UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
Multi-family apartment complexes, net of
accumulated depreciation of $35,532,827
and $34,745,814, respectively $32,939,732 $33,505,527
Cash and cash equivalents 1,923,068 2,022,328
Cash restricted for tenant security deposits 434,353 438,249
Cash restricted for capital improvements 784,247 729,508
Prepaid expenses and other assets 936,612 1,370,882
Deferred expenses, net of accumulated
amortization of $418,727 and $401,925,
respectively 472,436 489,238
Total assets $37,490,448 $38,555,732
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable $42,672,105 $42,800,954
Accounts payable 32,849 37,435
Accrued real estate taxes 1,260,344 1,660,000
Accrued expenses and other liabilities 1,178,729 1,183,468
Due to affiliates (Note 4) 22,966 34,327
Total liabilities 45,166,993 45,716,184
Commitments and contingencies (Note 2)
Partners' deficit (Note 3):
Investor Limited Partners
(35,200 Units outstanding) (7,038,508) (6,550,285)
Original Limited Partner (257,249) (234,539)
General Partners (380,788) (375,628)
Total Partners' deficit (7,676,545) (7,160,452)
Total liabilities and Partners' deficit $37,490,448 $38,555,732
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1996 1995
Revenue:
Rental $3,244,810 $3,581,165
Interest income 39,827 20,340
Total revenue 3,284,637 3,601,505
Expenses:
Operating (Note 4) 980,615 973,525
Maintenance 136,021 153,426
General and administrative (Note 4) 35,662 23,122
Real estate taxes 483,823 591,266
Management fees (Note 4) 117,946 120,157
Depreciation and amortization 803,815 856,745
Interest 864,354 981,420
Total expenses 3,422,236 3,699,661
Net loss $ (137,599) $ (98,156)
Allocation of net loss (Note 3):
Investor Limited Partners
(35,200 Units outstanding) $ (136,223) $ (97,174)
Per Unit of Investor Limited Partner
Interest $ (3.87) $ (2.76)
Original Limited Partner $ - $ -
General Partners $ (1,376) $ (982)
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1996 1995
Operating activities:
Net loss $ (137,599) $ (98,156)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 803,815 856,745
Decrease in cash restricted for tenant
security deposits 3,896 88
Decrease in prepaid expenses and other assets 434,270 507,154
Decrease in accrued real estate taxes (399,656) (406,115)
Decrease in accounts payable (25,941) (102,662)
Decrease in accrued expenses and other
liabilities (4,739) (20,317)
Decrease in due to affiliates (11,361) (35,419)
Net cash provided by operating
activities 662,685 701,318
Investing activities:
Additions to fixed assets (221,218) (123,541)
Decrease (increase) in cash restricted for
capital improvements (54,739) 231,944
Increase (decrease) in accounts payable related
to fixed asset additions 21,355 (55,489)
Net cash provided by (used in)
investing activities (254,602) 52,914
Financing activities:
Principal payments on mortgage notes payable (128,849) (142,759)
Distributions (378,494) -
Net cash used in financing activities (507,343) (142,759)
Net increase (decrease) in cash and cash
equivalents (99,260) 611,473
Cash and cash equivalents, beginning of period 2,022,328 598,443
Cash and cash equivalents, end of period $1,923,068 $1,209,916
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this report on
Form 10-Q pursuant to the Rules and Regulations of the Securities and
Exchange Commission. In the opinion of the General Partners of Krupp
Realty Limited Partnership-V and Subsidiary (the "Partnership") the
disclosures contained in this report are adequate to make the
information presented not misleading. See Notes to Consolidated
Financial Statements included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1995 for additional
information relevant to significant accounting policies followed by
the Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of only recurring accruals) necessary to
present fairly the Partnership's consolidated financial position as of
March 31, 1996, and its results of operations and cash flows for the
three months ended March 31, 1996 and 1995. Certain prior period
balances have been reclassified to conform with current period
consolidated financial statement presentation.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results which may be expected
for the full year. See Management's Discussion and Analysis of
Financial Condition and Results of Operations included in this report.
(2) Legal Proceedings
The Partnership is a defendant in a class action suit related to the
practice of giving discounts for the early or timely payments of rent
at Park Place. 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 day of the month. The ordinance in
question limited late fee charges to $10 per month if the rent was
more than 5 days late. 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 plus reasonable
attorneys' fees. To be eligible for such punitive damages Plaintiffs
must prove that the Defendant deliberately used a provision prohibited
by the ordinance.
During 1994, the Court ruled in favor of the Defendant, and accepted
the Partnership's Motion to Dismiss the Plaintiff's Third Amended
Complaint. The Plaintiffs have filed an appeal with the Appellate
Court of Illinois, First District, which is pending. Although
management believes that the Defendant will prevail on the issue of
statutory damages, the ultimate outcome of this litigation, including
an estimate of any potential loss, cannot be presently determined and
accordingly no provision for loss has been made in the accompanying
consolidated financial statements.
