-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GRLQpy9u/ns8DOvUxxQGRLVHowjspBdDk3zLJcXDqfpjAoUcnOcU6JBRHTw7j3tB CdIeSk9ZWXOTPa8pqp7OYw== 0000721799-97-000015.txt : 19971113 0000721799-97-000015.hdr.sgml : 19971113 ACCESSION NUMBER: 0000721799-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP REALTY LTD PARTNERSHIP V CENTRAL INDEX KEY: 0000721799 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042796207 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11985 FILM NUMBER: 97716582 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 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, 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 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 September 30,December 31, 1997 1996 Multi-family apartment complexes, net of accumulated depreciation of $40,660,816 and $38,066,263, respectively $30,975,574 $32,598,192 Cash and cash equivalents (Note 2) 1,382,317 1,767,094 Cash restricted for tenant security deposits 311,171 307,908 Replacement reserve and repair escrows 558,917 689,656 Prepaid expenses and other assets 1,294,516 1,377,390 Deferred expenses, net of accumulated amortization of $519,540 and $469,134, respectively 371,623 422,029 Total assets $34,894,118 $37,162,269 LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable $41,844,331 $42,270,255 Accrued real estate taxes 1,245,000 1,660,000 Accrued expenses and other liabilities 1,304,592 1,242,050 Due to affiliates (Note 5) 20,312 26,480 Total liabilities 44,414,235 45,198,785 Commitments and contingencies (Note 3) Partners' deficit (Note 4): Investor Limited Partners (35,200 Units outstanding) (8,751,918) (7,372,169) Original Limited Partner (368,974) (279,958) General Partners (399,225) (384,389) Total Partners' deficit (9,520,117) (8,036,516) Total liabilities and Partners' deficit $34,894,118 $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 For the Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenue: Rental $ 3,595,694 $ 3,395,929 $10,785,997 $10,032,114 Interest income 29,744 39,917 100,679 120,297 Total revenue 3,625,438 3,435,846 10,886,676 10,152,411 Expenses: Operating (Note 5)939,133 998,402 2,879,276 2,905,598 Maintenance 340,723 219,274 748,721 612,665 General and adminis- trative (Note 5) 41,169 27,799 174,790 74,835 Real estate taxes (Note 6) 522,760 163,247 1,496,052 1,130,881 Management fees (Note 5) 119,550 106,891 360,962 349,586 Depreciation and amortization 917,833 850,196 2,644,959 2,477,521 Interest 847,458 858,784 2,551,538 2,584,814 Total expenses 3,728,626 3,224,593 10,856,298 10,135,900 Net income (loss)$ (103,188)$ 211,253 $ 30,378$ 16,511 Allocation of net income (loss) (Note 4): Investor Limited Partners (35,200 Units outstanding)$ (102,156)$ 196,465 $ 28,251$ 15,355 Investor Limited Partners Per Unit$ (2.90) $ 5.58 $ .80 $ .44 Original Limited Partner$ - $ 12,675 $ 1,823 $ 991 General Partners$ (1,032)$ 2,113 $ 304 $ 165
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 Nine Months Ended September 30, 1997 1996 Operating activities: Net income $ 30,378 $ 16,511 Adjustments to reconcile net income to net cash provided by operating activities: Interest earned on replacement reserve and repair escrows (13,307) (13,746) Depreciation and amortization 2,644,959 2,477,521 Changes in assets and liabilities: Decrease (increase) in cash restricted for tenant security deposits (3,263) 61,417 Decrease in prepaid expenses and other assets 82,874 344,004 Decrease in accrued real estate taxes (415,000) (415,000) Increase (decrease) in accrued expenses and other liabilities 59,750 (64,520) Decrease in due to affiliates (6,168) (34,327) Net cash provided by operating activities 2,380,223 2,371,860 Investing activities: Deposits to replacement reserve escrow (159,684) (159,684) Withdrawals from replacement reserve and repair escrows 303,730 258,489 Additions to fixed assets (971,935) (1,132,116) Increase in accrued expenses and other liabilities related to fixed asset additions 2,792 - Net cash used in investing activities (825,097) (1,033,311) Financing activities: Principal payments on mortgage notes payable(425,924) (394,147) Distributions (1,513,979) (756,989) Net cash used in financing activities (1,939,903) (1,151,136) Net increase (decrease) in cash and cash equivalents (384,777) 187,413 Cash and cash equivalents, beginning of period 1,767,094 2,022,328 Cash and cash equivalents, end of period $1,382,317$ 2,209,741
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 necessary to present fairly the Partnership's consolidated financial position as of September 30, 1997, its results of operations for the three and nine months ended September 30, 1997 and 1996 and its cash flows for the nine months ended September 30, 1997 and 1996. Certain prior year balances have been reclassified to conform with current period financial statement presentation. The results of operations for the three and nine months ended September 30, 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)Cash and Cash Equivalents Cash and cash equivalents consisted of the following:
September 30,December 31, 1997 1996 Cash and money market accounts $ 637,253$ 1,484,612 Commercial paper 745,064 282,482 $ 1,382,317$ 1,767,094
At September 30, 1997, commercial paper represents corporate issues maturing in the fourth quarter of 1997. At September 30, 1997, the carrying value of the Partnership's investment in commercial paper approximates fair value. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (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. During 1994, the Court ruled in favor of the defendants, and accepted the Partnership's Motion to Dismiss the Plaintiffs' 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 was 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 and other fees and costs, in the consolidated financial statements as of September 30, 1997. 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 nine months ended September 30, 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 28,251 1,823 304 30,378 Distributions (1,408,000) (90,839) (15,140) (1,513,979) Balance at September 30, 1997 $(8,751,918)$(368,974)$(399,225)$(9,520,117)
Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (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. These management agreements were sold to BRI OP Limited Partnership, a subsidiary of Berkshire Realty Company Inc., 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 administrative expenses. Amounts accrued or paid to the General Partners' affiliates were as follows:
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 Property management fees$119,550 $106,891 $360,962 $349,586 Expense reimbursements 76,698 71,414 239,883 210,707 Charged to operations $196,248 $178,305 $600,845 $560,293
Due to affiliates consisted of expense reimbursements of $20,312 and $26,480 at September 30, 1997 and December 31, 1996, respectively. In addition to the amounts above, refinancing costs of $37,500 and $0 were paid to the General Partners or their affiliates at September 30, 1997 and December 31, 1996, respectively. (6) 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. 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 borrowings and the future refinancing and sale of the Partnership's remaining real estate investments. 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 Apartments ("Park Place"), have spent approximately $972,000 to date and 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 at Century, the replacement of fitness equipment, the 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. Currently, the General Partners are in the process of refinancing the Century mortgage note which is expected to be completed during the fourth quarter. The refinancing should, if concluded, result in significant savings to the Partnership. Operations The following discussion relates to the operations of the Partnership and its properties (Park Place and Century Apartments) for the three and nine months ended September 30, 1997 and 1996. Net income decreased for the three months ended September 30, 1997 when compared to the same period in 1996, as the increase in expenses more than offset the increase in revenue. Net income increased slightly for the nine months ended September 30, 1997 as compared to September 30, 1996, as the increase in revenue exceeded the increase in expenses. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY Operations - Continued Total revenue for the three and nine months ended September 30, 1997 increased when compared to the same periods in 1996, primarily due to increases in average occupancy at both Park Place and Century. Average occupancy rates at Century of 99% and 95% for the three and nine months ended September 30, 1996, respectively, increased to 100% for both the three and nine months ended September 30, 1997. At Park Place, occupancy rose from an average of 97% for the two periods in 1996 to an average of 99% in 1997. The Partnership's properties continue to enjoy strong occupancy as capital improvements, including an appliance replacement program at Century and a new fitness center at Park Place, have strengthened leasing efforts at the properties. Interest income decreased as investments in commercial paper have declined as a direct result of the 100% increase in the semiannual distributions paid in 1997. Total expenses for the three and nine months ended September 30, 1997 increased when compared to the same periods in 1996 as a result of increases in maintenance, general and administrative, real estate tax and depreciation expenses. Maintenance expense increased due to payment of the insurance deductible for flood damage at Park Place and preventive maintenance at both of the Partnership's properties, including interior painting and environmental upgrades. The increase in general and administrative expense was due to the increase in costs incurred in connection with the operation of the Partnership, including the preparation and mailing of reports and other communications to the investors, and an increase in Partnership legal costs relating to the unsolicited tender offers made to purchase Partnership Units during the year. The increase in real estate tax expense was due to a refund of prior years' real estate taxes which was received in the third quarter of 1996 and reflected as a reduction of the third quarter 1996 expense. The Partnership successfully petitioned for the reassessment of prior years' real estate taxes on Park Place and received real estate tax refunds toward the 1986, 1987, 1988 and 1990 tax years totaling approximately $325,000, of which approximately $305,000 was received in the third quarter of 1996. Depreciation expense increased in conjunction with the extensive capital improvement programs completed at the end of 1996. KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY PART II - OTHER INFORMATION Item 1.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 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 Plaintiffs' 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 was 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 and other fees and costs, in the consolidated financial statements as of September 30, 1997. 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: November 12, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Krupp Realty Fund 5 Financial Statements for the nine months ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1997 SEP-30-1997 1,382,317 0 311,906 0 0 1,852,698 72,527,553 (41,180,356) 34,894,118 2,569,904 41,844,331 0 0 (9,520,117) 0 34,894,118 0 10,886,676 0 0 8,304,760 0 2,551,538 0 0 0 0 0 0 30,378 0 0 Includes all receivables grouped in "prepaid expenses and other assets" on the Balance Sheet. Multi-family complexes of $71,636,390 and deferred expenses of $891,163. Accumulated depreciation of $40,660,816 and accumulated amortization of deferred expenses of $519,540. Represents mortgage notes payable. Represents total deficit of the General Partners and Limited Partners of ($399,225) and ($9,120,892), respectively. Includes all revenue of the Partnership. Includes operating expenses of $4,163,749, real estate taxes of $1,496,052 and depreciation and amortization of $2,644,959. Net income allocated $304 to the General Partners and $30,074 to the Limited Partners. Average net income per Unit of Limited Partners interest is $.80 on 35,000 Units outstanding.
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