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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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Commission file number 0-11176
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NTS-PROPERTIES III
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(Exact name of registrant as specified in its charter)
Georgia 61-1017240
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223 40223
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (502) 426-4800
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
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 (Section 229.405 of this chapter) 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. [X]
Exhibit Index: See Page 35
Total Pages: 38
TABLE OF CONTENTS
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Pages
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PART I
Items 1 and 2. Business and Properties 3-7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote
of Security Holders 7
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-16
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 16
Item 8. Financial Statements and Supplementary
Data 17-29
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 30
PART III
Item 10. Directors and Executive Officers of
the Registrant 31-32
Item 11. Management Remuneration and Transactions 32
Item 12. Security Ownership of Certain Beneficial
Owners and Management 33
Item 13. Certain Relationships and Related Transactions 34
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 35-37
Signatures 38
- 2 -
PART I
Items 1. and 2. Business and Properties
-----------------------
Development of Business
- -----------------------
NTS-Properties III (the "Partnership") is a limited partnership organized under
the laws of the state of Georgia on June 24, 1982. The General Partner is NTS-
Properties Associates, a Georgia limited partnership. As of December 31, 1999,
the Partnership owned the following properties:
- Peachtree Corporate Center, a business park with approximately
191,000 net rentable square feet located in Norcross, Georgia,
a suburb of Atlanta. Acquired complete on January 26, 1983.
- NTS Center, an office complex with approximately 115,000 net
rentable square feet located in Jeffersontown, Kentucky, a
suburb of Louisville. Acquired complete on January 26, 1983.
- Plainview Center, an office complex with approximately 94,000
net rentable square feet located in Jeffersontown, Kentucky.
Acquired complete on February 15, 1983.
In the second quarter of 1999, Plainview Plaza II was renamed NTS Center and
Plainview Triad North was renamed Plainview Center.
The Partnership has a fee title interest in the above properties. The General
Partner believes that the Partnership's properties are adequately covered by
insurance.
As of December 31, 1999, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/99
-------- ---- ---- -----------
NTS Center 6.89% 04/10/15 (1) $6,427,622
Peachtree Corporate -- -- None
Center
Plainview Center Prime -.25% 03/01/01 $1,646,234 (2)
(1) Current monthly principal payments are based upon a 17-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(2) On March 3, 1999, the Partnership obtained a $2,000,000 note payable
with a bank. The note is secured by Plainview Center, bears interest at
Prime - 1/4% and is due March 1, 2001.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's properties. Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to accommodate a tenant's needs,
new carpeting and paint and/or wallcovering. The extent and cost of these
improvements are determined by the size of the space and whether the
improvements are for a new tenant or incurred because of a lease renewal. Tenant
finish improvements will be funded by cash flow from operations, cash reserves
or additional financing where necessary. As of December 31, 1999, the
Partnership had no material commitments for tenant finish improvements.
Subsequent to December 31, 1999, the Partnership made a commitment for
approximately $50,000 for tenant finish improvements at NTS Center.
- 3 -
Development of Business - Continued
- -----------------------------------
During the third quarter of 1997, the Partnership received notice that the
tenant that occupied approximately 65% of Plainview Center would vacate the
property at the end of the lease term, August 1998. The Partnership was able to
negotiate a 30 day renewal (through September 30, 1998) with the tenant for the
approximately 63,000 square feet that they leased. The Partnership was also able
to negotiate a renewal for approximately 11,000 square feet of the original
63,000 square feet through March 31, 1999. Costs associated with this renewal
were not significant. As a result of this tenant vacating the remainder of their
space on March 31, 1999, there has been and will likely continue to be a
protracted period for the property to become fully leased again and substantial
funds, currently estimated to be from $700,000 to $1,000,000, will likely be
needed for leasing expenses; especially those needed to refinish space for new
tenants.
At Plainview Center, the Partnership renovated the common area and exterior
building. These renovations have been designed to make the property more
competitive and enhance its value. The cost of the renovations, which began
during 1998 and were completed during the fourth quarter of 1999, was
approximately $1,000,000.
In August 1999, a portion of the vacant space at Plainview Center, discussed
above, was leased to a new tenant. The lease is for approximately 28,000 square
feet and has a term of five and one-half years. The tenant took occupancy of the
space during the fourth quarter of 1999. The Partnership has incurred
approximately $500,000 of tenant finish improvements resulting from this lease.
The renovation and leasing costs discussed above will be funded from loan
proceeds ($2,000,000 note payable discussed above) and cash reserves. If
necessary, it may be possible for the Partnership to increase the note payable
secured by Plainview Center. However, there is no assurance that additional
financing will be able to be obtained when needed, or that any financing will be
on favorable terms.
Financial Information About Industry Segments
- ---------------------------------------------
The Partnership is engaged solely in the business of owning and operating
commercial real estate. A presentation of information concerning industry
segments is not applicable. See Note 10 in Item 8 for information regarding the
Partnership's operating segments.
Narrative Description of Business
- ---------------------------------
General
- -------
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to acquire, own and operate NTS Center, Peachtree
Corporate Center and Plainview Center. The Partnership's properties are in a
condition suitable for their intended use.
The Partnership intends to hold the Properties until such time as sale or other
disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a Property, the Partnership will consider
factors such as potential capital appreciation, cash flow and Federal income tax
considerations, including possible adverse Federal income tax consequences to
the Limited Partners.
NTS Center
- ----------
As of December 31, 1999, there were nine tenants leasing the 115,000 square feet
of office space at NTS Center. All leases provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. The tenants who occupy NTS Center are
professional service-orientated organizations. The principal
occupations/professions practiced include real estate, telecommunications, and
grocery chain management. Three tenants individually lease more than 10% of NTS
Center's rentable area.
- 4 -
NTS Center - Continued
- ----------------------
The following table contains approximate data concerning the leases for major
tenants in effect on December 31, 1999.
Sq. Ft. and Current Annual
Year of % of Net Rental per
Expiration Rentable Area Square Foot
---------- ------------- -----------
Major Tenants (1):
1 2004 20,368 (17.7%) $14.50
2 2003 16,937 (14.7%) $12.00
3 2004 53,435 (46.5%) $10.23 (2)
(1) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
(2) In accordance with the lease agreement, the tenant pays their own
electricity and cleaning costs thus the base rent is below market.
