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 June 30,
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
11.
<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>
June 30, December 31,
1997 1996
Multi-family apartment complexes, net of
accumulated depreciation of $39,759,785
<S> <C> <C>
and $38,066,263, respectively $31,369,816 $32,598,192
Cash and cash equivalents (Note 2) 2,261,051 1,767,094
Cash restricted for tenant security deposits 305,297 307,908
Replacement reserve escrow 669,260 689,656
Prepaid expenses and other assets 1,415,733 1,377,390
Deferred expenses, net of accumulated
amortization of $502,738 and $469,134,
respectively 388,425 422,029
Total assets $36,409,582 $37,162,269
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $41,989,073 $42,270,255
Accounts payable 38,439 83
Accrued real estate taxes 1,664,042 1,660,000
Accrued expenses and other liabilities 1,359,446 1,241,967
Due to affiliates (Note 5) 18,521 26,480
Total liabilities 45,069,521 45,198,785
Commitments and contingencies (Note 3)
Partners' deficit (Note 4):
Investor Limited Partners
(35,200 Units outstanding) (7,951,953) (7,372,169)
Original Limited Partner (317,363) (279,958)
General Partners (390,623) (384,389)
Total Partners' deficit (8,659,939) (8,036,516)
Total liabilities and Partners' deficit $36,409,582 $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 For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Revenue:
<S> <C> <C> <C> <C>
Rental $3,647,118 $3,391,375 $7,190,303$6,636,185
Interest income 37,826 40,553 70,935 80,380
Total revenue 3,684,944 3,431,928 7,261,238 6,716,565
Expenses:
Operating (Note 5) 1,028,834 926,581 1,940,143 1,907,196
Maintenance 258,997 257,370 407,998 393,391
General and administrative (Note 5)56,754 11,374 133,621 47,036
Real estate taxes 485,379 483,811 973,292 967,634
Management fees (Note 5) 115,894 124,749 241,412 242,695
Depreciation and amortization 867,704 823,510 1,727,126 1,627,325
Interest 850,589 861,676 1,704,080 1,726,030
Total expenses 3,664,151 3,489,071 7,127,672 6,911,307
Net income (loss) $ 20,793 $ (57,143)$ 133,566 $ (194,742)
Allocation of net income (loss)
(Note 4):
Investor Limited Partners
(35,200 Units outstanding) $ 19,337 $ (56,572)$ 124,216 $ (192,795)
Per Unit of Investor Limited
Partner Interest $ .55 $ (1.61)$ 3.53 $ (5.48)
Original Limited Partner $ 1,248 $ - $ 8,014 $ -
General Partners $ 208 $ (571)$ 1,336 $ (1,947)
</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 Six Months
Ended June 30,
1997 1996
Operating activities:
<S> <C> <C>
Net income (loss) $ 133,566 $(194,742)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Interest earned on replacement reserve escrow(12,300) (7,906)
Depreciation and amortization 1,727,126 1,627,325
Changes in assets and liabilities:
Decrease in cash restricted for tenant
security deposits 2,611 20,041
Increase in prepaid expenses and other
assets (38,343) (35,494)
Increase (decrease) in accounts payable 9,026 (35,409)
Increase in accrued real estate taxes 4,042 15,344
Increase (decrease) in accrued expenses and
other liabilities 117,479 (2,968)
Decrease in due to affiliates (7,959) (34,327)
Net cash provided by operating
activities 1,935,248 1,351,864
Investing activities:
Deposits to replacement reserve escrow (106,456) (106,456)
Withdrawals from replacement reserve escrow 139,152 199,314
Additions to fixed assets (465,146) (563,630)
Increase in accounts payable
related to fixed asset additions 29,330 3,024
Net cash used in investing activities (403,120) (467,748)
Financing activities:
Principal payments on mortgage notes payable (281,182)(260,214)
Distributions (756,989) (378,494)
Net cash used in financing activities (1,038,171) (638,708)
Net increase in cash and cash equivalents 493,957 245,408
Cash and cash equivalents, beginning of period 1,767,094 2,022,328
Cash and cash equivalents, end of period $2,261,051 $2,267,736
</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,
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 June 30, 1997, its results of operations
for the three and six months ended June 30,
1997 and 1996 and its cash flows for the six
months ended June 30, 1997 and 1996. Certain
prior year balances have been reclassified to
conform with current period financial
statement presentation.
