UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-11985
Krupp Realty Limited Partnership-V
(Exact name of registrant as specified in its charter)
Massachusetts 04-2796207
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 523-7722
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Investor
Limited Partner
Interest
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable.
Documents incorporated by reference: Part IV, Item 14.
The exhibit index is located on pages 12-14.
The total number of pages in this document is 33.
PART I
This Form 10-K 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.
ITEM 1. BUSINESS
Krupp Realty Limited Partnership-V ("KRLP-V") was formed on June 16, 1983
by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. The Krupp Corporation (a Massachusetts corporation) and The Krupp
Company Limited Partnership-II (a Massachusetts limited partnership) are the
General Partners of KRLP-V. KRLP-V issued all of the Original Limited Partner
Interests to The Krupp Company Limited Partnership-II. On September 6, 1983,
KRLP-V, pursuant to a sales agent agreement, commenced the marketing and sale of
units of Investor Limited Partner Interest ("Units") for $1,000 per Unit, 35,200
of which were sold. For further details, see Note A to Consolidated Financial
Statements included in Item 8 (Appendix A) of this report.
KRLP-V considers itself to be engaged only in the industry segment of
investment in real estate. KRLP-V invested the net proceeds from the offering in
leveraged real estate. KRLP-V originally invested in four multi-family apartment
complexes (Century II, Marine Terrace, Fieldcrest Apartments and Park Place
Tower Apartments) and a joint venture in Lakeview Tower Apartments (the "Joint
Venture") with Krupp Realty Limited Partnership-IV, an affiliated limited
partnership. The aggregate purchase price of the properties was approximately
$67 million and KRLP-V originally funded approximately $2.3 million to the Joint
Venture.
On March 20, 1989, the General Partners formed Krupp Realty Park
Place-Chicago Limited Partnership ("Realty-V") as a prerequisite for the
refinancing of Park Place Tower Apartments ("Park Place"). At the same time, the
General Partners transferred ownership of Park Place to Realty-V. The General
Partner of Realty-V is The Krupp Corporation ("Krupp Corp."). The Limited
Partner of Realty-V is KRLP-V. Krupp Corp. has beneficially assigned its
interest in Realty-V to KRLP- V. KRLP-V and Realty-V are collectively known as
Krupp Realty Limited Partnership-V and Subsidiary (collectively referred to
herein as the "Partnership").
The Partnership sold two of its apartment complexes, Fieldcrest Apartments
and Marine Terrace, in 1992 and 1995, respectively. The Partnership also
received a distribution of proceeds from the sale of the Joint Venture in 1992.
The Partnership's real estate investments are subject to some seasonal
fluctuations resulting from changes in utility consumption and seasonal
maintenance expenditures. However, the future performance of the Partnership
will depend upon factors which cannot be predicted. Such factors include general
economic and real estate market conditions, both on a national basis and in
those areas where the Partnership's real estate investments are located, real
estate tax rates, operating expenses, energy costs, government regulations and
federal and state income tax laws. The requirements for compliance with federal,
state and local regulations to date have not had an adverse effect on the
Partnership's operations, and no adverse effect therefrom is anticipated in the
future.
The Partnership's investments in real estate are also subject to such risks
as (I) competition from existing and future projects held by other owners in the
locations of the Partnership's properties, (ii) fluctuations in rental income
due to changes in occupancy levels, (iii) possible adverse changes in mortgage
interest rates, (iv) possible adverse changes in general economic and local
conditions, such as competitive over-building, increases in unemployment, or
adverse changes in real estate zoning laws, (v) the possible future adoption of
rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
As of December 31, 1999, the Partnership did not employ any personnel.
Recent Development
On January 21, 2000, KR5 Acquisition, L.L.C. ("KR5"), KRF Company, L.L.C.,
and The Krupp Family Limited Partnership - 94, affiliates of the General
Partner, filed a Transaction Statement on Schedule 13E-3 with the Securities and
Exchange Commission (the "SEC") with respect to KR5's proposal to merge KRLP-V
with and into KR5. Under the terms of the proposed merger, each unitholder of
KRLP-V other than certain unitholders that have agreed to reinvest their units
in KR5 will receive $1,200 in cash for each outstanding investor limited
partnership interest owned by it. KR5 was formed for the purpose of merging with
KRLP-V. The General Partners of the Partnership have filed definitive proxy
materials with the SEC with respect to the proposed merger, which is subject to
certain conditions, including approval by unitholders of the merger and related
amendments to KRLP-V's partnership agreement. On March 24, 2000, the proxy
statement was mailed to the unitholders of KRLP-V. KRLP-V estimates that the
merger will be completed, if approved by unitholders, in the second quarter of
2000.
On December 23, 1999, ERP Operating Partnership, an Illinois limited
partnership ("ERP"), made a third-party tender offer to acquire all of the
outstanding units at a price of $1,100 per unit. ERP's offer terminated on
January 21, 2000.
ITEM 2. PROPERTIES
As of December 31, 1999, the Partnership had leveraged investments in two
apartment complexes having an aggregate of 1,369 units. One of the complexes has
an additional 18,417 square feet of leasable commercial space.
A summary of the Partnership's real estate investments is presented below.
Schedule III included in Item 8 (Appendix A) of this report contains additional
detailed information with respect to individual properties.
Average Occupancy
Total Units/ For the Year Ended
Current December 31,
Year of Leasable ------------------------
Description Acquisition Square Footage 1999 1998 1997 1996 1995
- ----------- ----------- -------------- ---- ---- ---- ---- ----
Century II Apts.
Cockeysville, Maryland 1984 468 Units 96% 100% 100% 96% 92%
Park Place Tower Apts. 901 Units 97% 99% 99% 96% 94%
Chicago, Illinois 1984 18,417 Sq. Ft. 61% 64% 64% 76% 83%
ITEM 3. LEGAL PROCEEDINGS
The Partnership was a defendant in a class action suit relating to the alleged
unlawful practice of giving discounts for the early or timely payments of rent
at Park Place Tower Apartments and Marine Terrace Apartments. In November 1999,
the Court granted approval of the settlement agreement that was presented by
both Plaintiff and Defense counsel. Upon payment of the settlement amount, the
case was dismissed in December of 1999. The total cost of the settlement,
including
legal fees related to the settlement, was approximately $646,535 of which
$139,610 is included in accrued expenses and other liabilities on the balance
sheet. All other costs of the lawsuit have been paid as of December 31, 1999.
The Partnership recognized $328,630 in other income and $733,000 in expenses
which is included in general and administrative expenses, during 1999 and 1998,
respectively.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of Investor Limited Partners as of December 31, 1999 was
approximately 1,750.
One of the objectives of the Partnership is to generate cash available for
distribution. The General Partners discontinued distributions during 1990 due to
insufficient operating cash flow. However, during 1993, the Partnership
distributed $27,888 which was equivalent to the required withholding tax for the
state of Maryland which arose from the sale of Fieldcrest Apartments. This
amount was paid to the state of Maryland for the benefit of all Partners.
