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 September30,1998
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>
(Unaudited)
September 30,December 31,
1998 1997
Multi-family apartment complexes, net of
accumulated depreciation of $44,328,488
<S> <C> <C>
and $41,602,481, respectively $ 29,066,410$30,790,070
Cash and cash equivalents (Note 2) 1,361,109 802,726
Cash restricted for tenant security deposits 312,954 294,572
Replacement reserve escrow 582,146 399,771
Prepaid expenses and other assets (Note 6) 3,263,942 2,662,138
Deferred expenses, net of accumulated amortization
of $74,234 and $48,332, respectively (Note 3)491,138 507,755
Total assets $ 35,077,699$35,457,032
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note 3) $ 41,981,006$42,400,979
Accrued real estate taxes 2,610,095 1,950,000
Accrued expenses and other liabilities 1,131,380 1,249,087
Total liabilities 45,722,481 45,600,066
Commitments and contingencies (Note 4)
Partners' deficit (Note 5):
Investor Limited Partners
(35,200 Units outstanding) (9,833,408) (9,366,783)
Original Limited Partner (400,902) (370,797)
General Partners (410,472) (405,454)
Total Partners' deficit (10,644,782)(10,143,034)
Total liabilities and Partners' deficit $ 35,077,699$35,457,032
</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
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Revenue:
<S> <C> <C> <C> <C>
Rental $3,807,018 $3,595,694$11,193,425$10,785,997
Interest income 28,705 29,744 84,026 100,679
Total revenue 3,835,723 3,625,438 11,277,451 10,886,676
Expenses:
Operating (Note 6) 652,721 939,133 2,351,381 2,879,276
Maintenance 291,869 340,723 658,108 748,721
General and administrative (Note 6)43,876 41,169 125,223 174,790
Real estate taxes 572,843 522,760 1,728,890 1,496,052
Management fees (Note 6) 140,224 119,550 395,309 360,962
Depreciation and amortization 967,685 917,833 2,751,909 2,644,959
Interest (Note 3) 748,796 847,458 2,254,400 2,551,538
Total expenses 3,418,014 3,728,626 10,265,220 10,856,298
Net income (loss) $ 417,709 $ (103,188)$ 1,012,231$ 30,378
Allocation of net income (loss)
(Note 5):
Investor Limited Partners
(35,200 Units outstanding) $ 388,469 $ (102,156)$ 941,375$ 28,251
Investor Limited Partner, Per Unit$11.03 $ (2.90)$ 26.74 $ .80
Original Limited Partner $ 25,063 $ - $ 60,734 $ 1,823
General Partners $ 4,177 $ (1,032) $ 10,122$ 304
</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
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1998 1997
Operating activities:
<S> <C> <C>
Net income $1,012,231$ 30,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Interest earned on replacement reserve escrow (9,521) (13,307)
Depreciation and amortization 2,751,909 2,644,959
Changes in assets and liabilities:
Increase in cash restricted for tenant
security deposits (18,382) (3,263)
Decrease (increase) in prepaid expenses
and other assets (601,804) 82,874
Increase (decrease) in accrued real estate
taxes 660,095 (415,000)
Increase (decrease) in accrued expenses
and other liabilities (121,056) 59,750
Decrease in due to affiliates - (6,168)
Net cash provided by operating
activities 3,673,472 2,380,223
Investing activities:
Deposits to replacement reserve escrow (229,884) (159,684)
Withdrawals from replacement reserve escrow 57,030 303,730
Additions to fixed assets (1,002,347) (971,935)
Increase in accrued expenses and other
liabilities related to fixed asset additions 3,349 2,792
Net cash used in investing activities (1,171,852) (825,097)
Financing activities:
Principal payments on mortgage notes payable(419,973) (425,924)
Increase in deferred expenses (9,285) -
Distributions (1,513,979) (1,513,979)
Net cash used in financing activities (1,943,237) (1,939,903)
Net increase (decrease) in cash and
cash equivalents 558,383 (384,777)
Cash and cash equivalents, beginning of period 802,726 1,767,094
Cash and cash equivalents, end of period $1,361,109$ 1,382,317
</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,
1997 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, 1998, its results of
operations for the three and nine months ended
September 30, 1998 and 1997 and its cash flows
for the nine months ended September 30, 1998
and 1997.
