-----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, ImF8M8Gwzd83JpoE/T5JLkxn/o7NzwhyDBjBLU+k0j5/hJ6pciG/veZytZRO9wdU V0VfqX4gzcIbTQtrnBVheA== 0000839427-98-000002.txt : 19980331 0000839427-98-000002.hdr.sgml : 19980331 ACCESSION NUMBER: 0000839427-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP CASH PLUS V LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000839427 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 043021560 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18498 FILM NUMBER: 98578879 BUSINESS ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: C/O BERKSHIRE REALTY AFFILIATES STREET 2: 470 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 0-18498 Krupp Cash Plus-V Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-3021560 (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) (Registrant's telephone number, including area code) (617) 423-2233 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Depositary Receipts representing Units of Limited Partner Interests 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. Aggregate market value of voting securities held by non-affiliates: Not applicable, since securities are nonvoting. Documents incorporated by reference: Part IV, Item 14. The exhibit index is located on pages 8-9. The total number of pages in this document is 37. PART I This Form 10-K 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. ITEM 1. BUSINESS Krupp Cash Plus-V Limited Partnership (the "Partnership") was formed on August 22, 1988 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. Krupp Plus Corporation and Krupp Company Limited Partnership-VI were the original General Partners of the Partnership. On March 15, 1995, Krupp Plus Corporation withdrew as General Partner from the Partnership and assigned its rights, title and interest in the Partnership to Krupp Company Limited Partnership-VI. Krupp Depositary Corporation is the Corporate Limited Partner. For details, see Note A to Financial Statements included in Appendix A of this report. On March 3, 1989 the Partnership commenced the marketing and sale of Depositary Receipts ("Units") and raised $41,203,189 from this public offering. The Partnership invested the net proceeds from the offering in Spring Valley Partnership ("Joint Venture") and mortgage-backed securities ("MBS") issued or originated by the Federal Home Loan Mortgage Corporation ("FHLMC"). The Partnership considers itself to be engaged only in the industry segment of investment in real estate and related assets. The Partnership's retail real estate investment is subject to seasonal fluctuations, as net income may vary somewhat from quarter to quarter based upon changes in utility consumption, seasonal maintenance expenditures and changes in rental income which are based upon a percentage of gross receipts of retail tenants. The requirements for compliance with federal, state and local regulations have not had an adverse effect on the Partnership's operations to date, and no adverse effect therefrom is anticipated in the future. On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the General Partner, as agent for the Partnership and its Joint Venture Partner, Berkshire Realty Company Inc., (collectively referred to herein as the "Joint Venture Partners") entered into an Agreement of Sale to sell the Joint Venture's property, Spring Valley Marketplace, a shopping center containing 320,684 leasable square feet located in Spring Valley, New York, to Kejack, Inc. and its permitted assigns, which are unaffiliated third parties. The property was included in a package with thirteen other properties owned by affiliates of the General Partner. The total selling price of the fourteen properties was $138,000,000, of which the Joint Venture Partners received $29,571,700, less their share of the closing costs. The transaction was consummated on January 30, 1998. The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partner expects to liquidate and distribute the remaining assets of the Partnership in 1998 (see Note H to Financial Statements, included in Item 8 (Appendix A) of this report.) As of December 31, 1997, there was one person employed on-site by the Joint Venture. ITEM 2. PROPERTY As of December 31, 1997, the Partnership had an unleveraged joint venture investment in a shopping center with 320,684 square feet of leasable space. Additional detailed information with respect to the property is contained in Note D to the Financial Statements as well as the Separate Financial Statements and Schedule III for Spring Valley Partnership which are included in Item 8 (Appendix A) of this report. A summary of the Partnership's real estate investment is presented below. Average Occupancy For the Year Ended Year of Current Leasable December 31, Description Acquisition Square Footage 1997 1996 1995 1994 1993 Spring Valley Marketplace (1) 1988 320,684 96% 98% 98% 96% 95% (1) The Partnership has a 49.9% joint venture interest in this property. There were four tenants at Spring Valley Marketplace that occupied greater than 10% of the Partnership's leasable space as of December 31, 1997. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership is a party or to which its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Part II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There currently is no public market for the Units and it is not anticipated that any such public market will develop. The transfer of Units is subject to certain limitations contained in the Partnership Agreement. The number of investors holding Units ("Unitholders") as of December 31, 1997 is approximately 2,700. The Partnership made the following distributions, in quarterly installments, during the two years ended December 31, 1997 and 1996: 1997 1996 Amount Per Unit Amount Per Unit Limited Partners: Unitholders $2,060,350 1.00 $2,060,351 $1.00 (2,060,350 Units) Corporate Limited Partner (100 Units) 100 1.00 100 1.00 General Partner 12,847 14,625$2,073,297 $2,075,076 One of the objectives of the Partnership is to generate cash available for distribution. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial information regarding the Partnership's financial position and operating results. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements and Supplementary Data, which are included in Items 7 and 8 (Appendix A) of this report, respectively.