Plainview Center
- ----------------
As of December 31, 1999, there were nine tenants leasing office space
aggregating approximately 45,461 square feet of the 94,130 square feet of
rentable area at Plainview Center. All leases provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. The tenants who occupy Plainview Center are
professional service-orientated organizations. The principal
occupation/professions practices include healthcare, mortgage broker and a
victim notification service. One tenant individually leases more than 10% of
Plainview Center's rentable area.
The following table contains approximate data concerning the major lease in
effect on December 31, 1999:
Sq. Ft. and Current Annual
Year of % of Net Rental per
Expiration Rentable Area Square Foot
---------- ------------- -----------
Major Tenant (1):
1 2005 27,835 (29.5%) $14.00
(1) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
Peachtree Corporate Center
- --------------------------
As of December 31, 1999, there were 48 tenants leasing office, warehouse and
storage space aggregating approximately 160,000 square feet of the rentable area
at Peachtree Corporate Center. All leases provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance
and real estate taxes. The tenants who occupy Peachtree Corporate Center are
professional service-orientated organizations. The principal
occupation/profession practiced is sales-related services. There are no tenants
at Peachtree Corporate Center who individually lease 10% or more of the rentable
square footage.
General
- -------
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Peachtree
NTS Plainview Corporate
Center Center Center
------ ------ ------
Federal tax basis $9,603,218 $6,895,447 $9,694,881
Realty tax rate .01091 .01091 .03225
Annual realty taxes $60,409 $46,932 $103,368
- 5 -
General - Continued
- -------------------
Depreciation for book purposes is computed using the straight-line method over
the estimated useful lives of the assets which are 5 - 30 years for land
improvements, 30 years for buildings, 5 - 30 years for building improvements,
3 - 30 years for amenities and life of the lease for tenant improvements.
Competition
- -----------
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents and service provided to tenants. Competition is expected to
increase in the future as a result of the construction of additional properties.
As of December 31, 1999, there are no properties under construction in the
respective vicinities in which the properties are located. The Partnership has
not commissioned a formal market analysis of competitive conditions in any
market in which it owns properties, but relies upon the market condition
knowledge of the employees of NTS Development Company who manage and supervise
leasing for each property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS Properties Associates, the General
Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a wholly-
owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS Properties
Associates. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received $157,290 for the
year ended December 31, 1999. The fee is equal to 5% of gross revenues from the
Partnership's properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods, unless cancelled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1999, the
Management Agreement is still in effect.
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
Seasonal Operations
- -------------------
The Partnership does not consider its operations to be seasonal to any material
degree.
- 6 -
Conflict of Interest
- --------------------
Because the principals of the General Partner and/or its affiliates own and/or
operate real estate properties other than those owned by the Partnership that
are or could be in competition with the Partnership, potential conflicts of
interest exist. Because the Partnership was organized and is operated by the
General Partner, these conflicts are not resolved through arm's length
negotiations but through the exercise of the General Partner's good judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for liability resulting from errors in judgment or certain acts or
omissions. With respect to these potential conflicts of interest, the General
Partner and its affiliates retain a free right to compete with the Partnership's
properties including the right to develop competing properties now and in the
future, in addition to those existing properties which may compete directly or
indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. (See Item 8 Note 8 for further discussion of related party
transactions).
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
- 7 -
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
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Partner Matters
---------------
The Partnership had 814 limited partners as of February 29, 1999. There is no
established trading market for the limited partnership interests, nor is one
likely to develop. Cash distributions and allocations of net income (loss) are
made as described in Note 1D to the Partnership's 1999 financial statements in
Item 8.
No distributions were paid during 1999, 1998 and 1997. Quarterly distributions
are determined based on current cash balances, cash flow being generated by
operations and cash reserves needed for future leasing costs, tenant finish
costs, and capital improvements.
Due to the fact that no distributions were made during 1999, 1998 or 1997, the
table which represents that portion of the distributions that represent a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
- 8 -
Item 6. Selected Financial Data
-----------------------
For the years ended December 31, 1999, 1998, 1997, 1996 and 1995.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Total revenues $ 3,228,662 $ 3,698,431 $ 3,426,290 $ 3,265,631 $ 3,073,103
Total expenses (3,923,458) (3,426,517) (3,291,720) (3,076,384) (3,262,493)
----------- ----------- ----------- ----------- -----------
Net income (loss) before
extraordinary item (694,796) 271,914 134,570 189,247 (189,390)
Extraordinary item -- (65,258) -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (694,796) $ 206,656 $ 134,570 $ 189,247 $ (189,390)
=========== =========== =========== =========== ===========
Net income(loss)
allocated to:
General Partner $ (78,012) $ (93,182) $ (104,636) $ (94,850) $ (102,894)
Limited partners $ (616,784) $ 299,838 $ 239,206 $ 284,097 $ (86,496)
Net income (loss) per
limited partnership
unit $ (46.54) $ 21.64 $ 17.00 $ 19.70 $ (5.58)
Weighted average number
of limited partnership
units 13,253 13,855 14,072 14,418 15,495
Cumulative net income (loss)
allocated to:
General Partner $(2,566,315) $(2,488,303) $(2,395,121) $(2,290,485) $(2,195,635)
Limited partners $ (991,423) $ (374,639) $ 74,801 $ (164,405) $ (448,502)
Cumulative taxable income
(loss) allocated to:
General Partner $(2,689,375) $(2,578,046) $(2,737,694) $(2,845,410) $(2,696,785)
Limited partners $ (974,971) $ (694,314) $ (851,088) $ (682,815) $ (928,736)
Distributions declared:
General Partner $ -- $ -- $ -- $ -- $ --
Limited partners $ -- $ -- $ -- $ 108,018 $ 154,125
Cumulative distributions
declared:
General Partner $ 206,985 $ 206,985 $ 206,985 $ 206,985 $ 206,985
Limited partners $11,349,845 $11,349,845 $11,349,845 $11,349,845 $11,241,827
At year end:
Land, buildings and
amenities, net $11,316,969 $10,219,334 $ 9,828,962 $ 9,428,016 $ 9,585,286
Total assets $12,326,606 $11,170,156 $11,122,316 $10,975,886 $11,120,854
Mortgages Payable $ 8,073,856 $ 6,656,145 $ 6,734,603 $ 6,859,637 $ 6,964,619
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
- 9 -
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations is structured in four major sections. The first section provides
information related to occupancy levels and rental and other income generated by
the Partnership's properties. The second analyzes results of operations on a
consolidated basis. The final sections address consolidated cash flows and
financial condition. Discussion of certain market risks and our cautionary
statements also follow. Management's analysis should be read in conjunction with
the financial statements in Item 8 and the cautionary statements below.
