UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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, 1996
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
incorporation or organization) Identification No.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 423-2233
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 10-12.
The total number of pages in this document is 29.
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, 1996, there were 41 full and part-time on-site
personnel employed by the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership has 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.
Total Units/ Average Occupancy
Current For the Year Ended
Year of Leasable December 31,
Description Acquisition Square Footage 1996 1995 1994 1993 1992
Century II Apts.
Cockeysville, Maryland 1984 468 Units 96% 92% 92% 91% 93%
Park Place Tower Apts. 901 Units 96% 94% 94% 94% 92%
Chicago, Illinois 1984 18,417 Sq. Ft. 76% 83% 83% 80% 83%
ITEM 3. 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 and Marine Terrace. The central issue of the complaint is
whether the operative lease violated a Chicago municipal ordinance
relating to late fee charges because it allowed tenants a discount if rent
was paid on or before the first of the month. The allegation was that,
notwithstanding the stated rental rate and printed discount, the practice
represented an unlawful means of exacting late fee charges. In addition
to seeking damages for any "forfeited" discounts, plaintiffs seek
statutory damages of two months rent per lease violation and reasonable
attorneys' fees. To be eligible for such damages plaintiffs must prove
that defendants deliberately used a provision prohibited by the ordinance.
During 1994, the Court ruled in favor of the defendants and accepted
the Partnership's Motion to Dismiss the Plaintiff's Third Amended
Complaint. The plaintiffs filed an appeal with the Appellate Court of
Illinois, First District. During 1996, the decision was reversed on
appeal and the case remanded to trial court for further proceedings. The
defendants intend to vigorously defend this case. However, management
believes that it is probable that an unfavorable outcome related to the
discounts allowed and late fees collected will result. Accordingly, the
Partnership has recorded a provision of $168,474, representing its share
of the discounts and late fees, in the 1996 consolidated financial
statements. The ultimate outcome of the potential punitive damages award
related to this litigation, including an estimate of potential loss,
cannot presently be determined.
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, 1996 was
approximately 2,300.
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, are paid at an annual rate of $20.00 per Unit. The General Partners
now believe there to be sufficient Cash Flow and working capital reserves
to increase the annual distribution rate to $40.00 per Unit in 1997.
The Partnership made the following distributions to its Partners during
the years ended December 31, 1996 and 1995:
Year Ended December 31,
1996 1995
Amount Per Unit Amount Per Unit
Limited Partners:
Investor Limited Partners
(35,200 Units
outstanding) $704,000 $20.00 $ - $ -
Original Limited
Partner 45,419 -
General Partners 7,570 -
$756,989 $ -
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.
1996 1995 1994 1993 1992
Total revenue $13,660,261 $13,839,760 $13,652,413 $13,684,206 $14,117,452
Loss before
gain (loss)
from capital
transactions (119,075) (795,377) (1,450,214) (3,921,897) (2,786,658)
Partnership's
share of gain
on sale of
Joint Venture - - - - 3,875,915
Gain (loss) on
sale of
property - 3,265,789 - - (399,316)
Income (loss)
before extra-
ordinary loss (119,075) 2,470,412 (1,450,214) (3,921,897) 689,941
Extraordinary
loss - (93,215) - - -
Net income
(loss) (119,075) 2,377,197 (1,450,214) (3,921,897) 689,941
Net income (loss)
allocated to:
Investor Limited
Partners (117,884) 2,353,425 (1,435,712) (3,882,678) 683,042
Per Unit (3.35) 66.86 (40.79) (110.30) 19.41
Original Limited
Partner - - - - -
General Partners (1,191) 23,772 (14,502) (39,219) 6,899
Total assets at
December 31, 37,162,269 38,555,732 42,604,180 45,011,823 48,787,088
Long-term obligations
at December 31, 41,700,453 42,273,669 46,805,538 47,392,245 47,225,125
Distributions to:
Investor Limited
partners 704,000 - - 25,936 -
Per Unit - Investor
Limited Partners 20.00 - - .74 -
Original
Limited Partner 45,419 - - 1,673 -
General Partners 7,570 - - 279 -
The Selected Financial Data results for the periods presented is not
comparable due to the following events:
(a) Marine Terrace was sold on July 19, 1995.