Year ended December 31, 1997 1996 1995 1994 1993 Total income (a)$ 132,375$ 169,594 $ 223,956 $ 221,861 $ 288,831 Net income (loss) (5,960,390) 698,265 887,535 603,140 571,567 Net income (loss) allocated to Partners: Unitholders (5,900,500) 691,248 878,617 597,080 565,824 Per Unit (2.86) .34 .43 .29 .27 Corporate Limited Partner (286) 34 43 29 27 General Partner (59,604) 6,983 8,875 6,031 5,716 Total assets at December 31 16,880,489 24,916,567 26,240,244 27,437,10428,896,948 Distributions: Unitholders 2,060,350 2,060,351 2,060,350 2,064,585 2,058,935 Per Unit (b) 1.00 1.00 1.00 1.00 1.00 Corporate Limited Partner 100 100 100 100 100 General Partner 12,847 14,625 17,139 11,965 12,999
(a) For comparison, total income for the years 1993 through 1996 has been adjusted to exclude the Partnership's share of Joint Venture net income (loss) (see the Partnership's Statements of Income, in Financial Statements and Supplementary Data included in Appendix A of this report.) (b) During the years ended 1997, 1996, 1995, 1994 and 1993 the Unitholders' average per Unit return of capital based on the Distributable Cash Flow, as defined by Section 17 of the Partnership Agreement, was $.24, $.44, $.30, $.28, and $.39, respectively. ITEM 7.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 sources of liquidity are derived from the distributions it receives from its interest in the Joint Venture, earnings and collections on its MBS and interest earned on its short-term investments. In 1997, Spring Valley Marketplace (the "Marketplace") had an average occupancy rate of 96%. The Marketplace spent approximately $208,000 for capital improvements in 1997 which included parking lot paving, resurfacing of the sidewalks and painting of the external canopy. The Partnership holds MBS that are guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"). The principal risks with respect to MBS are the credit worthiness of FHLMC and the risk that the current value of any MBS may decline as a result of changes in market interest rates. At December 31, 1997, the Partnership recorded unrealized holding gains on its MBS of $46,946 to adjust the investments to market value (see Note C to Financial Statements, included in Item 8 (Appendix A) of this report). The most significant demands on the Partnership's liquidity are the quarterly distributions. Distributions are funded by MBS principal collections, distributions received from the Marketplace and working capital reserves. Based upon the Joint Venture Partners' assessment of the current and future market conditions, the capital improvements necessary to remain competitive in its market, its capital resources and the differing strategies of the Joint Venture Partners, the Joint Venture Partners determined that it was in their best interests, and that of their respective investors, to sell Spring Valley Marketplace. On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the General Partner, as agent for the Partnership and its Joint Venture Partner, entered into an Agreement of Sale to sell the Joint Venture's property, the Marketplace, a shopping center containing 320,684 leasable square feet located in Spring Valley, New York, to Kejack, Inc. and its permitted assigns, which are unaffiliated third parties. The property was included in a package with thirteen other properties owned by affiliates of the General Partner. The total selling price of the fourteen properties was $138,000,000, of which the Joint Venture Partners received $29,571,700, less their share of the closing costs. The transaction was consummated on January 30, 1998 (see Note H to Financial Statements, included in Item 8 (Appendix A) of this report). Based on the selling prices of the properties less estimated costs to sell, the Partnership recorded provisions for losses on its real estate at December 31, 1997 (see Note D to the Financial Statements, included in Item 8 (Appendix A) of this report). The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partner expects to liquidate and distribute the remaining assets of the Partnership in 1998. Operations Partnership 1997 compared to 1996 Net income, net of the Partnership's share of the Joint Venture net income (loss), decreased in 1997 when compared to 1996, with a decrease in total income and an increase in total expenses. MBS interest income decreased due to scheduled payments and prepayments of principal which occur on the MBS portfolio. Other interest income decreased as a result of lower average cash balances available for investment. Total expenses for the Partnership increased in 1997 when compared to 1996. General and administrative expense increased primarily due to an increase in charges incurred in connection with the preparation and mailing of Partnership reports and other investor communications. Amortization expense increased with the acceleration of amortization of acquisition costs related to the Partnership's Joint Venture investment, due to the anticipated sale of the Marketplace, subsequent to year end. 1996 compared to 1995 Net income, net of the Partnership's share of Joint Venture net income for the Partnership decreased from 1995 to 1996, due to both a decline in interest income and an increase in total expenses. In 1996, as compared to 1995, total income decreased primarily due to a decline in other interest income as a result of lower cash and cash equivalent balances available for investment. MBS interest income decreased due to scheduled payments and prepayments of principal which occur on the MBS portfolio. Total expenses increased in 1996, as compared to 1995. General and administrative expense increased primarily due to increased charges incurred in connection with the preparation and mailing of Partnership reports and other investor communications. Also, in 1996, the Partnership began amortizing costs relating to the investment in the Joint Venture which were to be amortized over the remaining life of the underlying asset. Joint Venture 1997 compared to 1996 Net income, net of the provision for losses on real estate, decreased in 1997 as compared to 1996 with a decrease in total revenue and an increase in total expenses. Rental revenue decreased due to the Marketplace's lower average occupancy rate of 96% in 1997, as compared to 98% in 1996. Rental revenue also decreased with decreases in reimbursable tenant billings as a result of lower reimbursable operating and maintenance expenses. Total expenses, net of the provision for losses on real estate, increased in 1997 as compared to 1996 with a rise in real estate taxes and depreciation expense partially offset by decreases in operating and maintenance expenses. Real estate taxes increased due to an increase in the school tax rate by the local taxing authority. Depreciation expense increased in conjunction with capital improvement expenditures. Operating expense decreased with a decline in expenses related to the operation of the property, including administrative expenses. Maintenance expense decreased in 1997 due to a milder winter season. 1996 compared to 1995 Net income for the Marketplace experienced a slight increase when comparing 1995 to 1996. Revenue increased primarily due to higher tenant billings at the Marketplace based upon greater reimbursable expenses, including snow removal costs from the stormy winter season and real estate taxes. During 1996, total expenses increased, as compared to 1995, primarily due to significant increases in maintenance expense and real estate taxes. Maintenance expense increased due to a rise in snow removal expenditures as a result of the adverse winter weather conditions. The increase in real estate taxes was due to both a rise in the assessed value of the Marketplace and an increase in the school tax rate by the local taxing authority. Operating expense increased due to an increase in expenses relating to the operation of the property including administrative expenses. Management fees also increased in conjunction with the rise in revenue. Depreciation expense increased in 1996, as compared to 1995, as a result of continued capital improvement expenditures. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix A to this report. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership has no directors or executive officers. Information as to the directors and executive officers of Krupp Company Limited Partnership-VI, which is the General Partner of the Partnership, and Krupp Plus-II Corporation, which is the General Partner of Krupp Company Limited Partnership-VI, is as follows: Position with Name and Age Krupp Plus-II Corporation Douglas Krupp (51) President and Co-Chairman of the Board George Krupp (53) Co-Chairman of the Board Wayne H. Zarozny (39) Treasurer Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group. Established in 1969 as the Krupp Companies, this real estate-based firm expanded over the years within its areas of expertise including investment program sponsorship, property and asset management, mortgage banking, healthcare facility ownership and the management of the company. Mr. Krupp is a graduate of Bryant College. In 1989 he received an honorary Doctor of Science in Business Administration from this institution and was elected trustee in 1990. Mr. Krupp is Chairman of the Board and a Director of both Berkshire Realty Company, Inc. (NYSE-BRI) and Harborside Healthcare Corporation (NYSE-HBR). Mr. Krupp also serves as Chairman of the Board and Trustee of Krupp Government Income Trust and as Chairman of the Board and Trustee of Krupp Government Income Trust II. George Krupp is Douglas Krupp's brother. George Krupp is the Co-Chairman and Co- Founder of The Berkshire Group. Established in 1969 as the Krupp Companies, this real estate-based firm expanded over the years within its areas of expertise including investment program sponsorship, property and asset management, mortgage banking and healthcare facility ownership. Mr. Krupp received his undergraduate education from the University of Pennsylvania and Harvard University Extension School, and holds a Master's degree in history from Brown University. Wayne H. Zarozny is Vice President of The Berkshire Group. Mr. Zarozny has held several positions within The Berkshire Group since joining the company in 1986 and is currently responsible for accounting and financial reporting, treasury, accounts payable and payroll activities. Prior to joining The Berkshire Group, he was an audit supervisor for Pannell Kerr Forster International and on the audit staff of Deloitte, Haskins and Sells in Boston. He received a B.S. degree from Bryant College, a Master's degree in Business Administration from Clark University and is a Certified Public Accountant. ITEM 11. EXECUTIVE COMPENSATION The Partnership does not have any directors or executive officers. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 1997 no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding 2,060,350 Depositary Receipts. The only interests held by management or its affiliates consist of its General Partner and Corporate Limited Partner Interests. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Partnership does not have any directors, executive offices or nominees for election as director. Additionally, as of December 31, 1997 no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. Financial Statements - see Index to Financial Statements included under Item 8 (Appendix A) on page F-2 of this report. 2. Financial Statement Schedules - all schedules are omitted as they are not applicable, not required or the information is provided in theFinancial Statements or the Notes thereto. 3. Separate Financial Statements - as required by Rule 3-09 of Regulation S-X, the financial statements and schedule for Spring Valley Partnership are included under Item 8 (Appendix A) on pages F-15 through F-27 of this report. (b) Exhibits: Number and Description Under Regulation S-K The following reflects all applicable Exhibits required under Item 601 of Regulation S-K: (4) Instruments defining the rights of security holders including indentures: (4.1)Agreement of Limited Partnership dated as of February 23, 1989 [Exhibit A to Prospectus included in Amendment No. 2 of Registrant's Registration Statement on Form S- 11 dated March 1, 1989 (File No. 33-24181)].* (4.2)Subscription Agreement Specimen [Exhibit D to Prospectus included in Amendment No. 2 of Registrant's Registration Statement on Form S-11 dated March 1, 1989 (File No. 33- 24181)].* (4.3)First Amendment to and Restatement of Certificate of Limited Partnership filed with the Massachusetts Secretary of State on February 22, 1989 [Exhibit 4.4 to Prospectus included in Amendment No. 2 of Registrant's Registration Statement on Form S-11 dated March 1, 1989 (File No. 33-24181)].* (4.4)Krupp Sponsored IRA New Investor Application [Exhibit 4.5 to Prospectus included in Amendment No. 1 of Registrant's Registration Statement on Form S-11 dated November 30, 1988 (File No. 33-24181)].* (10) Material Contracts: Spring Valley Marketplace (10.1) Purchase and Sale Agreement dated November 14,1988 between Krupp Realty Company Limited Partnership, now known as Berkshire Realty Enterprises L.P. ("BRE"), ("Buyer") and Valley Associates, Ltd. ("Seller"). [Exhibit 10.1 to Registrant's Report of Form 10-Q for the Quarter Ended September 30, 1989 (File No. 33-24181)].* (10.2) Assignment of Agreement dated December 13, 1988 by and between Spring Valley Partnership ("Assignee") and BRE ("Assignor"). [Exhibit 10.2 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1989 (File No. 33- 24181)].* (10.3) Spring Valley Partnership - Partnership Agreement dated December 13, 1988 by and among Krupp Cash Plus-V Limited Partnership and BRE [Exhibit 10.5 to Prospectus in Amendment No. 2 of Registrant's Registration Statement on Form S-11 dated March 1, 1989 (File No. 33- 24181)].* (10.4) Bargain and Sale Deed dated December 13, 1988 between Spring Valley Partnership ("Grantee") and BRE ("Grantor") [Exhibit 10.3 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1989 (File No. 33-24181)].* (10.5) Additional Sales Price Agreement dated December 13, 1988 between Krupp Cash Plus-V Limited Partnership and BRE [Exhibit 10.6 to Prospectus in Amendment No. 2 of Registrant's Registration Statement on Form S-11 dated March 1, 1989 (File No. 33- 24181)].* (10.6) Property Management Agreement dated December 16, 1988 between Spring Valley Partnership ("Owner") and BRE ("Agent") [Exhibit 10.7 to Prospectus in Amendment No. 2 of Registrant's Registration Statement on Form S-11 dated March 1, 1989 (File No. 33- 24181)].* * Incorporated by reference. (c) Reports on Form 8-K During the quarter ended December 31, 1997, the Partnership did not file any reports on Form 8-K. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 24th day of March, 1998. KRUPP CASH PLUS-V LIMITED PARTNERSHIP By: Krupp Company Limited Partnership-VI, the General Partner, by Krupp Plus-II Corporation, the General Partner of Krupp Company Limited Partnership-VI By: /s/ Douglas Krupp Douglas Krupp, Co-Chairman (Principal Executive Officer) and Director of Krupp Plus-II Corporation Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on the 24th day of March, 1998. Signatures Titles /s/ Douglas Krupp President, Co-Chair- man (Principal Executive Douglas Krupp Officer) and Director of Krupp Plus-II Corporation, the General Partner of Krupp Company Limited Partnership-VI /s/ George Krupp Co-Chairman (Principal Executive Officer) and George KruppDirector of Krupp Plus- II Corporation, the General Partner of Krupp Company Limited Partnership-VI /s/ Wayne H. Zarozny Treasurer of Krupp Plus- II Corporation,the WayneH. Zarozny General Partner of Krupp Company Limited Partnership- VI APPENDIX A KRUPP CASH PLUS-V LIMITED PARTNERSHIP FINANCIAL STATEMENTS ITEM 8 of FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Year Ended December 31, 1997 KRUPP CASH PLUS-V LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants F-3 Balance Sheets at December 31, 1997 and December 31, 1996 F-4 Statements of Income (Loss) for the Years Ended December 31, 1997, 1996 and 1995 F-5 Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995 F-6 Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 F-7 Notes to Financial Statements F-8 - F-14 Separate Financial Statements - Spring Valley Partnership F-15 - F-27 All other schedules are omitted as they are not applicable or not required, or the information is provided in the financial statements or the notes thereto. REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Krupp Cash Plus-V Limited Partnership: We have audited the financial statements of Krupp Cash Plus-V Limited Partnership (the "Partnership") listed in the index on page F-2 of this Form 10-K. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Krupp Cash Plus-V Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. As discussed in Note H, the Partnership's Joint Venture property was sold on January 30, 1998. As a result, the Partnership will be liquidated in 1998. Boston, Massachusetts COOPERS & LYBRAND L.L.P. January 30, 1998 KRUPP CASH PLUS-V LIMITED PARTNERSHIP BALANCE SHEETS December 31, 1997 and 1996
ASSETS 1997 1996 Real estate assets: Investment in Joint Venture (Note D) $15,173,852 $22,729,660 Mortgage-backed securities ("MBS") (Note C) 628,909 645,762 Total real estate assets 15,802,761 23,375,422 Cash and cash equivalents 1,063,094 1,524,048 Interest receivable and other assets 14,634 17,097 Total assets $16,880,489 $24,916,567 LIABILITIES AND PARTNERS' EQUITY Liabilities: Accrued audit liability $ 13,500 $ 13,500 Due to affiliates (Note F) 26 49,363 Total liabilities 13,526 62,863 Partners' equity (deficit) (Note E): Unitholders (2,060,350 Units outstanding) 16,943,976 24,904,826 Corporate Limited Partner (100 Units outstanding) (987) (601) General Partner (122,972) (50,521) Unrealized holding gains on MBS (Note C) 46,946 - Total Partners' equity 16,866,963 24,853,704 Total liabilities and Partners' equity$16,880,489 $24,916,567
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-V LIMITED PARTNERSHIP STATEMENTS OF INCOME (LOSS) For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 Income: Interest income - MBS (Note C) $56,747 $72,801 $ 86,939 Interest income - other 75,628 96,793 137,017 Total income 132,375 169,594 223,956 Expenses: General and administrative (Note F) 165,861 134,399 99,239 Asset management fees (Note F) 142,453 143,178 144,082 Amortization of acquisition costs (Note D) 1,777,960 104,586 - Total expenses 2,086,274 382,163 243,321 Loss from operations (1,953,899) (212,569) (19,365) Partnership's share of Joint Venture net income (loss) (Note D) (4,006,491) 910,834 906,900 Net income (loss) (Note G) $(5,960,390) $ 698,265 $ 887,535 Allocation of net income (loss) (Note E): Unitholders (2,060,350 Units outstanding)$(5,900,500)$ 691,248$ 878,617 Net income (loss) per Unit of Depositary Receipt $ (2.86) $ .34 $ .43 Corporate Limited Partner (100 Units outstanding) $ (286) $ 34 $ 43 General Partner $ (59,604) $ 6,983 $ 8,875
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-V LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 1997, 1996 and 1995
Corporate Unrealized Total Limited General Holding Partners' Unitholders Partner Partner Gains on MBS Equity Balance at December 31, 1994 $27,455,662 $ (478) $ (34,615)$ - $27,420,569 Distributions (2,060,350) (100) (17,139) - (2,077,589) Net income 878,617 43 8,875 - 887,535 Balance at December 31, 1995 26,273,929 (535) (42,879) - 26,230,515 Distributions (2,060,351) (100) (14,625) - (2,075,076) Net income 691,248 34 6,983 - 698,265 Balance at December 31, 1996 24,904,826 (601) (50,521) - 24,853,704 Distributions (Note E) (2,060,350) (100) (12,847) - (2,073,297) Net loss (Note E) (5,900,500) (286) (59,604) - (5,960,390) Unrealized holding gains on MBS (Note C) - - - 46,946 46,946 Balance at December 31, 1997 $16,943,976$ (987) $(122,972)$ 46,946$16,866,963
The per Unit distributions for each of the years ended December 31, 1997, 1996, and 1995 was $1.00, with $.24, $.44 and $.30, respectively, representing a return of capital for tax purposes. The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-V LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 Operating activities: Net income (loss) $(5,960,390) $ 698,265 $ 887,535 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Amortization of acquisition costs 1,777,960 104,586 - Amortization of MBS discount (755) (4,847) (669) Partnership's share of Joint Venture net (income) loss 4,006,491 (910,834) (906,900) Distributions from Joint Venture - 910,834 906,900 Changes in assets and liabilities: Decrease in interest receivable and other assets 2,463 19,093 2,279 Increase (decrease) in due to affiliates (49,337) 49,363 - Increase (decrease) in accrued audit liability - 3,771 (6,806) Net cash provided by (used in) operating activities (223,568) 870,231 882,339 Investing activities: Distributions from Joint Venture in excess of net income 1,771,357 353,133 561,160 Principal collections on MBS 64,554 274,639 69,680 Net cash provided by investing activities 1,835,911 627,772 630,840 Financing activity: Distributions (2,073,297) (2,075,076)(2,077,589) Net decrease in cash and cash equivalents (460,954) (577,073) (564,410) Cash and cash equivalents, beginning of year 1,524,048 2,101,121 2,665,531 Cash and cash equivalents, end of year$ 1,063,094 $ 1,524,048 $2,101,121 Supplemental schedule of noncash investing and financing activities: Unrealized holding gains on MBS (Note C) $ 46,946 $ - $ -
The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS A.Organization Krupp Cash Plus-V Limited Partnership (the "Partnership") was formed on August 22, 1988 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. The Partnership originally issued all of the General Partner Interests to Krupp Plus Corporation and The Krupp Company Limited Partnership-VI in exchange for capital contributions aggregating $3,000. Except under certain limited circumstances upon termination of the Partnership, the General Partners are not required to make any additional capital contributions. On March 15, 1995, Krupp Plus Corporation withdrew as General Partner from the Partnership and assigned its rights, title and interest in the Partnership to Krupp Company Limited Partnership-VI. The Partnership issued all of the Corporate Limited Partner Interests to Krupp Depositary Corporation (the "Corporate Limited Partner") in exchange for a capital contribution of $2,000. The Corporate Limited Partner, in turn, issued Depositary Receipts (the "Units") to the investors and assigned all of its rights and interest in the Limited Partner Interests (except for its $2,000 Limited Partner's interest) to the holders of the Units (the "Unitholders"). As of March 1, 1991, the Partnership completed its public offering having sold 2,060,350 Units for $41,203,189, net of purchase volume discounts of $3,811. On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the General Partner, as agent for the Partnership and its Joint Venture Partner, Berkshire Realty Company Inc., (collectively referred to herein as the "Joint Venture Partners") entered into an Agreement of Sale to sell the Joint Venture's property, Spring Valley Marketplace. The property was included in a package with thirteen other properties owned by affiliates of the Joint Venture Partners. The transaction was consummated on January 30, 1998 (see Note H). The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partners expect to liquidate and distribute the remaining assets of the Partnership in 1998. All distributions of net cash proceeds from the Terminating Capital Transaction shall be governed by the Partnership Agreement. B.Significant Accounting Policies The Partnership uses the following accounting policies for financial reporting purposes, which may differ in certain respects from those used for federal income tax purposes (see Note G): Risks and Uncertainties The Partnership invests its cash primarily in deposits and money market funds with commercial banks. The Partnership has not experienced any losses to date on its invested cash. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities and revenues and expenses during the reporting period. Actual results could differ from those estimates. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued B.Significant Accounting Policies, Continued Cash and Cash Equivalents The Partnership includes all short-term investments with maturities of three months or less from the date of acquisition in cash and cash equivalents. Cash equivalents are recorded at cost, which approximates current market values. Deferred Costs Costs incurred in connection with the acquisition of computer software are being amortized over a five year period using the straight-line method. Costs incurred in connection with the organization of the Partnership were amortized over a five year period using the straight-line method. Costs incurred in connection with the acquisition of the Partnership's Joint Venture are amortized over the remaining life of the underlying asset (see Note H). Investment in Joint Venture The Partnership has a 49.9% interest in the Spring Valley Partnership (the "Joint Venture"). This investment was recorded at cost and is accounted for by the equity method since the Partnership Agreement requires a two-thirds majority for all major decisions regarding the Joint Venture. As such, the Partnership does not have control of the operations of the underlying asset. Under the equity method of accounting, the Partnership's equity investment in the net income (loss) of the Joint Venture is included currently in the Partnership's net income (loss). Cash distributions received from the Joint Venture reduce the Partnership's investment (see Note D). Mortgage Backed Securities At December 31, 1997, MBS are classified as available-for-sale securities and are carried at market value due to the forthcoming sale of the Joint Venture's property (see Notes C and H). The market value of MBS is determined based on quoted market prices. At December 31, 1996, MBS were classified as held-to- maturity securities and carried at amortized cost. Premiums or discounts are amortized over the life of the underlying mortgages using the effective yield method. Income Taxes The Partnership is not liable for federal or state income taxes as Partnership income or loss is allocated to the Partners for income tax purposes. In the event that the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and the examination results in a change in the Partnership's taxable income or loss, such change will be reported to the Partners. Reclassifications Certain prior year balances have been reclassified to conform with current year financial statement presentation. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued C.Mortgage-Backed Securities All of the MBS held by the Partnership are issued by the Federal Home Loan Mortgage Corporation. The following is additional information on the MBS held as of December 31, 1997 and 1996:
1997 1996 Face Value $592,004 $656,558 Amortized Cost $581,963 $645,762 Estimated Market Value $629,000 $694,000
Coupon rates of the MBS range from 9.0% to 9.5% per annum and mature in the years 2016 and 2017. The Partnership's MBS portfolio had gross unrealized gains of $46,946 and $48,407 at December 31, 1997 and 1996, respectively. In accordance with Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities", unrealized holding gains and losses for available-for-sale securities are reported as a separate component of equity until realized. At December 31, 1997, the Partnershipr recorded unrealized holding gains of $46,946 on its MBS investments to adjust to market value based on quoted market prices. D.Investment in Joint Venture On December 14, 1988, the Joint Venture acquired Spring Valley Marketplace (the "Marketplace"), a 320,684 square foot shopping center located on 30 acres of land in Spring Valley, Rockland County, New York. The Joint Venture acquired the Marketplace for $50,000,000 and incurred closing costs of $359,408 related to the acquisition. Additionally, the Joint Venture executed a Net Operating Income Guaranty Agreement ("NOI Guaranty Agreement") with the seller, by which, the seller would reimburse the Joint Venture if the net operating income from the Marketplace did not meet or exceed $4.3 million annually. In accordance with the Net Operating Income Guaranty Agreement, the Joint Venture has collected $1,000,000, the maximum obligation due from the seller, and has therefore reduced the cost basis of the Marketplace by this amount for financial reporting purposes. The Marketplace, built in 1987, consists of one structure anchored by five major tenants and is connected by five sections occupied by smaller tenants. The Joint Venture owns the Marketplace free and clear from all material liens or encumbrances.The Partnership holds a 49.9% joint venture interest. At December 31, 1997, the investment balance reflected the original cost of the investment, allocations of net income (loss) earned by the Joint Venture and distributions received by the Joint Venture. For the year ended December 31, 1997, the Partnership recognized amortization of acquisition costs related to the Joint Venture investment of $1,777,960. Due to the anticipated sale of the Marketplace subsequent to year end, the Partnership fully amortized the remaining net acquisition costs. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued D.Investment in Joint Venture, Continued In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of", the Joint Venture recordeda valuation provision for losses on its real estate asset of $9,277,433 as of December 31, 1997. These provisions represent the difference between carrying value and selling price less estimated costs to sell as a result of the forthcoming sale of the Joint Venture's property subsequent to year end (see Note H). As these assets are held for sale, the Joint Venture Partnership has discontinued depreciation. Separate financial statements for the Joint Venture are included on pages F-15 through F-27 of this report. E. Partners' Equity Under the Partnership Agreement, profits or losses from Partnership operations and Distributable Cash Flow are allocated 99% to the Unitholders and Corporate Limited Partner (the "Limited Partners") based on Units held, and 1% to the General Partner. Upon the occurrence of a terminating capital transaction, as defined in the Partnership Agreement, proceeds will be applied to the payment of all debts and liabilities of the Partnership then due and then fund any reserves for contingent liabilities. Remaining net cash proceeds will then be distributed first, to each class of Partner, the aggregate of the then positive balances in the capital accounts of the Partners of such class, second, to the Limited Partners until the aggregate of the positive balances in the capital accounts of the Limited Partners is equal to their invested capital, third, to the General Partner until the aggregate of the positive balances in the capital accounts of the General Partner is equal to their invested capital, fourth, to the Limited Partners until they have received any deficiency in the 12% cumulative return on invested capital through fiscal years prior to the date of the terminating capital transaction, fifth, to the General Partner until they have received an amount necessary so that the amounts of net cash proceeds whenever allocated under number three and number four are in the ratio of 90% to 10%, and sixth, 90% to the Limited Partners and 10% to the General Partner. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued E. Partners' Equity, Continued As of December 31, 1997, the following cumulative Partner contributions and allocations have been made since inception of the Partnership:
Unrealized Corporate Holding Limited General Gains on Unitholders Partner Partner MBS Total Capital Contributions$ 41,203,189 $2,000 $ 3,000 - $41,208,189 Syndication Costs (4,826,066) - - - (4,826,066) Distributions (19,096,891) (1,029) (119,603) - (19,217,523) Unrealized Holding Gains on MBS - - - 46,946 46,946 Net Loss (336,256) (1,958) (6,369) - (344,583) Balance at December 31, 1997 $ 16,943,976$ (987)$(122,972)$ 46,946$ 16,866,963
F. Related Party Transactions Under the terms of the Partnership Agreement, the General Partner or its affiliates are entitled to an Asset Management Fee for the management of the Partnership's business equal to .5% per annum of the Total Invested Assets of the Partnership, as defined in the Prospectus, payable quarterly. The Partnership also reimburses affiliates of the General Partner for certain expenses incurred in connection with the preparation and mailing of reports and other communications to the Unitholders. Amounts paid to the General Partner's affiliates were as follows:
1997 1996 1995 Asset management fees $142,453 $143,178 $144,082 Expense reimbursements 114,447 92,401 53,519 Charged to operations $256,900 $235,579 $197,601
Due to affiliates consisted of expense reimbursements of $26 and $49,363 at December 31, 1997 and 1996, respectively. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued G. Federal Income Taxes The reconciliation of net income (loss) reported in the accompanying Statements of Income with the net income reported in the Partnership's 1997, 1996 and 1995 federal income tax returns is as follows:
1997 1996 1995 Net income (loss) per Statements of Income $(5,960,390) $ 698,265 $ 887,535 Difference in book to tax amortization 1,673,374 - - Difference in Partnership's share of Joint Venture taxable net income due to book to tax difference in depreciation 371,582 296,811 264,724 Difference in Partnership's share of Joint Venture taxable net income due to book to tax difference in bad debt (10,692) 7,767 - Difference in Partnership's share of Joint Venture taxable net income due to book to tax difference in fixed asset revaluation 4,434,396 - - Difference in Partnership's share of difference due to rental adjustment required by Generally Accepted Accounting Principles 983 13,120 (9,071) Net income for federal income tax purposes $ 509,253$1,015,963 $1,143,188 The allocation of the 1997 net income for federal income tax purposes is as follows: Portfolio Passive Income Income Total Unitholders $ 156,699 $347,436 $ 504,135 Corporate Limited Partner 8 17 25 General Partner 1,583 3,510 5,093 $ 158,290 $350,963 $ 509,253
For the years ended December 31, 1997, 1996 and 1995 the average per Unit income to the Unitholders for federal income tax purposes was $.24, $.49 and $.55, respectively. Continued KRUPP CASH PLUS-V LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued G.Federal Income Taxes, Continued The basis of the Partnership's assets for financial reporting purposes is less than its tax basis by approximately $8,213,000 and $1,840,000 at December 31, 1997 and 1996, respectively. The tax and book basis of the Partnership's liabilities are the same. H.Subsequent Events The sale of the Joint Venture's property, as discussed in Note A, was consummated on January 30, 1998. The total selling price of the fourteen properties was $138,000,000, of which the Joint Venture Partners received $29,571,700, less their share of the closing costs. The sale is considered a Terminating Capital Transaction as defined by the Partnership Agreement. Accordingly, the General Partner expects to liquidate and distribute the remaining assets of the Partnership in 1998. All distributions of net cash proceeds from the Terminating Capital Transaction shall be governed by Section 8.3(b) of the PartnershipAgreement as discussed above in Note E. As a result of the sale of the Marketplace on January 30, 1998, the Partnership filed a report on Form 8-K on February 2, 1998. SPRING VALLEY PARTNERSHIP FINANCIAL STATEMENTS AND SCHEDULE For the Year Ended December 31, 1997 SPRING VALLEY PARTNERSHIP INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Report of Independent Accountants F-17 Balance Sheets at December 31, 1997 and December 31, 1996 F-18 Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 F-19 Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995 F-20 Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 F-21 Notes to Financial Statements F-22 - F-26 Schedule III - Real Estate and Accumulated Depreciation F-27 All other schedules are omitted as they are not applicable or not required, or the information is provided in the financial statements or the notes thereto. REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Spring Valley Partnership: We have audited the financial statements and financial statement schedule of Spring Valley Partnership (the "Joint Venture") listed in the index on page F-16 of these Financial Statements. These financial statements and the financial statement schedule are the responsibility of the Joint Venture's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spring Valley Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in Note I, the Joint Venture's property was sold on January 30, 1998. As a result, the Joint Venture will be liquidated in 1998. Boston, Massachusetts COOPERS & LYBRAND L.L.P. January 30, 1998 SPRING VALLEY PARTNERSHIP BALANCE SHEETS December 31, 1997 and 1996 ASSETS
1997 1996 Real estate assets: Land $ 10,403,471$ 10,403,471 Building and improvements 43,632,731 43,425,111 54,036,202 53,828,582 Less accumulated depreciation at December 31, 1996 (Note G) (25,327,070) (13,983,325) Total real estate assets 28,709,132 39,845,257 Cash and cash equivalents 575,784 1,153,075 Other assets 1,392,739 1,099,725 Total assets $ 30,677,655$ 42,098,057 LIABILITIES AND PARTNERS' EQUITY Liabilities: Accrued expenses and other liabilities (Note C)$ 380,150 $ 185,163 Accounts payable - 30,044 Due to affiliates (Note F) 828 7,320 Total liabilities 380,978 222,527 Partners' equity (Note D) 30,296,677 41,875,530 Total liabilities and Partners' equity $ 30,677,655$ 42,098,057
The accompanying notes are an integral part of the financial statements. SPRING VALLEY PARTNERSHIP STATEMENTS OF OPERATIONS For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 Revenue: Rental (Note E) $ 6,734,019 $6,938,222 $6,544,064 Other income 51,936 33,438 35,233 Total revenue 6,785,955 6,971,660 6,579,297 Expenses: Operating (Note F) 344,832 376,480 350,023 Maintenance 493,218 649,491 511,014 Management fees (Note F) 394,601 416,414 398,642 Real estate taxes 2,238,599 1,804,942 1,661,539 Depreciation 2,066,312 1,899,015 1,840,644 Provision for losses on real estate (Note G) 9,277,433 - - Total expenses 14,814,995 5,146,342 4,761,862 Net income (loss) (Note H) $(8,029,040)$1,825,318 $1,817,435 Allocation of net income (loss) (Note D): Cash Plus-V Limited Partnership $(4,006,491) $ 910,834 $ 906,900 Berkshire Realty Company, Inc.$(4,022,549) $ 914,484 $ 910,535
The accompanying notes are an integral part of the financial statements. SPRING VALLEY PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 1997, 1996, and 1995
