UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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
The total number of pages in this document is 10.
<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
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $38,908,883
and $38,066,263, respectively $31,901,793 $32,598,192
Cash and cash equivalents 1,717,780 1,767,094
Cash restricted for tenant security deposits 309,582 307,908
Replacement reserve escrow 684,679 689,656
Prepaid expenses and other assets 977,181 1,377,390
Deferred expenses, net of accumulated
amortization of $485,936 and $469,134,
respectively 405,227 422,029
Total assets $35,996,242 $37,162,269
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $42,131,029 $42,270,255
Accounts payable 22,757 83
Accrued real estate taxes 1,249,042 1,660,000
Accrued expenses and other liabilities 1,204,420 1,241,967
Due to affiliates (Note 4) 69,726 26,480
Total liabilities 44,676,974 45,198,785
Commitments and contingencies (Note 2)
Partners' deficit (Note 3):
Investor Limited Partners
(35,200 Units outstanding) (7,971,290) (7,372,169)
Original Limited Partner (318,611) (279,958)
General Partners (390,831) (384,389)
Total Partners' deficit (8,680,732) (8,036,516)
Total liabilities and Partners' deficit $35,996,242 $37,162,269
</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
Ended March 31,
1997 1996
<S> <C> <C>
Revenue:
Rental $3,543,185 $3,244,810
Interest income 33,109 39,827
Total revenue 3,576,294 3,284,637
Expenses:
Operating (Note 4) 911,309 980,615
Maintenance 149,001 136,021
General and administrative (Note 4) 76,867 35,662
Real estate taxes 487,913 483,823
Management fees (Note 4) 125,518 117,946
Depreciation and amortization 859,422 803,815
Interest 853,491 864,354
Total expenses 3,463,521 3,422,236
Net income (loss) $ 112,773 $ (137,599)
Allocation of net income (loss) (Note 3):
Investor Limited Partners
(35,200 Units outstanding) $ 104,879 $ (136,223)
Per Unit of Investor Limited Partner
Interest $ 2.98 $ (3.87)
Original Limited Partner $ 6,766 $ -
General Partners $ 1,128 $ (1,376)
</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 Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Operating activities:
Net income (loss) $ 112,773 $ (137,599)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Interest earned on replacement reserve escrow (6,150) (1,511)
Depreciation and amortization 859,422 803,815
Changes in assets and liabilities:
Decrease (increase) in cash restricted for
tenant security deposits (1,674) 3,896
Decrease in prepaid expenses and other
assets 400,209 434,270
Decrease in accrued real estate taxes (410,958) (399,656)
Increase (decrease) in accounts payable 6,557 (25,941)
Decrease in accrued expenses and other
liabilities (37,547) (4,739)
Increase (decrease) in due to affiliates 43,246 (11,361)
Net cash provided by operating
activities 965,878 661,174
Investing activities:
Deposits to replacement reserve escrow (53,228) (53,228)
Withdrawals from replacement reserve escrow 64,355 -
Additions to fixed assets (146,221) (221,218)
Increase in accounts payable related to fixed asset
additions 16,117 21,355
Net cash used in investing activities (118,977) (253,091)
Financing activities:
Principal payments on mortgage notes payable (139,226) (128,849)
Distributions (756,989) (378,494)
Net cash used in financing activities (896,215) (507,343)
Net decrease in cash and cash equivalents (49,314) (99,260)
Cash and cash equivalents, beginning of period 1,767,094 2,022,328
Cash and cash equivalents, end of period $1,717,780 $1,923,068
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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, 1996 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 March 31, 1997, and its
results of operations and cash flows for the three
months ended March 31, 1997 and 1996. Certain prior
period balances have been reclassified to conform with
current period financial statement presentation.
The results of operations for the three months ended
March 31, 1997 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)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
Apartments (Park Place) and Marine Terrace Apartments.
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 and reasonable attorneys' fees. To be
eligible for such damages, plaintiffs must prove that
the defendants deliberately used a provision
prohibited by the ordinance.
During 1994, the Court ruled in favor of the
defendants 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. During 1996, the decision
was reversed on appeal and the case remanded to trial
court for further proceedings. The defendants intend
to vigorously defend this case. However, the
Partnership has recorded a provision of $168,474,
representing its share of the discounts and late fees,
in the 1996 consolidated financial statements. The
ultimate outcome of the potential punitive damages
award related to this litigation, including an
estimate of potential loss, cannot presently be
determined.
Continued
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(3)Changes in Partners' Deficit
A summary of changes in Partners' deficit for the
three months ended March 31, 1997 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, 1996 $(7,372,169) $(279,958) $(384,389) $(8,036,516)
Net income 104,879 6,766 1,128 112,773
Distributions (704,000) (45,419) (7,570) (756,989)
Balance at
March 31, 1997 $(7,971,290) $(318,611) $(390,831) $(8,680,732)
</TABLE>
(4) 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. These management agreements
were sold to BRI OP Limited Partnership,
a publicly traded real estate investment
trust and an affiliate of the General
Partners, on February 28, 1997. 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
Ended March 31,
1997 1996
<S> <C> <C>
Property management fees $125,518 $117,946
Expense reimbursements 83,727 74,597
Charged to operations $209,245 $192,543
Due to affiliates consisted of the following:
March 31, December 31,
1997 1996
Property management fees $ 67,774 $ -
Expense reimbursements 1,952 26,480
$ 69,726 $ 26,480
</TABLE>
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, capital improvements, debt
service and other expenses. Cash Flow, if any, as
calculated under Section 8.2(a) of the Partnership
Agreement, will then be available for distribution to
the Partners. Beginning with the distribution paid in
February, 1997, the annual distribution rate was
increased from $20.00 per Unit, to $40.00 per Unit,
based on sufficient Cash Flow and working capital
reserves.