(b) Lakeview Tower, a property owned in a Joint Venture with an
affiliate, was sold on August 28, 1992.
(c) Fieldcrest Apartments was sold on August 5, 1992.
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. The General
Partners now believe there to be sufficient Cash Flow and working capital
reserves to increase the annual distribution rate to $40.00 per Unit in
1997, beginning with the distribution payable in February, 1997.
On July 19, 1995, the Partnership sold Marine Terrace Apartments, a
187-unit apartment complex located in Chicago, Illinois, for cash proceeds
and other considerations which totaled $6,436,505. Proceeds from the
sale were used to pay closing costs of $44,152, to repay the existing
mortgage note on the property of $4,050,721 and to satisfy other
Partnership liabilities. For financial reporting purposes, the
Partnership realized a gain of $3,265,789 on the sale. The gain was
calculated as the difference between net consideration received, less net
book value of the property.
The Partnership's major capital improvement project, the repair of Park
Place Apartments' ("Park Place") 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
Apartments ("Century") and Park Place, are expected to spend approximately
$2,060,000 for capital improvements in 1997 in order to remain competitive
in their respective markets. These improvements include catwalk and
pavement upgrades at Century, replacement of fitness equipment,
refurbishment of the elevator and interior improvements at Park Place as
well as new appliances at both properties. The Partnership expects to
fund these improvements from established reserves and cash generated from
property operations.
Cash Flow
Shown below, as required by the Partnership Agreement, is the
calculation of Cash Flow of the Partnership for the year ended December
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 income for tax purposes $ 19,000
Items not requiring or (requiring)
the use of operating funds:
Tax basis depreciation and amortization 3,419,000
Principal payments on mortgage notes payable (531,000)
Expenditures for capital improvements (2,413,000)
Accrued legal expenses (168,000)
Amounts released from working capital
reserves 431,000
Cash Flow $ 757,000
Operations
The following discussion relates to the operations of the Partnership
and its properties (Park Place and Century) for the years ended December
31, 1996, 1995 and 1994, or portions thereof. The sale of Marine Terrace
in July, 1995, significantly impacts the comparability of the
Partnership's operations among the three years.
1996 compared to 1995
Cash Flow, before amounts released from working capital reserves and
after giving effect to the sale of Marine Terrace, decreased in 1996 as
compared to 1995, as the increase in expenditures for capital
improvements more than offset the increase in the Partnership's net
income. The Partnership began two significant capital improvement
projects in 1996, which included replacing the catwalk at Century and
expanding the parking garage at Park Place. When completed, these
improvements will further enhance the appearances of the properties and
will help them remain competitive in their respective markets. The
increase in net income is attributed to an increase in rental revenues
which more than offset the increase in total expenses, after giving
effect to the sale of Marine Terrace.
Average residential occupancy at Century and Park Place increased 4%
and 2%, respectively from 1995 to 1996. This, as well as increased
rental rates at both properties, have contributed to the rise in rental
income, excluding Marine Terrace's revenues. Interest income for the
Partnership increased in 1996, primarily from increased average cash
and cash equivalent balances during 1996 which resulted from the sale
of Marine Terrace in the third quarter of 1995.
Total expenses, after giving effect to the sale of Marine Terrace,
increased, as the rise in operating and maintenance expenses more than
offset the decrease in real estate taxes experienced in 1996. The
increase in operating expense is due to prior years' insurance refunds
received in 1995 combined with an increase in advertising and leasing
at both Century and Park Place. These additional advertising and
leasing costs, along with the property enhancements discussed above,
have increased occupancy rates at both properties and allowed
management to maintain these high occupancies throughout 1996.
Maintenance expense increased as flowers were replanted at Park Place
and the interiors of the buildings at both Century and Park Place were
painted in 1996. The decrease in real estate taxes is attributed to
the successful petition for the reassessment of prior years' real
estate taxes on Park Place in 1996. The Partnership received real
estate tax refunds related to the 1986, 1987, 1988 and 1990 tax years
totaling approximately $325,000 in 1996. The refunds are reflected as
reductions in the 1996 real estate tax expense. The increase in
depreciation expense is directly related to the extensive capital
improvement project at Park Place which was completed in 1995.