In 1995, the General Partners determined that there was sufficient Cash Flow,
as calculated under section 8.2 (a) of the Partnership Agreement ("Cash Flow"),
and working capital reserves to reinstate distributions. These semiannual
distributions, which commenced in the first quarter of 1996, were paid at an
annual rate of $20.00 per Unit. The General Partners believed there was
sufficient Cash Flow and working capital reserves to increase the annual
distribution rate in 1997 to the current rate of $40.00 per Unit.
The Partnership made the following distributions to its Partners during the
years ended December 31, 1999 and 1998:
Year Ended December 31,
--------------------------------------------
1999 1998
-------------------- ---------------------
Amount Per Unit Amount Per Unit
---------- -------- ---------- --------
Limited Partners:
Investor Limited Partners
(35,200 Units
outstanding) $1,408,000 $ 40.00 $1,408,000 $ 40.00
Original Limited Partner 90,839 90,839
General Partners 15,139 15,140
---------- ----------
$1,513,978 $1,513,979
========== ==========
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding the
Partnership's consolidated financial position and operating results. This
information should be used in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Supplementary Data, which are included in Items 7 and 8
of this report, respectively.
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Total revenue $16,260,401 $15,100,395 $14,523,598 $13,660,261 $13,839,760
Income (loss) before
gain from capital
transactions 2,678,794 692,911 (304,383) (119,075) (795,377)
Gain on sale of
property - - - - 3,265,789
Income (loss) before
extraordinary loss 2,678,794 692,911 (304,383) (119,075) 2,470,412
Extraordinary loss - - (288,156) - (93,215)
Net income (loss) 2,678,794 692,911 (592,539) (119,075) 2,377,197
Net income (loss)
allocated to:
Investor Limited
Partners 2,491,278 644,407 (586,614) (117,884) 2,353,425
Per Unit 70.77 18.31 (16.67) (3.35) 66.86
Original Limited
Partner 160,728 41,575 - - -
General Partners 26,788 6,929 (5,925) (1,191) 23,772
Total assets at
December 31, 34,340,161 34,721,709 35,457,032 37,162,269 38,555,732
Long-term obligations
at December 31, 40,589,661 41,235,548 41,848,811 41,700,453 42,273,669
Distributions:
Investor Limited
Partners 1,408,000 1,408,000 1,408,000 704,000 -
Per Unit 40.00 40.00 40.00 20.00 -
Original
Limited Partner 90,839 90,839 90,839 45,419 -
General Partners 15,139 15,140 15,140 7,570 -
The Selected Financial Data results for the periods presented are not comparable
due to the sale of Marine Terrace on July 19, 1995.
The per Unit distributions for the years ended December 31, 1999, 1998, 1997,
1996 and 1995 were $40.00, $40.00, $40.00, $20.00 and $0, respectively, none of
which represented a return of capital.
Prior performance of the Partnership is not necessarily indicative of future
operations.
ITEM 7. 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. In 1995, the General Partners
determined that there was sufficient Cash Flow and working capital reserves to
reinstate distributions. These semiannual distributions commenced in the first
quarter of 1996 at an annual rate of $20.00 per Unit. Beginning with the
distribution paid in February 1997, the annual distribution rate was increased
from $20.00 per Unit, to the current rate of $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 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 Partnership's properties, Century and Park Place, have spent
approximately $2,097,000 in 1999 and are expected to spend approximately
$1,590,000 for capital improvements in 2000 in order to remain competitive in
their respective markets. These improvements include boiler replacement, facade
repairs and new membrane as well as interior improvements at the Partnership's
properties. Future capital expenditures may increase above 1999 levels when
replacement of aging systems at the Partnerships properties become necessary.
The Partnership expects to fund these improvements from established reserves and
cash generated from property operations.
Financial Accounting Standards Board Statement No.137. ("FAS 137")
"Accounting for Derivative Instruments and Hedging Activities-deferral of the
Effective Date of the Statement of Financial Accounting Standards No.133." FAS
137 amended FAS 133 by deferring the effective date to fiscal quarters of all
fiscal years beginning after June 15, 2000. The General Partners believe that
the implementation of FAS 137 will not have a material impact on the
Partnership's financial statement.
Operations
The following discussion relates to the operations of the Partnership and
its properties (Park Place Tower and Century II Apartments) for the years ended
December 31, 1999, 1998 and 1997.
Year 2000
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 necessary steps to understand the nature and extent of the work
required to make its systems Year 2000 ready. They have evaluated Year 2000
compliance issues with respect to its non-financial systems and have received
assurances from third-party service providers (including but not limited to its
telecommunications providers and banks) with regard to their Year 2000
readiness.
The General Partners completed the testing and conversion of the
Partnership's 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 General
Partners 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 significant
internal systems or software that the Partnership is using at the present time.
To date, the Partnership has not incurred, and does not expect to incur,
any significant cost associated with being Year 2000 compliant.
To date, the Partnership has not had, and does not expect to have, any Year
2000 related problems.
1999 compared to 1998
Net income increased in 1999 as compared to 1998, as rental revenue
increased and expenses decreased.
In comparing 1999 to 1998, the increase in rental revenue is
attributable to residential rental rate increases implemented at Park Place
and Century.
Total expenses decreased when comparing 1999 to 1998, primarily due to
decreases in general and administrative, real estate taxes, depreciation
and interest expenses, partially offset by an increase in operating and
maintenance expenses. The decrease in general and administrative expense is
due to significant litigation costs recorded in 1998 that are not present
in 1999. Real estate taxes decreased in 1999 due to an abatement, of
approximately $245,000, and refund of prior years taxes received by Park
Place. Depreciation expense decreased as fixed asset additions purchased in
previous years at Park Place became fully depreciated. Operating expense
increased in 1999 resulting from increases in payroll expense and an
increase in liability and workmen's compensation expense over 1998 due to a
favorable adjustment in 1998 as a result of favorable claims experience.
Property management fees and maintenance fees increased in conjunction with
the increase in rental revenue.
1998 compared to 1997
Net income increased in 1998 as compared to 1997, as rental revenue
increased and expenses decreased.
In comparing 1998 to 1997, the increase in rental revenue is
attributable to residential rental rate increases implemented at Park Place
and Century.
Total expenses decreased when comparing 1998 to 1997, primarily due to
decreases in operating, maintenance, real estate taxes and interest
expenses, partially offset by an increase in general and administrative and
depreciation expenses. The decrease in operating expense is mainly a 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 liability and
workers compensation expense at the Partnership's properties, due to lower
claims experience. Maintenance expense decreased primarily due to payment
of an insurance deductible in 1997 for flood damage at Park Place. Real
estate taxes decreased due to actual 1997 tax bills for Park Place lower
than estimated. Interest expense decreased as a result of the refinancing
of Century's mortgage note in December, 1997. The increase in general and
administrative expense is due to an increase in legal expense related to
the litigation discussed in Note F to Consolidated Financial Statements
included in Item 8 (Appendix A) of this report. Depreciation expense
increased in conjunction with capital improvement expenditures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to
the directors and executive officers of The Krupp Corporation, which is a
General Partner of KRLP-V and The Krupp Company Limited Partnership-II, the
other General Partner of KRLP-V, is as follows:
Position with
Name and Age The Krupp Corporation
------------ ---------------------
Douglas Krupp (53) President and Co-Chairman of the Board
George Krupp (55) Co-Chairman of the Board
Wayne H. Zarozny (41) Treasurer
Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive
Officer of The Berkshire Group, an integrated real estate financial services
firm engaged in real estate acquisitions, property management, mortgage banking,
investment sponsorship, venture capital investing and financial management. Mr.
