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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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KRUPP REALTY FUND, LTD. - III
(Name of Subject Company)
KRUPP REALTY FUND, LTD. - III
(Name of Person Filing Statement)
Limited Partnership Units
(Title of Class of Securities)
501128 10 2
(CUSIP Number of Class of Securities)
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Douglas S. Krupp
The Krupp Corporation
One Beacon Street
Boston, Massachusetts 02108
(617) 523-7722
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) filing Statement)
Copy to:
Scott D. Spelfogel, Esq. James M. Dubin, Esq.
The Berkshire Group Paul, Weiss, Rifkind, Wharton & Garrison
One Beacon Street 1285 Avenue of the Americas
Boston, Massachusetts 02108 New York, New York 10019-6064
(617) 574-8385 (212) 373-3000
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Item 1. Security and Subject Company
The name of the subject partnership is Krupp Realty Fund, Ltd.- III, a
Massachusetts limited partnership (the "Partnership"), and the address of its
principal executive offices is c/o The Krupp Corporation, One Beacon Street,
Suite 1500, Boston, Massachusetts 02108. The title of the class of equity
securities to which this statement relates is the Partnership's Units of
Investor Limited Partnership Interests ("Units").
Item 2. Tender Offer of the Bidder
This statement relates to an offer by KRF3 Acquisition Company, L.L.C.,
a Delaware limited liability company (the "Purchaser"), disclosed in a Tender
Offer Statement on Schedule 14D-1 dated May 14, 1999 (the "Schedule 14D-1"), to
purchase all of the outstanding Units at a price of $550 per Unit, in cash, less
the aggregate amount of distributions per Unit, if any, made by the Partnership
from and after May 14, 1999, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 14, 1999 and the related
Agreement of Assignment and Transfer and accompanying documents, each as each
may be supplemented or amended from time to time (which collectively constitute
the "KRF3 Offer" and are contained within the Schedule 14D-1).
The address of the Purchaser's principal executive offices is One
Beacon Street, Suite 1500, Boston, Massachusetts 02108.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is the
person filing this statement, is set forth in Item 1 above.
(b) The general partners responsible for management of the
Partnership's business are The Krupp Corporation, a Massachusetts corporation
(the "Corporate General Partner"), and The Krupp Company, a Massachusetts
limited partnership (together with the Corporate General Partner, the "General
Partners").
The General Partners are affiliates of the Purchaser. The General
Partners have conflicts of interest with respect to the KRF3 Offer, as a result
of their affiliation with the Purchaser and otherwise, including (i) the desire
of the Purchaser (which is an affiliate of the General Partners) to maximize the
value of its ownership of the Units (including its desire to increase its profit
by acquiring Units at a low price and its current intention, following the
successful consummation of the KRF3 Offer, to propose and seek to consummate the
Proposed Merger (as defined in Item 7(a) below)), which may result in a conflict
for the General Partners in attempting to reconcile the interests of the
Purchaser with the interests of the other Unitholders; (ii) the fact that a sale
or liquidation of the Partnership's assets
would result in a decrease or elimination of the distributions received by the
General Partners in respect of their interests in the Partnership and/or the
fees paid to their affiliates in connection with services provided to the
Partnership, as described below in this Item 3(b); and (iii) the fact that, if
successful, the KRF3 Offer will place the Purchaser (which is an affiliate of
the General Partners) in a position to control all Partnership decisions on
which the holders of Units may vote, including removal of the General Partners,
and, due to its affiliation with the General Partners and their affiliates, the
Purchaser will most likely vote the Units owned by it in whatever manner it
deems to be in the best interests of the General Partners and their affiliates
but may or may not be in the interest of the other Unitholders, including voting
against the elimination or a decrease in fees payable to affiliates of the
Purchaser or the General Partners.
The following describes certain agreements between affiliates of the
General Partners (including the Purchaser) and the Partnership.
Pursuant to the Partnership Agreement, the General Partners are
entitled to certain cash distributions in respect of their interests in the
Partnership. The General Partners have received aggregate cash distributions in
respect of such interests of $4,174, $4,174 and $6,261 for the years ended
December 31, 1996, 1997 and 1998, respectively.
Pursuant to certain management agreements (the "Management
Agreements"), the affiliate of the General Partners which manages the properties
of the Partnership (the "Property Manager Affiliate") receives property
management fees in return for management of the Properties. The Management
Agreements provide for the payment of monthly management fees payable at the
rate of up to 5% of rents and other income actually received by the Partnership.
In addition, although the General Partners and their affiliates do not receive
any fees from the Partnership for the partnership administration services
provided to the Partnership, the Property Manager Affiliate and other affiliates
of the General Partners are reimbursed by the Partnership for expenses incurred
in connection with the provision of services including accounting, computer,
insurance, travel, payroll, and legal services and the preparation and mailing
of reports and other communication to Unitholders. For the three years ended
December 31, 1996, 1997 and 1998, the Partnership paid such affiliate property
management fees and reimbursement of expenses aggregating $499,495, $536,798 and
$540,461, respectively.
