-----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, KUqaAT0UENkP4NoiQqsk3o+5pELnI80Gz8f3Lw8Ff8OAKci0E3psVc/fU2pbgPI7 AmBTSoCQeFlVrZr4J2mpsw== 0000721799-98-000006.txt : 19981229 0000721799-98-000006.hdr.sgml : 19981229 ACCESSION NUMBER: 0000721799-98-000006 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981228 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-K/A SEC ACT: SEC FILE NUMBER: 000-11985 FILM NUMBER: 98776208 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-K/A 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 September30,1998 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
(Unaudited) September 30,December 31, 1998 1997 Multi-family apartment complexes, net of accumulated depreciation of $44,328,488 and $41,602,481, respectively $ 29,066,410$30,790,070 Cash and cash equivalents (Note 2) 1,361,109 802,726 Cash restricted for tenant security deposits 312,954 294,572 Replacement reserve escrow 582,146 399,771 Prepaid expenses and other assets (Note 6) 3,263,942 2,662,138 Deferred expenses, net of accumulated amortization of $74,234 and $48,332, respectively (Note 3)491,138 507,755 Total assets $ 35,077,699$35,457,032 LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable (Note 3) $ 41,981,006$42,400,979 Accrued real estate taxes 2,610,095 1,950,000 Accrued expenses and other liabilities 1,131,380 1,249,087 Total liabilities 45,722,481 45,600,066 Commitments and contingencies (Note 4) Partners' deficit (Note 5): Investor Limited Partners (35,200 Units outstanding) (9,833,408) (9,366,783) Original Limited Partner (400,902) (370,797) General Partners (410,472) (405,454) Total Partners' deficit (10,644,782)(10,143,034) Total liabilities and Partners' deficit $ 35,077,699$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 (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Revenue: Rental $3,807,018 $3,595,694$11,193,425$10,785,997 Interest income 28,705 29,744 84,026 100,679 Total revenue 3,835,723 3,625,438 11,277,451 10,886,676 Expenses: Operating (Note 6) 652,721 939,133 2,351,381 2,879,276 Maintenance 291,869 340,723 658,108 748,721 General and administrative (Note 6)43,876 41,169 125,223 174,790 Real estate taxes 572,843 522,760 1,728,890 1,496,052 Management fees (Note 6) 140,224 119,550 395,309 360,962 Depreciation and amortization 967,685 917,833 2,751,909 2,644,959 Interest (Note 3) 748,796 847,458 2,254,400 2,551,538 Total expenses 3,418,014 3,728,626 10,265,220 10,856,298 Net income (loss) $ 417,709 $ (103,188)$ 1,012,231$ 30,378 Allocation of net income (loss) (Note 5): Investor Limited Partners (35,200 Units outstanding) $ 388,469 $ (102,156)$ 941,375$ 28,251 Investor Limited Partner, Per Unit$11.03 $ (2.90)$ 26.74 $ .80 Original Limited Partner $ 25,063 $ - $ 60,734 $ 1,823 General Partners $ 4,177 $ (1,032) $ 10,122$ 304
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, 1998 1997 Operating activities: Net income $1,012,231$ 30,378 Adjustments to reconcile net income to net cash provided by operating activities: Interest earned on replacement reserve escrow (9,521) (13,307) Depreciation and amortization 2,751,909 2,644,959 Changes in assets and liabilities: Increase in cash restricted for tenant security deposits (18,382) (3,263) Decrease (increase) in prepaid expenses and other assets (601,804) 82,874 Increase (decrease) in accrued real estate taxes 660,095 (415,000) Increase (decrease) in accrued expenses and other liabilities (121,056) 59,750 Decrease in due to affiliates - (6,168) Net cash provided by operating activities 3,673,472 2,380,223 Investing activities: Deposits to replacement reserve escrow (229,884) (159,684) Withdrawals from replacement reserve escrow 57,030 303,730 Additions to fixed assets (1,002,347) (971,935) Increase in accrued expenses and other liabilities related to fixed asset additions 3,349 2,792 Net cash used in investing activities (1,171,852) (825,097) Financing activities: Principal payments on mortgage notes payable(419,973) (425,924) Increase in deferred expenses (9,285) - Distributions (1,513,979) (1,513,979) Net cash used in financing activities (1,943,237) (1,939,903) Net increase (decrease) in cash and cash equivalents 558,383 (384,777) Cash and cash equivalents, beginning of period 802,726 1,767,094 Cash and cash equivalents, end of period $1,361,109$ 1,382,317
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 September 30, 1998, its results of operations for the three and nine months ended September 30, 1998 and 1997 and its cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the three and nine months ended September 30, 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) Cash and Cash Equivalents Cash and cash equivalents consisted of the following:
September 30, December 31, 1998 1997 Cash and money market accounts $ 511,754 $ 802,726 Treasury bills 849,355 - $ 1,361,109 $ 802,726
(3)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. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (4)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, plus estimated legal costs, in the consolidated financial statements as of September 30, 1998. The ultimate outcome of the potential punitive damages award related to this litigation, including an estimate of potential loss, cannot presently be determined. (5)Changes in Partners' Deficit A summary of changes in Partners' deficit for the nine months ended September 30, 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 941,375 60,734 10,122 1,012,231 Distributions (1,408,000) (90,839) (15,140) (1,513,979) Balance at September 30, 1998$(9,833,408)$(400,902)$(410,472) $(10,644,782)
Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued (6)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. 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, 1998 1997 1998 1997 Property management fees$140,224 $119,550 $395,309 $360,962 Expense reimbursements 79,283 76,698 201,456 239,883 Charged to operations$219,507 $196,248 $596,765 $600,845
Expense reimbursements due from affiliates of $32,103 were included in prepaid expenses and other assets at September 30, 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 a 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 prepayment premium of $210,825 and to establish various escrows. The Partnership's properties, Century and Park Place, have spent approximately $1,002,000 to date and are anticipated to spend approximately $2,134,000 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. Financial Accounting Standards Board Statement No. 130 ("FAS 130") "Reporting Comprehensive Income" is effective for fiscal years beginning after December 31, 1997, although earlier application is permitted. FAS 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. Financial Accounting Standards Board Statement No. 131 ("FAS 131") "Disclosures about Segments of an Enterprise and Related Information" establishes standards for disclosing measures for profit or loss and total assets for each reportable segment. FAS 131 is effective for fiscal years beginning after December 15, 1997. The General Partners do not believe that the implementation of FAS 130 or FAS 131 will have a material impact on the Partnership's financial statements. The General Partners of the Partnership have conducted an assessment of the Partnership's core internal and external computer information systems and have taken the further 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 all organizations. Continued KRUPP REALTY LIMITED PARTNERSHIP-V AND SUBSIDIARY Liquidity and Capital Resources, Continued 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 Partnership 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 systems or software that the Partnership is using at the present time. The General Partners of the Partnership are in the process of evaluating the potential adverse impact that could result from the failure of material third-party service providers (including but not limited to its banks and telecommunications providers) and significant vendors to be Year 2000 ready. No estimate can be made at this time as to the impact of the readiness of such third parties. 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, 1998 and 1997. Net income increased for the three and nine months ended September 30, 1998 as compared to the same periods in 1997, as rental revenue increased and expenses decreased. In comparing the three and nine months ended September 30, 1998 to the same periods in 1997, the increases in rental revenue are attributable to residential rental rate increases implemented at Park Place and Century. Interest income decreased as average cash and cash equivalent balances decreased between the periods. Total expenses decreased when comparing the three months ended September 30, 1998 to the three months ended September 30, 1997, primarily due to decreases in operating, maintenance and interest expenses, partially offset by an increase in real estate tax expense. The decrease in operating expense is mainly the result of decreases in utilities and insurance expenses. Lower gas expenditures are attributable to a more energy efficient system at Park Place. The decrease in insurance expense is due to a reduction in contingent insurance premiums at the Partnership's properties, due to a favorable claim history. Maintenance expense decreased primarily due to payment of an insurance deductible in the third quarter of 1997 for flood damage at Park Place. Interest expense decreased as a result of the refinancing of Century's mortgage note in December, 1997. Park Place was assessed at a higher value at the end of 1997, resulting in an increase in real estate tax expense. For the reasons discussed above, total expenses decreased when comparing the nine months ended September 30, 1998 to the nine months ended September 30, 1997. In addition, general and administrative expense also decreased during these periods as a result of legal costs incurred in 1997 which related to the unsolicited tender offers to purchase Partnership Units. 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 September 30, 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: December 22, 1998 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, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 1,361,109 0 1,066,663 0 0 3,092,379 73,960,270 (44,402,722) 35,077,699 3,741,475 41,981,006 0 0 (10,644,782) 0 35,077,699 0 11,277,451 0 0 8,010,820 0 2,254,400 0 0 0 0 0 0 1,012,231 0 0 Includes all receivables grouped in "prepaid expenses and other assets" on the Balance Sheet. Multi-family complexes of $73,394,898 and deferred expenses of $565,372. Accumulated depreciation of $44,328,488 and accumulated amortization of deferred expenses of $74,234. Represents mortgage notes payable. Represents total deficit of the General Partners and Limited Partners of ($410,472) and ($10,234,310), respectively. Includes all revenue of the Partnership. Includes operating expenses of $3,530,021, real estate taxes of $1,002,109 to the Limited Partners. Average net income per Unit of Limited Partners interest is $26.74 on 35,200 Units outstanding. Net income allocated $10,122 to the General Partners and $1,002,109 to the Limited Partners. Average net income per Unit of Limited Partners interest is $26.74 on 35,200 Units outstanding.
-----END PRIVACY-ENHANCED MESSAGE-----