The results of operations for the three and
six months ended June 30, 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) Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Cash and money market accounts $1,891,721 $ 1,484,612
Commercial paper 369,330 282,482
$2,261,051 $ 1,767,094
</TABLE>
At June 30, 1997, commercial paper represents
corporate issues complying with Section 6.2(a)
of the Partnership Agreement purchased through
a corporate issuer maturing in the third
quarter of 1997. At June 30, 1997, the
carrying value of the Partnership's investment
in commercial paper approximates fair value.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(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 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 $282,000, representing its share
of the discounts and late fees and other fees
and costs in the consolidated financial
statements as of June 30, 1997. The ultimate
outcome of the potential punitive damages
award related to this litigation, including an
estimate of potential loss, cannot presently
be determined.
(4)Changes in Partners' Deficit
A summary of changes in Partners' deficit for
the six months ended June 30, 1997 is as
follows:
<TABLE>
<CAPTION>
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
<S> <C> <C> <C> <C>
December 31, 1996 $(7,372,169) $(279,958) $(384,389) $(8,036,516)
Net income 124,216 8,014 1,336 133,566
Distributions (704,000) (45,419) (7,570) (756,989)
Balance at
June 30, 1997 $(7,951,953)$(317,363)$(390,623)$(8,659,939)
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(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. These management agreements
were sold to BRI OP Limited Partnership, a
subsidiary of Berkshire Realty Company Inc., 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 For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Property management fees $115,894 $124,749 $241,412 $242,695
Expense reimbursements 79,458 64,696 163,185 139,293
Charged to operations $195,352 $189,445 $404,597 $381,988
</TABLE>
Due to affiliates consisted of expense
reimbursements of $18,521 and $26,480 at June
30, 1997 and December 31, 1996, respectively.
<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, 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 six months ended June
30, 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 $ 151,000
Items not requiring or (requiring)
the use of operating funds:
Tax basis depreciation and amortization 1,709,000
Principal payments on mortgage notes payable (281,000)
Expenditures for capital improvements (465,000)
Accrued legal expenses (114,000)
Additions to working capital reserves (243,000)
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 Apartments)
for the three and six months ended June 30,
1997 and 1996.
Cash Flow, before additions to working capital
reserves, increased for the six months ended
June 30, 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 half of 1997 when compared to the
first half of 1996 as a result of extensive
improvements completed on the model unit and
pool at Park Place in 1996.
In comparing the three and six months ended
June 30, 1997 to the same periods in 1996, the
increases in rental revenue are attributable
to increases in average occupancy at both Park
Place and Century. Average occupancy rates
increased at Century from 97% and 93% for the
three and six months ended June 30, 1996,
respectively, to 100% for both the three and
six months ended June 30, 1997. At Park
Place, occupancy rose from an average of 96%
to an average of 99% for both the three and
six months ended June 30, 1996 and 1997,
respectively. The Partnership's properties
continue to enjoy strong occupancy as capital
improvements, including an appliance
replacement program, have strengthened 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 increased for the three and six
months ended June 30, 1997 when compared to
the second quarter of 1996 primarily due to
general and administrative and depreciation
expenses. Costs incurred in connection with
the operation of the Partnership, including
the preparation and mailing of reports and
other communications to the investors
increased. This coupled with an increase in
Partnership legal costs relating to the
unsolicited tender offers made to purchase
Partnership Units, caused the increase in
general and administrative expense.
Depreciation expense increased in conjunction
with the extensive capital improvement
programs completed at the end of 1996.
<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 $282,000, representing its share
of the discounts and late fees and other fees
and costs in the consolidated financial
statements as of June 30, 1997. 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>
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.
<PAGE>
DATE: August 12, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Krupp
Realty Fund 5 financial statements for the six months ending June 30, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> 12-31-97
<PERIOD-END> 06-30-97
<CASH> 2,261,051
<SECURITIES> 0
<RECEIVABLES> 75,450<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,314,840
<PP&E> 72,020,764<F2>
<DEPRECIATION> (40,262,523)<F3>
<TOTAL-ASSETS> 36,409,582
<CURRENT-LIABILITIES> 3,080,448
<BONDS> 41,989,073<F4>
0
0
<COMMON> (8,659,939)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,409,582
<SALES> 0
<TOTAL-REVENUES> 7,261,238<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,423,592<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,704,080
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,566<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 $71,129,601 and deferred expenses of $891,163.
<F3>Represents depreciation of $39,759,785 and accumulated amortization on
deferred expenses $502,738.
<F4>Represents mortgage note payable.
<F5>Represents total deficits of the General Partners and Limited Partners of
(390,623) and ($8,269,316), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Operating expenses of $2,723,174 real estate tax expense of $973,292 and
depreciation and amortization of $1,727,126.
<F8>Net income allocated $1,336 to the General Partners and $132,230 to the
Limited Partners. Average net income per unit of Limited Partners interest
is $3.53 on 35,200 units.
</FN>
</TABLE>
