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 August 1, 2001, the Partnership sold Fenland Field, a 234-unit multi-family apartment complex, located in Maryland, to an unaffiliated third party (see Note E to Consolidated Financial Statements, included in Item 8 (Appendix A) of this report).
On November 14, 2001, the Partnership sold Walden Pond, a 416-unit multi-family apartment complex, located in Texas, to Walden Pond Limited Partnership, an affiliate of the general partner. (see Note E to Consolidated Financial Statements, included in Item 8 (Appendix A) of this report).
On November 20, 2001, the Partnership sold Pavillion Apartments, a 350-unit multi-family apartment complex, located in Texas, to an unaffiliated third party (see Note E to Consolidated Financial Statements, included in Item 8 (Appendix A) of this report).
The future performance of the Partnership will depend upon factors which cannot be predicted. Such factors include general economic, both on a national basis and in those areas where the Partnership's real estate investments were located, liquidation expenses, government regulations and federal and state income tax laws as well as the ultimate settlement of contingent liabilities associated with the sale of certain of the Partnerships real estate investments.. 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.
As of December 31, 2001, the Partnership held no multi-family investments.
As of December 31, 2001, the Partnership did not employ any personnel.
ITEM 2.
ITEM 2. PROPERTIES - ------
As of December 31, 2001, the Partnership held no multi-family investments. Historical occupancy percentages are as follows:
Average Occupancy For the Year Ended December 31, Year of Total ---------------------------------- Description Aquisition Units 2001 2000 1999 1998 1997 - ------------------------ ---------- ------ ------ ------ ------ ------ ------ Fenland Field Apartments Columbia, Maryland 1983 234 N/A 95% 97% 99% 100%
Pavillion Apartments Garland, Texas 1983 350 N/A 94% 95% 96% 95%
Walden Pond Apartments Houston, Texas 1983 416 N/A 89% 94% 97% 98% ------
1,000 Units ======
ITEM 3.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------
On November 12, 2001, a special meeting of the partners of Krupp Realty Limited Partnership IV was held to approve the sale of Walden Pond Apartments, a 416 unit multi-family apartment community, located in Houston, Texas to Walden Pond Limited Partnership, and affiliate of the general partner and to approve an amendment to the partnership agreement necessary to effect the sale. The sale and amendment were passed by a majority of the unit holders.
PART II
ITEM 5.
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, 2001 was approximately 1,535.
The Partnership made the following distributions to its Partners during the years ended December 31, 2001 and 2000:
Year Ended December 31, --------------------------------------------- 2001 2000 --------------------- --------------------- Amount Per Unit Amount Per Unit ----------- -------- ----------- -------- Limited Partners:
Investor Limited Partners (30,000 Units Outstanding) $16,872,259 $562.41 $ 740,589 $24.69
Original Limited Partner 31,183 31,182
General Partners 170,742 7,796 ----------- -----------
$17,074,184 $ 779,567 =========== ===========
One of the objectives of the Partnership is to generate cash available for distribution. In 2000 and thereafter, semiannual distributions were paid at an annual rate of $24.69 per unit.
The Partnership made special capital distributions of $255.96 and $281.76 per Unit during the fourth and third quarter of 2001, respectively, with the funds received from the sale of Fenland Field and Walden Pond in 2001, 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 if this report).
ITEM 6.
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.