Occupancy Levels
- ----------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
1999(1) 1998 1997
------- ---- ----
NTS Center 100% 100% 84%
Plainview Center (2) 48% 35% 86%
Peachtree Corporate Center (3) 84% 89% 86%
(1) With the exception of Plainview Center, current occupancy levels are
considered adequate to continue the operation of the Partnership's
properties. See below for details.
(2) The current occupancy level is the result of one tenant vacating 52,000
square feet on September 30, 1998 and 11,000 square feet on March 31,
1999. In the opinion of the General Partner of the Partnership, the
year- ending occupancy level is only a temporary situation and does not
represent a permanent downward occupancy trend.
(3) In the opinion of the General Partner of the Partnership, the decrease
in year-ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
The Average Occupancy levels at the Partnership's properties as of December 31
were as follows:
1999 1998 1997
---- ---- ----
NTS Center 100% 98% 88%
Plainview Center 30% 75% 90%
Peachtree Corporate Center 84% 87% 86%
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1999, 1998 and 1997. Items that did not have a
material impact on operations for the periods listed above have been eliminated
from this discussion.
- 10 -
Rental and Other Income
- -----------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31 1999, 1998 and 1997 were as follows:
1999 1998 1997
---- ---- ----
NTS Center $ 1,594,725 $ 1,484,593 $ 1,244,744
Plainview Center $ 410,490 $ 1,045,951 $ 1,057,964
Peachtree Corporate Center $ 1,211,827 $ 1,153,808 $ 1,088,708
Rental and other income decreased approximately $470,000 or 12% in 1999. The
decrease is primarily a result of a decrease in average occupancy at Plainview
Center following the move-out of one tenant who previously occupied 63,000
square feet or 65% of the building (see Item 8 Note 9). The decrease at
Plainview Center is partially offset by increased cost recovery income at
Peachtree Corporate Center and NTS Center.
Rental and other income increased approximately $270,000 or 7% in 1998. The
increase in rental and other income is primarily a result of increased rental
rates on lease renewals and increased average occupancy at Peachtree Corporate
Center and NTS Center and increased cost recovery income at all of the
Partnership's properties. These increases are partially offset by decreased
average occupancy at Plainview Center.
Year-ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
more representative of the entire year's results.
In cases of tenants who cease making rental payments or abandon the premises in
breach of the lease terms, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical. There
have been no funds recovered as a result of these actions during the periods
ended December 31, 1999, 1998 or 1997. As of December 31, 1999 there were no on-
going cases.
Operating expenses increased approximately $66,000 or 8% in 1999 primarily as a
result of increased repairs and maintenance expenses at Peachtree Corporate
Center and increased irrigation and building maintenance expenses at NTS Center.
Operating expenses increased approximately $88,000 or 11% in 1998. The increase
in operating expenses was primarily driven by the increased occupancy at NTS
Center which resulted in increased janitorial, utility and restroom supply
costs. The increase in operating expenses was also a result of the cost to seal
and stripe the parking lot at Plainview Center.
Operating expenses - affiliated increased approximately $67,000 or 16% in 1999
primarily due to increased leasing, administrative and architectural salaries at
Peachtree Corporate Center and Plainview Center. The increase is partially
offset by decreased architectural salaries at NTS Center. Operating expenses -
affiliated are expenses incurred for services performed by employees of NTS
Development Company, an affiliate of the General Partner.
Operating expenses - affiliated decreased approximately $28,000 or 6% in 1998
primarily as a result of decreased leasing costs partially offset by increased
property management costs.
The 1999 write-off of unamortized building, land and tenant improvements is the
result of the write-off of the following items: land improvements at Peachtree
Corporate Center, building improvements at NTS Center and Plainview Center and
tenant improvements at Plainview Center. The write-offs are the result of
various property renovations including resurfacing the parking lot at Peachtree
Corporate Center, replacing corridor carpet at NTS Center, redesigning the lobby
area at Plainview Center and accommodating new leases and improving the
marketability of vacant suites at Plainview Center. In order to complete the
renovations, it was necessary to replace improvements which were not fully
depreciated. The write-offs represent the costs of unamortized assets which were
replaced as a result of the renovations.
- 11 -
Rental and Other Income - Continued
- -----------------------------------
The 1998 and 1997 write-off of unamortized building, land and tenant
improvements can primarily be attributed to NTS Center. The write-off of
unamortized building improvements at NTS Center is the result of renovations of
the common area lobbies, corridors and restrooms. The write-off of unamortized
land improvements at NTS Center is the result of renovations of the sidewalks
and landscaping during 1997. The write-off represents the cost of assets which
had not been fully depreciated.
Interest expense increased approximately $40,000 or 9% in 1999 as a result of a
$2,000,000 note payable secured by Plainview Center in March 1999. The note
bears interest at prime -1/4% and the balance at December 31, 1999 was
$1,646,234. The increase in interest expense is partially offset by principal
payments made on the Partnership's mortgage secured by NTS Center.
Interest expense decreased approximately $56,000 or 11% in 1998 as the result of
a lower interest rate (6.89%) on the $6,800,000 debt financing obtained by the
Partnership on April 1, 1998. Prior to the new financing, the Partnership's debt
bore interest at a fixed rate of 9.125% (on an approximately $2,200,000 mortgage
payable) and a variable rate based on the 10-year treasury bill rate plus 60
basis points (on a $4,500,000 mortgage payable). The variable interest rate
which adjusts quarterly was 6.94% from January to March 1997, 7.39% from April
to June 1997, 7.05% from July to September 1997, and 6.68% from October 1997 to
March 1998. The decrease in interest expense in 1998 is also a result of
principal payments made.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between years will differ from the fluctuations of
management fee expense. The approximate $29,000 or 16% decrease in management
fees in 1999 can be attributed to decreased occupancy and related revenues at
Plainview Center. The approximate $18,000 or 11% increase in management fees in
1998 can be attributed to increased occupancy and related revenues at NTS
Center.
Professional and administrative expenses increased approximately $35,000 or 48%
in 1999 and approximately $14,000 or 23% in 1998 primarily as a result of costs
incurred in connection with the Tender Offers (see discussion below).
Professional and administrative expenses - affiliated decreased approximately
$29,000 or 22% in 1999 primarily as a result of a decrease in salary costs.
Professional and administrative expenses - affiliated are expenses incurred for
the services performed by employees of NTS Development Company, an affiliate of
the General Partner.
