UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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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 13.
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 (In Liquidation)
ASSETS
(Unaudited)
September 30, December 31,
2002 2001
------------- -------------
Cash and cash equivalents $ 1,570,837 $ 11,068,529
Real estate tax escrows - 32,399
Prepaid expenses and other assets 78,207 19,190
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Total assets $ 1,649,044 $ 11,120,118
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Due to affiliates $ - $ 25,115
Other liabilities 1,353 506,925
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Total liabilities 1,353 532,040
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Partners' equity (Note 2):
Investor Limited Partners
(30,000 Units outstanding) 1,631,214 10,482,197
Original Limited Partner - -
General Partners 16,477 105,881
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Total partners' equity 1,647,691 10,588,078
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Total liabilities and
partners' equity $ 1,649,044 $ 11,120,118
============= =============
The accompanying notes are an integral
part of the consolidated financial statements.
2
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In Liquidation)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ---------- ----------- -----------
Revenue:
Rental $ - $ 1,504,813 $ - $ 5,150,000
Interest Income 196,728 - 253,787 -
Other income 1,970 71,365 9,410 100,084
----------- ----------- ----------- -----------
Total revenue 198,698 1,576,178 263,197 5,250,084
----------- ----------- ----------- -----------
Expenses:
Operating 37,516 405,315 60,430 1,399,175
Maintenance 1,024 98,427 1,024 371,845
Real estate taxes 1,339 168,348 1,339 547,662
Management fees - 73,787 11,004 227,456
General and
administrative (11,083) 75,879 (5,347) 270,777
Depreciation and
amortization - 341,632 - 1,155,927
Interest - 299,962 - 1,050,154
----------- ----------- ----------- -----------
Total expenses 28,796 1,463,350 68,450 5,022,996
----------- ----------- ----------- -----------
Income before minority interest
and gain on sale of property 169,902 112,828 194,747 227,088
Minority interest 203,873 (1,918) 203,998 (3,369)
Gain on sale of property - 12,219,145 - 12,219,145
----------- ----------- ----------- -----------
Net income $ 373,775 $12,330,055 $ 398,745 $12,442,864
=========== =========== =========== ===========
The accompanying notes are an integral
part of the consolidated financial statements.
3
Continued
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Allocation of net income:
Investor Limited Partners
(30,000 Units outstanding):
Income before gain
on sale of Property $ 370,037 $ 105,365 $ 394,758 $ 212,533
Gain on sale of property - 12,096,954 - 12,096,954
----------- ----------- ----------- -----------
Net income $ 370,037 $12,202,319 $ 394,758 $12,309,487
=========== =========== =========== ===========
Investor Limited Partners
Per Unit:
Income before gain on sale of
Property $ 12.33 $ 3.51 $ 13.16 $ 7.08
Gain on sale of property - 403.23 - 403.23
----------- ----------- ----------- -----------
Net income $ 12.33 $ 406.74 $ 13.16 $ 410.31
=========== =========== =========== ===========
Original Limited Partner:
Income before gain on sale of
Property $ - $ 4,436 $ - $ 8,949
Gain on sale of property - - - -
----------- ----------- ----------- -----------
Net income $ - $ 4,436 $ - $ 8,949
=========== =========== =========== ===========
General Partners:
Income before gain on sale of
Property $ 3,738 $ 1,109 $ 3,987 $ 2,237
Gain on sale of property - 122,191 - 122,191
----------- ----------- ----------- -----------
Net income $ 3,738 $ 123,300 $ 3,987 $ 124,428
=========== =========== =========== ===========
The accompanying notes are an integral
part of the consolidated financial statements.
4
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Liquidation)
(Unaudited)
For the Nine Months
Ended September 30,
------------------------------
2002 2001
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Cash flows from operating activities:
Net income $ 398,745 $ 12,442,864
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization - 1,155,927
Changes in assets and liabilities:
Gain on sale of property - (12,219,145)
(Increase) decrease in prepaid
expenses and other assets (26,618) 205,442
Decrease in other liabilities (505,572) (154,940)
(Decrease) increase in due to
affiliates (25,115) 88,065
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Net cash (used in) provided
by operating activities (158,560) 1,518,213
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Cash flows from investing activities:
Increase in other liabilities related to
fixed asset additions - 911
Fixed asset additions - (305,447)
Proceeds from sale of property - 14,462,618
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Net cash provided by
investing activities - 14,158,082
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Cash flows from financing activities:
Principal payments on mortgage notes
payable - (220,190)
Distributions (9,339,132) (9,317,751)
Repayment of mortgage note payable - (3,637,387)
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Net cash used in financing
activities (9,339,132) (13,175,328)
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Net (decrease) increase in cash and cash
equivalents (9,497,692) 2,500,967
Cash and cash equivalents, beginning of period 11,068,529 740,853
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Cash and cash equivalents, end of period $ 1,570,837 $ 3,241,820
============= ============
The accompanying notes are an integral
part of the consolidated financial statements
5
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation)
(1) Accounting Policies
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this report on Form 10-Q
pursuant to the Rules and Regulations of the Securities and Exchange
Commission. In the opinion of the General Partners of Krupp Realty Limited
Partnership - IV and Subsidiaries ( the "Partnership"), the disclosures
contained in this report are adequate to make the information presented not
misleading. See notes to Consolidated Financial Statements included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
2001 for additional information relevant to significant accounting policies
followed by the Partnership.
