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 September
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
<TABLE>
<CAPTION>
ASSETS
September 30,December 31,
1997 1996
<S> <C> <C>
Multi-family apartment complexes, net of
accumulated depreciation of $40,660,816
and $38,066,263, respectively $30,975,574 $32,598,192
Cash and cash equivalents (Note 2) 1,382,317 1,767,094
Cash restricted for tenant security deposits 311,171
307,908
Replacement reserve and repair escrows 558,917 689,656
Prepaid expenses and other assets 1,294,516 1,377,390
Deferred expenses, net of accumulated
amortization of $519,540 and $469,134,
respectively 371,623 422,029
Total assets $34,894,118 $37,162,269
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $41,844,331 $42,270,255
Accrued real estate taxes 1,245,000 1,660,000
Accrued expenses and other liabilities 1,304,592 1,242,050
Due to affiliates (Note 5) 20,312 26,480
Total liabilities 44,414,235 45,198,785
Commitments and contingencies (Note 3)
Partners' deficit (Note 4):
Investor Limited Partners
(35,200 Units outstanding) (8,751,918) (7,372,169)
Original Limited Partner (368,974) (279,958)
General Partners (399,225) (384,389)
Total Partners' deficit (9,520,117) (8,036,516)
Total liabilities and Partners' deficit $34,894,118 $37,162,269
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Rental $ 3,595,694 $ 3,395,929 $10,785,997 $10,032,114
Interest income 29,744 39,917 100,679 120,297
Total revenue 3,625,438 3,435,846 10,886,676 10,152,411
Expenses:
Operating (Note 5)939,133 998,402 2,879,276 2,905,598
Maintenance 340,723 219,274 748,721 612,665
General and adminis-
trative (Note 5) 41,169 27,799 174,790 74,835
Real estate taxes
(Note 6) 522,760 163,247 1,496,052 1,130,881
Management fees (Note 5)
119,550 106,891 360,962 349,586
Depreciation and
amortization 917,833 850,196 2,644,959 2,477,521
Interest 847,458 858,784 2,551,538 2,584,814
Total expenses 3,728,626 3,224,593 10,856,298 10,135,900
Net income (loss)$ (103,188)$ 211,253 $ 30,378$ 16,511
Allocation of net income
(loss) (Note 4):
Investor Limited Partners
(35,200 Units
outstanding)$ (102,156)$ 196,465 $ 28,251$ 15,355
Investor Limited Partners
Per Unit$ (2.90) $ 5.58 $ .80 $ .44
Original Limited Partner$ - $ 12,675 $ 1,823 $ 991
General Partners$ (1,032)$ 2,113 $ 304 $ 165
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
<S> <C> <C>
Operating activities:
Net income $ 30,378 $ 16,511
Adjustments to reconcile net income to net
cash provided by operating activities:
Interest earned on replacement reserve and
repair escrows (13,307) (13,746)
Depreciation and amortization 2,644,959 2,477,521
Changes in assets and liabilities:
Decrease (increase) in cash restricted
for tenant security deposits (3,263) 61,417
Decrease in prepaid expenses and other
assets 82,874 344,004
Decrease in accrued real estate taxes (415,000) (415,000)
Increase (decrease) in accrued expenses
and other liabilities 59,750 (64,520)
Decrease in due to affiliates (6,168) (34,327)
Net cash provided by operating
activities 2,380,223 2,371,860
Investing activities:
Deposits to replacement reserve escrow (159,684) (159,684)
Withdrawals from replacement reserve and repair
escrows 303,730 258,489
Additions to fixed assets (971,935) (1,132,116)
Increase in accrued expenses and other
liabilities related to fixed asset additions 2,792 -
Net cash used in investing
activities (825,097) (1,033,311)
Financing activities:
Principal payments on mortgage notes payable(425,924) (394,147)
Distributions (1,513,979) (756,989)
Net cash used in financing
activities (1,939,903) (1,151,136)
Net increase (decrease) in cash and cash
equivalents (384,777) 187,413
Cash and cash equivalents, beginning of period 1,767,094 2,022,328
Cash and cash equivalents, end of period $1,382,317$ 2,209,741
</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 necessary to present fairly the
Partnership's consolidated financial position
as of September 30, 1997, its results of
operations for the three and nine months ended
September 30, 1997 and 1996 and its cash flows
for the nine months ended September 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
nine months ended September 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>
September 30,December 31,
1997 1996
<S> <C> <C>
Cash and money market accounts $ 637,253$ 1,484,612
Commercial paper 745,064 282,482
$ 1,382,317$ 1,767,094
</TABLE>
At September 30, 1997, commercial paper
represents corporate issues maturing in the
fourth quarter of 1997. At September 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, a previously
owned property. 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 Plaintiffs' 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 was 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 September 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 nine months
ended September 30, 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 28,251 1,823 304 30,378
Distributions (1,408,000) (90,839) (15,140) (1,513,979)
Balance at
September 30, 1997 $(8,751,918)$(368,974)$(399,225)$(9,520,117)
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(5)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.