Berkshire Cash Plus-V Realty Total Limited Company, Partners' Partnership Inc. Equity Balance at December 31, 1994 $21,865,991 $21,841,786 $43,707,777 Distributions (1,468,058) (1,473,942) (2,942,000) Net income 906,900 910,535 1,817,435 Balance at December 31, 1995 21,304,833 21,278,379 42,583,212 Distributions (1,263,967) (1,269,033) (2,533,000) Net income 910,834 914,484 1,825,318 Balance at December 31, 1996 20,951,700 20,923,830 41,875,530 Distributions (Note D) (1,771,357) (1,778,456) (3,549,813) Net loss (Note D) (4,006,491) (4,022,549) (8,029,040) Balance at December 31, 1997 $15,173,852 $15,122,825 $30,296,677
The accompanying notes are an integral part of the financial statements. SPRING VALLEY PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995 Operating activities: Net income (loss)$(8,029,040) $ 1,825,318 $ 1,817,435 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 2,066,312 1,899,015 1,840,644 Provision for losses on real estate 9,277,433 - - Changes in assets and liabilities: Increase in other assets (293,014) (183,554) (143,627) Increase (decrease) in accounts payable (23,044) (22,532) 37,044 Increase (decrease) in due to affiliates (6,492) 4,598 2,722 Increase (decrease) in other liabilities 194,987 (52) (9,839) Net cash provided by operating activities 3,187,142 3,522,793 3,544,379 Investing activities: Increase (decrease) in accounts payable related to fixed asset additions (7,000) 7,000 - Additions to fixed assets (207,620) (419,284) (279,315) Net cash used in investing activities (214,620) (412,284) (279,315) Financing activity: Distributions (3,549,813) (2,533,000) (2,942,000) Net increase (decrease) in cash and cash equivalents (577,291) 577,509 323,064 Cash and cash equivalents, beginning of year 1,153,075 575,566 252,502 Cash and cash equivalents, end of year $ 575,784 $ 1,153,075 $ 575,566
The accompanying notes are an integral part of the financial statements. SPRING VALLEY PARTNERSHIP NOTES TO FINANCIAL STATEMENTS A.Organization Spring Valley Partnership (the "Joint Venture") was formed on December 13, 1988 by filing a Business Certificate in the Commonwealth of Massachusetts. The original General Partner interests were issued to Krupp Cash Plus-IV Limited Partnership ("Cash Plus- IV"), at 50.1%; Krupp Cash Plus-V Limited Partnership ("Cash Plus-V"), at .01%; and Krupp Realty Company Limited Partnership ("Krupp Realty Company"), at 49.89%. Pursuant to the original Partnership Agreement, Cash Plus-V purchased Krupp Realty Company's interest in the Joint Venture and succeeded to its capital contributions and its share of profit and loss allocations and distributions. On June 25, 1991, The Joint Venture executed an Amended and Restated Partnership Agreement, whereby Cash Plus-IV assigned its rights, title and interest in the Partnership to Berkshire Realty Company, Inc. ("Berkshire"), a Delaware Corporation. Pursuant to the Assignment and First Amendment to Spring Valley Partnership Amended and Restated Partnership Agreement dated May 1, 1995, Berkshire assigned 49.1% of its rights, title and interest in the Partnership to BRI OP Limited Partnership ("BRI OP LP"), its majority owned subsidiary. As of December 31, 1995, the Joint Venture Partners of Spring Valley Partnership are BRI OP LP (49.1%) and Berkshire (1%), collectively, "Berkshire Realty Company, Inc." (50.1%) and Cash Plus-V Limited Partnership (49.9%). Profits and losses and distributions will continue to be allocated to the Joint Venture Partners based on the percentage of their respective capital contributions to total Partners' capital contributions. On December 14, 1988, the Joint Venture acquired Spring Valley Marketplace (the "Marketplace"), a 320,684 square foot shopping center located on 30 acres of land in Spring Valley, Rockland County, New York. The Joint Venture acquired the Marketplace for $50,000,000 and incurred closing costs of $359,408 related to the acquisition. Additionally, the Joint Venture executed a Net Operating Income Guaranty Agreement ("NOI Guaranty Agreement") with the seller, by which, the seller would reimburse the Joint Venture if the net operating income from the Marketplace did not meet or exceed $4.3 million annually. Per the NOI Guaranty Agreement, which expired on December 13, 1990, the seller's obligation was limited to $1,000,000 on a cumulative basis. As a result of the NOI Guaranty Agreement, the Joint Venture has collected $1,000,000, the maximum obligation due from the seller, and has therefore reduced the cost basis of the Marketplace by this amount for financial reporting purposes. The Marketplace, built in 1987, consists of one structure anchored by five major tenants and is connected by five sections occupied by smaller tenants. The Joint Venture owns the Marketplace free and clear from all material liens or encumbrances. On December 2, 1997, Berkshire Realty Enterprise Limited Partnership, an affiliate of the Joint Venture Partners, as agent for the Joint Venture, entered into an Agreement of Sale to sell the Joint Venture's property, Spring Valley Marketplace, to Kejack, Inc. and its permitted assigns, which are unaffiliated third parties. Spring Valley Marketplace was included in a package with thirteen other properties owned by affiliates of the Joint Venture Partners. The transaction was consummated on January 30, 1998 (see Note I). The sale of the Marketplace is considered a cause for dissolution of the Joint Venture as defined by the Partnership Agreement. Accordingly, the Joint Venture Partners expect to liquidate and distribute the remaining assets of the Joint Venture in 1998. All distributions of net cash proceeds from the Terminating Capital Transaction shall be governed by Section 8.3 (b) of the Partnership Agreement. Continued SPRING VALLEY PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued B. Significant Accounting Policies The Joint Venture uses the following accounting policies for financial reporting purposes, which may differ in certain respects from those used for federal income tax purposes (see Note H): Risks and Uncertainties The Joint Venture invests its cash primarily in deposits and money market funds with commercial banks. The Joint Venture has not experienced any losses to date on its invested cash. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Joint Venture includes all short-term investments with maturities of three months or less from the date of acquisition in cash and cash equivalents. Cash equivalents are recorded at cost, which approximates current market value. Rental Revenues Commercial leases require the payment of base rent monthly in advance. Rental revenues are recorded on the accrual basis. Leases generally contain provisions for additional rent based on a percentage of tenant sales and other provisions which are also recorded on the accrual basis, but are billed in arrears. Minimum rental revenue for long term commercial leases is recognized on a straight- line basis over the life of the related lease. Depreciation Depreciation of building and improvements is provided for by the use of the straight-line method over estimated useful lives of 3 to 25 years. Tenant improvements are depreciated over the life of the lease. Impairment of Long-Lived Assets Real estate assets and equipment are stated at depreciated cost. Pursuant to Statement of Financial Accounting Standards Opinion No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", impairment losses are recorded on long-lived assets used in operations on a property by property basis, when events and circumstances indicate that the assets might be impaired and the estimated undiscounted cash flows to be generated by those assets are less than the carrying amount of those assets. Upon determination that an impairment has occurred, those assets shall be reduced to fair value less estimated costs to sell (see Note G). Leasing Commissions Leasing commissions are deferred and amortized over the life of the related lease. Continued SPRING VALLEY PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued B.Significant Accounting Policies, Continued Income Taxes The Joint Venture is not liable for federal or state income taxes because Joint Venture income or loss is allocated to the Partners for income tax purposes. In the event the Joint Venture's tax returns are examined by the Internal Revenue Service or state taxing authority and such an examination results in a change in Joint Venture taxable income or loss, such change will be reported to the Partners. C.Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following at December 31, 1997 and 1996:
1997 1996 Prepaid rent $225,000 $ - Accrued insurance 89,673 110,846 Tenant security deposits 65,185 71,614 Other accrued expenses 292 2,703
$380,150 $185,163 D.Partners' Equity Under the terms of the Partnership Agreement, profits, losses and distributions are allocated 49.9% to Cash Plus-V Limited Partnership and 50.1% to Berkshire Realty Company, Inc. Upon the occurrence of the sale by the Joint Venture of all or substantially all of the Property and other assets owned by the Joint Venture, the Joint Venture shall be dissolved. After payment of the debts and allowances for the liabilities of the Joint Venture, the remaining assets shall be distributed to the Joint Venture Partners on the basis of the amount of each Partner's capital contribution in proportion to total capital contributions. As of December 31, 1997, the following cumulative Partner contributions and allocations have been made since inception of the Joint Venture:
Berkshire Cash Plus-V Realty Total Limited Company, Partners' Partnership Inc. Equity Capital contributions $ 26,379,755 $ 26,373,641$ 52,753,396 Net income 2,245,368 2,254,369 4,499,737 Distributions (13,451,271) (13,505,185) (26,956,456) Total at December 31, 1997 $ 15,173,852 $ 15,122,825 $ 30,296,677
E. Future Base Rents Due Under Commercial Operating Leases As a result of the sale of the Marketplace subsequent to year- end, all commercial operating leases were assumed by the buyer (see Note I). Continued SPRING VALLEY PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued F.Related Party Transactions Property management fees are paid monthly to an affiliate of the Joint Venture Partners at the rate of up to 6% of rentals and other operating income received by the Marketplace. The Joint Venture also reimburses affiliates for certain expenses incurred in connection with operation of the Joint Venture and its property including administrative expenses. Amounts paid or accrued to affiliates of the Joint Venture Partners during the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995 Property management fees$394,601 $416,414 $398,642 Expense reimbursements 42,841 87,766 58,284 Charged to operations$437,442 $504,180 $456,926
Due to affiliates consisted of expense reimbursements of $828 and $7,320 at December 31, 1997 and 1996, respectively. G.Provision for Losses on Real Estate In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", the Joint Venture recorded a valuation provision for losses on its real estate asset of $9,277,433 as of December 31, 1997, these provisions represent the difference between carrying value and selling price less estimated costs to sell as a result of the forthcoming sale of the Joint Venture's property subsequent to year end (see Note I). As this asset is held for sale, the Joint Venture has discontinued depreciation. H.Federal Income Taxes The reconciliation of the net income (loss) for each year reported in the accompanying Statement of Operations with the net income reported in the Joint Venture's federal income tax return is as follows:
1997 1996 1995 Net income (loss) per Statement of Operations$(8,029,040) $1,825,318 $1,817,435 Difference in book to tax depreciation 784,586 624,845 573,232 Difference in book to tax bad debt (21,428) 15,566 - Difference in book to tax fixed asset revaluation 8,886,565 - - Rental adjustment required by Generally Accepted Accounting Principles 1,969 26,293 (18,176) Net income for federal income tax purposes $ 1,622,652 $2,492,022 $2,372,491 Continued SPRING VALLEY PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued H. Federal Income Taxes, Continued The allocation of the 1997 net income for federal income tax purposes is as follows: Passive Portfolio Income Income Total Cash Plus-V Limited Partnership $ 763,862 $ 25,915 $ 789,777 Berkshire Realty Company, Inc. 806,856 26,019 832,875 $1,570,718 $ 51,934 $1,622,652
The basis of the Joint Venture's assets for financial reporting purposes is less than its tax basis by approximately $16,543,000 and $6,157,000 at December 31, 1997 and 1996, respectively. The tax and book basis of the Joint Venture's liabilities are the same. I.Subsequent Event The sale of the Joint Venture's property, as discussed in Note A, was consummated on January 30, 1998. The total selling price of the fourteen properties was $138,000,000, of which the Joint Venture Partners received $29,571,700, less their share of the closing costs. The sale is considered a cause for dissolution of the Joint Venture as defined by the Partnership Agreement. Accordingly, the Joint Venture Partners expect to liquidate and distribute the remaining assets of the Joint Venture in 1998. All distributions of net cash proceeds from the sale and dissolution of the Joint Venture shall be governed by Section IV, Paragraph 17, of the Partnership Agreement, as discussed above in Note D. SPRING VALLEY PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1997
Costs Capitalized Subsequent to Initial Cost to Joint Venture Acquisition Buildings & Buildings & Depreciable Description Land Improvements Improvements Life Spring Valley Marketplace $10,403,471 $ 41,613,880 $ 2,018,8513 to 25 years Gross Amounts Carried at End of Year Accumulated Buildings Depreciation Year and & Valuation Construction Year Description Land Improvements Total(a) Provision Completed Acquired Spring Valley Marketplace $10,403,471$ 43,632,731$54,036,202$ 25,327,070 1987 1988 Reconciliation of Real Estate and Accumulated Depreciation for each of the three years in the period ended December 31, 1997: Real Estate 1997 1996 1995 Balance at beginning of year $53,828,582 $53,409,298 $53,129,983 Improvements 207,620 419,284 279,315 Balance at end of year $54,036,202 $53,828,582 $53,409,298 Accumulated Depreciation and Property Valuation 1997 1996 1995 Balance at beginning of year $13,983,325 $12,084,310 $10,243,666 Property valuation 9,277,433 - - Depreciation expense 2,066,312 1,899,015 1,840,644 Balance at end of year$25,327,070 $13,983,325 $12,084,310
(a) The aggregate cost of the Joint Venture's real estate for federal income tax purposes was $53,170,799 and the aggregate accumulated depreciation for federal income tax purposes was $8,242,176 for the year ended December 31, 1997. EX-27 2
5 This schedule contains summary financial information extracted from Cash Plus V Financial Statements for the twelve months ended December 31, 1997 and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1997 DEC-31-1997 1,063,094 628,909 13,005 0 0 1,629 15,173,853 0 16,880,489 13,526 0 0 0 16,866,963 0 16,880,489 0 132,375 0 0 6,092,765 0 0 0 0 0 0 0 0 (5,960,390) 0 0 Includes cash and cash equivalents of $569,987 and investments in commercial paper of $493,107. Includes all receivables of the Partnership included in "Other Assets" on the Balance Sheet. Includes investment in Joint Venture. Equity of General Partners ($122,972), Limited Partners $16,942,989 and unrealized holding gain on MBS of $46,946. Includes operating expenses of $2,086,274 and Partnership's share of Joint Venture net loss of $4,006,491. Net Loss allocated ($59,604) to General Partners and ($5,900,786) to the Limited Partners. Net Loss per unit is ($2.86).
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