2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- Total revenue $5,992,724 $7,290,609 $7,052,216 $7,169,243 $7,721,285
Income (loss) before gain on sale of property and extraordinary loss (127,155) 333,985 464,369 574,090 157,116
Gain on sale of property 33,203,086 - - 2,960,743 -
Extraordinary loss from early extinguishment of debt (16,487) - - (389,523) -
Net income 33,059,444 333,985 464,369 3,145,310 157,116
Net income (loss) allocated to: Investor Limited Partners 31,056,853 317,286 441,150 3,090,894 149,260
Per Unit 1,035.23 10.58 14.71 103.03 4.98
Original Limited Partner 1,413,444 13,359 18,575 22,964 6,285
General Partners 589,147 3,340 4,644 31,452 1,571
Total assets at December 31, 11,120,118 12,017,592 12,588,568 13,245,952 16,718,318
Long-term obligations at December 31, - 9,363,967 12,496,331 10,552,809 19,544,471
Distributions:
Investor Limited Partners 16,872,259 740,589 740,590 2,853,592 1,119,903
Per Unit 562.41 24.69 24.69 95.12 37.33
Original Limited Partner 31,183 31,182 31,183 35,369 47,158
General Partners 170,742 7,796 7,796 29,182 11,790
Operating results for the periods presented are not comparable due to the sale of Indian Run Apartments on March 31, 1998, Fenland Field on August 1, 2001, Walden Pond on November 14, 2001 and Pavillion Apartments on November 20, 2001.
The per Unit distributions for the years ended December 31, 2001, 2000, 1999, 1998 and 1997 were $562.41, $24.69, $24.69, $95.12 and $37.33, respectively, of which $537.72, $0, $0, $67.12 and $0 represented a return of capital.
Prior performance of the Partnership is not necessarily indicative of future operations.
ITEM 7.
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
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. For further details, see Note E to the Consolidated Financial Statements included in Item 8 (Appendix A) of this report.
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. For further details, see Note E to the Consolidated Financial Statements included in Item 8 (Appendix A) of this report.
On November 20, 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. For further details, see Note E to the Consolidated Financial Statements included in Item 8 (Appendix A) of this report.
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, 2001, 2000 and 1999. 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.
2001 compared to 2000
Net income increased during 2001 when compared to 2000 as a result of the Partnership recognizing the gain on the sale of its remaining real estate assets.
Total expenses decreased in 2001 when compared to 2000 due the Partnership's sale of its remaining real estate assets in August and November. Management fees increased due to increases in expense reimbursements paid to affiliates to extinguish management contracts and general and administrative expenses increased as a result of increased investor communication costs, which includes printing and mailing of quarterly and annual reports
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.
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.
ITEM 7A.
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 the debt payments, acquisitions, capital expenditures, distributions and other cash requirements.
All of the Partnership's mortgage debt has been repaid as of December 31, 2001.
ITEM 8.
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 of this Annual Report on Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
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 (55) Co-Chairman of the Board George Krupp (57) Co-Chairman of the Board Frank Apeseche (44) President David Quade (58) 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, the brother of Douglas 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.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 15, 2002, 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 Limited Partners, LLC 2,458.38 Units(1)(2) 8.2% Partner P.O. Box 7533 Units Incline Village, NV 89452
Investor First Equity Realty, LLC 2,458.38 Units(1)(3) 8.2% Limited Partner 555 Fifth Avenue, 9th Floor Units New York, NY 10017
Investor The Harmony Group II, LLC 2,458.38 Units(1)(4) 8.2% Limited Partner P.O. Box 7533 Units Incline Village, NV 89452
Investor Ronald M. Dickerman 2,458.38 Units(1)(5) 8.2% Limited Partner 555 Fifth Avenue, 9th Floor Units New York, NY 10017
Investor Bryan E. Gordon 2,458.38 Units(1)(6) 8.2% Limited Partner P.O. Box 7533 Units Incline Village, NV 89452
Investor Equity Resources Group, Limited Incorporated Partner 14 Story Street Units Cambridge, MA 02138 1,704.50 Units(7) 5.7%
(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 and Amendment No. 2 thereto dated February 14, 2001 and Amendment No. 3 thereto date February 15, 2002 (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 2,458.38 units of the Partnership.
(3) According to the Madison Schedule 13G, First Equity Realty, LLC has shared voting and dispositive power with respect to 2,458.38 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 2,458.38 units of the Partnership.