Krupp has held the position of Co-Chairman since The Berkshire Group was
established as The Krupp Companies in 1969 and he has served as the Chief
Executive Officer since 1992. Mr. Krupp serves as a member of the Board of
Trustees at Brigham & Women's Hospital. He is a graduate of Bryant College where
he received an honorary Doctor of Science in Business Administration in 1989 and
was elected trustee in 1990.
George Krupp is the Co-Founder and Co-Chairman of The Berkshire Group, an
integrated real estate financial services firm engaged in real estate
acquisitions, property management, mortgage banking, investment sponsorship,
venture capital investing and financial management. Mr. Krupp has held the
position of Co-Chairman since The Berkshire Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High School in Waltham, Massachusetts since September of 1997. Mr. Krupp
attended the University of Pennsylvania and Harvard University and holds a
Master's Degree in History from Brown University.
Wayne H. Zarozny is Vice President of the Berkshire Group. Mr. Zarozny has
held several positions within The Berkshire Group since joining the company in
1986 and is currently responsible for asset management, accounting, financial
reporting and treasury activities. Prior to joining The Berkshire Group, he was
an audit supervisor for Panell Kerr Forster International and on the audit staff
of Deloitte, Haskins and Sells, in Boston. He received a B.S. degree from Bryant
College, a Master's degree in Business Administration from Clark University and
is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1999, beneficial owners of record owning more than 5% of the
Partnership's 35,200 outstanding Units were as follows:
Title Name and Address Amount and Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
- ------- ------------------------ -------------------- --------
Investor Equity Resource Fund XIX
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(2) 11.3%
Investor Equity Resource Fund XXI
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(3) 11.3%
Investor Equity Resource General Fund
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(4) 11.3%
Investor Equity Resource Cambridge Fund
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(5) 11.3%
Investor Equity Resource Bridge Fund
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(6) 11.3%
Investor Equity Resource Boston Fund
Limited Limited Partnership
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(7) 11.3%
Investor Equity Resources Group,
Limited Incorporated
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(8) 11.3%
Investor Eggert Dagbjartsson
Limited
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(9) 11.3%
Investor Mark S. Thompson
Limited
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(10) 11.3%
Investor James E. Brooks
Limited
Partner 14 Story Street
Units Cambridge, MA 02138 3,985.5 Units(1)(11) 11.3%
Investor KRF Company, L.L.C.
Limited
Partner One Beacon Street, Suite 1500
Units Boston, MA 02108 3,985.5 Units(1)(12) 11.3%
Investor KR5 Company, L.L.C.
Limited
Partner One Beacon Street, Suite 1500
Units Boston, MA 02108 3,985.5 Units(1)(13) 11.3%
<FN>
(1)According to the statement on Schedule 13D originally filed on December 12,
1996 by Equity Resources Group, Incorporated ("Equity Resources"), Equity
Resources Fund XVII Limited Partnership, Equity Resources Fund XIX Limited
Partnership, Equity Resource Fund XXI Limited Partnership, Equity Resource
General Fund Limited partnership, Equity Resource Cambridge Fund Limited
Partnership, Equity Resource Bridge Fund Limited Partnership, Equity Resource
Boston Fund Limited Partnership (collectively, "Equity"), James E. Brooks, Mark
S. Thompson, and Eggert Dagbjartsson, as amended by Amendment No. 1 thereto
dated April 14, 1997, Amendment No. 2 thereto, dated May 31, 1999 and Amendment
No. 3 thereto dated December 2, 1999 (as amended, the "Equity/Krupp Schedule
13D"), each of Equity Resources, Equity, Mark S. Thompson, Eggert Dagbjartsson,
KRF Company, L.L.C. ("KRF"), KR5 Acquisition, L.L.C. ("KR5"), The Krupp Family
Limited Partnership - 94 ("Krupp-94"), Douglas Krupp and George Krupp (Messrs.
Krupp, together with KRF, KR5 and Krupp-94, the "KRF Affiliates") may be deemed
to constitute a "group" within the meaning of Section 13(d)(3) of the Exchange
Act by virtue of the execution of an Investment Agreement, dated as of December
2, 1999, by and among Equity, KRF and KR5 (the "Investment Agreement") and a
Voting Agreement dated as of December 2, 1999 by and among Equity, KRF and KR5
(the "Voting Agreement"). According to the Equity/Krupp Schedule 13D, Equity,
KRF and KR5 entered into the Investment Agreement and the Voting Agreement for
the purpose of facilitating a merger proposal (the "Proposal") made by KR5 to
acquire outstanding units for cash. According to the Equity/Krupp 13D,
completion of the merger is subject to the satisfaction of a number of
conditions, including the approval of the merger agreement and necessary
amendments to the Amended Agreement of Limited Partnership, dated as of July 27,
1983, of the Partnership (the "Amendments") by the Holders of a majority of
Units of the Partnership. According to the Equity/Krupp Schedule 13D, under the
terms of the Voting Agreement, Equity has agreed that at any meeting of the
partners of the Partnership, however called, and in any action by consent of the
limited partners of the Partnership, Equity will vote (or cause to be voted) the
units held of record or beneficially owned by it in favor of the Proposal and
the Amendments. According to the Equity/Krupp Schedule 13D, the Voting Agreement
shall terminate on August 1, 2000 unless extended by agreement of each of the
parties.
(2) According to the Equity/Krupp Schedule 13D, Equity Resource Fund XIX Limited
Partnership has shared voting power over 3,985.5 units of the Partnership solely
with respect to the proposed merger. Also, according to the Equity/Krupp
Schedule 13D, Equity Resource Fund XIX Limited Partnership has sole voting and
dispositive power with respect to 225 units of the Partnership.
(3) According to the Equity/Krupp Schedule 13D, Equity Resource Fund XXI Limited
Partnership has shared voting power over 3,985.5 units of the Partnership solely
with respect to the proposed merger. Also, according to the Equity/Krupp
Schedule 13D, Equity Resource Fund XXI Limited Partnership has sole voting and
dispositive power with respect to 847 units of the Partnership.
(4) According to the Equity/Krupp Schedule 13D, Equity Resource General Fund
Limited Partnership has shared voting power over 3,985.5 units of the
Partnership solely with respect to the proposed merger. Also, according to the
Equity/Krupp Schedule 13D, Equity Resource Fund XXI Limited Partnership has sole
voting and dispositive power with respect to 20 units of the Partnership.
