UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-11985 Krupp Realty Limited Partnership-V Massachusetts 04-2796207 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The total number of pages in this document is 10. PART I. FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS This form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 1997 1996 Multi-family apartment complexes, net of accumulated depreciation of $38,908,883 and $38,066,263, respectively $31,901,793 $32,598,192 Cash and cash equivalents 1,717,780 1,767,094 Cash restricted for tenant security deposits 309,582 307,908 Replacement reserve escrow 684,679 689,656 Prepaid expenses and other assets 977,181 1,377,390 Deferred expenses, net of accumulated amortization of $485,936 and $469,134, respectively 405,227 422,029 Total assets $35,996,242 $37,162,269 LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable $42,131,029 $42,270,255 Accounts payable 22,757 83 Accrued real estate taxes 1,249,042 1,660,000 Accrued expenses and other liabilities 1,204,420 1,241,967 Due to affiliates (Note 4) 69,726 26,480 Total liabilities 44,676,974 45,198,785 Commitments and contingencies (Note 2) Partners' deficit (Note 3): Investor Limited Partners (35,200 Units outstanding) (7,971,290) (7,372,169) Original Limited Partner (318,611) (279,958) General Partners (390,831) (384,389) Total Partners' deficit (8,680,732) (8,036,516) Total liabilities and Partners' deficit $35,996,242 $37,162,269 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, 1997 1996 Revenue: Rental $3,543,185 $3,244,810 Interest income 33,109 39,827 Total revenue 3,576,294 3,284,637 Expenses: Operating (Note 4) 911,309 980,615 Maintenance 149,001 136,021 General and administrative (Note 4) 76,867 35,662 Real estate taxes 487,913 483,823 Management fees (Note 4) 125,518 117,946 Depreciation and amortization 859,422 803,815 Interest 853,491 864,354 Total expenses 3,463,521 3,422,236 Net income (loss) $ 112,773 $ (137,599) Allocation of net income (loss) (Note 3): Investor Limited Partners (35,200 Units outstanding) $ 104,879 $ (136,223) Per Unit of Investor Limited Partner Interest $ 2.98 $ (3.87) Original Limited Partner $ 6,766 $ - General Partners $ 1,128 $ (1,376) 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, 1997 1996 Operating activities: Net income (loss) $ 112,773 $ (137,599) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Interest earned on replacement reserve escrow (6,150) (1,511) Depreciation and amortization 859,422 803,815 Changes in assets and liabilities: Decrease (increase) in cash restricted for tenant security deposits (1,674) 3,896 Decrease in prepaid expenses and other assets 400,209 434,270 Decrease in accrued real estate taxes (410,958) (399,656) Increase (decrease) in accounts payable 6,557 (25,941) Decrease in accrued expenses and other liabilities (37,547) (4,739) Increase (decrease) in due to affiliates 43,246 (11,361) Net cash provided by operating activities 965,878 661,174 Investing activities: Deposits to replacement reserve escrow (53,228) (53,228) Withdrawals from replacement reserve escrow 64,355 - Additions to fixed assets (146,221) (221,218) Increase in accounts payable related to fixed asset additions 16,117 21,355 Net cash used in investing activities (118,977) (253,091) Financing activities: Principal payments on mortgage notes payable (139,226) (128,849) Distributions (756,989) (378,494) Net cash used in financing activities (896,215) (507,343) Net decrease in cash and cash equivalents (49,314) (99,260) Cash and cash equivalents, beginning of period 1,767,094 2,022,328 Cash and cash equivalents, end of period $1,717,780 $1,923,068 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, 1996 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, 1997, and its results of operations and cash flows for the three months ended March 31, 1997 and 1996. Certain prior period balances have been reclassified to conform with current period financial statement presentation. The results of operations for the three months ended March 31, 1997 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 Apartments (Park Place) and Marine Terrace Apartments. The central issue of the complaint was whether the operative lease violated a Chicago municipal ordinance relating to late fee charges because it allowed tenants a discount if rent was paid on or before the first of the month. The allegation was that, notwithstanding the stated rental rate and printed discount, the practice represented an unlawful means of exacting late fee charges. In addition to seeking damages for any "forfeited" discounts, plaintiffs seek statutory damages of two months rent per lease violation and reasonable attorneys' fees. To be eligible for such damages, plaintiffs must prove that the defendants deliberately used a provision prohibited by the ordinance. During 1994, the Court ruled in favor of the defendants and accepted the Partnership's Motion to Dismiss the Plaintiff's Third Amended Complaint. The plaintiffs filed an appeal with the Appellate Court of Illinois, First District. During 1996, the decision was reversed on appeal and the case remanded to trial court for further proceedings. The defendants intend to vigorously defend this case. However, the Partnership has recorded a provision of $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. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (3)Changes in Partners' Deficit A summary of changes in Partners' deficit for the three months ended March 31, 1997 is as follows: Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit Balance at December 31, 1996 $(7,372,169) $(279,958) $(384,389) $(8,036,516) Net income 104,879 6,766 1,128 112,773 Distributions (704,000) (45,419) (7,570) (756,989) Balance at March 31, 1997 $(7,971,290) $(318,611) $(390,831) $(8,680,732) (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. These management agreements were sold to BRI OP Limited Partnership, a publicly traded real estate investment trust and an affiliate of the General Partners, on February 28, 1997. 