1995 compared to 1994
Cash Flow was impacted favorably due to decreased expenditures for
capital improvements resulting from the completion of the Park Place
capital improvement project in 1995. The increase in rental revenue is
even more significant after giving effect to the sale of Marine Terrace
and is primarily due to rental rate increases at Park Place and Century
during the second half of 1994. Interest income for the Partnership
increased in 1995 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.
Total expenses of the Partnership for 1995, excluding Marine
Terrace, remained stable as compared to 1994, with the exception of
operating expense and real estate taxes. The decrease in operating
expense is primarily due to management's efforts to reduce reimbursable
operating costs. The increase in real estate taxes is primarily due to
an increase in assessed property value at Park Place which is directly
related to the capital improvement project completed in 1995.
Depreciation expense also increased as a result of the extensive
improvements at Park Place.
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
material 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 material impaired.
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 (50) Co-Chairman of the Board
George Krupp (52) Co-Chairman of the Board
Laurence Gerber (40) President
Robert A. Barrows (39) Treasurer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking,
healthcare facility ownership and the management of the Company. Today,
The Berkshire Group is an integrated real estate, mortgage and healthcare
company which is headquartered in Boston with regional offices throughout
the country. A staff of approximately 3,400 are responsible for the more
than $4 billion under management for institutional and individual clients.
Mr. Krupp is a graduate of Bryant College. In 1989 he received an
honorary Doctor of Science in Business Administration from this
institution and was elected trustee in 1990. Mr. Krupp is Chairman of the
Board and a Director of both Berkshire Realty Company, Inc. (NYSE-BRI) and
Harborside Healthcare (NYSE-HBR). George Krupp is Douglas Krupp's
brother.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an
integrated real estate, mortgage and healthcare company which is
headquartered in Boston with regional offices throughout the country. A
staff of approximately 3,400 are responsible for more than $4 billion
under management for institutional and individual clients. Mr. Krupp
attended the University of Pennsylvania and Harvard University. Mr. Krupp
also serves as Chairman of the Board and Trustee of Krupp Government
Income Trust and as Chairman of the Board and Trustee of Krupp Government
Income Trust II.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as Director of Berkshire Realty
Company, Inc. (NYSE-BRI) and Harborside Healthcare Corporation (NYSE-HBR)
as well as President and Trustee of Krupp Government Income Trust and
President and Trustee of Krupp Government Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of The Berkshire Group. Mr. Barrows has held several positions within The
Berkshire Group since joining the company in 1983 and is currently
responsible for accounting and financial reporting, treasury, tax, payroll
and office administrative activities. Prior to joining The Berkshire
Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in Boston.
He received a B.S. degree from Boston College 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, 1996, beneficial owners of record owning more than
5% of the Partnerships 35,200 outstanding Units are as follows:
Title Name and Address Amount and Nature Percent
of of of of
Class Beneficial Owner Beneficial Ownership Class
Investor Mark S. Thompson 1,929.5 Units 5.48%
Limited c/o Equity Resources
Partner Group, Inc.
Units 14 Story Street
Cambridge, MA 02138
On that date, the General Partners or their affiliates owned 53 Units
(.15% of the total outstanding) of the Partnership in addition to their
General and Original Limited Partner Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or
nominees for election as director. Additionally, as of December 31, 1996
no person of record owned, or was known by the General Partners to own,
beneficially more than 5% of the Partnership's outstanding Units.
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) Management Agreement dated May 4, 1984 between Krupp
Realty Limited Partnership-V, as Owner, and Krupp
Asset Management Company, now known as Berkshire
Property Management [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) Management Agreement dated October 11, 1984 between
Krupp Realty Limited Partnership-V, as Owner, and
Krupp Asset Management Company, now known as
Berkshire Property Management [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 Associated 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)].*
*Incorporated by reference
(c) Reports on Form 8-K
During the last quarter of the fiscal year ended December 31, 1996,
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
28th day of March, 1997.
