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 June 30, 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 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 June 30, December 31, 1996 1995 Multi-family apartment complexes, net of accumulated depreciation of $36,339,535 and $34,745,814, respectively $32,475,436 $33,505,527 Cash and cash equivalents 2,267,736 2,022,328 Cash restricted for tenant security deposits 418,208 438,249 Cash restricted for capital improvements 644,556 729,508 Prepaid expenses and other assets 1,406,376 1,370,882 Deferred expenses, net of accumulated amortization of $435,529 and $401,925, respectively 455,634 489,238 Total assets $37,667,946 $38,555,732 LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable $42,540,740 $42,800,954 Accounts payable 5,050 37,435 Accrued real estate taxes 1,675,344 1,660,000 Accrued expenses and other liabilities 1,180,500 1,183,468 Due to affiliates (Note 4) - 34,327 Total liabilities 45,401,634 45,716,184 Commitments and contingencies (Note 2) Partners' deficit (Note 3): Investor Limited Partners (35,200 Units outstanding) (7,095,080) (6,550,285) Original Limited Partner (257,249) (234,539) General Partners (381,359) (375,628) Total Partners' deficit (7,733,688) (7,160,452) Total liabilities and Partners' deficit $37,667,946 $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 For the Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 Revenue: Rental $3,391,375 $3,652,061 $6,636,185 $7,233,226 Interest income 40,553 35,064 80,380 55,404 Total revenue 3,431,928 3,687,125 6,716,565 7,288,630 Expenses: Operating (Note 4) 926,581 926,613 1,907,196 1,900,138 Maintenance 257,370 280,240 393,391 433,666 General and administrative (Note 4) 11,374 37,392 47,036 60,514 Real estate taxes 483,811 591,012 967,634 1,182,278 Management fees (Note 4) 124,749 138,975 242,695 259,132 Depreciation and amortization 823,510 875,884 1,627,325 1,732,629 Interest 861,676 978,437 1,726,030 1,959,857 Total expenses 3,489,071 3,828,553 6,911,307 7,528,214 Net loss $ (57,143) $ (141,428) $ (194,742) $ (239,584) Allocation of net loss (Note 3): Investor Limited Partners (35,200 Units outstanding) $ (56,572) $ (140,014) $ (192,795) $ (237,188) Per Unit of Investor Limited Partner Interest $ (1.61) $ (3.98) $ (5.48) $ (6.74) Original Limited Partner $ - $ - $ - $ - General Partners $ (571) $ (1,414) $ (1,947) $ (2,396) 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 Six Months Ended June 30, 1996 1995 Operating activities: Net loss $ (194,742) $ (239,584) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,627,325 1,732,629 Decrease in cash restricted for tenant security deposits 20,041 2,129 Decrease (increase) in prepaid expenses and other assets (35,494) 76,038 Decrease in accounts payable (35,409) (112,317) Increase in accrued real estate taxes 15,344 103,135 Increase (decrease) in accrued expenses and other liabilities (2,968) 2,001 Decrease in due to affiliates (34,327) (205,333) Net cash provided by operating activities 1,359,770 1,358,698 Investing activities: Additions to fixed assets (563,630) (595,518) Decrease in cash restricted for capital improvements 84,952 237,484 Increase in accounts payable related to fixed asset additions 3,024 80,056 Net cash used in investing activities (475,654) (277,978) Financing activities: Principal payments on mortgage notes payable (260,214) (288,460) Distribution (378,494) - Net cash used in financing activities (638,708) (288,460) Net increase in cash and cash equivalents 245,408 792,260 Cash and cash equivalents, beginning of period 2,022,328 598,443 Cash and cash equivalents, end of period $2,267,736 $1,390,703 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 June 30, 1996, its results of operations for the three and six months ended June 30, 1996 and 1995 and its cash flows for the six months ended June 30, 1996 and 1995. Certain prior year balances have been reclassified to conform with current period financial statement presentation. The results of operations for the three and six months ended June 30, 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 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. 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 plus reasonable attorneys' fees. To be eligible for 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 filed an appeal with the Appellate Court of Illinois, First District, which reversed the trial court in July, 1996, remanding the case to the lower court for trial. 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 six months ended June 30, 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 (192,795) - (1,947) (194,742) Distribution (352,000) (22,710) (3,784) (378,494) Balance at June 30, 1996 $(7,095,080) $(257,249) $(381,359) $(7,733,688) (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 For the Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 Property management fees $124,749 $138,975 $242,695 $259,132 Expense reimbursements 64,696 74,670 139,293 112,058 Charged to operations $189,445 $213,645 $381,988 $371,190 Due to affiliates consists of the following: June 30, December 31, 1996 1995 Property management fees $ - $ 15,774 Expense reimbursements - 18,553 $ - $ 34,327 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, 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 II and Park Place, are anticipated to spend approximately $2,272,000 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 six months ended June 30, 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 $ (185,000) Items not requiring or (requiring) the use of operating funds: Tax basis depreciation and amortization 1,617,000 Principal payments on mortgage notes payable (260,000) Expenditures for capital improvements (564,000) Additions to working capital reserves (230,000) Cash Flow $ 378,000 KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY Operations The following discussion relates to the operations of the Partnership and its properties (Park Place and Century II Apartments) for the three and six months ended June 30, 1996 and 1995. The sale of Marine Terrace in July, 1995, significantly impacts the comparability of the Partnership's operations between the three and six month periods. Cash flow, before additions to working capital reserves and after giving affect to the sale of Marine Terrace Apartments, has increased for the six months ended June 30, 1996 as compared to the same period in 1995 due to increased capital improvements at Park Place in 1995. Net loss decreased for the three and six months ended June 30, 1996 as compared to the same period in 1995, as an increase in total revenue more than offset the increase in total expenses. Strong occupancy at Park Place along with steady market conditions in Chicago have favorably impacted the Partnership's revenue throughout the first half of 1996. This, along with a rise in rental rates at Park Place during the second half of 1995 resulted in an increase in total revenue for the three and six months ended June 30, 1996 as compared to the same period in 1995. 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 for the three and six months ended June 30, 1996 as compared to the same period in 1995, after giving affect to the sale of Marine Terrace Apartments, have remained relatively stable with the exception of operating, maintenance, and real estate tax expenses. The increase in operating expense in comparing the two periods is attributable to increased utility usage due to adverse weather conditions in the first quarter of 1996 as well as increases in occupancy at Park Place and Century, causing higher gas consumption. Additionally, operating expense increased as a result of prior years' insurance refunds received in the second quarter of 1995, along with a rise in expenses incurred in connection with the operation of the Partnership and its properties, including computer, accounting, travel, insurance, legal and payroll costs. Catwalk repairs were completed at Century during the second quarter of 1995 resulting in a decrease in maintenance expense for the Partnership in 1996. Real estate taxes decreased for the three and six months ended June 30, 1996 as compared to the same period in 1995 as a result of refunds on Park Place's prior years' real estate tax bill received in the first and second quarters 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 Standard 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 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 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 filed an appeal with the Appellate Court of Illinois, First District, which reversed the trial court in July, 1996, remanding the case to the lower court for trial. 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: July , 1996