(5) According to the Madison Schedule 13G, Ronald M. Dickerman has shared voting and dispositive power with respect to 2,458.38 units of the Partnership.
(6) According to the Madison Schedule 13G, Bryan E. Gordon has shared voting and dispositive power with respect to 2,458.38 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.
The only interests held by management or its affiliates consist of its General Partner and Original Limited Partner Interests.
ITEM 13.
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).
PART IV
ITEM 14.
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 of this Report.
2. Consolidated Financial Statement Schedule - see Index to Consolidated Financial Statements and Schedule included under Item 8 (Appendix A), on page 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.
(c) 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)].*
(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)].*
(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.
(b) Reports on Form 8-K
On November 14, 2001 and November 20, 2001, the Partnership filed Form 8-K regarding the sale of Walden Pond Apartments and Pavillion Apartments, respectively.
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 1st day of April, 2002.
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 1st day of April, 2002.
Signatures Titles
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer) - ------------------------------- and Director of The Douglas Krupp Krupp Corporation, a General Partner.
/s/ George Krupp Co-Chairman (Principal Executive Officer) - ------------------------------- and Director of the George Krupp Krupp Corporation, a General 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 David Quade Krupp Corporation, a General Partner.
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, 2001
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 2001 and December 31, 2000
Consolidated Statements of Operations For the Years Ended December 31, 2001, 2000 and 1999 -
Consolidated Statements of Changes in Partners' Deficit For the Years Ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows For the Years Ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements -
Schedule III - Real Estate and Accumulated Depreciation
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.
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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 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.
As explained in Note A, the Partnership implemented a liquidation plan to dispose of the remaining real estate assets of the Partnership. At December 31, 2001, the Partnership has completed its disposition of its real estate assets and expects to complete the liquidation and dissolution of the Partnership in 2002. As such, at December 31, 2001, the Partnership has adopted the liquidation basis of accounting.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts March 26, 2002
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In Liquidation) December 31, 2001 and 2000
ASSETS
2001 2000 ------------ ------------ Multi-family apartment complexes, net of accumulated depreciation of $0 and $26,362,441, respectively (Note B) $ - $ 10,139,898 Cash and cash equivalents (Note C) 11,068,529 740,853 Real estate tax escrows 32,399 723,394 Prepaid expenses and other assets 19,190 277,631 Investment in Securities (Note D) - 95,516 Deferred expenses, net of accumulated amortization of $0 and $341,854, respectively - 40,300 ------------ ------------ Total assets $ 11,120,118 $ 12,017,592 ============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities: Mortgage notes payable (Note F) $ - $ 16,224,646 Due to affiliates (Note I) 25,115 - Other liabilities (Note G) 506,925 1,190,128 ------------ ------------ Total liabilities 532,040 17,414,774
Partners' equity (deficit) (Note H): Investor Limited Partners (30,000 Units outstanding) 10,482,197 (3,702,397) Original Limited Partner - (1,382,261) General Partners 105,881 (312,524) ------------ ------------ Total partners' equity (deficit) 10,588,078 (5,397,182) ------------ ------------ Total liabilities and partners' equity (deficit) $ 11,120,118 $ 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 (In Liquidation) For the Year Ended December 31, 2001, 2000, and 1999
2001 2000 1999 ----------- ----------- ----------- Revenue: Rental $ 5,837,297 $ 7,213,565 $ 6,989,114 Interest income 155,427 77,044 63,102 ----------- ----------- -----------
Total revenue 5,992,724 7,290,609 7,052,216 ----------- ----------- -----------