KRUPP REALTY LIMITED PARTNERSHIP-V
By: The Krupp Corporation, a General Partner
By: /s/Douglas Krupp
Douglas Krupp, 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 28th day of March,
1997.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of The Krupp Corporation, a General
Partner.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a General
Partner.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner.
/s/Robert A. Barrows Treasurer of The Krupp Corporation,
Robert A. Barrows 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, 1996
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, 1996 and
December 31, 1995 F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Changes in Partners' Deficit
for the years ended December 31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 F-7
Notes to Consolidated Financial Statements F-8 - F-14
Schedule III - Real Estate and Accumulated Depreciation F-15 - F-16
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Realty Limited Partnership-V and Subsidiary:
We have audited the consolidated financial statements and the financial
statement schedule of Krupp Realty Limited Partnership-V and Subsidiary
(the "Partnership") listed in the index on page F-2 of this Form 10-K.
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 schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Krupp Realty Limited Partnership-V and Subsidiary as of December 31, 1996
and 1995 and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Boston, Massachusetts
February 25, 1997
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
Multi-family apartment complexes, net of
accumulated depreciation of $38,066,263
and $34,745,814, respectively (Notes C and D) $32,598,192 $33,505,527
Cash and cash equivalents 1,767,094 2,022,328
Cash restricted for tenant security deposits 307,908 438,249
Replacement reserve escrow (Note D) 689,656 729,508
Prepaid expenses and other assets 1,377,390 1,370,882
Deferred expenses, net of accumulated
amortization of $469,134 and $401,925,
respectively (Note E) 422,029 489,238
Total assets $37,162,269 $38,555,732
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Notes C and D) $42,270,255 $42,800,954
Accounts payable 83 37,435
Accrued real estate taxes 1,660,000 1,660,000
Accrued expenses and other liabilities 1,241,967 1,183,468
Due to affiliates (Note E) 26,480 34,327
Total liabilities 45,198,785 45,716,184
Commitments and contingencies (Note F)
Partners' deficit (Note G):
Investor Limited Partners
(35,200 Units outstanding) (7,372,169) (6,550,285)
Original Limited Partner (279,958) (234,539)
General Partners (384,389) (375,628)
Total Partners' deficit (8,036,516) (7,160,452)
Total liabilities and Partners' deficit $37,162,269 $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 Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenue:
Rental (Note H) $13,489,627 $13,695,050 $13,577,822
Interest income 170,634 144,710 74,591
Total revenue 13,660,261 13,839,760 13,652,413
Expenses:
Operating (Note E) 3,635,470 3,732,763 4,103,984
Maintenance 927,736 895,329 941,189
General and administrative
(Notes E and F) 323,652 170,943 141,403
Real estate taxes (Note I) 1,621,545 2,201,309 2,101,222
Management fees (Note E) 442,295 512,462 438,049
Depreciation and amortization 3,387,658 3,405,153 3,421,941
Interest (Note D) 3,440,980 3,717,178 3,954,839
Total expenses 13,779,336 14,635,137 15,102,627
Income (loss) before gain on sale
Of property and extraordinary
loss (119,075) (795,377) (1,450,214)
Gain on sale of property (Note C) - 3,265,789 -
Income (loss) before
extraordinary loss (119,075) 2,470,412 (1,450,214)
Extraordinary loss (Note D) - (93,215) -
Net income (loss) (Note J) $ (119,075) $ 2,377,197 $(1,450,214)
Allocation of net income (loss)(Note G):
Investor Limited Partners
(35,200 Units outstanding) $ (117,884) $ 2,353,425 $(1,435,712)
Per Unit of Investor
Limited Partner Interest:
Income (loss) before gain on
sale of property and
extraordinary loss $ (3.35) $ (22.37) $ (40.79)
Gain on sale of property - 91.85 -
Extraordinary loss - (2.62) -
Net income (loss) $ (3.35) $ 66.86 $ (40.79)
Original Limited Partner:
Income before gain on sale
of property and extra-
ordinary loss $ - $ - $ -
Gain on sale of property - - -
