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 September 30, 1999 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.) One Beacon Street, Boston, Massachusetts 02108 (Address of principal executive offices) (Zip Code) (617) 523-7722 (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 (Unaudited) September 30, December 31, 1999 1998 Multi-family apartment complexes, net of accumulated depreciation of $47,876,135 and $45,292,687, respectively $27,214,103$28,589,655 Cash and cash equivalents (Note 2) 3,806,917 2,101,415 Cash restricted for tenant security deposits 320,149 311,432 Replacement reserve escrows 750,758 664,186 Prepaid expenses and other assets (Note 5) 1,465,716 2,572,492 Deferred expenses, net of accumulated amortization of $108,668 and $82,843, respectively 456,704 482,529 Total assets $34,014,347$34,721,709 LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable $41,387,023$41,836,237 Accrued real estate taxes 1,504,557 2,008,500 Accrued expenses and other liabilities (Note 3)2,026,803 1,841,074 Total liabilities 44,918,383 45,685,811 Contingency (Note 3) Partners' deficit (Note 4): Investor Limited Partners (35,200 Units outstanding) (10,074,515)(10,130,376) Original Limited Partner (416,456) (420,061) General Partners (413,065) (413,665) Total Partners' deficit (10,904,036)(10,964,102) Total liabilities and Partners' deficit$34,014,347$34,721,709 The accompanying notes are an integral part of the consolidated financial statements.<<page> KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 Revenue: Rental $3,922,597 $3,807,018 $11,634,413$11,193,425 Interest income 53,528 28,705 129,135 84,026 Total revenue 3,976,125 3,835,723 11,763,548 11,277,451 Expenses: Operating (Note 5) 961,011 652,721 2,652,161 2,351,381 Maintenance 292,786 291,869 705,272 658,108 General and administrative(Note5) 76,592 43,876 196,675 125,223 Real estate taxes 189,102 572,843 1,334,783 1,728,890 Management fees (Note 5) 178,426 140,224 467,815 395,309 Depreciation and amortization 894,245 967,685 2,609,273 2,751,909 Interest 738,374 748,796 2,223,525 2,254,400 Total expenses 3,330,536 3,418,014 10,189,504 10,265,220 Net income $645,589 $417,709 $1,574,044$1,012,231 Allocation of net income (Note 4): Investor Limited Partners (35,200 Units outstanding) $600,398 $388,469 $1,463,861$ 941,375 Investor Limited Partner Per Unit$ 17.06$ 11.03 $ 41.59 $ 26.74 Original Limited Partner $ 38,735 $ 25,063 $ 94,443 $ 60,734 General Partners $ 6,456 $ 4,177 $ 15,740 $ 10,122 The accompanying notes are an integral part of the consolidated financial statements. KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, 1999 1998 Cash flows from operating activities: Net income $1,574,044 $1,012,231 Adjustments to reconcile net income to net cash provided by operating activities: Interest earned on replacement reserve escrows (8,842) (9,521) Depreciation and amortization 2,609,273 2,751,909 Changes in assets and liabilities: Increase in cash restricted for tenant security deposits (8,717) (18,382) Decrease (Increase) in prepaid expenses and other assets 1,106,776 (601,804) Increase (Decrease) in accrued real estate taxes (503,943) 660,095 Increase (decrease) in accrued expenses and other liabilities 185,729 (121,056) Net cash provided by operating activities 4,954,320 3,673,472 Cash flows from investing activities: Deposits to replacement reserve escrows (229,884) (229,884) Withdrawals from replacement reserve escrows 152,154 57,030 Additions to fixed assets (1,207,896)(1,002,347) Increase in accrued expenses and other liabilities related to fixed asset additions - 3,349 Net cash used in investing activities (1,285,626)(1,171,852) Cash flows from financing activities: Principal payments on mortgage notes payable(449,214) (419,973) Increase in deferred expenses - (9,285) Distributions (1,513,978)(1,513,979) Net cash used in financing activities (1,963,192)(1,943,237) Net increase in cash and cash equivalents 1,705,502 558,383 Cash and cash equivalents, beginning of period2,101,415 802,726 Cash and cash equivalents, end of period $3,806,917$1,361,109 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, 1998 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 normal recurring accruals) necessary to present fairly the Partnership's consolidated financial position as of September 30, 1999, its results of operations for the three and nine months ended September 30, 1999 and 1998 and its cash flows for the nine months ended September 30, 1999 and 1998. The results of operations for the three and nine months ended September 30, 1999 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)Cash and Cash Equivalents Cash and cash equivalents consisted of the following: September 30, December 31, 1999 1998 Cash and money market accounts $ 2,436,248 $ 405,431 Treasury bills 1,370,669 1,695,984 $ 3,806,917$ 2,101,415 (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 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 have continued to vigorously defend this case. Continued discussions with Plaintiffs' counsel have resulted in a settlement agreement which was presented to the court on July 28, 1999. The court granted preliminary approval of the settlement agreement and a hearing on the fairness of the settlement has been scheduled for November 18, 1999. Although the settlement has not received final approval by the court, the Partnership has recorded provisions totaling $1,015,000 in the consolidated financial statements at September 30, 1999 and December 31, 1998. (4) Changes in Partners' Deficit A summary of changes in Partners' deficit for the nine months ended September 30, 1999 is as follows: Investor Original Total Limited Limited General Partners' Partners Partner Partners Deficit Balance at December 31, 1998$(10,130,376)$(420,061) $(413,665)$(10,964,102) Net income 1,463,861 94,443 15,740 1,574,044 Distributions (1,408,000) (90,838) (15,140) ( 1,513,978) Balance at September 30,1999$(10,074,515)$(416,456)$(413,065)$(10,904,036) Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued Amounts accrued or paid to the General Partners' affiliates were as follows: For the Three Months For the Nine Months Ended September30, Ended September 30, 1999 1998 1999 1998 Property management fees $178,426 $140,224 $467,815 $395,309 Expense reimbursements 100,691 79,283 275,029 201,456 Charged to operations$279,117 $ 219,507$742,844 $596,765 Expense reimbursements due from affiliates of $8,323 and $1,456 were included in prepaid expenses and other assets at September 30, 1999 and December 31, 1998, respectively. 