(5) According to the Equity/Krupp Schedule 13D, Equity Resource Cambridge Fund
Limited Partnership has shared voting power over 3,985.5 units of the
Partnership solely with respect to the proposed merger. Also, according to the
Equity/Krupp Schedule 13D, Equity Resource Cambridge Fund Limited Partnership
has sole voting and dispositive power with respect to 175 units of the
Partnership.
(6) According to the Equity/Krupp Schedule 13D, Equity Resource Bridge Fund
Limited Partnership has shared voting power over 3,985.5 units of the
Partnership solely with respect to the proposed merger. Also, according to the
Equity/Krupp Schedule 13D, Equity Resource Cambridge Fund Limited Partnership
has sole voting and dispositive power with respect to 20 units of the
Partnership.
(7) According to the Equity/Krupp Schedule 13D, Equity Resource Boston Fund
Limited Partnership has shared voting power over 3,985.5 units of the
Partnership solely with respect to the proposed merger. Also, according to the
Equity/Krupp Schedule 13D, Equity Resource Boston Fund Limited Partnership has
sole voting and dispositive power with respect to 1,099 units of the
Partnership.
(8) According to the Equity/Krupp Schedule 13D, Equity Resources Group,
Incorporated has shared voting power over 3,985.5 units of the Partnership
solely with respect to the proposed merger. Also, according to the Equity/Krupp
Schedule 13D, Equity Resources Group, Incorporated has sole voting and
dispositive power with respect to 847 units of the Partnership.
(9) According to the Equity/Krupp Schedule 13D, Eggert Dagbjartsson has shared
voting power over 3,985.5 units of the Partnership solely with respect to the
proposed merger. Also, according to the Equity/Krupp Schedule 13D, Eggert
Dagbjartsson has shared voting and dispositive power with respect to 3,138.5
units of the Partnership.
(10) According to the Equity/Krupp Schedule 13D, Mark S. Thompson has shared
voting power over 3,985.5 units of the Partnership solely with respect to the
proposed merger. Also, according to the Equity/Krupp Schedule 13D, Mark S.
Thompson has shared voting and dispositive power with respect to 1,314 units of
the Partnership.
(11) According to the Equity/Krupp Schedule 13D, James E. Brooks has shared
voting power over 3,985.5 units of the Partnership solely with respect to the
proposed merger. Also, according to the Equity/Krupp Schedule 13D, James E.
Brooks has shared voting and dispositive power with respect to 2,671.5 units of
the Partnership.
(12) According to the Equity/Krupp Schedule 13D, KRF has shared voting power
over 3,985.5 units of the Partnership solely with respect to the proposed
merger. Also according to the Equity/Krupp Schedule 13D, KRF has not purchased
and does not hold, directly or indirectly, any units of the Partnership. As
stated in the Equity/Krupp Schedule 13D, KRF may be deemed to have acquired
beneficial ownership of the units reported in the Equity/Krupp Schedule 13D
pursuant to the terms of the Voting Agreement and the Investment Agreement. The
sole member of KRF is Krupp-94, of which Douglas Krupp and George Krupp are the
general partners. In such capacities, theses remaining Krupp Affiliates may also
be deemed to share voting power over 3,985.5 units of the Partnership solely
with respect to the proposed merger.
(13) According to the Equity/Krupp Schedule 13D, KR5 has shared voting power
over 3,985.5 units of the Partnership solely with respect to the proposed
merger. Also, according to the Equity/Krupp Schedule 13D, KR5 has not purchased
and does not hold, directly or indirectly, any units of the Partnership. As
stated in the Equity/Krupp Schedule 13D, KR5 may be deemed to have acquired
beneficial ownership of the units reported in the Equity/Krupp Schedule 13D
pursuant to the terms of the Voting Agreement and the Investment Agreement. The
sole member of KR5 is KRF.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or nominees
for election as director. Please see "Business - Recent Developments" above and
Note E to the Consolidated Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - see Index to Consolidated
Financial Statements and Schedule included under Item 8 (Appendix
A),on page F-2 of this Report.
2. Consolidated Financial Statement Schedule - see Index to
Consolidated Financial Statements and Schedule included under Item
8 (Appendix A), on page F-2 of this Report. All other schedules
are omitted as they are not applicable, not required or the
information is provided in the Consolidated Financial Statements
or the Notes thereto.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable Exhibits required under Item 601
of Regulation S-K.
(4) Instruments defining the rights of security holders including
indentures:
(4.1) Amended Agreement of Limited Partnership dated as
of July 27, 1983 [Exhibit A to Prospectus included
in Registrant's Registration Statement on Form
S-11 (File 2-84645)].*
(4.2) Amended Certificate of Limited Partnership filed
with the Massachusetts Secretary of State on
December 16, 1983 [Exhibit 4.2 to Registrant's
Report on Form 10-K for 1983 (File 2-84645)].*
(10) Material Contracts:
Park Place Apartments
(10.1) Purchase and Sale Agreement dated April 24, 1984
between Douglas Krupp and Sheldon J. Mandell,
Howard J. Mandell, Jerome W. Mandell and Norman
Mandell [Exhibit 1 to Registrant's Report on Form
8-K dated May 4, 1984 (File No. 2-84645)].*
(10.2) Assignment of Beneficial Interest in Land Trust
dated May 1, 1984 by Sheldon J. Mandell, Howard J.
Mandell, Jerome W. Mandell and Norman Mandell to
Krupp Realty Limited Partnership-V. [Exhibit 10.9
to Registrant's Report on Form 10-K for the year
ended November 30, 1984 (File No. 0-11985)].*
(10.3) Addendum to Management Agreement between Krupp
Realty Park Place - Chicago Limited Partnership
and Krupp Asset Management Company, now known as
Berkshire Property Management [Exhibit 2 to
Registrant's Report on Form 8-K dated April 27,
1989 (File No. 0-11985)].*
(10.4) Agreement of Limited Partnership of Krupp Realty
Park Place - Chicago Limited Partnership dated
March 15, 1989 [Exhibit 5 to Registrant's Report
on Form 8-K dated April 27, 1989 (File No.
0-11985)].*
(10.5) Assignment of General Partners interests in Krupp
Realty Park Place - Chicago Limited Partnership by
The Krupp Corporation to Krupp Realty Limited
Partnership-V dated
March 15, 1989 [Exhibit 6 to Registrant's Report
on Form 8-K dated April 27, 1989 (File No.
0-11985)].*
(10.6) Written Consent of Directors of The Krupp
Corporation dated April 18, 1989 assigning
beneficial interest in Park Place Apartments to
Krupp Realty Park Place - Chicago Limited
Partnership [Exhibit 7 to Registrant's Report on
Form 8-K dated April 27, 1989 (File No.
0-11985)].*
(10.7) Property Management Agreement, dated May 4, 1984
between Krupp Realty Limited Partnership-V, as
Owner, and BRI OP Limited Partnership, formerly
known as Berkshire Property Management, a
subsidiary of Berkshire Realty Company, Inc.
[Exhibit 10.18 to Registrant's Report on Form 10-K
for the year ended November 30, 1984 (File No.