The results of operations for the three and
nine months ended September 30, 1998 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,
1998 1997
<S> <C> <C>
Cash and money market accounts $ 511,754 $ 802,726
Treasury bills 849,355 -
$ 1,361,109 $ 802,726
</TABLE>
(3)Mortgage Note Payable
On December 10, 1997, the Partnership
completed the refinancing of the Century II
Apartments mortgage note. The property was
refinanced with a $11,000,000 non-recourse
mortgage note payable at the rate of 6.75% per
annum with monthly principal and interest
payments of $71,346. The mortgage note, which
is collateralized by the property, matures on
January 1, 2008 at which time the remaining
principal (approximately $9,401,537) and
accrued interest are due. The note may be
prepaid, subject to a prepayment penalty, at
any time with 30 days notice. The Partnership
used the majority of the proceeds from the
refinancing to repay the existing mortgage
note on the property of $10,309,332, pay
closing costs of $236,763, to pay a prepayment
premium of $210,825 and to establish various
escrows. The prepayment premium as well as
unamortized deferred mortgage costs of
$77,331, were reported in the Statement of
Operations as an extraordinary loss from early
extinguishment of debt for the year ended
December 31, 1997.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(4)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 Tower 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 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, plus estimated
legal costs, in the consolidated financial
statements as of September 30, 1998. The
ultimate outcome of the potential punitive
damages award related to this litigation,
including an estimate of potential loss,
cannot presently be determined.
(5)Changes in Partners' Deficit
A summary of changes in Partners' deficit for
the nine months ended September 30, 1998 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, 1997 $(9,366,783)$(370,797)$(405,454)$(10,143,034)
Net income 941,375 60,734 10,122 1,012,231
Distributions (1,408,000) (90,839) (15,140) (1,513,979)
Balance at
September 30, 1998$(9,833,408)$(400,902)$(410,472) $(10,644,782)
</TABLE>
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(6)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.
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,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Property management fees$140,224 $119,550 $395,309 $360,962
Expense reimbursements 79,283 76,698 201,456 239,883
Charged to operations$219,507 $196,248 $596,765 $600,845
</TABLE>
Expense reimbursements due from affiliates of $32,103 were
included in prepaid expenses and other assets at September 30,
1998.<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.
On December 10, 1997, the Partnership
completed the refinancing of the Century II
Apartments ("Century") mortgage note. The
property was refinanced with a $11,000,000
non-recourse mortgage note payable at the rate
of 6.75% per annum with monthly principal and
interest payments of $71,346. The Partnership
used a majority of the proceeds from the
refinancing to repay the existing mortgage
note on the property of $10,309,332, pay
closing costs of $236,763, to pay prepayment
premium of $210,825 and to establish various
escrows.
The Partnership's properties, Century and Park
Place, have spent approximately $1,002,000 to
date and are anticipated to spend
approximately $2,134,000 for capital
improvements in 1998 to remain competitive in
their respective markets. These improvements
include floor covering, pavement upgrades and
appliance replacements, as well as interior
improvements and refurbishment of the elevator
and convenience store at Park Place. The
Partnership expects to fund these improvements
from established reserves and cash generated
from property operations.
Financial Accounting Standards Board Statement
No. 130 ("FAS 130") "Reporting Comprehensive
Income" is effective for fiscal years
beginning after December 31, 1997, although
earlier application is permitted. FAS 130
establishes standards for reporting and
display of comprehensive income and its
components in financial statements. Financial
Accounting Standards Board Statement No. 131
("FAS 131") "Disclosures about Segments of an
Enterprise and Related Information"
establishes standards for disclosing measures
for profit or loss and total assets for each
reportable segment. FAS 131 is effective for
fiscal years beginning after December 15,
1997. The General Partners do not believe
that the implementation of FAS 130 or FAS 131
will have a material impact on the
Partnership's financial statements.
The General Partners of the Partnership have
conducted an assessment of the Partnership's
core internal and external computer
information systems and have taken the further
necessary steps to understand the nature and
extent of the work required to make its
systems Year 2000 ready in those situations in
which it is required to do so. The Year 2000
readiness issue concerns the inability of
computerized information systems to accurately
calculate, store or use a date after 1999.
