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,
1998
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
11.
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,
1998 1997
Multi-family apartment complexes, net of
accumulated depreciation of $42,479,396
and $41,602,481, respectively $30,063,514$30,790,070
Cash and cash equivalents 987,394 802,726
Cash restricted for tenant security deposits 298,756 294,572
Replacement reserve and repair escrows 479,531 399,771
Prepaid expenses and other assets (Note 5) 2,207,021 2,662,138
Deferred expenses, net of accumulated
amortization of $57,014 and $48,332,
respectively (Note 2) 508,358 507,755
Total assets $34,544,574$35,457,032
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable (Note 2) $42,263,337 $42,400,979
Accrued real estate taxes 1,605,845 1,950,000
Accrued expenses and other liabilities 1,307,313 1,249,087
Total liabilities 45,176,495 45,600,066
Commitments and contingencies (Note 3)
Partners' deficit (Note 4):
Investor Limited Partners
(35,200 Units outstanding) (9,821,448) (9,366,783)
Original Limited Partner (400,130) (370,797)
General Partners (410,343) (405,454)
Total Partners' deficit (10,631,921)(10,143,034)
Total liabilities and Partners' deficit $34,544,574$35,457,032
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,
1998 1997
Revenue:
Rental $3,677,852 $3,543,185
Interest income 26,107 33,109
Total revenue 3,703,959 3,576,294
Expenses:
Operating (Note 5) 929,416 911,309
Maintenance 129,840 149,001
General and administrative (Note 5) 36,817 76,867
Real estate taxes 576,814 487,913
Management fees (Note 5) 123,311 125,518
Depreciation and amortization 885,597 859,422
Interest 754,062 853,491
Total expenses 3,435,857 3,463,521
Net income $ 268,102 $ 112,773
Allocation of net income (Note 4):
Investor Limited Partners
(35,200 Units outstanding) $ 249,335 $ 104,879
Investor Limited Partner Per Unit $ 7.08 $ 2.98
Original Limited Partner $ 16,086 $ 6,766
General Partners $ 2,681 $ 1,128
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,
1998 1997
Operating activities:
Net income $ 268,102 $ 112,773
Adjustments to reconcile net income to net cash
provided by operating activities:
Interest earned on replacement reserve escrow(3,132) (6,150)
Depreciation and amortization 885,597 859,422
Changes in assets and liabilities:
Increase in cash restricted for tenant
security deposits (4,184) (1,674)
Decrease in prepaid expenses and other
assets 455,117 400,209
Decrease in accrued real estate taxes (344,155)(410,958)
Increase (decrease) in accrued expenses
and other liabilities 52,772 (30,990)
Increase in due to affiliates - 43,246
Net cash provided by operating
activities 1,310,117 965,878
Investing activities:
Deposits to replacement reserve escrow (76,628) (53,228)
Withdrawals from replacement reserve escrow -
64,355
Additions to fixed assets (150,359) (146,221)
Increase in accrued expenses and other liabilities
related to fixed asset additions 5,454 16,117
Net cash used in investing activities (221,533) (118,977)
Financing activities:
Principal payments on mortgage notes payable (137,642)(139,226)
Increase in deferred expenses (9,285) -
Distributions (756,989) (756,989)
Net cash used in financing activities (903,916) (896,215)
Net increase (decrease) in cash and cash
equivalents 184,668 (49,314)
Cash and cash equivalents, beginning of period 802,726 1,767,094
Cash and cash equivalents, end of period $ 987,394$1,717,780
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, 1997
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 necessary to present fairly the
Partnership's consolidated financial position
as of March 31, 1998, and its results of
operations and cash flows for the three months
ended March 31, 1998 and 1997.
The results of operations for the three months
ended March 31, 1998 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)Mortgage Note Payable
On December 10, 1997, the Partnership
completed the refinancing of the Century II
Apartments mortgage note. The property was
refinanced with a $11,000,000 non-recourse
mortgage note payable at the rate of 6.75% per
annum with monthly principal and interest
payments of $71,346. The mortgage note, which
is collateralized by the property, matures on
January 1, 2008 at which time the remaining
principal (approximately $9,401,537) and
accrued interest are due. The note may be
prepaid, subject to a prepayment penalty, at
any time with 30 days notice. The Partnership
used the majority of the proceeds from the
refinancing to repay the existing mortgage
note on the property of $10,309,332, pay
closing costs of $236,763, to pay a prepayment
premium of $210,825 and to establish various
escrows. The prepayment premium as well as
unamortized deferred mortgage costs of
$77,331, were reported in the Statement of
Operations as an extraordinary loss from early
extinguishment of debt for the year ended
December 31, 1997.