0-11985)].*
(10.8) Loan Modification/Cancellation Agreement dated
September 14, 1993 between South Chicago Bank, as
Trustee, and Krupp Realty Park Place - Chicago
Limited Partnership (File No. 0-11985).*
(10.9) Modification to mortgage note dated September 14,
1993 between South Chicago Bank, as Trustee, and
Government National Mortgage Association (File No.
0-11985).*
(10.10) Modification of mortgage dated September 14, 1993
between South Chicago Bank, as Trustee, and
Government National Mortgage Association (File No.
0-11985).*
(10.11) Regulatory Agreement for Multifamily Housing
Projects dated September 14, 1993, between South
Chicago Bank, as Trustee, and Krupp Realty Park
Place - Chicago Limited Partnership (File No.
0-11985).*
Century II Apartments
(10.12) Agreement of Sale, dated September 18, 1984
between the Partners of Century III Associates and
Douglas Krupp and related exhibits including
Mortgage Notes and Related Mortgages [Exhibit 1 to
Registrant's Report on Form 8-K dated October 11,
1984 (File No. 0-11985)].*
(10.13) Assignment of Partnership Interest in Century III
Associates dated October 10, 1984 by the Partners
of Century III Associates to The Krupp Company
Limited Partnership-II, The Krupp Corporation and
Krupp Realty Limited Partnership-V [Exhibit 2 to
Registrant's Report on Form 8-K dated October 11,
1984 (File No. 0-11985)].*
(10.14) Fifth, Sixth and Seventh Amended and Restated
Limited Partnership Agreement of Century III
Associates Limited Partnership [Exhibit 3 to
Registrant's Report on Form 8-K dated October 11,
1984 (File No. 0-11985)].*
(10.15) Assignment of Beneficial Interest in Century III
Associates from The Krupp Company Limited
Partnership-II and The Krupp Corporation to Krupp
Realty Limited Partnership-V. [Exhibit 10.32 to
Registrant's Report on Form 10-K for the year
ended November 30, 1984 (File No. 0-11985)].*
(10.16) Property Management Agreement, dated October 11,
1984 between Krupp Realty Limited Partnership-V,
as Owner, and BRI OP Limited Partnership, formerly
known as Berkshire Property Management, an
affiliate of Berkshire Realty
Company, Inc. [Exhibit 10.33 to Registrant's
Report on Form 10-K for the year ended November
30, 1984 (File No. 0-11985)].*
(10.17) Third Amended and Restated Promissory Note dated
April 27, 1989 between Century III Associates
Limited Partnership and Bankers United Life
Assurance Company. [Exhibit 8 to Registrant's
Report on Form 8-K dated April 27, 1989 (File No.
0-11985)].*
(10.18) Third Amended and Restated Deed of Trust dated
April 27, 1989 between Century III Associates
Limited Partnership and Bankers United Life
Assurance Company. [Exhibit 9 to Registrant's
Report on Form 8-K dated April 27, 1989 (File No.
0-11985)].*
(10.19) Multifamily Note dated December 10, 1997 between
Century III Associates Limited Partnership and
Reilly Mortgage Group, Inc.*
(10.20) Multifamily Deed of Trust, Assignment of Rents,
and Security Agreement dated December 8, 1997
between Century III Associates Limited Partnership
and Trust Company of Chicago and Reilly Mortgage
Group, Inc.*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the fiscal year ended December 31, 1999, the
Partnership did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 30th day of
March, 2000.
KRUPP REALTY LIMITED PARTNERSHIP-V
By: The Krupp Corporation, a General Partner
By: /s/ Douglas Krupp
Douglas Krupp, President, Co-Chairman
(Principal Executive Officer)
and Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 30th day of March, 2000.
Signatures Titles
- ---------- ------
/s/ Douglas Krupp President, Co-Chairman (Principal Executive
Douglas Krupp Officer) and Director of The Krupp
Corporation, a General Partner.
/s/ George Krupp Co-Chairman (Principal Executive Officer) and
George Krupp Director of The Krupp Corporation, a General
Partner.
/s/ Wayne H. Zarozny Treasurer (Principal Financial and Accounting
Wayne H. Zarozny Officer) of The Krupp Corporation, a General
Partner.
APPENDIX A
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1999
F-1
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1999 and
December 31, 1998 F-4
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Changes in Partners' Deficit
for the years ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8 - F-16
Schedule III - Real Estate and Accumulated Depreciation F-17 - F-18
All other schedules are omitted as they are not applicable, not required, or the
information is provided in the consolidated financial statements or the notes
thereto.
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-V and Subsidiary:
In our opinion, the consolidated financial statements and the financial
statement schedule listed in the index on page F-2 present fairly, in all
material respects, the financial position of Krupp Realty Limited Partnership-V
and Subsidiary (the "Partnership") at December 31, 1999 and December 31, 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial statement schedule are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
February 25, 2000
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
------------ ------------
Multi-family apartment complexes, net of
accumulated depreciation of $48,927,222
and $45,292,687, respectively (Note D) $ 27,052,599 $ 28,589,655
Cash and cash equivalents (Note C) 3,794,272 2,101,415
Cash restricted for tenant security deposits 322,812 311,432
Replacement reserve escrows (Note D) 810,576 664,186
Prepaid expenses and other assets (Note E) 1,911,807 2,572,492
Deferred expenses, net of accumulated
amortization of $117,277 and $82,843,
respectively (Note E) 448,095 482,529
------------ ------------
Total assets $ 34,340,161 $ 34,721,709
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note D) $ 41,232,174 $ 41,836,237
Accrued real estate taxes 1,885,853 2,008,500
Accrued expenses and other liabilities 1,021,420 1,841,074
------------ ------------
Total liabilities 44,139,447 45,685,811
------------ ------------
Partners' deficit (Note G):
Investor Limited Partners
(35,200 Units outstanding) (9,047,098) (10,130,376)
Original Limited Partner (350,172) (420,061)
General Partners (402,016) (413,665)
------------ ------------
Total Partners' deficit ( 9,799,286) (10,964,102)
------------ ------------
Total liabilities and Partners' deficit $ 34,340,161 $ 34,721,709
============ ============
The accompanying notes are an integral
part of the consolidated financial statements.
