UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-11985
Krupp Realty Limited Partnership-V
Massachusetts 04-2796207
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(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
<PAGE>
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-V AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $37,172,929
and $34,745,814, respectively $32,210,528 $33,505,527
Cash and cash equivalents 2,209,741 2,022,328
Cash restricted for tenant security
deposits 376,832 438,249
Cash restricted for capital improvements 644,449 729,508
Prepaid expenses and other assets 1,026,878 1,370,882
Deferred expenses, net of accumulated
amortization of $452,331 and $401,925,
respectively 438,832 489,238
Total assets $36,907,260 $38,555,732
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable $42,406,807 $42,800,954
Accounts payable 2,122 37,435
Accrued real estate taxes 1,245,000 1,660,000
Accrued expenses and other liabilities 1,154,261 1,183,468
Due to affiliates (Note 5) - 34,327
Total liabilities 44,808,190 45,716,184
Commitments and contingencies (Note 3)
Partners' deficit (Note 4):
Investor Limited Partners
(35,200 Units outstanding) (7,238,930) (6,550,285)
Original Limited Partner (278,967) (234,539)
General Partners (383,033) (375,628)
Total Partners' deficit (7,900,930) (7,160,452)
Total liabilities and Partners' deficit $36,907,260 $38,555,732
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months EndedFor the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Rental $3,395,929 $3,324,815 $10,032,114 $10,558,041
Interest income 39,917 37,120 120,297 92,524
Total revenue 3,435,846 3,361,935 10,152,411 10,650,565
Expenses:
Operating (Note 5) 998,402 961,681 2,905,598 2,861,819
Maintenance 219,274 191,707 612,665 625,373
General and adminis-
trative (Note 5) 27,799 57,163 74,835 117,677
Real estate taxes
(Note 6) 163,247 502,855 1,130,881 1,685,133
Management fees (Note 5) 106,891 133,069 349,586 392,201
Depreciation and
amortization 850,196 829,958 2,477,521 2,562,587
Interest 858,784 890,502 2,584,814 2,850,359
Total expenses 3,224,593 3,566,935 10,135,900 11,095,149
Income (loss) before gain
on sale of property and
extraordinary loss 211,253 (205,000) 16,511 (444,584)
Gain on sale of property
(Note 2) - 3,271,459 - 3,271,459
Income before extraordinary
loss 211,253 3,066,459 16,511 2,826,875
Extraordinary loss from
early extinguishment
of debt(Note 2) - (93,215) - (93,215)
Net income $ 211,253 $2,973,244 $ 16,511 $ 2,733,660
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
Continued
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Continued
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Allocation of net income
(Note 4):
Investor Limited Partners
(35,200 Units
outstanding) $ 196,465 $2,943,511 $ 15,355 $ 2,706,323
Per Unit of Investor
Limited Partner
Interest:
Income (loss) before
gain on sale of
property and extra-
ordinary loss $ 5.58 $ (5.77) $ .44 $ (12.51)
Gain on sale of
property - 92.01 - 92.01
Extraordinary loss - (2.62) - (2.62)
Net income $ 5.58 $ 83.62 $ .44 $ 76.88
Original Limited Partner:
Income before gain
on sale of property
and extraordinary
loss $ 12,675 $ - $ 991 $ -
Gain on sale of
property - - - -
Extraordinary loss - - - -
Net income $ 12,675 $ - $ 991 $ -
General Partners:
Income (loss) before
gain on sale of
and extraordinary
loss $ 2,113 $ (2,050) $ 165 $ (4,446)
Gain on sale of
property - 32,715 - 32,715
Extraordinary loss - (932) - (932)
Net income $ 2,113 $ 29,733 $ 165 $ 27,337
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1996 1995
<S> <C> <C>
Operating activities:
Net income $ 16,511 $ 2,733,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,477,521 2,562,587
Gain on sale of property - (3,271,459)
Extraordinary loss from early
extinguishment of debt - 93,215
Decrease in cash restricted for tenant
security deposits 61,417 82,971
Decrease (increase) in prepaid expenses
and other assets 344,004 (220,821)
Decrease in accounts payable (35,313) (173,005)
Increase (decrease) in accrued real
estate taxes (415,000) 185,215
Decrease in accrued expenses and
other liabilities (29,207) (105,662)
Decrease in due to affiliates (34,327) (1,266,260)
Net cash provided by operating
activities 2,385,606 620,441
Investing activities:
Additions to fixed assets (1,132,116) (1,100,124)
Decrease in cash restricted for capital
improvements 85,059 183,392
Decrease in accounts payable
related to fixed asset additions - (22,035)
Proceeds from sale of property - 6,397,152
Net cash provided by (used in)
investing activities (1,047,057) 5,458,385
Financing activities:
Payment of prepayment premium - (78,179)
Principal payments on mortgage notes payable (394,147) (412,428)
Distributions (756,989) -
Repayment of mortgage note payable - (4,050,721)
Net cash used in financing
activities (1,151,136) (4,541,328)
Net increase in cash and cash equivalents 187,413 1,537,498
