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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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KRUPP REALTY LIMITED PARTNERSHIP - V
(Name of Subject Company)
KRUPP REALTY LIMITED PARTNERSHIP - V
(Name of Person Filing Statement)
Limited Partnership Units
(Title of Class of Securities)
501128 30 0
(CUSIP Number of Class of Securities)
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Douglas S. Krupp
The Krupp Corporation
One Beacon Street
Boston, Massachusetts 02108
(617) 523-7722
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) filing Statement)
Copy to:
Scott D. Spelfogel, Esq. James M. Dubin, Esq.
The Berkshire Group Paul, Weiss, Rifkind, Wharton & Garrison
One Beacon Street 1285 Avenue of the Americas
Boston, Massachusetts 02108 New York, New York 10019-6064
(617) 574-8385 (212) 373-3000
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Item 1. Security and Subject Company
The name of the subject partnership is Krupp Realty Limited
Partnership - V, a Massachusetts limited partnership (the "Partnership"), and
the address of its principal executive offices is c/o The Krupp Corporation, One
Beacon Street, Suite 1500, Boston, Massachusetts 02108. The title of the class
of equity securities to which this statement relates is the Partnership's units
of investor limited partnership interest ("Units").
Item 2. Tender Offer of the Bidder
This statement relates to an unsolicited offer by ERP Operating Limited
Partnership, an Illinois limited partnership, (the "Purchaser"), disclosed in a
Tender Offer Statement on Schedule 14D-1, dated November 23, 1999 (the "Schedule
14D-1"), to purchase up to 23,584 Units at a price of $675 per Unit, in cash,
less the amount of any distributions declared or made with respect to the Units
between November 23, 1999 and January 12, 2000, or such other date to which its
offer may be extended, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 23, 1999, and the
related Letter of Transmittal, as each may be supplemented or amended from time
to time (which collectively constitute the "ERP Offer" and are contained within
the Schedule 14D-1). The address of the Purchaser's principal executive offices
is Equity Residential Properties Trust, Two North Riverside Plaza, Suite 450,
Chicago, IL, 60606.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is the
person filing this statement, is set forth in Item 1 above.
(b) The general partners responsible for management of the
Partnership's business are The Krupp Corporation, a Massachusetts corporation
(the "Corporate General Partner"), and The Krupp Company, a Massachusetts
limited partnership (together with the Corporate General Partner, the "General
Partners").
On December 2, 1999, an affiliate of the General Partner made a merger
proposal to acquire all outstanding Units for $864 per Unit in cash other than
Units held by affiliates of the General Partners, such affiliate and certain
current limited partners of the Partnership who will be reinvesting their Units
in the entity making the merger proposal. See "Merger Proposal" below.
General
The General Partners are subject to certain conflicts of interest in
connection with the response to the ERP Offer contained in this Schedule 14D-9.
The Amended Agreement of Limited Partnership of the Partnership, dated as of
July 27, 1983, as amended to date (the "Partnership Agreement"), provides that,
without the concurrence of the General Partners, a majority in interest of the
"Investor Limited Partners" (a person who has been admitted to the Partnership
as, and has the rights afforded to, an Investor Limited Partner, as provided in
the Partnership Agreement) may vote to remove the General Partners or amend
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the Partnership Agreement (including amending certain fees and compensation
payable or authorized to be payable to the General Partners or their
affiliates), and the ownership of a large block of Units by any person increases
the likelihood that the General Partners may be removed or that the Partnership
Agreement may be amended should that person become an Investor Limited Partner
or otherwise acquire the voting rights of an Investor Limited Partner. In
addition, since property management agreements (described below) between
affiliates of the General Partners and the Partnership are terminable without
penalty at the end of any calendar month on not less than 60 days advance
written notice, the removal of the General Partners or the amendment of the
Partnership Agreement could result in a reduction of management fee income from
the Partnership to such affiliates. If a large number of Units were tendered to
the Purchaser, the likelihood of such removal or amendment would increase.
As described below, an affiliate of the General Partners has made a
merger proposal to acquire outstanding Units for $864 per Unit in cash (the
"Merger Proposal"). As a result, there is a conflict of interest between the
General Partners and its affiliates, on the one hand, and the Purchaser on the
other, inherent in the fact that such Merger Proposal could compete with the ERP
Offer.
The following describes certain agreements between affiliates of the
General Partners and the Partnership.
Pursuant to the Partnership Agreement, the General Partners are
entitled to certain cash distributions in respect of their interests in the
Partnership. The General Partners have received aggregate cash distributions in
respect of such interests of $15,140, $15,140 and $7,570 for the years ended
December 31, 1996, 1997 and 1998, respectively.