F-4
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
----------- ----------- -----------
Revenue:
Rental (Note H) $15,729,054 $14,987,931 $14,395,306
Interest income 202,717 112,464 128,292
Other income 328,630 - -
----------- ----------- -----------
Total revenue 16,260,401 15,100,395 14,523,598
----------- ----------- -----------
Expenses:
Operating (Note E) 3,485,521 3,205,429 3,629,513
Maintenance 977,390 961,085 1,136,671
General and administrative
(Notes E and F) 222,415 891,841 324,660
Real estate taxes (Note I) 1,700,398 2,117,434 2,280,910
Management fees (Note E) 567,764 506,198 475,569
Depreciation and amortization 3,668,969 3,724,717 3,600,639
Interest (Note D) 2,959,150 3,000,780 3,380,019
----------- ----------- -----------
Total expenses 13,581,607 14,407,484 14,827,981
----------- ----------- -----------
Income (loss) before
extraordinary loss 2,678,794 692,911 (304,383)
Extraordinary loss (Note D) - - (288,156)
----------- ----------- -----------
Net income (loss) (Note J) $ 2,678,794 $ 692,911 $ (592,539)
=========== =========== ===========
Allocation of net income (loss)(Note G):
Investor Limited Partners
(35,200 Units outstanding):
Income (loss) before
extraordinary loss $ 2,491,278 $ 644,407 $ (301,339)
Extraordinary loss - - (285,275)
----------- ----------- -----------
Net income (loss) $ 2,491,278 $ 644,407 $ (586,614)
=========== =========== ===========
Investor Limited Partners Per Unit:
Income (loss) before
extraordinary loss $ 70.77 $ 18.31 $ (8.56)
Extraordinary loss - - (8.11)
----------- ----------- -----------
Net income (loss) $ 70.77 $ 18.31 $ (16.67)
=========== =========== ===========
Original Limited Partner:
Income (loss) before
extraordinary loss $ 160,728 $ 41,575 $ -
Extraordinary loss - - -
----------- ----------- -----------
Net income (loss) $ 160,728 $ 41,575 $ -
=========== =========== ===========
General Partners:
Income (loss) before
extraordinary loss $ 26,788 $ 6,929 $ (3,044)
Extraordinary loss - - (2,881)
----------- ----------- -----------
Net income (loss) $ 26,788 $ 6,929 $ (5,925)
=========== =========== ===========
The accompanying notes are an integral
part of the consolidated financial statements.
F-5
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1999, 1998 and 1997
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
------------- ---------- ---------- ------------
Balance at
December 31, 1996 $ (7,372,169) $(279,958) $(384,389) $(8,036,516)
Distributions (1,408,000) (90,839) (15,140) (1,513,979)
Early extinguishment
of debt (285,275) - (2,881) (288,156)
Loss before
extraordinary loss (301,339) - (3,044) (304,383)
------------ --------- --------- -----------
Balance at
December 31, 1997 (9,366,783) (370,797) (405,454) (10,143,034)
Net Income 644,407 41,575 6,929 692,911
Distributions (1,408,000) (90,839) (15,140) (1,513,979)
------------ --------- --------- -----------
Balance at
December 31, 1998 (10,130,376) (420,061) (413,665) (10,964,102)
Net income (Note G) 2,491,278 160,728 26,788 2,678,794
Distributions (Note G) (1,408,000) (90,839) (15,139) (1,513,978)
------------ --------- --------- -----------
Balance at
December 31, 1999 $ (9,047,098) $(350,172) $(402,016) $ (9,799,286)
============ ========= ========= ============
The per Unit distributions for the years ended December 31, 1999, 1998 and 1997
were $40.00, $40.00 and $40.00, respectively, none of which represents a return
of capital for tax purposes.
The accompanying notes are an integral
part of the consolidated financial statements.
F-6
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $ 2,678,794 $ 692,911 $ (592,539)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Interest earned on replacement
reserve escrows (6,068) (14,933) (17,068)
Depreciation and amortization 3,668,969 3,724,717 3,600,639
Extraordinary loss from early
extinguishment of debt - - 288,156
Changes in assets and liabilities:
Decrease (increase) in cash
restricted for tenant
security deposits (11,380) (16,860) 13,336
Decrease (increase) in prepaid
expenses and other assets 660,685 89,646 (1,284,748)
Increase (decrease) in accrued
real estate taxes (122,647) 58,500 290,000
Increase (decrease) in accrued
expenses and other liabilities (887,983) 591,492 7,037
Decrease in due to affiliates - - (26,480)
----------- ----------- -----------
Net cash provided by
operating activities 5,980,370 5,125,473 2,278,333
----------- ----------- -----------
Cash flow from investing activities:
Deposits to replacement reserve
escrows (306,512) (306,512) (212,912)
Withdrawals from replacement
reserve escrows 166,190 57,030 519,865
Additions to fixed assets (2,097,479) (1,489,791) (1,728,096)
Increase in accrued expenses and
other liabilities related to
fixed asset additions 68,329 495 -
----------- ----------- -----------
Net cash used in investing
activities (2,169,472) (1,738,778) (1,421,143)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from mortgage note payable - - 11,000,000
Repayment of mortgage notes payable - - (10,309,332)
Payment of prepayment premium - - (210,825)
Principal payments on mortgage
notes payable (604,063) (564,742) (559,944)
Increase in deferred expenses - (9,285) (227,478)
Distributions (1,513,978) (1,513,979) (1,513,979)
----------- ----------- -----------
Net cash used in
financing activities (2,118,041) (2,088,006) (1,821,558)
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents 1,692,857 1,298,689 (964,368)
Cash and cash equivalents,
beginning of year 2,101,415 802,726 1,767,094
----------- ----------- -----------
Cash and cash equivalents,
end of year $ 3,794,272 $ 2,101,415 $ 802,726
=========== =========== ===========
The accompanying notes are an integral
part of the consolidated financial statements.
F-7
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization
Krupp Realty Limited Partnership-V ("KRLP-V") was formed on June 16, 1983
by filing a Certificate of Limited Partnership in The Commonwealth of
Massachusetts. KRLP-V terminates on December 31, 2020, unless earlier
terminated upon the sale of the last of KRLP-V's properties or the
occurrence of certain other events as set forth in the Partnership
Agreement.
KRLP-V issued all of the General Partner Interests to The Krupp Corporation
("Krupp Corp.") (a Massachusetts corporation) and The Krupp Company Limited
Partnership-II ("KCLP-II") (a Massachusetts limited partnership), in
exchange for capital contributions aggregating $1,000. Except under certain
limited circumstances upon termination of KRLP-V, the General Partners are
not required to make any additional capital contributions. KRLP-V also
issued all of the Original Limited Partner Interests to KCLP-II in exchange
for a capital contribution of $4,000.
On September 6, 1983, KRLP-V commenced the marketing and sale of units of
Investor Limited Partner Interest ("Units") for $1,000 per Unit. The public
offering was closed on December 2, 1983 at which time a total of 35,200
Units had been sold for $35,200,000.
On March 20, 1989, the General Partners formed Krupp Realty Park Place-
Chicago Limited Partnership ("Realty-V") as a prerequisite for the
refinancing of Park Place Tower Apartments ("Park Place"). At the same
time, the General Partners transferred ownership of Park Place to Realty-V.
The General Partner of Realty-V is Krupp Corp. The Limited Partner of
Realty-V is KRLP-V. Krupp Corp. has beneficially assigned its interest in
Realty-V to KRLP-V. KRLP-V and Realty-V are collectively known as Krupp
Realty Limited Partnership-V and Subsidiary (collectively referred to
herein as the "Partnership").
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those used
for federal income tax purposes (see Note J).