(3)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 Tower Apartments ("Park
Place") and Marine Terrace Apartments, a
previously owned property. 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.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND
SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Continued
(3)Legal Proceeding, Continued
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 $282,000, representing its share
of the discounts and late fees, plus estimated
legal costs, in the consolidated financial
statements as of March 31, 1998. The ultimate
outcome of the potential punitive damages
award related to this litigation, including an
estimate of potential loss, cannot presently
be determined.
(4)Changes in Partners' Deficit
A summary of changes in Partners' deficit for
the three months ended March 31, 1998 is as
follows:
Investor Original Total
Limited Limited General Partners'
Partners Partner Partners Deficit
Balance at
December 31, 1997 $(9,366,783)$(370,797)$(405,454)$(10,143,034)
Net income 249,335 16,086 2,681 268,102
Distributions (704,000) (45,419) (7,570) (756,989)
Balance at
March 31, 1998 $(9,821,448)$(400,130)$(410,343)$(10,631,921)
(5)Related Party Transactions
The Partnership pays property management fees
to an affiliate of the General Partners for
management services. Pursuant to the
management agreements, management fees are
payable monthly at a rate of 5% of the gross
receipts from the properties under management.
The Partnership also reimburses affiliates of
the General Partners for certain expenses
incurred in connection with the operation of
the Partnership and its properties, including
administrative expenses.
Continued
KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(5) Related Party Transactions, Continued
Amounts accrued or paid to the General Partners' affiliates
were as follows:
For the Three Months
Ended March 31,
1998 1997
Property management fees $123,311 $125,518
Expense reimbursements 42,960 83,727
Charged to operations $166,271 $209,245
Expense reimbursements due from affiliates of $21,078 were
included in prepaid expenses and other assets at March 31,
1998.
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.
On December 10, 1997, the Partnership
completed the refinancing of the Century II
Apartments ("Century") mortgage note. The
property was refinanced with a $11,000,000
non-recourse mortgage note payable at the rate
of 6.75% per annum with monthly principal and
interest payments of $71,346. The Partnership
used the majority of the proceeds from the
refinancing to repay the existing mortgage
note on the property of $10,309,332, pay
closing costs of $236,763, to pay a prepayment
premium of $210,825 and to establish various
escrows.
The Partnership's properties, Century and Park
Place, have spent approximately $150,000 to
date and are anticipated to spend
approximately $2,122,000 for capital
improvements in 1998 to remain competitive in
their respective markets. These improvements
include floor covering, pavement upgrades and
appliance replacements, as well as interior
improvements and refurbishment of the elevator
and convenience store at Park Place. The
Partnership expects to fund these improvements
from established reserves and cash generated
from property operations.
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, 1998 and 1997.
Net income increased for the three months
ended March 31, 1998 as compared to the same
period in 1997, as rental revenue increased
and expenses stayed relatively stable.
The Partnership's properties both enjoyed
consistent 99% average residential occupancy
rates in the first quarter of 1998 and during
the same period in 1997. However, residential
rental rate increases at Park Place and
Century were implemented and as a result,
rental revenue increased between the periods.
The strong occupancy and the ability to
increase rental rates is a direct result of
the Partnership's efforts to enhance the
appeal of its properties, including an
appliance replacement program at Century and a
new fitness center at Park Place. Interest
income decreased as average cash and cash
equivalent balances between the periods
decreased.
Total expenses remained relatively stable when
comparing the first three months of 1998 to
the first three months of 1997, as the
increase in real estate tax expense offset the
decrease in general and administrative and
interest expenses. At the end of 1997, Park
Place was assessed at a higher value,
resulting in a higher real estate tax expense.
General and administrative expense decreased
due to legal costs incurred in 1997,
associated with the unsolicited tender offer
to purchase Partnership Units. Interest
expense decreased as a result of the
refinancing of Century's mortgage note payable
in December, 1997.
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 Tower Apartments ("Park
Place") and Marine Terrace Apartments, a
previously owned property. 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 $282,000, representing its share
of the discounts and late fees, in the
consolidated financial statements as of March
31, 1998. 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 13, 1998