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, 1997 1996 Property management fees $125,518 $117,946 Expense reimbursements 83,727 74,597 Charged to operations $209,245 $192,543 Due to affiliates consisted of the following: March 31, December 31, 1997 1996 Property management fees $ 67,774 $ - Expense reimbursements 1,952 26,480 $ 69,726 $ 26,480 KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward- looking statements including those concerning Management's expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the operating performance of its real estate investments. Such ability would also be impacted by the future availability of bank borrowing sources as current debt matures. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, capital improvements, debt service and other expenses. Cash Flow, if any, as calculated under Section 8.2(a) of the Partnership Agreement, will then be available for distribution to the Partners. Beginning with the distribution paid in February, 1997, the annual distribution rate was increased from $20.00 per Unit, to $40.00 per Unit, based on sufficient Cash Flow and working capital reserves. The Partnership's properties, Century II Apartments (Century) and Park Place, are anticipated to spend approximately $2,060,000 for capital improvements in 1997 to remain competitive in their respective markets. These improvements include catwalk and pavement upgrades and replacement of fitness equipment at Century, refurbishment of the elevator and interior improvements at Park Place, and new appliances at both properties. 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, 1997. The General Partners provide 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 $ 118,000 Items not requiring or (requiring) the use of operating funds: Tax basis depreciation and amortization 855,000 Principal payments on mortgage notes payable (139,000) Expenditures for capital improvements (146,000) Amounts released from working capital reserves 69,000 Cash Flow $ 757,000 Continued 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) for the three months ended March 31, 1997 and 1996. Cash Flow, before amounts released from working capital reserves, increased for the three months ended March 31, 1997 as compared to the same period in 1996 due to both an increase in the Partnership's net income and a decrease in capital improvements at the Partnership's properties. The increase in net income was primarily due to an increase in rental revenue. Capital improvements decreased for the first quarter of 1997 when compared to the first quarter of 1996 as a result of extensive improvements completed on the model unit at Park Place in 1996. In comparing the three months ended March 31, 1997 to the same period in 1996, the increase in rental revenue is attributable to an increase in occupancy at both Park Place and Century from an average of 96% and 90%, respectively, to an average of 99% for both properties. The Partnership's properties continue to enjoy strong occupancy as capital improvements, including an appliance replacement program at both properties, have enhanced leasing efforts at the properties. Interest income for the Partnership decreased as investments in commercial paper declined as a direct result of the 100% increase in the semiannual distribution paid in February, 1997. Total expenses remained relatively stable when comparing the first three months of 1997 to the first three months of 1996, as the increase in general and administrative and maintenance expenses offset the decrease in operating expense. Increased legal costs relating to the recent unsolicited tender offer to purchase Partnership Units resulted in an increase in general and administrative expense. The increase in maintenance expense was primarily due to additional painting of the interiors of the buildings at Park Place beginning at the end of 1996 and continuing through the first quarter of 1997. A combination of high utility usage in the first three months of 1996, due to adverse weather conditions, and low utility usage in the first quarter of 1997, due to an unusually mild winter in the Chicago area, contributed to a decrease in utility expense at Park Place and thus a decrease in the Partnership's operating expense. Depreciation expense increased in conjunction with the increase in capital improvements. KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY PART II - OTHER INFORMATION Item 1.Legal Proceeding The Partnership is a defendant in a class action suit related to the practice of giving discounts for the early or timely payments of rent at Park Place Apartments (Park Place) and Marine Terrace Apartments. The central issue of the complaint was whether the operative lease violated a Chicago municipal ordinance relating to late fee charges because it allowed tenants a discount if rent was paid on or before the first of the month. The allegation was that, notwithstanding the stated rental rate and printed discount, the practice represented an unlawful means of exacting late fee charges. In addition to seeking damages for any "forfeited" discounts, plaintiffs seek statutory damages of two months rent per lease violation and reasonable attorneys' fees. To be eligible for such damages, plaintiffs must prove that the defendants deliberately used a provision prohibited by the ordinance. During 1994, the Court ruled in favor of the defendants and accepted the Partnership's Motion to Dismiss the Plaintiff's Third Amended Complaint. The plaintiffs filed an appeal with the Appellate Court of Illinois, First District. During 1996, the decision was reversed on appeal and the case remanded to trial court for further proceedings. The defendants intend to vigorously defend this case. However, the Partnership has recorded a provision of $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 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/Wayne H. Zarozny Wayne H. Zarozny Treasurer and Chief Accounting Officer of the Krupp Corporation, a General Partner. DATE: May 14, 1997