Extraordinary loss - - -
Net income $ - $ - $ -
General Partners:
Loss before gain on sale
of property and extra-
ordinary loss $ (1,191) $ (7,954) $ (14,502)
Gain on sale of property - 32,658 -
Extraordinary loss - (932) -
Net income (loss) $ (1,191) $ 23,772 $ (14,502)
The accompanying notes are an integral
part of the consolidated financial statements.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the Years Ended December 31, 1996, 1995 and 1994
_____________
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
December 31, 1993 $(7,467,998) $(234,539) $(384,898) $(8,087,435)
Net loss (1,435,712) - (14,502) (1,450,214)
Balance at
December 31, 1994 (8,903,710) (234,539) (399,400) (9,537,649)
Gain on sale of
property, net 3,233,131 - 32,658 3,265,789
Early extinguishment
of debt (92,283) - (932) (93,215)
Net loss (787,423) - (7,954) (795,377)
Balance at
December 31, 1995 (6,550,285) (234,539) (375,628) (7,160,452)
Distributions (Note G) (704,000) (45,419) (7,570) (756,989)
Net loss (Note G) (117,884) - (1,191) (119,075)
Balance at
December 31, 1996 $(7,372,169) $(279,958) $(384,389) $(8,036,516)
The per Unit distribution for 1996 is $20.00.
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 Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Operating activities:
Net income (loss) $ (119,075) $ 2,377,197 $(1,450,214)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and amortization 3,387,658 3,405,153 3,421,941
Gain on sale of property - (3,265,789) -
Extraordinary loss from early
extinguishment of debt - 93,215 -
Decrease in cash restricted for
tenant security deposits 130,341 78,078 50,299
Decrease (increase)in prepaid
expenses and other assets (6,508) 197,690 42,165
Decrease in accounts payable (37,352) (143,652) (412,993)
Decrease in accrued real
estate taxes - (235,473) (30,880)
Increase (decrease) in accrued
expenses and other
liabilities 58,499 (36,033) 70,505
Decrease in due to affiliates (7,847) (1,231,933) (119,068)
Net cash provided by
operating activities 3,405,716 1,238,453 1,571,755
Investing activities:
Additions to fixed assets (2,413,114) (1,539,727) (3,016,777)
Decrease in replacement reserve
escrow 39,852 189,539 1,361,295
Net consideration received from
the sale of property - 6,392,353 -
Increase (decrease) in accounts
payable related to fixed
asset additions - (189,020) 77,846
Net cash provided by (used
in) investing activities (2,373,262) 4,853,145 (1,577,636)
Financing activities:
Repayment of mortgage notes
payable - (4,050,721) -
Payment of prepayment premium - (78,179) -
Principal payments on
mortgage notes payable (530,699) (538,813) (542,839)
Increase in deferred expenses - - (12,138)
Distributions (756,989) - -
Net cash used in
financing activities (1,287,688) (4,667,713) (554,977)
Net increase (decrease) in
cash and cash equivalents (255,234) 1,423,885 (560,858)
Cash and cash equivalents,
beginning of year 2,022,328 598,443 1,159,301
Cash and cash equivalents,
end of year $ 1,767,094 $ 2,022,328 $ 598,443
The accompanying notes are an integral
part of the consolidated financial statements.
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.
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 5 years
Impairment of Long-Lived Assets
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 investments in properties are carried at cost less accumulated
depreciation unless the General Partners believe there is a
material 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 materially impaired.
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.
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.
C. Disposition of Real Estate Investment
On July 19, 1995, the Partnership sold Marine Terrace Apartments, a
187-unit apartment complex located in Chicago, Illinois, for cash
proceeds and other considerations which totalled $6,436,505. Proceeds
from the sale were used to pay closing costs of $44,152, to repay the
existing mortgage note on the property of $4,050,721 and to satisfy
other Partnership liabilities. For financial reporting purposes, the
Partnership realized a gain of $3,265,789 on the sale. The gain was
calculated as the difference between net consideration received, less
net book value of the property.