Cash and cash equivalents, beginning of period 2,022,328 598,443
Cash and cash equivalents, end of period $ 2,209,741 $ 2,135,941
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting 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-V and Subsidiary (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, 1995 for additional information relevant to
significant accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of only recurring accruals) necessary to present
fairly the Partnership's consolidated financial position as of September
30, 1996, its results of operations for the three and nine months ended
September 30, 1996 and 1995 and its cash flows for the nine months ended
September 30, 1996 and 1995. Certain prior year balances have been
reclassified to conform with current period financial statement
presentation.
The results of operations for the three and nine months ended September
30, 1996 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) Disposition of Real Estate Investment
On July 19, 1995, the Partnership sold Marine Terrace Apartments, a 187
unit apartment complex located in Chicago, Illinois, for cash proceeds
and other considerations which totaled $6,436,505. Proceeds from the
sale were used to pay closing costs of $44,152, to repay the existing
mortgage note on the property of $4,050,721 and to satisfy other
Partnership liabilities. For financial reporting purposes, the
Partnership realized a gain of $3,271,459 on the sale. The gain was
calculated as the difference between net consideration received, less net
book value of the property.
(3) Legal Proceeding
The Partnership is a defendant in a class action suit related to the
practice of giving discounts for the early or timely payments of rent at
Park Place. The central issue of the complaint was whether the operative
lease violated a Chicago municipal ordinance relating to late fee charges
because it allowed tenants a discount if rent was paid on or before the
first of the month. The allegation was that, notwithstanding the stated
rental rate and printed discount, the practice represented an unlawful
means of exacting late fee charges. In addition to seeking damages for
any "forfeited" discounts, Plaintiffs seek statutory damages of two
months rent per lease violation plus reasonable attorneys' fees. To be
eligible for punitive damages Plaintiffs must prove that the Defendant
deliberately used a provision prohibited by the ordinance.
During 1994, the Court ruled in favor of the Defendant, and accepted the
Partnership's Motion to Dismiss the Plaintiff's Third Amended Complaint.
The Plaintiffs filed an appeal with the Appellate Court of Illinois,
First District, which reversed the trial court in July, 1996, remanding
the case to the lower court for trial. Although management believes
that the Defendant will prevail on the issue of statutory damages, the
ultimate outcome of this litigation, including an estimate of any
potential loss, cannot be presently determined and accordingly no
provision for loss has been made in the accompanying consolidated
financial statements.
(4) Changes in Partners' Deficit
A summary of changes in Partners' deficit for the nine months ended
September 30, 1996 is as follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
<S> <C> <C> <C> <C>
Balance at
December 31, 1995 $(6,550,285) $(234,539) $(375,628) $(7,160,452)
Net income 15,355 991 165 16,511
Distributions (704,000) (45,419) (7,570) (756,989)
Balance at
September 30, 1996 $(7,238,930) $(278,967) $(383,033) $(7,900,930)
</TABLE>
(5) Related Party Transactions
Commencing with the date of acquisition of the Partnership's properties,
the Partnership entered into agreements under which property management
fees are paid to an affiliate of the General Partners for services as
management agent. Such agreements provide for management fees 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 accounting, computer,
insurance, travel, legal and payroll; and with the preparation and mailing
of reports and other communications to the Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates were as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Property management fees $106,891 $133,069 $349,586 $392,201
Expense reimbursements 71,414 68,186 210,707 180,244
Charged to operations $178,305 $201,255 $560,293 $572,445
</TABLE>
Due to affiliates consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <S> <C> <C>
Property management fees $ - $ 15,774
Expense reimbursements - 18,553
$ - $ 34,327
</TABLE>
(6) Real Estate Taxes
During the third quarter of 1996, the Partnership successfully petitioned
for the reassessment of prior years' real estate taxes on Park Place
Apartments. The Partnership received tax refunds toward the 1986, 1987,
1988 and 1990 real estate taxes totaling approximately $325,000, which is
reflected as a reduction in the 1996 real estate tax expense.