The consolidated financial statements present consolidated assets,
liabilities and operations of Pavillion Partners, Ltd., Westbridge
Partners, Ltd., and Krupp Realty Limited Partnership - IV. Westcop
Corporation has a 1% interest in the operations of Westbridge Partners,
Ltd. and Pavillion Partners, Ltd. At September 30, 2002 and December 31,
2001, minority interest of $0 and $203,998, respectively, is included in
other assets.
In the opinion of the General Partners of the Partnership, the accompanying
unaudited consolidated financial statements reflect all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the Partnership's consolidated financial position as of September 30, 2002,
its results of operations for the three and nine months ended September 30,
2002 and 2001 and its cash flows for the nine months ended September 30,
2002 and 2001.
The results of operations for the three and nine months ended September 30,
2002 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) Changes in Partners' Equity
A summary of changes in Partners' equity for the nine months ended
September 30, 2002 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Equity
----------- ----------- ----------- -----------
Balance at December
31, 2001 $10,482,197 $ - 105,881 $10,588,078
Net income 394,758 - 3,987 398,745
Distributions: (9,245,741) - (93,391) (9,339,132)
----------- ----------- ----------- -----------
Balance at September
30, 2002 $ 1,631,214 $ - $ 16,477 $ 1,647,691
=========== =========== =========== ===========
6
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(3) Related Party Transactions
In 2001, the partnership paid property management fees to an affiliate of
the General Partners for management services. Pursuant to the management
agreements, management fees are payable monthly at a rate of 5% of the
gross receipts from the properties under management. The Partnership also
reimburses affiliates of the General Partners for certain expenses incurred
in connection with the operation of the Partnership and its properties,
including administrative expenses.
Amounts accrued or paid to the General Partners' affiliates were as
follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Property management fees$ - $ 73,787 $ 5,673 $ 227,456
Expense reimbursements 208 94,090 8,545 364,078
----------- ----------- ----------- -----------
Charge to operations $ 208 $ 167,877 $ 14,218 $ 591,534
=========== =========== =========== ===========
Due from affiliates consisted of expense reimbursements of $0 and $0 at
September 30, 2002 and December 31, 2001, respectively.
7
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
On August 1, 2001 the Partnership sold Fenland Field to an unaffiliated
third party. The Partnership received $14,443,077, net of closing costs of
$56,923 and repaid the mortgage note payable of $3,637,387 and accrued
interest of $28,793.
On November 14, 2001, the Partnership sold Walden Pond to a related party,
KR 5 Acquisition, LLC. The Partnership received $12,521,805, net of closing
costs of $278,195 and repaid the mortgage note payable of $5,819,727 and
accrued interest of $16,824.
On November 14, 2001, the Partnership sold Pavillion Apartments to an
unaffiliated third party. The Partnership received $15,485,089, net of
closing costs of $87,850 and repaid the mortgage note payable of $6,531,153
and accrued interest of $35,109.
As of December 31, 2001, the Partnership had no investment in any
multi-family apartment communities.
Operations
The following discussion relates to the operation of the Partnership and
its properties (Fenland Field, Pavillion and Walden Pond Apartments) for
the three and nine months ended September 30, 2002 and 2001. The sale of
Fenland Field, Walden Pond and Pavillion Apartments as of December 31, 2001
significantly impacts the comparability of the Partnership's operations
between these periods.
Net income decreased during the three and nine months ended September 30,
2002 when compared to the same period in 2001 due to sale of the
Partnership's remaining real estate assets in August and November of 2001.
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.
A detailed analysis of quantitative and qualitative market risk exposures
was provided in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2001. There have been no material changes in market risk
subsequent to that date.
All of the Partnership's mortgage debt was repaid as of December 31, 2001.
8
KRUPP REALTY LIMITED PARTNERSHIP - IV AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
None
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Krupp Realty Limited Partnership - IV
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(Registrant)
BY: /s/ David C. Quade
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Treasurer (Principal Financial and Accounting
Officer) of The Krupp Corporation, a General
Partner
DATE: November 14, 2002
10
Certifications
I, Douglas Krupp, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Krupp Realty Limited
Partnership - IV;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Douglas Krupp
---------------------------
Douglas Krupp
Principal Executive Officer
11
Certifications
I, David C. Quade, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Krupp Realty Limited
Partnership - IV;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
2. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
4. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
5. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ David C. Quade
------------------------
David C. Quade
Principal Accounting Officer
12
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Krupp Realty Limited Partnership-IV
(the "Partnership") on Form 10-Q for the period ended September 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David C. Quade, Principal Financial and Accounting Officer of The
Krupp Corporation, a General Partner of the Partnership, certify, pursuant to
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition of the Partnership as of
September 30, 2002 and the results of operations of the Partnership
for the three months period then ended.
/s/ David C. Quade
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David C. Quade
Principal Financial and Accounting Officer
13