Depreciation and amortization increased approximately $57,000 or 6% in 1999 and
approximately $138,000 or 16% in 1998 as the result of assets being placed in
service. Assets placed in service are tenant improvements and building and land
improvements at all the Partnership's properties. The increase in depreciation
and amortization expense is partially offset by a portion of the Partnership's
assets (primarily tenant finish improvements) becoming fully depreciated.
Depreciation is computed using the straight line method over the estimated
useful live of the assets which are 5 - 30 years for land improvements, 30 years
for buildings, 5 - 30 years for building improvements, 3 - 30 years for
amenities and the life of the lease for tenant improvements. The aggregate costs
of the Partnership's properties for Federal tax purposes is approximately
$26,214,477.
The 1998 write-off of unamortized loan costs (recorded as an extraordinary item)
relates to the loan costs associated with two mortgages of the Partnership. The
unamortized loan costs were expensed due to the fact that the mortgages were
repaid April 1, 1998 prior to their maturity (November 1998 and June 2001) as a
result of a new mortgage loan obtained April 1, 1998 as discussed above.
- 12 -
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is derived from operating activities
and investing activities. Cash flows used in investing activities are for tenant
finish improvements and other capital additions and are funded by operating
activities, cash reserves and financing activity. Changes to current tenant
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to accommodate a tenant's needs,
new carpeting and paint and/or wallcovering. The extent and cost of these
improvements are determined by the size of the space and whether the
improvements are for a new tenant or incurred because of a lease renewal. Cash
flows used in investing activities also include purchases of investment
securities. As part of its cash management activities, the Partnership had
purchased Certificates of Deposit or securities issued by the U.S. Government
with initial maturities of greater than three months to improve the return on
its excess cash. The Partnership held the securities until maturity. Cash flows
provided by investing activities are from the maturity of investment securities.
Cash flows provided by investing activities also include the release of funds
escrowed as required by a loan agreement. The funds were required to be escrowed
for the replacement of the HVAC system and asphalt paving at Peachtree Corporate
Center. The balance in the escrow was returned to the Partnership when the loan
was repaid in 1998. Cash flows used in financing activities include principal
payments on the mortgages payable, the repurchase of limited partnership Units,
cash reserved by the Partnership to fund the Tender Offer and the addition of
loan costs. Cash flows provided by financing activities represent the
utilization of cash which has been reserved by the Partnership for the
repurchase of limited partnership Units and proceeds received from new mortgage
loans obtained in 1998 and 1999. The Partnership does not expect any material
changes in the mix and relative cost of capital resources from those in 1999.
Cash flows provided by (used in):
1999 1998 1997
---- ---- ----
Operating activities $ 463,486 $ 1,295,737 $ 1,075,282
Investing activities (1,866,317) (967,030) (1,366,451)
Financing activities 1,273,519 (361,803) (13,574)
------------ ----------- -----------
Net decrease in cash
and equivalents $ (129,312) $ (33,096) $ (304,743)
============ =========== ===========
Net cash provided by operating activities decreased approximately $830,000 or
64% in 1999. The decrease was primarily driven by a decrease in net income as a
result of decreased revenues from Plainview Center (as discussed above), as well
as net negative changes in various working capital accounts.
Net cash provided by operating activities increased approximately $220,000 or
21% in 1998. This increase was primarily driven by higher net income before
depreciation and other non-cash charges.
Net cash used in investing activities increased approximately $899,000 in 1999
as compared to 1998 primarily as a result of increased capital expenditures. Net
cash used in investing activities decreased approximately $399,000 in 1998 as
compared to 1997 as a result of increased funds received from the escrow which
was required by a loan agreement and the fact that no investment securities were
purchased during 1998.
The approximate $1,635,000 increase in net cash provided by financing activities
in 1999 as compared to 1998 is primarily the result of a new mortgage loan
obtained March 2, 1999 to fund renovations at Plainview Center. Net cash used in
financing activities increased approximately $348,000 in 1998 as compared to
1997 as a result of funds being reserved for the purchase of limited partnership
Units through the Tender Offer, higher repurchases of limited partnership Units
through the Interest Repurchase Reserve and the payment of loan costs.
- 13 -
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
The Partnership indefinitely suspended distributions starting December 31, 1996
as a result of the anticipated decrease in occupancy at Plainview Center. Cash
reserves (which are unrestricted cash and equivalents and investment securities
as shown on the Partnership's balance sheet as of December 31) were $104,532 and
$233,844 at December 31, 1999 and 1998, respectively.
In the next 12 months, the General Partner expects the demand on future
liquidity to increase as a result of future leasing activity driven primarily by
the decreased occupancy at Plainview Center. There has been and will likely
continue to be a protracted period for Plainview Center to become fully leased
again and substantial funds, currently estimated to be from $700,000 to
$1,000,000, will likely be needed for leasing expenses; especially those needed
to refinish space for new tenants. As of December 31, 1999, the Partnership had
no material commitments for tenant finish improvements. The demand on future
liquidity will be managed by the General Partner through funds from operations
or additional borrowings secured by the Partnership's properties. There can be
no guarantee that such funds will be available at which time the General Partner
will manage the demand on liquidity accordingly.
Subsequent to December 31, 1999, the Partnership had a commitment for
approximately $50,000 of tenant finish improvements at NTS Center.
Due to the fact that no distributions were made during 1999, 1998 or 1997, the
table which represents that portion of the distribution that represent a return
of capital on a Generally Accepted Accounting Principal basis has been omitted.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in 1995. During the years ended December 31, 1998 and 1997, the Partnership
funded $75,000 and $0, respectively, to the reserve. For the year ending
December 31, 1999, the Partnership has funded $0 to the reserve. Through
September 30, 1998 (the commencement date of the Partnership's First Tender
Offer), the Partnership had repurchased a total of 1,830 Units for $393,240 at a
price ranging from $208 to $250 per Unit. The offering price per Unit was
established by the General Partner in its sole discretion and does not purport
to represent the fair market value or liquidation value of the Units.
Repurchased Units are retired by the Partnership, thus increasing the percentage
of ownership of each remaining limited partner investor. The Interest Repurchase
Reserve was funded from cash reserves. The balance in the reserve at December
31, 1999 was $0.