This could result in a system failure or
miscalculations causing disruptions of
operations. The Year 2000 issue affects
virtually all companies
and all organizations.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
Liquidity and Capital Resources, Continued
In this regard, the General Partners of the
Partnership, along with certain affiliates,
began a computer systems project in 1997 to
significantly upgrade its existing hardware
and software. The General Partners completed
the testing and conversion of the financial
accounting operating systems in February 1998.
As a result, the General Partners have
generated operating efficiencies and believe
their financial accounting operating systems
are Year 2000 ready. The Partnership incurred
hardware costs as well as consulting and other
expenses related to the infrastructure and
facilities enhancements necessary to complete
the upgrade and prepare for the Year 2000.
There are no other systems or software that
the Partnership is using at the present time.
The General Partners of the Partnership are in
the process of evaluating the potential
adverse impact that could result from the
failure of material third-party service
providers (including but not limited to its
banks and telecommunications providers) and
significant vendors to be Year 2000 ready. No
estimate can be made at this time as to the
impact of the readiness of such third parties.
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, 1998
and 1997.
Net income increased for the three and nine
months ended September 30, 1998 as compared to
the same periods in 1997, as rental revenue
increased and expenses decreased.
In comparing the three and nine months ended
September 30, 1998 to the same periods in
1997, the increases in rental revenue are
attributable to residential rental rate
increases implemented at Park Place and
Century. Interest income decreased as average
cash and cash equivalent balances decreased
between the periods.
Total expenses decreased when comparing the
three months ended September 30, 1998 to the
three months ended September 30, 1997,
primarily due to decreases in operating,
maintenance and interest expenses, partially
offset by an increase in real estate tax
expense. The decrease in operating expense is
mainly the result of decreases in utilities
and insurance expenses. Lower gas
expenditures are attributable to a more energy
efficient system at Park Place. The decrease
in insurance expense is due to a reduction in
contingent insurance premiums at the
Partnership's properties, due to a favorable
claim history. Maintenance expense decreased
primarily due to payment of an insurance
deductible in the third quarter of 1997 for
flood damage at Park Place. Interest expense
decreased as a result of the refinancing of
Century's mortgage note in December, 1997.
Park Place was assessed at a higher value at
the end of 1997, resulting in an increase in
real estate tax expense.
For the reasons discussed above, total
expenses decreased when comparing the nine
months ended September 30, 1998 to the nine
months ended September 30, 1997. In addition,
general and administrative expense also
decreased during these periods as a result of
legal costs incurred in 1997 which related to
the unsolicited tender offers to purchase
Partnership Units.
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 Tower 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 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, in the
consolidated financial statements as of
September 30, 1998. 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: December 22, 1998
<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,
1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,361,109
<SECURITIES> 0
<RECEIVABLES> 1,066,663<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,092,379
<PP&E> 73,960,270<F2>
<DEPRECIATION> (44,402,722)<F3>
<TOTAL-ASSETS> 35,077,699
<CURRENT-LIABILITIES> 3,741,475
<BONDS> 41,981,006<F4>
0
0
<COMMON> (10,644,782)<F5>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,077,699
<SALES> 0
<TOTAL-REVENUES> 11,277,451<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,010,820<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,254,400
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,012,231<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 $73,394,898 and deferred expenses of $565,372.
<F3>Accumulated depreciation of $44,328,488 and accumulated amortization of
deferred expenses of $74,234.
<F4>Represents mortgage notes payable.
<F5>Represents total deficit of the General Partners and Limited Partners of
($410,472) and ($10,234,310), respectively.
<F6>Includes all revenue of the Partnership.
<F7>Includes operating expenses of $3,530,021, real estate taxes of $1,002,109
to the Limited Partners. Average net income per Unit of Limited Partners
interest is $26.74 on 35,200 Units outstanding.
<F8>Net income allocated $10,122 to the General Partners and $1,002,109 to the
Limited Partners. Average net income per Unit of Limited Partners interest
is $26.74 on 35,200 Units outstanding.
</FN>
</TABLE>