The Partnership's properties, Century II Apartments
(Century) and Park Place, are anticipated to spend
approximately $2,060,000 for capital improvements in
1997 to remain competitive in their respective
markets. These improvements include catwalk and
pavement upgrades and replacement of fitness equipment
at Century, refurbishment of the elevator and interior
improvements at Park Place, and new appliances at both
properties. 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 three months ended March 31, 1997. The General
Partners provide 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 $ 118,000
Items not requiring or (requiring)
the use of operating funds:
Tax basis depreciation and amortization 855,000
Principal payments on mortgage notes payable (139,000)
Expenditures for capital improvements (146,000)
Amounts released from working capital reserves 69,000
Cash Flow $ 757,000
</TABLE>
Continued
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
Operations
The following discussion relates to the operations of
the Partnership and its properties (Park Place and
Century) for the three months ended March 31, 1997 and
1996.
Cash Flow, before amounts released from working
capital reserves, increased for the three months ended
March 31, 1997 as compared to the same period in 1996
due to both an increase in the Partnership's net
income and a decrease in capital improvements at the
Partnership's properties. The increase in net income
was primarily due to an increase in rental revenue.
Capital improvements decreased for the first quarter
of 1997 when compared to the first quarter of 1996 as
a result of extensive improvements completed on the
model unit at Park Place in 1996.
In comparing the three months ended March 31, 1997 to
the same period in 1996, the increase in rental
revenue is attributable to an increase in occupancy at
both Park Place and Century from an average of 96% and
90%, respectively, to an average of 99% for both
properties. The Partnership's properties continue to
enjoy strong occupancy as capital improvements,
including an appliance replacement program at both
properties, have enhanced leasing efforts at the
properties. Interest income for the Partnership
decreased as investments in commercial paper declined
as a direct result of the 100% increase in the
semiannual distribution paid in February, 1997.
Total expenses remained relatively stable when
comparing the first three months of 1997 to the first
three months of 1996, as the increase in general and
administrative and maintenance expenses offset the
decrease in operating expense. Increased legal costs
relating to the recent unsolicited tender offer to
purchase Partnership Units resulted in an increase in
general and administrative expense. The increase in
maintenance expense was primarily due to additional
painting of the interiors of the buildings at Park
Place beginning at the end of 1996 and continuing
through the first quarter of 1997. A combination of
high utility usage in the first three months of 1996,
due to adverse weather conditions, and low utility
usage in the first quarter of 1997, due to an
unusually mild winter in the Chicago area, contributed
to a decrease in utility expense at Park Place and
thus a decrease in the Partnership's operating
expense. Depreciation expense increased in
conjunction with the increase in capital improvements.
<PAGE>
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1.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
Apartments (Park Place) and Marine Terrace Apartments.
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 and reasonable attorneys' fees. To be
eligible for such damages, plaintiffs must prove that
the defendants deliberately used a provision
prohibited by the ordinance.
During 1994, the Court ruled in favor of the
defendants 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. During 1996, the decision
was reversed on appeal and the case remanded to trial
court for further proceedings. The defendants intend
to vigorously defend this case. However, the
Partnership has recorded a provision of $168,474,
representing its share of the discounts and late fees,
in the 1996 consolidated financial statements. The
ultimate outcome of the potential punitive damages
award related to this litigation, including an
estimate of potential loss, cannot presently be
determined.
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>
<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/Wayne H. Zarozny
Wayne H. Zarozny
Treasurer and Chief Accounting Officer of the Krupp
Corporation, a General Partner.
DATE: May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the financial
statements for the quarter ended March 31, 1997 and is qualifed in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,717,780
<SECURITIES> 0
<RECEIVABLES> 113,640<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,857,802
<PP&E> 71,701,839<F2>
<DEPRECIATION> (39,394,819)<F3>
<TOTAL-ASSETS> 35,996,242
<CURRENT-LIABILITIES> 2,545,945
<BONDS> 42,131,029<F4>
0
0
<COMMON> (8,680,732)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,996,242
<SALES> 0
<TOTAL-REVENUES> 3,576,294<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,610,030<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 853,491
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,773<F8>
<EPS-PRIMARY> 0<F8>
<EPS-DILUTED> 0<F8>
<FN>
<F8>Net income allocated $1,128 to the general partners and $111,645 to the limted
partners. Average net income per unit of limited partner interest is $2.98.
<F7>Includes operating expenses of $1,262,695, real estate tax of $487,913 and
depreciation and amortization of $859,422.
<F6>Includes all revenue of the Partnership.
<F5>Total deficit of the General Partnes is ($390,831) total deficit of the Limited
Partners is ($8,289,901).
<F4>Represents mortgage note payable
<F3>Accumulated depreciation of ($38,908,883) and accumulated amortization of
($485,936).
<F2>Includes apartment complexles of $70,810,676 and deferred expenses $891,163.
<F1>Includes all recivables included in "prepaid expenses and other assets" on the
consolidated balance sheet.
</FN>
</TABLE>