On September 30, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the"bidders") commenced a tender offer (the "First Tender Offer")
to purchase up to 1,000 Units of the Partnership's limited partnership Units at
a price of $250 per Unit as of the date of the First Tender Offer. The initial
expiration date of the First Tender Offer was December 29, 1998, and this
expiration date was subsequently extended through March 31, 1999. A total of
1,160 Units were tendered and the bidders accepted all Units. The Partnership
repurchased 500 Units and ORIG, LLC purchased 660 Units at a total cost of
$290,000 plus offering expenses.
On July 27, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a tender offer (the "Second Tender
Offer") to purchase up to 1,000 of the Partnership's limited partnership Units
at a price of $250 per Unit. Although the bidders believe that this price is
appropriate, the price of $250 per Unit may not equate to the fair market value
or the liquidation value of the Unit, and is less than the book value per Unit
as of the date of the Second Tender Offer. The initial expiration date of the
Second Tender Offer was October 29, 1999 and this expiration date was
subsequently extended through December 8, 1999. A total of 938 Units were
tendered and the bidders accepted all Units. The Partnership repurchased 500
Units and ORIG, LLC purchased 438 Units at a total cost of $234,500 plus
offering expenses.
- 14 -
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Peachtree Corporate
Center in Norcross, Georgia, the Partnership has an on-site leasing agent, an
employee of NTS Development Company (an affiliate of the General Partner), who
makes calls to potential tenants, negotiates lease renewals with current tenants
and manages local advertising with the assistance of NTS Development Company's
marketing staff. The leasing and renewal negotiations for NTS Center and
Plainview Center are handled by leasing agents, employees of NTS Development
Company, located in Louisville, Kentucky. The leasing agents are located in the
same city as both commercial properties. All advertising for the Louisville
properties is also coordinated by NTS Development Company's marketing staff
located in Louisville, Kentucky.
Leases at all the Partnership's properties provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. This lease provision should protect the
Partnership's operations from the impact of inflation and changing prices.
Year 2000
- ---------
During 1999, all divisions of NTS Corporation, including NTS-Properties III, the
General Partner of the Partnership, reviewed the effort necessary to prepare
NTS' information systems (IT) and non-information technology with embedded
technology (ET) for the Year 2000. The information technology solutions were
addressed separately for the Year 2000 since the Partnership saw the need to
move to more advance management and accounting systems made available by new
technology and software development during the decade of the 1990's. NTS'
property management staff surveyed vendors to evaluate embedded technology in
our alarm systems, HVAC controls, telephone systems and other computer
associated facilities. Some equipment was replaced, while others had circuitry
upgrades.
In 1999, the PILOT software system, purchased in the early 1990's, was replaced
by a Windows based network system both for NTS' headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California replaced PILOT. The Yardi system
is fully implemented and operational as of December 31, 1999. There have been no
Year 2000 related problems with either system.
The costs of these advances in NTS' systems technology are not all attributable
to the Year 2000 issue since NTS had already identified the need to move to a
network based system regardless of the Year 2000. The Partnership's share of the
costs involved were approximately $25,000 during 1999 and 1998. These costs
include primarily purchase, lease and maintenance of hardware and software.
At the date of this filing the Partnership did not experience any significant
operating issues relative to the Year 2000 issue. Despite diligent preparation,
unanticipated third-party failures, inability of our tenants to pay rent when
due, more general public infrastructure failures or failure of our remediation
efforts as planned could have a material adverse impact on our results of
operations, financial conditions and/or cash flows in 2000 and beyond.
- 15 -
Cautionary Statements
- ---------------------
Some of the statements included in Items 1 and 2, Business and Properties and
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, may be considered to be "forward-looking statements" since such
statements relate to matters which have not yet occurred. For example, phrases
such as "the Partnership anticipates", "believes" or "expects" indicate that it
is possible that the event anticipated, believed or expected may not occur.
Should such event not occur, then the result which the Partnership expected also
may not occur or occur in a different manner, which may be more or less
favorable to the Partnership. The Partnership does not undertake any obligations
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
Any forward-looking statements included in Managements's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
office buildings and a business center. If a major commercial tenant defaults on
its lease, the Partnership's ability to make payments due under its debt
agreements, payment of operating costs and other partnership expenses would be
directly impacted. A lessee's ability to make payments are subject to risks
generally associated with real estate, many of which are beyond the control of
the Partnership, including general or local economic conditions, competition,
interest rates, real estate tax rates, other operating expenses and acts of God.
At Plainview Center, there has been and will likely continue to be a protracted
period for the property to become fully leased again. Failure to lease the
vacant space at Plainview Center may have an adverse effect on the Partnership's
operations. The extent of the impact on the Partnership is unknown at this time.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate with the exception of the $2,000,000 note payable which the
Partnership obtained on March 2, 1999. At December 31, 1999, a hypothetical 100
basis point increase in interest rates would increase interest expense by
approximately $16,000.