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 administrative expenses.
Amounts accrued or paid to the General Partners' affiliates were
as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Property management fees$119,550 $106,891 $360,962 $349,586
Expense reimbursements 76,698 71,414 239,883 210,707
Charged to operations $196,248 $178,305 $600,845 $560,293
</TABLE>
Due to affiliates consisted of expense
reimbursements of $20,312 and $26,480 at
September 30, 1997 and December 31, 1996,
respectively.
In addition to the amounts above,
refinancing costs of $37,500 and $0 were
paid to the General Partners or their
affiliates at September 30, 1997 and
December 31, 1996, respectively.
(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 borrowings and the future
refinancing and sale of the Partnership's
remaining real estate investments. 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
Apartments ("Park Place"), have spent
approximately $972,000 to date and 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 at Century, the replacement
of fitness equipment, the 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.
Currently, the General Partners are in the
process of refinancing the Century mortgage
note which is expected to be completed during
the fourth quarter. The refinancing should,
if concluded, result in significant savings to
the Partnership.
Operations
The following discussion relates to the
operations of the Partnership and its
properties (Park Place and Century Apartments)
for the three and nine months ended September
30, 1997 and 1996.
Net income decreased for the three months
ended September 30, 1997 when compared to the
same period in 1996, as the increase in
expenses more than offset the increase in
revenue. Net income increased slightly
for the nine months ended September 30,
1997 as compared to September 30, 1996, as the
increase in revenue exceeded the increase in
expenses.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND
SUBSIDIARY
Operations - Continued
Total revenue for the three and nine months
ended September 30, 1997 increased when
compared to the same periods in 1996,
primarily due to increases in average
occupancy at both Park Place and Century.
Average occupancy rates at Century of 99% and
95% for the three and nine months ended
September 30, 1996, respectively, increased to
100% for both the three and nine months ended
September 30, 1997. At Park Place, occupancy
rose from an average of 97% for the two
periods in 1996 to an average of 99% in 1997.
The Partnership's properties continue to enjoy
strong occupancy as capital improvements,
including an appliance replacement program at
Century and a new fitness center at Park
Place, have strengthened leasing efforts at
the properties. Interest income decreased as
investments in commercial paper have declined
as a direct result of the 100% increase in the
semiannual distributions paid in 1997.
Total expenses for the three and nine months
ended September 30, 1997 increased when
compared to the same periods in 1996 as a
result of increases in maintenance, general
and administrative, real estate tax and
depreciation expenses. Maintenance expense
increased due to payment of the insurance
deductible for flood damage at Park Place and
preventive maintenance at both of the
Partnership's properties, including interior
painting and environmental upgrades. The
increase in general and administrative expense
was due to the increase in costs incurred in
connection with the operation of the
Partnership, including the preparation and
mailing of reports and other communications to
the investors, and an increase in Partnership
legal costs relating to the unsolicited tender
offers made to purchase Partnership Units
during the year. The increase in real estate
tax expense was due to a refund of prior
years' real estate taxes which was received in
the third quarter of 1996 and reflected as a
reduction of the third quarter 1996 expense.
The Partnership successfully petitioned for
the reassessment of prior years' real estate
taxes on Park Place and 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.
Depreciation expense increased in conjunction
with the extensive capital improvement
programs completed at the end of 1996.
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 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 Plaintiffs' 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 was 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 September 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.
DATE: November 12, 1997
<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, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,382,317
<SECURITIES> 0
<RECEIVABLES> 311,906<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,852,698
<PP&E> 72,527,553<F2>
<DEPRECIATION> (41,180,356)<F3>
<TOTAL-ASSETS> 34,894,118
<CURRENT-LIABILITIES> 2,569,904
<BONDS> 41,844,331<F4>
0
0
<COMMON> (9,520,117)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,894,118
<SALES> 0
<TOTAL-REVENUES> 10,886,676<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,304,760<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,551,538
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,378<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>Multi-family complexes of $71,636,390 and deferred expenses of $891,163.
<F3>Accumulated depreciation of $40,660,816 and accumulated amortization of
deferred expenses of $519,540.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($399,225) and ($9,120,892), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $4,163,749, real estate taxes of $1,496,052 and
depreciation and amortization of $2,644,959.
<F8>Net income allocated $304 to the General Partners and $30,074 to the Limited
Partners. Average net income per Unit of Limited Partners interest is $.80 on
35,000 Units outstanding.
</FN>
</TABLE>