Expenses: Operating (Note I) 1,612,740 1,846,098 1,830,422 Maintenance 465,532 557,813 594,780 Real estate taxes 667,249 816,275 701,956 Management fees (Note I) 302,882 291,677 271,555 General and administrative (Note I) 349,156 222,339 225,045 Depreciation and amortization 1,318,072 1,676,566 1,537,145 Interest 1,191,662 1,543,174 1,422,506 ----------- ----------- -----------
Total expenses 5,907,293 6,953,942 6,583,409 ----------- ----------- -----------
Income before minority interest, gain on sale of real estate assets and extraordinary loss from early extinguishment of debt 85,431 336,667 468,807
Minority interest (212,586) (2,682) (4,438) ----------- ----------- -----------
Income (loss) before gain on sale of real estate assets and extraordinary loss from early extinguishment of debt (127,155) 333,985 464,369
Gain on sale of real estate assets (Note E) 33,203,086 - - ----------- ----------- -----------
Net income beforeextraordinaryloss from early extinguishment of debt 33,075,931 333,985 464,369
Extraordinary loss from early extinguishment of debt (Note E) (16,487) - - ----------- ----------- -----------
Net Income (Note J) $33,059,444 $ 333,985 $ 464,369 =========== =========== ===========
Continued
The accompanying notes are an integral part of the Consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In Liquidation), Continued For the Year Ended December 31, 2001, 2000, and 1999
2001 2000 1999 ----------- ----------- ----------- Allocation of net income (loss) (Note H):
Investor Limited Partners (30,000 Units outstanding): Income (loss) before gain of sale of real estate assets and extraordinary loss on early extinguishment of debt $(1,797,880) $ 317,286 $ 441,150 Gain on sale of real estate assets 32,871,055 - - Extraordinary loss from early extinguishment of debt (16,322) - - ----------- ----------- -----------
Net Income $31,056,853 $ 317,286 $ 441,150 =========== =========== ===========
Investor Limited Partners, Per Unit: Income (loss) before gain on sale of real estate assets and extraordinary loss from early extinguishment of debt $ (59.93) $ 10.58 $ 14.71 Gain on sale of real estate assets 1,095.70 - - Extraordinary loss from early extinguishment of debt (.54) - - ----------- ----------- -----------
Net Income $ 1,035.23 $ 10.58 $ 14.71 =========== =========== ===========
Original Limited Partner: Income (loss) before gain on sale of real estate assets and extraordinary loss from early extinguishment of debt $ 1,413,444 $ 13,359 $ 18,575 Gain on sale of real estate assets - - - Extraordinary loss from early extinguishment of debt - - - ----------- ----------- -----------
Net Income $ 1,413,444 $ 13,359 $ 18,575 =========== =========== ===========
General Partners: Income (loss) before gain on sale of real estate assets and extraordinary loss from early extinguishment of debt $ 257,281 $ 3,340 $ 4,644 Gain on sale of real estate assets 332,031 - - Extraordinary loss from early extinguishment of debt (165) - - ----------- ----------- -----------
Net Income $ 589,147 $ 3,340 $ 4,644 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY(DEFICIT) (In Liquidation) For the Year Ended December 31, 2001, 2000 and 1999
Total Investor Original Partners' Limited Limited General Equity/ Partners Partner Partners (Deficit) ------------ ------------ ------------ ------------ $ (2,979,654) $ (1,351,830) $ (304,916) $ (4,636,400) Balance at December 31, 1998
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 317,286 13,359 3,340 333,985
Distributions (740,589) (31,182) (7,796) (779,567) ------------ ------------ ------------ ------------ Balance at December 31, 2000 (3,702,397) (1,382,261) (312,524) (5,397,182)
Net Income 31,056,853 1,413,444 589,147 33,059,444
Distributions (16,872,259) (31,183) (170,742) (17,074,184) ------------ ------------ ------------ ------------
Balance at December 31, 2001 $ 10,482,197 $ - $ 105,881 $ 10,588,078 ============ ============ ==+========= ============
The per Unit distributions for the years ended December 31, 2001, 2000 and 1999 were $562.41, $24.69 and $24.69, respectively, of which $537.72, $0 and $0 represented a return of capital, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Liquidation) For the Year Ended December 31, 2001, 2000, and 1999
2001 2000 1999 ----------- ----------- ----------- Cash flows from operating activities: Net income $33,059,444 $ 333,985 $ 464,369 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,318,072 1,676,566 1,537,145 Gain on sale of real estate assets (33,203,086) - - Extraordinary loss from early extinguishment of debt 16,487 - - Impairment of securities 95,516 - - Changes in assets and liabilities: Decrease (increase) in prepaid expenses and other assets 943,318 (99,797) (105,521) Increase (decrease) in other liabilities (683,203) 134,187 23,850 Increase (decrease) in due to affiliates 25,115 (33,723) 22,989 ----------- ----------- -----------