- 16 -
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties III, a Georgia limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties III, (a
Georgia limited partnership) as of December 31, 1999 and 1998, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 NTS-Properties III as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 36 and 37
are presented for purposes of complying with the Securities and Exchange
Commission's rules and regulations and are not a required part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 24, 2000
- 17 -
NTS-PROPERTIES III
------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
1999 1998
---- ----
ASSETS
- ------
Cash and equivalents $ 104,532 $ 233,844
Cash and equivalents - restricted 8,073 139,350
Accounts receivable, net of allowance
for doubtful accounts of $15,512 (1999)
and $3,034 (1998) 404,773 184,327
Land, buildings and amenities, net 11,316,969 10,219,334
Other assets 492,259 393,301
----------- -----------
$12,326,606 $11,170,156
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $ 8,073,856 $ 6,656,145
Accounts payable - operations 114,813 40,632
Accounts payable - construction 775,219 180,272
Security deposits 142,573 98,611
Other liabilities 43,995 73,550
----------- -----------
9,150,456 7,049,210
Commitments and contingencies (Note 9)
Partners' equity 3,176,150 4,120,946
----------- -----------
$12,326,606 $11,170,156
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 18 -
NTS-PROPERTIES III
------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1999 1998 1997
---- ---- ----
Revenues:
- ---------
Rental income, net of provision for
doubtful accounts of $19,081 (1999),
$1,943 (1998) and $28,661 (1997) $ 2,919,927 $ 3,386,729 $ 3,090,978
Rental income - affiliated 295,336 295,336 295,031
Interest and other income 13,399 16,366 40,281
----------- ----------- -----------
3,228,662 3,698,431 3,426,290
Expenses:
- ---------
Operating expenses 948,995 882,594 794,637
Operating expenses - affiliated 479,799 412,338 440,458
Write-off of unamortized building, land
and tenant improvements 332,333 48,108 86,406
Interest Expense 509,224 468,749 524,901
Management fees 157,290 186,416 168,006
Real estate taxes 210,708 206,038 206,603
Professional and administrative
expenses 109,381 74,514 60,604
Professional and administrative
expenses - affiliated 104,227 133,297 133,969
Depreciation and amortization 1,071,501 1,014,463 876,136
----------- ----------- -----------
3,923,458 3,426,517 3,291,720
----------- ----------- -----------
Net income (loss) before extraordinary
item (694,796) 271,914 134,570
Extraordinary item-write-off of
unamortized loan costs -- (65,258) --
----------- ----------- -----------
Net income (loss) $ (694,796) $ 206,656 $ 134,570
=========== =========== ===========
Net income (loss)allocated to the
limited partners:
Income (loss) before extraordinary item $ (616,784) $ 364,443 $ 239,206
Extraordinary item -- (64,605) --
----------- ----------- -----------
Net income (loss) $ (616,784) $ 299,838 $ 239,206
=========== =========== ===========
Net income (loss) per limited
partnership Unit:
Income (loss) before extraordinary item $ (46.54) $ 26.30 $ 17.00
Extraordinary item -- (4.66) --
----------- ----------- -----------
Net income (loss) $ (46.54) $ 21.64 $ 17.00
=========== =========== ===========
Weighted average number of Units 13,253 13,855 14,072
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 19 -
NTS-PROPERTIES III
------------------
STATEMENTS OF PARTNERS' EQUITY (1)
------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1996 3,772,918 87,210 3,860,128
Net income(loss) 239,206 (104,636) 134,570
Repurchase of limited partnership
units (5,408) -- (5,408)
----------- ----------- -----------
Balances at December 31, 1997 4,006,716 (17,426) 3,989,290
Net income (loss) 299,838 (93,182) 206,656
Repurchase of limited partnership
units (75,000) -- (75,000)
----------- ----------- -----------
Balances at December 31, 1998 4,231,554 (110,608) 4,120,946
Net loss (616,784) (78,012) (694,796)
Repurchase of limited partnership
units (250,000) -- (250,000)
----------- ----------- -----------
Balances at December 31, 1999 $ 3,364,770 $ (188,620) $ 3,176,150
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented, there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board,Statement
of Financial Accounting Standards Statement No. 130, Reporting
---------
Comprehensive Income.
---------------------
- 20 -
NTS-PROPERTIES III
------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $ (694,796) $ 206,656 $ 134,570
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for doubtful accounts 19,081 1,943 28,661
Accrued interest on investment securities -- 923 (923)
Write-off of unamortized building, land and
tenant improvements 332,333 48,108 86,406
Write-off of unamortized loan costs -- 65,258 --
Depreciation and amortization 1,071,501 1,014,464 876,136
Change in assets and liabilities:
Cash and equivalents - restricted 6,277 (3,384) (4,595)
Accounts receivable (239,527) 83,652 (99,613)
Other assets (119,971) (38,907) (39,079)
Accounts payable - operations 74,181 3,859 (60,929)
Security deposits 43,962 (5,205) 10,882
Other liabilities (29,555) (81,630) 143,766
----------- ----------- -----------
Net cash provided by operating activities 463,486 1,295,737 1,075,282
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings, amenities and
construction in progress (2,461,264) (1,418,950) (1,318,585)
Accounts payable - construction 594,947 77,619 48,583
Decrease in cash equivalents - restricted -- 273,633 4,219
Purchase of investment securities -- -- (304,521)
Maturity of investment securities -- 100,668 203,853
----------- ----------- -----------
Net cash used in investing activities (1,866,317) (967,030) (1,366,451)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in mortgage payable 1,646,234 6,800,000 --
Principal payments on mortgages payable (228,523) (6,878,458) (125,034)
Increase in loan costs (19,192) (83,345) --
Repurchase of limited partnership Units (250,000) (75,000) (5,408)
Decrease (increase)in cash and equivalent-
restricted 125,000 (125,000) 116,868
----------- ----------- -----------
Net cash provided by (used in) financing
activities 1,273,519 (361,803) (13,574)
----------- ----------- -----------
Net decrease in cash and equivalents (129,312) (33,096) (304,743)
CASH AND EQUIVALENTS, beginning of period 233,844 266,940 571,683
----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 104,532 $ 233,844 $ 266,940
=========== =========== ===========
Interest paid on a cash basis $ 498,283 $ 444,145 $ 570,819
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 21 -
NTS-PROPERTIES III
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties III (the "Partnership") is a limited
partnership organized under the laws of the State of Georgia
on June 24, 1982. The General Partner is NTS-Properties
Associates, a Georgia limited partnership. The Partnership is
in the business of owning and operating commercial real
estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Peachtree Corporate Center, a business park with
approximately 191,000 net rentable square feet
located in Norcross, Georgia, a suburb of Atlanta.
- NTS Center an office complex with approximately
115,000 net rentable square feet located in
Jeffersontown, Kentucky, a suburb of Louisville.
- Plainview Center, an office complex with
approximately 94,000 net rentable square feet located
in Jeffersontown, Kentucky.
C) Changes in the Names of Properties Held by the Partnership
----------------------------------------------------------
In the second quarter of 1999, Plainview Plaza II was renamed
NTS Center and Plainview Triad North was renamed Plainview
Center.
D) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Net Cash Receipts, as defined in the partnership agreement,
will be distributed, to the extent made available, to the
limited partners in an amount equal to the greater of 10% per
year, non-cumulative, of their invested capital or their pro
rata share of such Net Cash Receipts, as defined in the
partnership agreement. The balance of the Net Cash Receipts,
as defined in the partnership agreement, would be available
for distribution to the General Partner until the General
Partner has received its pro rata share of such Net Cash
Receipts. At such time as the limited partners have received
cash distributions equal to their original capital
contributions, cash flow would be distributed 52% to the
limited partners and 48% to the General Partner. In general,
operating income and losses (exclusive of depreciation) are
allocated to the limited partners and the General Partner in
proportion to their respective distributions of cash for all
period presented in the accompanying Financial Statements. In
no event, however, will the portion of any item of Partnership
income, gain, loss, deduction or credit allocated to the
General Partner be less than 1%. Starting December 31, 1996,
the Partnership has indefinitely interrupted distributions.