Pursuant to the Partnership Agreement, the General Partners are
entitled to a brokerage fee in an amount equal to 3% of the contract sales price
of any real estate acquired by the Partnership, subject to certain limitations.
No brokerage fees have been paid to the General Partners or their affiliates
during the three-year period ending December 31, 1998.
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The KRF3 Offer, in and of itself, will not result in any change in the
compensation payable to the General Partners or their affiliates. However, if
the KRF3 Offer is successful, the Purchaser (which is an affiliate of the
General Partners) will participate, in its capacity as a Unitholder, in any
subsequent distributions to Unitholders to the extent of the number of Units
purchased pursuant to the KRF3 Offer.
Except as described above and in Item 7(a) below, there are no material
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interest between the General Partners or their affiliates and (i)
the Partnership, its executive officers, directors or affiliates or (ii) the
Purchaser, its executive officers, directors or affiliates.
Item 4. The Solicitation or Recommendation
Because of the conflict of interest inherent in the fact that the
General Partners are affiliates of the Purchaser, the Corporate General Partner
is making no recommendation and is remaining neutral as to whether or not
Unitholders should accept or reject the KRF3 Offer. The Corporate General
Partner does believe, however, that Unitholders who desire to presently
liquidate their interest in the Partnership for cash should tender their Units
for the greatest purchase price available.
Item 5. Persons Retained, Employed, or to be Compensated
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person to make solicitations or recommendations to Unitholders on behalf of
the Partnership in response to the KRF3 Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Neither the Partnership nor the General Partners have effected any
transactions in the Units during the past 60 days. The General Partners are not
aware of any transactions in the Units during the past 60 days by any of its
executive officers, directors, affiliates or subsidiaries.
(b) The General Partners (who own an aggregate of 101.5 Units) intend,
and, to their knowledge, the other persons listed below who may be deemed to be
affiliates of the Partnership intend, to tender Units owned by them to the
Purchaser pursuant to the KRF3 Offer.
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Persons No. of Units Owned
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Douglas Krupp and George Krupp, jointly, as
the partners of Krupp Associates,
a Massachusetts general partnership 50
Douglas Krupp 40
George Krupp 40
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Except as provided below, no negotiation is being undertaken or is
underway by the Partnership in response to the KRF3 Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Partnership; (ii) a purchase, sale or transfer of
a material amount of assets by the Partnership; (iii) a tender offer for or
other acquisition of securities by or of the Partnership; or (iv) any material
change in the present capitalization or dividend policy of the Partnership.
If the KRF3 Offer is successful and results in the Purchaser (which is
an affiliate of the General Partners) having the right to vote a majority of the
Units, the Purchaser intends to propose and seek to have the Partnership
consummate a merger or similar business combination with the Purchaser (the
"Proposed Merger") pursuant to which (i) the Purchaser would acquire all Units
not tendered and purchased pursuant to the KRF3 Offer or otherwise and (ii) each
Unit not owned by the Purchaser would be converted into the right to receive an
amount in cash equal to the price per Unit paid by the Purchaser pursuant to the
KRF3 Offer, without interest. There is no assurance that the Proposed Merger
will be proposed or that, if proposed, it will not be delayed or abandoned.
(b) Except as described in Item 7(a) above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the KRF3 Offer which relate to or would result in one or more of the matters
referred to in the first paragraph of Item 7(a) above.
Item 8. Additional Information to be Furnished
None.
Item 9. Material to be Filed as Exhibits
(a) Cover letter to Unitholders from the Partnership dated May 14,
1999.
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(b) (i) The Partnership Agreement, dated as of June 1, 1982, by and
among The Krupp Company and The Krupp Corporation, as general
partners, The Krupp Company, as the Original Limited Partner,
and those persons who have been admitted to the Partnership as
Investor Limited Partners pursuant to the terms of the
Partnership Agreement.
(ii) Form of Property Management Agreement between the Partnership
and Berkshire Property Management Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 14, 1999
KRUPP REALTY FUND, LTD. - III
By: The Krupp Corporation, a
general partner
By: /s/ Douglas S. Krupp
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Name: Douglas S. Krupp
Title: President and Co-Chairman
of the Board
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EXHIBIT INDEX
Exhibit Description Page
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1. Cover letter to Unitholders from the
Partnership dated May 14, 1999
2. Amended Agreement, dated as of June 1,
1982 (the "Partnership Agreement"), by and
among The Krupp Company and The Krupp
Corporation, as general partners, The Krupp
Company, as the Original Limited Partner,
and those persons who have been admitted to
the Partnership as Investor Limited Partners
pursuant to the terms of the Partnership
Agreement
3. Form of Property Management Agreement
between the Partnership and Berkshire
Property Management Company
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