Pursuant to certain management agreements (the "Management
Agreements"), the affiliate of the General Partners which manages the properties
of the Partnership (the "Property Manager Affiliate") receives property
management fees in return for management of the Properties. The Management
Agreements provide for the payment of monthly management fees payable at the
rate of up to 5% of rents and other income actually received by the Partnership.
In addition, although the General Partners and their affiliates do not receive
any fees from the Partnership for the partnership administration services
provided to the Partnership, the Property Manager Affiliate and other affiliates
of the General Partners are reimbursed by the Partnership for expenses incurred
in connection with the provision of services including accounting, computer,
insurance, travel, payroll, and legal services and the preparation and mailing
of reports and other communication to Unit holders. For the three years ended
December 31, 1996, 1997 and 1998, the Partnership paid such affiliate property
management fees and reimbursement of expenses aggregating $813,666, $793,001 and
$730,521, respectively.
Pursuant to the Partnership Agreement, the General Partners are
entitled to a brokerage fee in an amount equal to 3% of the contract sales price
of any real estate sold by the Partnership, subject to certain limitations. No
brokerage fees have been paid to the General Partners or their affiliates during
the three-year period ending December 31, 1998.
Merger Proposal
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On December 2, 1999, the Partnership received an acquisition proposal
from KR5 Acquisition, L.L.C., a newly formed Delaware limited liability company
affiliated with the General Partners of the Partnership ("KR5 Acquisition"), to
acquire outstanding Units for $864 per Unit in cash. The proposed transaction
would be structured as a merger of the Partnership into KR5 Acquisition, in
which all outstanding partnership interests other than those held by affiliates
of the General Partners and certain current limited partners who will be
reinvesting their Units in KR5 Acquisition (the "Investors"), would receive the
$864 per Unit merger price, which amount will not be reduced by distributions
declared or made by the Partnership to holders of Units. The Merger Proposal is
subject to certain conditions, including the approval of the merger and
necessary amendments to the partnership agreement by the holders of a majority
of the Units. The Merger Proposal is not subject to a financing condition. The
Investors, who own approximately 11% of the outstanding Units, have agreed to
vote in favor of the Merger Proposal. The General Partners intend to cause the
Partnership to distribute proxy materials to holders of Units to seek approval
of the Merger Proposal and related amendments to the Partnership Agreement, and
presently anticipate that if all conditions to the Merger Proposal are
satisfied, consummation of the merger would occur in the first quarter of 2000.
However, there is no assurance that the Merger Proposal will be consummated or
that it will not be delayed.
Except as described herein, there are no material contracts,
agreements, arrangements or understandings or any actual or potential conflicts
of interest between the General Partners or their affiliates and (i) the
Partnership, its executive officers, directors or affiliates or (ii) the
Purchaser, its executive officers, directors or affiliates.
Item 4. The Solicitation or Recommendation
Following receipt of the ERP Offer, the Corporate General Partner
reviewed and considered the ERP Offer. The Corporate General Partner has
determined that the ERP Offer is inadequate and not in the best interests of the
Unit holders, and recommends that the holders of the Units reject the ERP Offer
and not tender their Units pursuant thereto.
In reaching its conclusion described in the paragraph above, the
Corporate General Partner considered a number of factors, including the
following:
(i) The fact that the Corporate General Partner believes each
Unit to have a value substantially in excess of $675. This belief is based on
the Corporate General Partner's familiarity with the Partnership's properties
and its experience in real estate matters generally, as well as on an appraisal
of the properties owned by the Partnership by an independent real estate
valuation firm in August 1999, which indicates a value per Unit of approximately
$864, after taking into account the Partnership's liabilities and other assets
as of September 30, 1999 and mortgage debt-related expenses;
(ii) The fact that the ERP Offer is being made for only 67% of
the outstanding Units. Consequently, if the ERP Offer is oversubscribed, the
holders of Units not accepted for purchase by the Purchaser will likely
encounter increased difficulty in selling Units at a fair price in light of the
already illiquid secondary market for Units; and
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(iii) The fact that the Partnership has been presented with a
merger proposal from KR5 Acquisition, an affiliate of the General Partners
which, if consummated, will result in the Unit holders receipt of $864 in cash
for each Unit owned by them, which amount will not be reduced by distributions
declared or made by the Partnership to such holders. As noted above, the Merger
Proposal is subject to certain conditions, and there is no assurance that such
merger will be consummated.