<PAGE> KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
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 risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is
dependent primarily upon the operating performance of its real estate
investments. Such ability would also be impacted by the future availability of
bank borrowing sources as current debt matures. These sources of liquidity will
be used by the Partnership for payment of expenses related to real estate
operations, debt service, capital improvements and expenses. Cash Flow, if
any, as calculated under Section 8.2(a) of the Partnership Agreement, will then
be available for distribution to the Partners. In 1995, the General Partners
determined that there was sufficient Cash Flow and working capital reserves to
reinstate semi-annual distributions. These distributions commenced in the
first quarter of 1996 at an annual rate of $20.00 per Unit.
The Partnership's major capital improvement project, the repair of Park Place's
building facade, was completed in the fourth quarter of 1995. The external
improvements, along with extensive interior improvements, were funded from
established reserves and cash generated by the property. The completion of
these improvements has greatly enhanced the appearance of the property and has
resulted in both increased rents and occupancy. The Partnership's properties,
Century II Apartments ("Century") and Park Place Apartments ("Park Place"), are
anticipated to spend approximately $2,268,000 for capital improvements in 1996
to remain competitive in their respective markets. Again, the Partnership
expects to fund these improvements from established reserves and cash generated
from the properties.
Cash Flow
Shown below, as required by the Partnership Agreement, is the calculation of
Cash Flow of the Partnership for the nine months ended September 30, 1996. The
General Partners provide certain of the information below to meet requirements
of the Partnership Agreement and because they believe that it is an appropriate
supplemental measure of operating performance. However, Cash Flow should not
be considered by the reader as a substitute to net income (loss), as an
indicator of the Partnership's operating performance or to cash flows as a
measure of liquidity.
<TABLE>
<CAPTION>
Rounded to $1,000
<S> <C>
Net income for tax purposes $ 68,000
Items not requiring or (requiring)
the use of operating funds:
Tax basis depreciation and amortization 2,426,000
Principal payments on mortgage notes payable (394,000)
Expenditures for capital improvements (1,132,000)
Additions to working capital reserves (211,000)
Cash Flow $ 757,000
</TABLE>
Operations
The following discussion relates to the operations of the Partnership and its
properties (Park Place and Century) for the three and nine months ended
September 30, 1996 and 1995. The sale of Marine Terrace Apartments ("Marine
Terrace") in July, 1995, significantly impacts the comparability of the
Partnership's operations between the three and nine month periods.
Cash flow, before additions to working capital reserves and after giving
effect to the sale of Marine Terrace, increased for the nine months ended
September 30, 1996 as compared to the same period in 1995, due to an increase
in the Partnership's net income in 1996. For the three months ended
September 30, 1996 as compared to the same period in 1995, net income, after
giving effect to the sale of Marine Terrace, increased as total revenue
increased and total expenses decreased. Between the two nine month periods
ending September 30, 1996 and 1995, net income, after giving effect to the
sale of Marine Terrace, increased as total revenue increased and total
expenses remained relatively stable.
A rise in rental rates at Park Place during the second half of 1995 as well
as steady market conditions in the Chicago area, favorably impacted the
Partnership's revenue through the first three quarters of 1996. This, along
with strong occupancy at both Park Place and Century resulted in an increase
in total revenue for the three and nine months ended September 30, 1996 as
compared to the same periods in 1995. Interest income for the Partnership
increased in 1996 primarily from higher average cash and cash equivalent
balances as a result of the sale of Marine Terrace in the third quarter of
1995.
Total expenses for the three months ended September 30, 1996 as compared to
the same period in 1995, after giving effect to the sale of Marine Terrace,
have decreased as a major decline in real estate taxes in the third quarter
of 1996 more than offset increases in operating and maintenance expenses.