Basis of Presentation
The consolidated financial statements present the consolidated assets,
liabilities and operations of the Partnership. All intercompany
balances and transactions have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market
funds with commercial banks. The Partnership has not experienced any
losses to date on its invested cash.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, contingent assets and liabilities and revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Continued
F-8
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies, Continued
Cash and Cash Equivalents
The Partnership includes all short-term investments with maturities of
three months or less from the date of acquisition in cash and cash
equivalents. The cash investments are recorded at cost, which
approximates current market values.
Rental Revenues
Leases require the payment of base rent monthly in advance. Rental
revenues are recorded on the accrual basis.
Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives of the related assets as follows:
Buildings and improvements 5 to 25 years
Appliances, carpeting and equipment 3 to 8 years
Impairment of Long-Lived Assets
Real estate assets and equipment are stated at depreciated cost.
Pursuant to Statement of Financial Accounting Standards Opinion No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", impairment losses are recorded on
long-lived assets used in operations on a property by property basis,
when events and circumstances indicate that the assets might be
impaired and the estimated undiscounted cash flows to be generated by
those assets are less than the carrying amount of those assets. Upon
determination that an impairment has occurred, those assets shall be
reduced to fair value.
Deferred Expenses
Costs of obtaining and recording mortgages on the properties are
amortized over the term of the related mortgage notes using the
straight-line method which approximates the effective interest method.
Income Taxes
The Partnership is not liable for federal or state income taxes as
Partnership income or loss is allocated to the Partners for income tax
purposes. In the event that the Partnership's tax returns are examined
by the Internal Revenue Service or state taxing authority and the
examination results in a change in the Partnership's taxable income or
loss, such change will be reported to the Partners.
Continued
F-9
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Significant Accounting Policies, Continued
Descriptive Information About Reportable Segments
The Partnership operates and develops apartment communities which
generate rental and other income through the leasing of apartment
units. The General Partners separately evaluate the performance of each
of the Partnership's apartment communities. However, because each of
the apartment communities have similar economic characteristics,
facilities, services and tenants, the apartment communities have been
aggregated into a single dominant apartment communities segment.
All revenues are from external customers and no revenues are generated
from transactions with other segments. There are no tenants which
contributed 10% or more of the Partnership's total revenue during 1999,
1998 or 1997.
C. Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
December 31,
-----------------------------
1999 1998
----------- -----------
Cash and money market accounts $ 2,049,580 $ 405,431
Treasury bills 1,744,692 1,695,984
----------- -----------
$ 3,794,272 $ 2,101,415
=========== ===========
D. Mortgage Notes Payable
The properties owned by the Partnership are pledged as collateral for the
non-recourse mortgage notes outstanding at December 31, 1999 and 1998.
Mortgage notes payable consisted of the following:
Principal Annual
------------------------ Interest
Property 1999 1998 Rate Maturity Date
---------------- ----------- ----------- ------------ -------------
Century II
Apartments $10,757,374 $10,882,768 6.75% January 1, 2008
Park Place
Tower Apartments 30,474,800 30,953,469 6.75% May 1, 2024
----------- -----------
Total $41,232,174 $41,836,237
=========== ===========
Continued
F-10
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
D. Mortgage Notes Payable, Continued
Century II Apartments
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, are reported in the
Statement of Operations as an extraordinary loss from early
extinguishment of debt for the year ended December 31, 1997.
Based on the borrowing rates currently available to the Partnership for
bank loans with similar terms and average maturities, the fair value of
long term debt is approximately $9,900,000 and $10,898,000 at December
31, 1999 and 1998, respectively.
Park Place Tower Apartments
The property is subject to a non-recourse mortgage note in the
original amount of $33,000,000, dated September 15, 1993, held by
the U.S. Department of Housing and Urban Development ("HUD"). The
note is payable in equal monthly installments of principal and
interest of $212,783, based on a 31-year amortization. At maturity,
all unpaid principal (approximately $1,457,000) and any accrued
interest are due. The note may be prepaid subject to a prepayment
premium. In the event prepayment of principal occurs, a prepayment
premium shall be due, based on a declining premium rate of 5% to 0%
of the outstanding principal balance over a period of 5 years. As
stipulated in the Regulatory Agreement with HUD, the Partnership
makes monthly deposits of $17,743 in an established reserve for
replacements to be used for improvements. Under the terms of the
loan, HUD restricts the distribution of funds to Surplus Cash, as
defined by HUD in the Regulatory Agreement.
Based on the borrowing rates currently available to the Partnership
for bank loans with similar terms and average maturities, the fair
value of long-term debt is approximately $27,076,000 and $31,766,000
at December 31, 1999 and 1998, respectively.
Due to restrictions on transfers and prepayment, the Partnership may be
unable to refinance certain mortgage notes payable at such calculated
fair value.
Continued
F-11
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
D. Mortgage Notes Payable, Continued
The aggregate scheduled principal amounts of long-term borrowings due
during the five years ending December 31, 2004 are $642,513, $687,250,
$735,102, $786,286 and $841,029.
During the years ended December 31, 1999, 1998 and 1997, the Partnership
paid $2,805,485, $2,844,807 and $3,221,886 of interest on its mortgage
notes, respectively.
E. 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 during the
years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
-------- -------- --------
Property management fees $567,764 $506,198 $475,569
Expense reimbursements 373,661 307,468 317,432
-------- -------- --------
Charged to operations $941,425 $813,666 $793,001
======== ======== ========
Expense reimbursements due from affiliates of $4,941 and $1,456 were
included in prepaid expenses and other assets for the year ended December
31, 1999 and 1998, respectively.
In addition to the amounts above, refinancing costs of $110,000 were paid
to the General Partners' affiliates during the year ended December 31,
1997.
F. Legal Proceeding
The Partnership was a defendant in a class action suit relating to
the alleged unlawful practice of giving discounts for the early or timely
payments of rent at Park Place Tower Apartments and Marine Terrace Apartments.
In November 1999, the Court granted approval of the settlement agreement that
was presented by both Plaintiff and Defense counsel. Upon payment of the
settlement amount, the case was dismissed in December of 1999. The total cost of
the settlement, including legal fees related to the settlement, was
approximately $646,535 of which $139,610 is included in accrued expenses and
other liabilities on the balance sheet. All other costs of the lawsuit have been
paid as of December 31, 1999. The Partnership recognized $328,630 in other
income and $733,000 in expenses which is included in general and administrative
expenses, during 1999 and 1998, respectively.
Continued
F-12
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G. Partners' Deficit
Under the terms of the Partnership Agreement, losses from operations are
allocated 99% to the Investor Limited Partners and 1% to the General
Partners and profits from operations are allocated 93% to the Investor
Limited Partners, 6% to the Original Limited Partner and 1% to the General
Partners until such time that the Investor Limited Partners have received a
return of their total invested capital plus a 9% per annum cumulative
return thereon and thereafter, 65% to the Investor Limited Partners, 28% to
the Original Limited Partner and 7% to the General Partners.
Profits from Capital Transactions are allocated first, to the Investor
Limited Partners until they have received a return of their total invested
capital. Thereafter, profits from Capital Transactions are allocated in
accordance with the Partnership Agreement. Losses from Capital Transactions
are allocated 99% to the Investor Limited Partners and 1% to the General
Partners. Notwithstanding anything above, the General Partners shall be
allocated at least 1% of all profits and losses from Capital Transactions.