Net cash provided by operating activities 1,571,663 2,011,218 1,942,832 ----------- ----------- -----------
Cash flows from investing activities: Additions to fixed assets (395,128) (991,607) (661,282) Decrease (increase) in other liabilities for fixed asset additions - (7,893) 5,899 Proceeds from sale of property, net 42,449,971 - - ----------- ----------- -----------
Net cash provided by (used in) investing activities 42,054,843 (999,500) (655,383) ----------- ----------- -----------
Cash flows from financing activities: Principal payments on mortgage notes payable (236,380) (313,481) (394,922) Decrease in deferred expenses - (34,555) (30,450) Repayment of mortgage notes payable (15,988,266) - - Distributions (17,074,184) (779,567) (779,569) ----------- ----------- -----------
Net cash used in financing activities (33,298,830) (1,127,603) (1,204,941) ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 10,327,676 (115,885) 82,508 Cash and cash equivalents, beginning of year 740,853 856,738 774,230 ----------- ----------- ----------- Cash and cash equivalents, end of year $11,068,529 $ 740,853 $ 856,738 =========== =========== ===========
Non-cash investing activities: Investment in securities $ - $ 95,516 $ -
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation)
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 described in Note E, the Partnership sold its remaining real estate investments in 2001 and intends to liquidate the Partnership's remaining assets, distribute any remaining cash and dissolve the Partnership in 2002.
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 accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in The United States of America.
In connection with its adoption of a liquidation plan during 2001, the Partnership adopted the liquidation basis of accounting which, among other things, requires that assets be stated at net realizable value and that a net loss during the liquidation period, if any, be accrued. Management believes there is currently no material liquidation period losses that require accrual.
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, 2001 and 2000, minority interest of $(203,998) and $8,589, were included in other liabilities and other assets, respectively.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
B. Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market funds with commercial banks. The Partnership has not experienced any loss 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.
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
Residential leases require the advance payment of monetary base. Rental revenues are recorded on the accrual basis.
Real Estate Assets
Real estate assets and equipment are stated at depreciated cost. Pursuant to Financial Accounting Standards Statement 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 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 fore sale upon the General Partners committing to a formal plan of disposal. Realized gains and losses from sales of real estate assets are recognized when the sale is consummated, the earnings process is complete, and the Partnership does not have substantial continuing involvement with the property.
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
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
B. Significant Accounting Policies, Continued
Descriptive Information About Reportable Segments
The Partnership operated and developed apartment communities which generated rental and other income through the leasing of apartment units. The General Partners separately evaluated 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 2001, 2000 or 1999.
Investment in Securities
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 Accounting Standards Board Statement 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 at December 31, 2001 and 2000:
2001 2000 ------------ ------------
Cash and money market accounts $ 11,068,529 $ 740,853 ============ ============
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.
On November 14, 2001, concurrent with the sale of Walden Pond Apartments ("Walden Pond"), the Partnership wrote down its investment in securities by approximately $51,873. This amount was attributable to the value of the investment related to the master lease agreement ("MLA") signed with respect to Walden Pond.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
D. Investment in Securities, Continued
On November 20, 2001, concurrent with the sale of Pavillion Apartments ("Pavillion"), the Partnership wrote down its investment in securities by approximately $43,643. This amount was attributable to the value of the investment related to the master lease agreement ("MLA") signed with respect to Pavillion.