D. Mortgage Notes Payable
The properties owned by the Partnership are pledged as collateral for
the non-recourse mortgage notes outstanding at December 31, 1996 and
1995. Mortgage notes payable consist of the following:
Annual
Principal Interest
Property 1996 1995 Rate Maturity Date
Century II
Apartments $10,450,896 $10,590,450 10.625% May 1, 1999
Park Place
Tower
Apartments 31,819,359 32,210,504 6.75% May 1, 2024
Total $42,270,255 $42,800,954
Century II Apartments
The property is subject to a non-recourse first mortgage note of
$11,000,000, which is payable in equal monthly installments of
principal and interest of $104,844, based on a 25-year amortization
schedule. The note matures on May 1, 1999, at which point all
unpaid principal (approximately $10,077,000) and any accrued
interest is due. The note may be prepaid, in whole, beginning May
1, 1994, subject to a prepayment premium equal to 10% of the
outstanding balance. Beginning June 1, 1994 the prepayment premium
shall equal 10% of the outstanding principal balance, less 0.185%
of the outstanding balance per each calendar month expired after
June 1, 1994. There shall be no prepayment premium for any
prepayment made during the six month period prior to the maturity
date of the note.
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 $11,430,000 and
$12,000,000 for the years ended December 31, 1996 and 1995,
respectively.
Marine Terrace Apartments
In conjunction with the sale of the property on July 19, 1995, the
Partnership prepaid the non-recourse first mortgage note of
$4,050,721. As a result of the retirement of debt, the Partnership
incurred a prepayment premium of $78,179. The prepayment premium,
as well as unamortized deferred mortgage costs of $15,036, are
reported in the Statement of Operations as an extraordinary loss
from early extinguishment of debt for the year ended December 31,
1995.
Park Place Tower Apartments
The property is subject to a non-recourse mortgage note 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 is due. The
note may not be prepaid prior to October 1, 1998. In the event
prepayment of principal occurs any time after this date, 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.
Since the mortgage note cannot be prepaid prior to October 1, 1998,
the fair market value cannot be determined.
The aggregate scheduled principal amounts of long-term borrowings due
during the five years ending December 31, 2001 are $569,802, $615,927,
$10,614,413, $509,135 and $544,585.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership paid $3,280,828, $3,555,694 and $3,792,109 of interest on
its mortgage notes, respectively.
E. 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
during the years ended December 31, 1996, 1995 and 1994 are as
follows:
1996 1995 1994
Property management fees $442,295 $512,462 $438,049
Expense reimbursements 288,226 267,147 435,467
Charged to operations $730,521 $779,609 $873,516
Due to affiliates consists of the following as of December 31, 1996
and 1995:
1996 1995
Expense reimbursements $ 26,480 $ 34,327
F. 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 and Marine Terrace. The central issue of the complaint
is whether the operative lease violated a Chicago municipal ordinance
relating to late fee charges because it allowed tenants a discount if
rent was paid on or before the first of the month. The allegation was
that, notwithstanding the stated rental rate and printed discount, the
practice represented an unlawful means of exacting late fee charges.
In addition to seeking damages for any "forfeited" discounts,
plaintiffs seek statutory damages of two months rent per lease
violation and reasonable attorneys' fees. To be eligible for such
damages plaintiffs must prove that defendants deliberately used a
provision prohibited by the ordinance.
During 1994, the Court ruled in favor of the defendants and accepted
the Partnership's Motion to Dismiss the Plaintiff's Third Amended
Complaint. The plaintiffs filed an appeal with the Appellate Court of
Illinois, First District. During 1996, the decision was reversed on
appeal and the case remanded to trial court for further proceedings.
The defendants intend to vigorously defend this case. However,
management believes that it is probable that an unfavorable outcome
related to the discounts allowed and late fees collected will result.
Accordingly, the Partnership has recorded a provision of $168,474,
representing its share of the discounts and late fees, in the 1996
consolidated financial statements. The ultimate outcome of the
potential punitive damages award related to this litigation, including
an estimate of potential loss, cannot presently be determined.
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 or losses from Capital Transactions
are allocated in accordance with the Partnership Agreement.
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.