Under the Partnership Agreement, cash distributions are made on the same
basis as the allocations of profits described above. Pursuant to the
Partnership Agreement, proceeds from Capital Transactions shall first be
applied to the payment of all debts and liabilities of the Partnership and
second to fund reserves for contingent liabilities. The remaining net cash
proceeds shall then be distributed in accordance with the Partnership
Agreement.
Continued
F-13
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
G. Partners' Deficit, Continued
As of December 31, 1999, the following cumulative partner contributions and
allocations have been made since inception of the Partnership:
Investor Original
Limited Limited General
Partners Partner Partners Total
------------ --------- --------- ------------
Capital contributions $ 35,200,000 $ 4,000 $ 1,000 $ 35,205,000
Syndication costs (4,501,000) - - (4,501,000)
Distributions (9,027,303) (569,415) (94,901) (9,691,619)
Net income (loss)
before capital
transactions (37,393,759) 215,243 (375,539) (37,554,055)
Net gains on capital
transactions 6,674,964 - 67,424 6,742,388
------------ --------- --------- ------------
Balance at
December 31, 1999 $( 9,047,098) $(350,172) $(402,016) $( 9,799,286)
============ ========= ========= ============
H. Future Base Rents Due Under Commercial Operating Leases
Future base rent receivable under commercial operating leases for the years
2000 through 2004 and thereafter is as follows:
2000 $149,276
2001 149,960
2002 149,960
2003 106,238
2004 106,238
Thereafter 90,000
I. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating property
using the Accelerated Cost Recovery System ("ACRS") and the Modified
Accelerated Cost Recovery System ("MACRS") depending on which is
applicable.
Continued
F-14
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
I. Federal Income Taxes, Continued
The reconciliation of the net income (loss) reported in the accompanying
Consolidated Statement of Operations with the net income (loss) reported in
the Partnership's federal income tax return for the years ended December
31, 1999, 1998 and 1997 is as follows:
1999 1998 1997
----------- ---------- ----------
Net income (loss) per Consolidated
Statement of Operations $ 2,678,794 $ 692,911 $ (592,539)
Difference between book and tax
depreciation and
amortization 357,133 414,641 317,863
Difference between book and tax
legal adjustment (860,562) 733,000 113,526
----------- ---------- ----------
Net income (loss) for federal
income tax purposes $ 2,175,365 $1,840,552 $ (161,150)
=========== ========== ==========
The allocation of the net income for federal income tax purposes for 1999
is as follows:
Portfolio Passive
Income Income Total
---------- ---------- -----------
Investor Limited Partners $ 185,800 $1,837,289 $ 2,023,089
Original Limited Partner 11,987 118,535 130,522
General Partners 1,998 19,756 21,754
---------- ---------- -----------
$ 199,785 $1,975,580 $ 2,175,365
========== ========== ===========
During the years ended December 31, 1999, 1998 and 1997 the per Unit net
income (loss) to the Investor Limited Partners for federal income tax
purposes were $57.47, $48.63 and $(4.58), respectively.
The basis of the Partnership's assets for financial reporting purposes
exceeded its tax basis by approximately $7,293,000 and $7,651,000 at
December 31, 1999 and 1998, respectively. The basis of the Partnership's
liabilities for financial reporting purposes exceeded its tax basis by
approximately $154,000 and $1,015,000 at December 31, 1999 and 1998,
respectively.
Continued
F-15
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
J. Subsequent Events
On January 21, 2000, KR5 Acquisition, L.L.C. ("KR5"), KRF Company, L.L.C.,
and The Krupp Family Limited Partnership - 94, affiliates of the General
Partner, filed a Transaction Statement on Schedule 13E-3 with the
Securities and Exchange Commission (the "SEC") with respect to KR5's
proposal to merge KRLP-V with and into KR5. Under the terms of the proposed
merger, each unitholder of KRLP-V other than certain unitholders that have
agreed to reinvest their units in KR5 will receive $1,200 in cash for each
outstanding investor limited partnership interest owned by it. KR5 was
formed for the purpose of merging with KRLP-V. The General Partners of the
Partnership have filed definitive proxy materials with the SEC with respect
to the proposed merger, which is subject to certain conditions, including
approval by unitholders of the merger and related amendments to KRLP-V's
partnership agreement. KRLP-V estimates that the merger, if approved by
unitholders, will be completed in the second quarter of 2000.
F-16
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
Costs
Capitalized
Subsequent to
Initial Cost to Partnership Acquisition
-------------------------- ------------
Buildings & Buildings & Depreciable
Description Encumbrances Land Improvements Improvements Life
- ----------- ------------ ---------- ------------ ----------- ------------
Century II
Apartments
Cockeysville,
Maryland $ 10,757,374 $1,049,868 $ 13,948,246 $ 6,085,913 3 to 25 Yrs.
Park Place Tower
Apartments
Chicago, Illinois 30,474,800 2,877,561 38,230,448 13,787,785 3 to 25 Yrs.
------------ ---------- ------------ -----------
Total $ 41,232,174 $3,927,429 $ 52,178,694 $19,873,698
============ ========== ============ ===========
Gross Amounts Carried at
End of Year
-----------------------------
Buildings Year
and Accumulated Construction Year
Description Land Improvements Total Depreciation Completed Acquired
- -------------- -------- ------------ -------- ------------ ------------ --------
Century II
Apartments
Cockeysville,
Maryland $1,049,868 $ 20,034,159 $21,084,027 $ 14,033,906 1971 1984
Park Place
Tower
Apartments
Chicago,
Illinois 2,877,561 52,018,233 54,895,794 34,893,316 1973 1984
---------- ------------ ----------- ------------
Total $3,927,429 $ 72,052,392 $75,979,821 $ 48,927,222
========== ============ =========== ============
Continued
F-17
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
December 31, 1999
Reconciliation of Real Estate and Accumulated Depreciation for each of the three
years in the period ended December 31, 1999:
1999 1998 1997
----------- ----------- -----------
Real Estate
Balance at beginning of
year $73,882,342 $72,392,551 $70,664,455
Acquisitions and
improvements 2,097,479 1,489,791 1,728,096
----------- ----------- -----------
Balance at end of year $75,979,821 $73,882,342 $72,392,551
=========== =========== ===========
1999 1998 1997
----------- ----------- -----------
Accumulated Depreciation
Balance at beginning of
year $45,292,687 $41,602,481 $38,066,263
Depreciation expense 3,634,535 3,690,206 3,536,218
----------- ----------- -----------
Balance at end of year $48,927,222 $45,292,687 $41,602,481
=========== =========== ===========
Note: The Partnership uses the cost basis for property valuation for
both income tax and financial statement purposes. The aggregate
cost of the Partnership's real estate for federal income tax
purposes was $75,991,870 and the aggregate accumulated
depreciation for federal income tax purposes was $56,225,023, at
December 31, 1999.
F-18