E. Sale of Property
On August 1, 2001, the Partnership sold Fenland Field, a 234-unit multi-family apartment complex, located in Maryland, 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 $28,973. For financial reporting purposes, the Partnership realized a gain of $12,192,858 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.
On November 14, 2001, the Partnership sold Walden Pond, a 416-unit multi-family apartment complex, located in Texas, to a related party, KRF V. 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. For financial reporting purposes, the Partnership realized a gain of $8,674,304 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.
On November 20, 2001, the Partnership sold Pavillion Apartments, a 350-unit multi-family apartment complex, located in Texas, 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. For financial reporting purposes, the Partnership realized a gain of $12,335,924 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.
F. Mortgage Notes Payable
The properties that were owned by the Partnership were pledged as collateral for the respective non-recourse mortgage notes payable outstanding at December 31, 2000. Mortgage notes payable consisted of the following:
Principal Rate ---------------------------- Annual Maturity Property 2001 2000 Interest Date - ------------------ ------------ ------------ ------------ ------------
Fenland Field Apartments $ - $ 3,720,715 9.25% June 1, 2002
Walden Pond Apartments - 5,903,327 See below November 1, 2002
Pavillion Apartments - 6,600,604 9.25% May 1, 2002 ------------ ------------
Total $ - $ 16,224,646 ============ ============
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
F. Mortgage Notes Payable, Continued
Fenland Field Apartments
Concurrent with the sale of Fenland Field Apartments, the mortgage note was repaid in full on August 1, 2001.
The property was 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 would have been due. The mortgage note was collateralized by the property.
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
Concurrent with the sale of Walden Pond Apartments, the mortgage note was repaid in full on November 14, 2001.
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 matured 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.
Pavillion Apartments
Concurrent with the sale of Pavillion Apartments, the mortgage note was repaid in full on November 20, 2001.
The property was 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 were due.
The Partnership wrote off the unamortized balance of deferred mortgage costs related to the early extinguishment of mortgage debt of$16,487, which was recorded as an extraordinary loss on the consolidated statement of operations.
The Partnership paid interest on its mortgage notes of $1,183,898, $1,542,659 and $1,422,506 during the years ended December 31, 2001, 2000 and 1999, respectively.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
G. Other Liabilities
Other liabilities consisted of the following at December 31, 2001 and 2000:
2001 2000 ------------------ --------------- Accounts payable $ 139,168 $30,998 Accrued real estate taxes - 608,519 Other liabilities 367,757 392,943 Tenant security deposits - 157,668 ------------------ --------------- $ 506,925 $1,190,128 ================== ===============
H. Partners' Equity (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 allocated and distributed 99% to the Investor Limited Partners until they have received a return of their total invested capital plus a 9% per annum cumulative return and 1% to the General Partners, thereafter net cash proceeds will be distributed in accordance with the Partnership Agreement.
The Partnership entered into a Sales Agent Agreement for the public offering of Units. Under that Agreement, the Partnership was required to pay to the sales agent underwriting commissions and related financial consulting fees equal to 9% of the gross proceeds from the offering. In addition, the sales agent will be entitled to receive, over the life of the Partnership, a subordinated financial consulting fee based upon the net cash proceeds received by the Partnership as a result of sales and refinancings of Partnership properties, which fee shall be in an amount not exceeding 1.5% of the gross proceeds of the offering of Units. No such fees will, however, be payable unless and until all Partners have received a return of their Invested Capital and the Investor Limited Partners have received a 9% per annum cumulative return. The Partnership does not expect to incur any subordinated financial consulting fees.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), Continued
H. Partners' Equity (Deficit), Continued
As of December 31, 2001, the following cumulative partner contributions and allocations have been made since inception of KRLP-IV:
Total Investor Original Partners' Limited Limited General Equity/ 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 (10,195,816) (429,310) (107,326) (10,732,452) Capital transaction (21,445,230) - (216,619) (21,661,849) Income (loss): Operations (28,504,582) 127,388 (25,475) (28,402,669) Capital transaction 44,677,825 297,922 454,301 45,430,048 ------------ ------------ ------------ ------------ Balance at December 31, 2001 $ 10,482,197 $ - $ 105,881 $ 10,588,078 ============ ============ ============ ============
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.
