Property management fees $ 75,404 $ 73,239
Expense reimbursements 165,361 57,180
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Charge to operations $ 240,765 $ 130,419
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Due to (from) affiliates consisted of expense reimbursements of $20,749 and
($28,007) at March 31, 2001 and December 31, 2000, respectively. Amounts due
from affiliates are included in prepaid expenses and other assets on the balance
sheet at December 31, 2000.
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 it is an opportune time to formulate a
liquidation strategy for the Partnership. As previously disclosed, the
General Partners have begun the process of more thoroughly assessing the
real estate 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 have extended the mortgage loan
which would have matured in the next 2 months with financing that leaves
flexibility for the property sales.
Assuming market conditions do not change, the assessment of the real estate
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 signed an agreement 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.
On April 27, 2001, the General Partners signed an agreement extending the
mortgage note payable on Pavillion Apartments, under the original terms,
until May 1, 2002. The Partnership paid an extension fee of $32,969 for
this privilege.
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 Investor Limited Partner Unit, and is paid semi-annually
in February and August.
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
Operations
The following discussion relates to the operation of the Partnership and
its properties (Fenland Field, Pavillion and Walden Pond Apartments) for
the three months ended March 31, 2001 and 2000.
Net income decreased during the three months ended March 31, 2001 when
compared to the three months ended March 31, 2000 due to increases in total
expenses more than offsetting increases in total revenue. 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.
Total expenses for the three months ended March 31, 2001 increased when
compared to the three months ended March 31, 2000 due to increases in
operating and general and administrative expenses, partially offset by a
decrease in real estate taxes. Operating expenses increased as a result of
increases in utilities and payroll expenses. General and administrative
expenses increased as a result of increased investor communication costs,
including the annual look back adjustment which totaled approximately
$49,000, which includes printing and mailing of quarterly and annual
reports. Real estate tax expense decreased as a result of a reassessment of
property values by the local taxing authority.
Item 3. 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.
A detailed analysis of quantitative and qualitative market risk exposures
was provided in the in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 2000. There have been no material changes in market
risk subsequent to that date
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
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(Registrant)
BY: /s/ David C. Quade
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David C. Quade
Treasurer (Principal Financial and
Accounting Officer) of The Krupp
Corporation, a General Partner
DATE: May 15, 2001