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. Year 2000 The General Partners of the Partnership conducted an assessment of the Partnership's core internal and external computer information systems and have taken the necessary steps to understand the nature and extent of the work required to make its systems Year 2000 ready in those situations in which it is required to do so. The Year 2000 readiness issue concerns the inability of computerized information systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and organizations. In this regard, the General Partners of the Partnership, along with certain affiliates, began a computer systems project in 1997 to significantly upgrade its existing hardware and software. The General Partners completed the testing and conversion of the financial accounting operating systems in February 1998. As a result, the General Partners have generated operating efficiencies and believe their financial accounting operating systems are Year 2000 ready. The General Partners incurred hardware costs as well as consulting and other expenses related to the infrastructure and facilities enhancements necessary to complete the upgrade and prepare for the Year 2000. There are no other significant internal systems or software that the Partnership is using at the present time. The General Partners of the Partnership have evaluated Year 2000 compliance issues with respect to its non-financial systems, such as computer controlled elevators, boilers, chillers and other miscellaneous systems. The General Partners do not anticipate any problems in its non-financial systems. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY Year 2000, Continued The General Partners of the Partnership surveyed the Partnership's material third- party service providers (including but not limited to its banks and telecommunications providers) and significant vendors and received assurances that such providers and vendors are to be Year 2000 ready. The General Partners do not anticipate any problems with such providers and vendors that would materially impact its results of operations, liquidity or captial resources. In addition, the Partnership is also subject to external forces that might generally affect industry and commerce, such as utility and transportation company Year 2000 readiness failures and related service interruptions. However, the General Partners do not anticipate these would materially impact its results of operations, liquidity or capital resources. To date, the Partnership has not incurred, and does not expect to incur, any significant cost associated with being Year 2000 ready. Operations The following discussion relates to the operations of the Partnership and its properties (Park Place and Century) for the three and nine months ended September 30, 1999 and 1998. Net income increased for the three and nine months ended September 30, 1999 as compared to the same periods in 1998, as rental revenue increased and total expenses remained relatively stable. The increase in rental revenue for the three and nine months ended September 30, 1999 when compared to the same periods in 1998 is attributable to residential rental rate increases implemented at Park Place and Century during the second half of 1998 and the first quarter of 1999. Interest income increased as average cash and cash equivalent balances increased between the periods. Total expenses remained relatively stable when comparing the three and nine months ending September 30, 1999 to the same periods of 1998 as the increase in operating, general and administrative and management fee expenses were offset by a decrease in real estate taxes and depreciation expenses. Operating expense increased in the third quarter of 1999, resulting from increases in electricity expense and an increase in workmen's compensation expense due to an adjustment to the workmen's compensation reserve in 1998. General and administrative expense increased due to higher expenses incurred in connection with preparation and mailing of Partnership reports and other investor communications. Property management fees increased in conjunction with the increase in rental revenue as discussed above. Real estate taxes decreased during the third quarter of 1999 due to an abatement, of approximately $245,000, and refund of prior years taxes received by Park Place. Depreciation expense decreased as fixed asset additions purchased in previous years at Park Place became fully depreciated. 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 have continued to vigorously defend this case. Continued discussions with Plaintiffs' counsel have resulted in a settlement agreement which was presented to the court on July 28, 1999. The court granted preliminary approval of the settlement agreement and a hearing on the fairness of the settlement has been scheduled for November 18, 1999. Although the settlement has not received final approval by the court, the Partnership has recorded provisions totaling $1,015,000 in the consolidated financial statements at September 30, 1999 and December 31, 1998. 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: November 15, 1999