On November 14, 2001, the Partnership sold Walden Pond, a 416-unit multi-family apartment complex, located in Texas, to Walden Pond Limited Partnership, an affiliate of the general partner. (see Note E)
Amounts accrued or paid to the General Partners' affiliates for the years ended December 31, 2001, 2000 and 1999 were as follows:
2001 2000 1999 ----------- ----------- ----------- Property management fees $ 302,882 $ 291,677 $ 271,555
Expense reimbursements 456,098 295,476 269,037 ----------- ----------- -----------
Charged to operations $ 758,980 $ 587,153 $ 540,592 =========== =========== ===========
Due from affiliates consisted of expense reimbursements of $0 and $28,007 and is included in prepaid expenses and other assets at December 31, 2001 and 2000.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Liquidation), 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, 2001, 2000 and 1999 is as follows:
2001 2000 1999 ----------- ----------- ----------- Net income per Consolidated Statement of Operations $33,059,444 $ 333,985 $ 464,369
Difference in book and tax depreciation for Fenland Field 616,685 213,609 172,556
Difference in Partnership's share of Pavillion Partners net income for tax purposes 95,143 289,727 255,803
Difference in Partnership's share of Westbridge Partners net income for tax purposes (777,525) 533,554 390,020 ----------- ----------- -----------
Net income for federal income tax purposes $32,993,747 $ 1,370,875 $ 1,282,748 =========== =========== ===========
The allocation of the net income for federal income tax purposes for 2001 is as follows:
Portfolio Passive Income Income Total ----------- ----------- -----------
Investor Limited Partners $ 156,840 $29,535,807 $29,692,647 Original Limited Partner 6,604 2,588,941 2,595,545 General Partners 1,651 703,904 705,555 ----------- ----------- ----------- $ 165,095 $32,828,652 $32,993,747 =========== =========== ===========
During the years ended December 31, 2001, 2000 and 1999 the per Unit net income to the Investor Limited Partners for federal income tax purposes was $989.76, $43.41 and $40.62, respectively.
The basis of the Partnership's assets for financial reporting purposes exceeded its tax basis by approximately $150,000 and $2,829,000 at December 31, 2001 and 2000, respectively. The basis of the Partnership's liabilities for financial reporting purposes is less than its tax basis by approximately $88,000 and $4,492,000 at December 31, 2001 and 2000, respectively.
KRUPP REALTY LIMITED PARTNERSHIP-IV AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2001 -----
Reconciliation of Real Estate and Accumulated Depreciation for each of the three years in the period ended December 31, 2001:
2001 2000 1999 ----------- ----------- -----------
Real Estate
Balance at beginning of year $36,502,339 $35,510,732 $34,849,450
Acquisition and improvements 395,127 991,607 661,282
Sale of property (36,897,466) - - ----------- ----------- -----------
Balance at end of year $ - $36,502,339 $35,510,732 =========== =========== ===========
2001 2000 1999 ----------- ----------- -----------
Accumulated Depreciation
Balance at beginning of year $26,362,441 $24,736,628 $23,263,961
Depreciation expense 1,288,140 1,625,813 1,472,667
Sale of property (27,650,581) - - ----------- ----------- -----------
Balance at end of year $ - $26,362,441 $24,736,628 =========== =========== ===========
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, 2001 is $5,908 and the aggregate accumulated depreciation for federal income tax purposes is $857.