(3) Changes in Partners' Deficit
A summary of changes in Partners' deficit for the three months ended
March 31, 1996 is as follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
December 31, 1995 $(6,550,285) $(234,539) $(375,628) $(7,160,452)
Net loss (136,223) - (1,376) (137,599)
Distributions (352,000) (22,710) (3,784) (378,494)
Balance at
March 31, 1996 $(7,038,508) $(257,249) $(380,788) $(7,676,545)
(4) Related Party Transactions
Commencing with the date of acquisition of the Partnership's
properties, the Partnership entered into agreements under which
property management fees are paid to an affiliate of the General
Partners for services as management agent. Such agreements provide
for management fees payable monthly at a rate of 5% of the gross
receipts from the properties under management. The Partnership also
reimburses affiliates of the General Partners for certain expenses
incurred in connection with the operation of the Partnership and its
properties including accounting, computer, insurance, travel, legal
and payroll; and with the preparation and mailing of reports and other
communications to the Limited Partners.
Amounts accrued or paid to the General Partners or their affiliates
were as follows:
For the Three Months
Ended March 31,
1996 1995
Property management fees $117,946 $120,157
Expense reimbursements 74,597 37,389
Charged to operations $192,543 $157,546
Due to affiliates consists of the following:
March 31, December 31,
1996 1995
Property management fees $ 2,494 $ 15,774
Expense reimbursements 20,472 18,553
$ 22,966 $ 34,327
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, debt service, capital
improvements and 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 semi-annual distributions. These distributions commenced in the
first quarter of 1996 at an annual rate of $20.00 per Unit.
The Partnership's major capital improvement project, the repair of Park
Place's building facade, was completed in the fourth quarter of 1995. The
external improvements, along with extensive interior improvements, were
funded from established reserves and cash generated by the property. The
completion of these improvements has greatly enhanced the appearance of
the property and has resulted in both increased rents and occupancy. The
Partnership's properties, Century and Park Place, are anticipated to spend
approximately $2,280,000 for capital improvements in 1996 to remain
competitive in their respective markets. Again, the Partnership expects
to fund these improvements from established reserves and cash generated
from the properties.
Cash Flow
Shown below, as required by the Partnership Agreement, is the calculation
of Cash Flow of the Partnership for the three months ended March 31, 1996.
The General Partners provide certain of the information below to meet
requirements of the Partnership Agreement and because they believe that it
is an appropriate supplemental measure of operating performance. However,
Cash Flow should not be considered by the reader as a substitute to net
income (loss), as an indicator of the Partnership's operating performance
or to cash flows as a measure of liquidity.
Rounded to $1,000
Net loss for tax purposes $(142,000)
Items not requiring or (requiring)
the use of operating funds:
Tax basis depreciation and amortization 809,000
Principal payments on mortgage notes payable (129,000)
Expenditures for capital improvements (221,000)
Working capital reserves (128,000)
Cash Flow $ 189,000
Operations
The following discussion relates to the operations of the Partnership and
its properties (Park Place and Century II Apartments) for the three months
ended March 31, 1996 and 1995. The sale of Marine Terrace in July, 1995,
significantly impacts the comparability of the Partnership's operations
between the two three-month periods.
Cash Flow, net of working capital reserves and Marine Terrace, has
decreased for the three months ended March 31, 1996 as compared to the
same period in 1995 due to an increase in capital improvements at Park
Place. Net loss also increased within these two periods as the increase in
total expenses more than offset the increase in total revenue. Rental
rates at Park Place increased during the second half of 1995 and rental
rates at Century are anticipated to increase during the second quarter of
1996. These increases in rental rates as well as higher occupancy at Park
Place in 1996 continue to favorably impact rental revenues of the
Partnership. Interest income for the Partnership increased in 1996 due to
a rise in short-term interest rates coupled with an increase in
investments in cash and cash equivalents as a result of the sale of Marine
Terrace in the third quarter of 1995.
Total expenses, net of expenses relating to Marine Terrace, have remained
relatively stable with the exception of operating and real estate tax
expenses. The increase in operating expense is attributable to both
increased leasing and advertising at Park Place and an increase in
utilities due to higher gas consumption at Park Place and Century as a
result of adverse weather conditions in 1996. Real estate taxes decreased
for the three months ended March 31, 1996 as compared to the same period
in 1995 as a result of a refund on Park Place's prior year's real estate
tax bill received in the first quarter of 1996. The increase in
depreciation expense is directly related to the extensive capital
improvement program at Park Place which was completed in the fourth
quarter of 1995.
General
In accordance with Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", which is effective for fiscal years beginning after December
15, 1995, the Partnership has implemented policies and practices for
assessing impairment of its real estate assets.
The Partnership's investments in properties are carried at cost less
accumulated depreciation, unless the General Partners believe there is a
significant impairment in value, in which case a provision to write down
investments in properties to fair value will be charged against income.
At this time, the General Partners do not believe that any assets of the
Partnership are significantly impaired.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is a defendant in a class action suit related to the
practice of giving discounts for the early or timely payments of rent at
Park Place. 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 day of the month. The ordinance in question limited
late fee charges to $10 per month if the rent was more than 5 days late.
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 plus reasonable attorneys' fees. To be eligible for
such punitive damages Plaintiffs must prove that the Defendant
deliberately used a provision prohibited by the ordinance.
During 1994, the Court ruled in favor of the Defendant, and accepted
the Partnership's Motion to Dismiss the Plaintiff's Third Amended
Complaint. The Plaintiffs have filed an appeal with the Appellate Court
of Illinois, First District, which is pending. Although management
believes that the Defendant will prevail on the issue of statutory
damages, the ultimate outcome of this litigation, including an estimate
of any potential loss, cannot be presently determined and accordingly no
provision for loss has been made in the accompanying consolidated
financial statements.
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
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/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer of the Krupp
Corporation, a General Partner.
DATE: May 1, 1996