Item 5. Persons Retained, Employed, or to be Compensated
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person to make solicitations or recommendations to Unit holders on behalf of
the Partnership in response to the ERP Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) On December 2, 1999, KR5 Acquisition, L.L.C., KRF Company, L.L.C.,
each an affiliate of the General Partners, and the Investors, which are real
estate investment funds affiliated with Equity Resources Group, Incorporated
entered into certain agreements in connection with the Merger Proposal with
respect to 3,985.5 Units beneficially owned by the Investors, constituting
approximately 11% of the outstanding Units. Such agreements provide that,
subject to certain terms and conditions, (a) the Investors will vote such Units
(i) in favor of the Proposed Merger and otherwise to facilitate the consummation
of the Proposed Merger and (ii) in opposition to any proposal or action made in
opposition or in competition with the Proposed Merger, and (b) the Investors
will contribute their Units to KR5 Acquisition in exchange for equity interests
in KR5 Acquisition subject to certain conditions, including approval by Unit
holders of the Proposed Merger and necessary amendments to the Partnership
agreement.
Except as described above, neither the Partnership nor the General
Partners have effected any transactions in the Units during the past 60 days.
The General Partners are not aware of any transactions in the Units during the
past 60 days by any of its executive officers, directors, or subsidiaries.
(b) Neither the General Partners nor, to the knowledge of the General
Partners, any of their executive officers, directors, affiliates or subsidiaries
intend to tender Units owned by them to the Purchasers pursuant to the ERP
Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Except for the Merger Proposal described herein, no negotiation is
being undertaken or is underway by the Partnership in response to the ERP Offer
which relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Partnership; (ii) a purchase, sale or
transfer of a material amount of assets by the Partnership; (iii) a tender offer
for or other acquisition of securities by or of the Partnership; or (iv) any
material change in the present capitalization or dividend policy of the
Partnership. While the Merger Proposal described herein was not made in response
to the ERP Offer, it could result in one or more of such matters.
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(b) Except for the Merger Proposal described herein, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the ERP Offer which relate to or would result in one or more of the
matters referred to in the first paragraph of Item 7(a) above.
Item 8. Additional Information to be Furnished
This document does not constitute a solicitation of proxies or consents
from holders of Units. Any such solicitation that may be made by the Partnership
will be made only pursuant to separate materials complying with the requirements
of Section 14(a) of the Securities and Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
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Item 9. Material to be Filed as Exhibits
1. Cover letter to Unit holders from the Partnership dated December 2,
1999.
2. The Amended Agreement, dated as of July 27, 1983, by and among The
Krupp Company Limited Partnership II and The Krupp Corporation, as
general partners, The Krupp Company Limited Partnership II, as the
Original Limited Partner, and those persons who have been admitted
to the Partnership as Investor Limited Partners pursuant to the
terms of the such Agreement.
3. Park Place Property Management Agreement, dated as of January 1,
1994, between the Partnership and Berkshire Realty Enterprises
Limited Partnership.
4. Amendment to Park Place Property Management Agreement between the
Partnership and Berkshire Realty Enterprises Limited Partnership,
dated as of January 1, 1996.
5. Century II Apartments Property Management Agreement, dated as of
January 1, 1996, between the Partnership and Berkshire Realty
Enterprises Limited Partnership.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 2, 1999
KRUPP REALTY LIMITED PARTNERSHIP - V
By: The Krupp Corporation, a
general partner
By: /s/ Douglas S. Krupp
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Name: Douglas S. Krupp
Title: President and Co-Chairman
of the Board
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EXHIBIT INDEX
Exhibit Description Page
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1. Cover letter to Unit holders from the Partnership dated
December 2, 1999.
2. The Amended Agreement, dated as of July 27, 1983, by and
among The Krupp Company Limited Partnership II and The
Krupp Corporation, as general partners, The Krupp
Company Limited Partnership II, as the Original Limited
Partner, and those persons who have been admitted to the
Partnership as Investor Limited Partners pursuant to the
terms of the such Agreement Form of Property Management
Agreement between the Partnership and Berkshire Property
Management Company.
3. Park Place Property Management Agreement, dated as of
January 1, 1994, between the Partnership and Berkshire
Realty Enterprises Limited Partnership.
4. Amendment to Park Place Property Management Agreement
between the Partnership and Berkshire Realty Enterprises
Limited Partnership, dated as of January 1, 1996.
5. Century II Apartments Property Management Agreement,
dated as of January 1, 1996, between the Partnership and
Berkshire Realty Enterprises Limited Partnership.
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