During the third quarter of 1996, the Partnership successfully petitioned for
the reassessment of prior years' real estate taxes on Park Place. The
Partnership received real estate tax refunds toward the 1986, 1987, 1988, and
1990 tax years totaling approximately $325,000, of which approximately
$305,000 was received in the third quarter of 1996. The refunds are
reflected as reductions in the 1996 real estate tax expense. The increase in
operating expense is attributable to increased leasing and advertising at
Century and Park Place. The increase in maintenance expense is attributed to
preventative maintenance to the pool and to the interior of the buildings at
Century in the third quarter of 1996.
Total expenses, after giving effect to the sale of Marine Terrace, remained
relatively stable between the two nine month periods despite increases in
operating and depreciation expenses. Operating expense increased as utility
usage increased due to the adverse weather conditions in the first quarter of
1996. In addition, increases in occupancy at Park Place and Century resulted
in higher gas consumption. Also, operating expense increased as a result of
prior years' insurance refunds received in the second quarter of 1995, along
with an adjustment of 1994 reimbursable expenses recorded in 1995, relating
to the operation of the Partnership and its properties. The increase in
depreciation expense is directly related to the extensive capital improvement
program at Park Place which was completed in the fourth quarter of 1995.
These increases offset the real estate tax refunds received in 1996, as
discussed above.
General
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which is effective for fiscal years beginning after December 15, 1995, the
Partnership has implemented policies and practices for assessing impairment
of its real estate assets.
The Partnership's investments in properties are carried at cost less
accumulated depreciation, unless the General Partners believe there is a
significant impairment in value, in which case a provision to write down
investments in properties to fair value will be charged against income. At
this time, the General Partners do not believe that any assets of the
Partnership are significantly impaired.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is a defendant in a class action suit related to the
practice of giving discounts for the early or timely payments of rent at
Park Place. The central issue of the complaint was whether the operative
lease violated a Chicago municipal ordinance relating to late fee charges
because it allowed tenants a discount if rent was paid on or before the
first day of the month. The allegation was that, notwithstanding the
stated rental rate and printed discount, the practice represented an
unlawful means of exacting late fee charges. In addition to seeking
damages for any "forfeited" discounts, Plaintiffs seek statutory damages of
two months rent per lease violation plus reasonable attorneys' fees. To be
eligible for punitive damages Plaintiffs must prove that the Defendant
deliberately used a provision prohibited by the ordinance.
During 1994, the Court ruled in favor of the Defendant, and accepted the
Partnership's Motion to Dismiss the Plaintiff's Third Amended Complaint.
The Plaintiffs filed an appeal with the Appellate Court of Illinois, First
District, which reversed the trial court in July, 1996, remanding the case
to the lower court for trial. Although management believes that the
Defendant will prevail on the issue of statutory damages, the ultimate
outcome of this litigation, including an estimate of any potential loss,
cannot be presently determined and accordingly no provision for loss has
been made in the accompanying consolidated financial statements.
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
<PAGE> 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-V
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer
of the Krupp Corporation, a General
Partner.
DATE: November 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp
Realty Fund 5 Financial Statements for the nine months ended September 30, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,209,741
<SECURITIES> 0
<RECEIVABLES> 75,300<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,972,859
<PP&E> 70,274,620<F2>
<DEPRECIATION> (37,625,260)<F3>
<TOTAL-ASSETS> 36,907,260
<CURRENT-LIABILITIES> 2,401,383
<BONDS> 42,406,807<F4>
0
0
<COMMON> (7,900,930)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,907,260
<SALES> 0
<TOTAL-REVENUES> 10,152,411<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,551,086<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,584,814
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,511<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<FN>
<F1>Includes all receivables grouped in "Prepaid expenses and other assets" on
the balance sheet.
<F2>Includes apartment complexes of $69,383,535 and accumulated amortization of
deferred expenses of $891,163.
<F3>Represents depreciation of $37,172,929 and accumualated amortization of
deferred expeneses of $452,331.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($383,033) and ($7,517,897), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Operating expenses of $3,942,684, real estate tax expenses of $1,130,881 and
depreication and amortization of $2,477,521.
<F8>Net income allocated $165 to the General Partners and $16,346 to the Limited
Partners. Average net income per Unit of Limited Partners interest is $.46 on
35,200 Units outstanding.
</FN>
</TABLE>