As of December 31, 1996 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 (4,803,303) (296,898) (49,482) (5,149,683)
Net gains on capital
transactions 6,674,964 - 67,424 6,742,388
Net income (loss)
before capital
transactions (39,942,830) 12,940 (403,331) (40,333,221)
Balance at
December 31, 1996 $ (7,372,169) $(279,958) $(384,389) $ (8,036,516)
H. Future Base Rents Due Under Commercial Operating Leases
Future base rent receivable under commercial operating leases for the
years 1997 through 2001 is as follows:
1997 $ 120,388
1998 97,216
1999 93,784
2000 79,071
2001 66,885
Thereafter 57,912
I. Real Estate Taxes
During the third quarter of 1996, the Partnership successfully
petitioned for the reassessment of prior years' real estate taxes on
Park Place Apartments. The Partnership received tax refunds toward
the 1986, 1987, 1988 and 1990 real estate taxes totaling approximately
$325,000, which is reflected as a reduction in the 1996 real estate
tax expense.
J. 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.
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, 1996, 1995 and 1994 is as follows:
1996 1995 1994
Net income (loss) per
Consolidated Statement
of Operations $ (119,075) $2,377,197 $(1,450,214)
Difference between book
and taxdepreciation (30,155) 540 5,917
Difference between book
and tax gain on sale
of property - 962,454 -
Difference between book
and tax legal
adjustment 168,474 - -
Net income (loss) for
federal income tax
purposes $ 19,244 $3,340,191 $(1,444,297)
The allocation of the net loss for federal income tax purposes for
1996 is as follows:
Portfolio Passive
Income Loss Total
General Partners $ 1,682 $ (1,489) $ 193
Original Limited Partner - - -
Investor Limited Partners 166,508 (147,457) 19,051
$ 168,190 $ (148,946) $ 19,244
During the years ended December 31, 1996, 1995 and 1994 the per Unit
net income (loss) to the Investor Limited Partners for federal income
tax purposes were $.54, $93.94 and ($40.62), respectively.
The basis of the Partnership's assets for financial reporting purposes
exceeded its tax basis by approximately $8,400,000 and $8,300,000 at
December 31, 1996 and 1995, respectively. The basis of the
Partnership's liabilities for financial reporting purposes exceeded
its tax basis by approximately $168,000 and $0 at December 31, 1996
and 1995, respectively.
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
Costs
Capitalized
Initial Subsequent to
Cost to Partnership Acquisition
Encumb- Buildings & Buildings & Depreciable
Description rances Land Improvements Improvement Life
Century II
Apartments
Cockeysville,
Maryland $10,450,896 $1,049,868 $13,948,246 $ 3,584,743 3 to 25 Yrs.
Park Place
Apartments
Chicago,
Illinois 31,819,359 2,877,561 38,230,448 10,973,589 3 to 25 Yrs.
Total $42,270,255 $3,927,429 $52,178,694 $14,558,332
Gross Amounts Carried at
End of Year
Year
Constr-
Buildings uction Year
and Accumulated Comp- Acq-
Description Land Improvements Total Depreication lete ired
Century II
Apartments
Cockeysville,
Maryland $1,049,868 $17,532,989 $18,582,857 $ 10,701,257 1971 1984
Park Place
Apartments
Chicago,
Illinois 2,877,561 49,204,037 52,081,598 27,365,006 1973 1984
Total $3,927,429 $66,737,026 $70,664,455 $ 38,066,263
Reconciliation of Real Estate and Accumulated Depreciation for each of
the three years in the period ended December 31, 1996:
1996 1995 1994
Real Estate
Balance at
beginning of year $68,251,341 $73,325,592 $70,308,815
Acquisitions and
improvements 2,413,114 1,539,727 3,016,777
Sale of property - (6,613,978) -
Balance at
end of year $70,664,455 $68,251,341 $73,325,592
1996 1995 1994
Accumulated Depreciation
Balance at
beginning of year $34,745,814 $34,905,809 $31,569,120
Depreciation expense 3,320,449 3,327,419 3,336,689
Sale of property - (3,487,414) -
Balance at end of year $38,066,263 $34,745,814 $34,905,809
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 $70,668,276 and the aggregate
accumulated depreciation for federal income tax purposes was
$(46,448,760), at December 31, 1996.