- 22 -
1. Significant Accounting Policies - Continued
-------------------------------------------
D) Allocation of Net Income (Loss) and Cash Distributions -
--------------------------------------------------------------
Continued
---------
Depreciation of the assets acquired on the date operations
commenced is allocated directly to the limited partners and
the General Partner based upon their respective tax basis in
the property. Depreciation of assets subsequently acquired is
allocated based on the limited partners' interests of 65% and
the General Partner's interest of 35%. In the accompanying
Statements of Operations, net income (loss) was allocated 99%
to the limited partners and 1% to the General Partner net of
the effects of depreciation on contributed assets in
accordance with the Partnership Agreement.
E) Tax Status
----------
The Partnership has received a ruling from the Internal
Revenue Service stating that the Partnership is classified as
a limited partnership for federal income tax purposes. As
such, the Partnership makes no provision for income taxes. The
taxable income or loss is passed through to the holders of
interests for inclusion on their individual income tax
returns.
The reconciliation of net income for financial statement
purposes and for income tax reporting is as follows:
1999 1998 1997
---- ---- ----
Net income (loss) $(694,796) $ 206,656 $ 134,570
Items handled differently
for tax purposes:
Depreciation 523,494 409,636 (204,471)
Write-off of unamortized
building and tenant
improvements (231,592) (116,602) (86,819)
Rental income (44,971) (145,195) 139,596
Allowance for doubtful
accounts 12,478 (39,001) (39,945)
Other 43,401 928 (3,490)
--------- --------- ---------
Taxable income(loss) $(391,986) $ 316,422 $ (60,559)
========= ========= =========
F) Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
- 23 -
1. Significant Accounting Policies - Continued
-------------------------------------------
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represent 1) funds which
have been escrowed with a mortgage company for NTS Center's
property taxes in accordance with the loan agreement and 2)
funds which the partnership has reserved for the repurchase of
limited Partnership Units (1998 balance only).
H) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost to the
Partnership as determined by the historical cost of the
property to the General Partner for its interest and by the
purchase price of the property to the Partnership for the
limited partners' interests. Depreciation is computed using
the straight-line method over the estimated useful lives of
the assets which are 5-30 years for land improvements, 5-30
years for buildings and improvements, 3 - 30 years for
amenities and the life of the lease for tenant improvements.
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long- Lived Assets to be Disposed Of, specifies circumstances
in which certain long-lived assets must be reviewed for
impairment. If such review indicates that the carrying amount
of an asset exceeds the sum of its expected future cash flows,
the asset's carrying value must be written down to fair value.
Application of this standard during the years ended December
31, 1999, 1998 and 1997 did not result in an impairment loss.
I) Rental Income and Deferred Leasing Commissions
----------------------------------------------
Certain of the Partnership's lease agreements are structured
to include scheduled and specified rent increases over the
lease term. For financial reporting purposes, the income from
these leases is being recognized on a straight-line basis over
the lease term. Accrued income connected with these leases is
included in accounts receivable and totaled $136,323 and
$129,197 December 31, 1999 and 1998, respectively. All
commissions paid to leasing agents are deferred and amortized
on a straight-line basis over the term of the lease to which
they apply.
J) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during
the years ended December 31, 1999, 1998 and 1997.
- 24 -
1. Significant Accounting Policies - Continued
-------------------------------------------
K) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents
include cash on hand and short-term, highly liquid investments
with initial maturities of three months or less.
L) Reclassifications of 1998 and 1997 Financial Statements
-------------------------------------------------------
Certain reclassifications have been made to the December 31,
1998 and 1997 financial statements to conform with December
31, 1999 classifications. These reclassifications have no
material effect on previously reported operations.
2. Concentration of Credit Risk
----------------------------
NTS-Properties III is a limited partnership which owns and operates
commercial properties in Norcross, Georgia, a suburb of Atlanta, and
Jeffersontown, Kentucky, a suburb of Louisville. One tenant in NTS
Center occupies 46% of the office building's net rentable area.
Substantially all of the Partnership's tenants are local businesses or
are businesses which have operations in the location in which they
lease space.
3. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an
Interest Repurchase Reserve in 1995. During the years ended December
31, 1998 and 1997, the Partnership funded $75,000 and $0, respectively,
to the reserve. For the year ending December 31, 1999, the Partnership
has funded $0 to the reserve. Through September 30, 1998 (the
commencement date of the Partnership's First Tender Offer), the
Partnership had repurchased a total of 1,830 Units for $393,240 at a
price ranging from $208 to $250 per Unit. The offering price per Unit
was established by the General Partner in its sole discretion and does
not purport to represent fair market value or liquidation value of the
Units. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited
partner investor. The Interest Repurchase Reserve was funded from cash
reserves. The balance in the reserve at December 31, 1999 was $0.
4. Tender Offer
------------
On September 30, 1998, the Partnership and ORIG, LLC, an affiliate of
the Partnership, (the"bidders") commenced a tender offer (the "First
Tender Offer") to purchase up to 1,000 Units of the Partnership's
limited partnership Units at a price of $250 per Unit as of the date of
the First Tender Offer. The initial expiration date of the First Tender
Offer was December 29, 1998, and this expiration date was subsequently
extended through March 31, 1999. A total of 1,160 Units were tendered
and the bidders accepted all Units. The Partnership repurchased,
pursuant to the First Tender Offer, 500 Units and ORIG, LLC purchased
660 Units at a total cost of $290,000 plus offering expenses.
- 25 -
4. Tender Offer - Continued
------------------------
On July 27, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a tender offer (the "Second
Tender Offer") to purchase up to 1,000 of the Partnership's limited
partnership Units at a price of $250 per Unit. Although the bidders
believe that this price is appropriate, the price of $250 per Unit may
not equate to the fair market value or the liquidation value of the
Unit, and is less than the book value per Unit as of the date of the
Second Tender Offer. The initial expiration date of the Second Tender
Offer was October 29, 1999 and this expiration date was subsequently
extended through December 8, 1999. A total of 938 Units were tendered
and the bidders accepted all Units. The Partnership repurchased,
pursuant to the Second Tender Offer, 500 Units and ORIG, LLC purchased
438 Units at a total cost of $234,500 plus offering expenses.
5. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1999 1998
---- ----
Land and improvements $ 4,817,717 $ 4,737,375
Buildings and improvements 22,230,344 21,481,396
Amenities 148,876 122,429
---------- ----------
27,196,937 26,341,200
Less accumulated depreciation 15,879,968 16,121,866
---------- ----------
$11,316,969 $10,219,334
========== ==========
6. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1999 1998
---- ----
Mortgage payable to an insurance company,
bearing interest at 6.89%, maturing
April 10, 2015, secured by land and building $ 6,427,622 $ 6,656,145
$2,000,000 mortgage payable to a bank
maturing March 1, 2001, secured by
land and buildings, bearing a variable
interest of prime minus .25%. The
current rate at December 31, 1999 is
8.5% and current amount available at
December 31, 1999 is $353,766. 1,646,234 --
---------- ----------
$ 8,073,856 $ 6,656,145
========== ==========
- 26 -
6. Mortgages Payable
-----------------
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 334,774
2001 1,818,416
2002 280,828
2003 300,800
2004 322,192
Thereafter 5,016,846
---------
$8,073,856
=========
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms and average maturities, the fair value of
long-term debt is approximately $7,400,000.
7. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1999:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 2,829,775
2001 2,325,592
2002 1,873,324
2003 1,554,438
2004 1,091,658
Thereafter 257,697
----------
$ 9,932,484
==========
8. Related Party Transactions
--------------------------
Property management fees of $157,290 (1999), $186,416 (1998) and
$168,006 (1997) were paid to NTS Development Company, an affiliate of
the General Partner, pursuant to an agreement with the Partnership. The
fee is equal to 5% of gross revenues from the Partnership's properties.
Also permitted by an agreement with the Partnership, NTS Development
Company will receive a repair and maintenance fee equal to 5.9% of
costs incurred which relate to capital improvements. The Partnership
has incurred $141,626 and $80,897 as a repair and maintenance fee
during the years ended December 31, 1999 and 1998, respectively, and
has capitalized this cost as a part of land, buildings and amenities.
As permitted by an agreement, the Partnership also was charged the
following amounts from NTS Development Company for the years ended
December 31, 1999, 1998 and 1997. These charges include items which
have been expensed as operating expenses - affiliated or professional
and administrative expenses - affiliated and items which have been
capitalized as other assets or as land, buildings and amenities.
- 27 -
8. Related Party Transactions - Continued
--------------------------------------
1999 1998 1997
---- ---- ----
Leasing $262,508 $169,294 $279,851
Administrative 134,215 132,949 166,422
Property manager 252,627 230,315 171,324
Other 8,679 59,411 28,460
------- ------- -------
$658,029 $591,969 $646,057
======= ======= =======
During 1999, NTS Development Company leased 20,368 square feet in NTS
Center at a rental rent of $14.50 per square foot. The Partnership
received approximately $295,000 in rental payments from NTS Development
Company during 1999, 1998 and 1997.
During January 1997, NTS Development Company leased 23,160 square feet
of the available space in NTS Center at a base rent of $13.50 per
square foot. During February and March of 1997, NTS Development Company
leased 20,368 square feet. Effective April 1, 1997, the NTS Development
Company lease was extended for five years to March 2002 at a rental
rate of $14.50 per square foot for 20,368 square feet.
Effective November 19, 1999, the NTS Development Company lease was
extended two years to March 2004 at a rental rate of $14.50 per square
foot for 20,368 square feet. Leasing arrangements contemplated
allowances for certain tenant finish. Expenses related to such tenant
finish were capitalized within the line item land, buildings, amenities
in the accompanying balance sheets. Such capital expenditures were
approximately $225,000 and $394,000 as of and for the years ended
December 31, 1999 and 1998, respectively.
9. Commitments and Contingencies
-----------------------------
One tenant at Plainview Center occupied approximately 65% of the
building. During the third quarter of 1997, the Partnership received
notice that the tenant would vacate the property at the end of the
lease term, August 1998. A 30-day renewal extension was negotiated
(through September 30, 1998) with the tenant for approximatel 63,000
leased square feet. A renewal for approximately 11,000 square feet of
the original 63,000 square feet was also negotiated through March 31,
1999. Costs associated with this renewal were not significant. As a
result of this tenant vacating the remainder of their space on March
31, 1999, there has been and will likely continue to be a protracted
period for the property to become full leased again and substantial
funds, currently estimated to be from $700,000 to $1,000,000, will
likely be needed for leasing expenses; especially those needed to
refinish space for new tenants. Such costs will be funded from
additional available loan proceeds (See Note 6) and cash reserves. If
necessary, it may be possible for the Partnership to increase the note
payable secured by Plainview Center. However, there is no assurance
that additional financing will be obtained when needed, or that any
financing will be available on favorable terms.
- 28 -
10. Segment Reporting
-----------------
The Company's reportable operating segments include only one segment
that is Commercial real estate operations.
11. Subsequent Event
----------------
Subsequent to December 31, 1999, the Affiliate (ORIG, LLC) purchased
Interests in the Partnership pursuant to an Agreement, Bill of Sale and
Assignment dated February 7, 2000, by and among the Affiliate and four
investors in the Partnership (the "Purchase Agreement"). The Affiliate
purchased 135 Interests in the Partnership from one of the investors
for total consideration of $38,676, or an average price of $286.49 per
Interest. The Affiliate paid these investors a premium above the
purchase price previously offered for Interests pursuant to prior
tender offers because this purchase allowed the Affiliate to purchase
substantial number of Interests without incurring the expenses involved
with a tender offer and multiple transfers.
- 29 -
Item 9. Changes in and Disagreements with Accountants on Accounting and
----------------------------------------------------------------------
Financial Disclosure
--------------------
None.
- 30 -
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The General Partners of NTS-Properties Associates are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 58) is the managing General Partner of NTS-Properties
Associates and is Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
L. C. Aroh
- ----------
Mr. Aroh (age 70) has been an independent real estate developer for the past ten
years. He is a partner in other real estate developments with the principals of
NTS Development Company.
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
Alliance Realty Corporation
- ---------------------------
Alliance Realty Corporation was formed in September 1982, and is a wholly-owned
subsidiary of S.N. Alliance, Inc. S.N. Alliance, Inc. is also the parent
corporation of Stifle, Nicolas & Company, Inc. which acted as the Dealer Manager
in connection with the offering for the interests.
Gary D. Adams
- -------------
Mr. Adams (age 54) is Senior Vice President of NTS Development Company. Since
joining the NTS organization in May 1977, Mr. Adams has been involved in the
development, construction and management of properties in the southeast region.
A. Toni Rizzo
- -------------
Mr. Rizzo (age 52) joined Abel Construction during 1995 as the Director of
Business Development. From 1985 to 1995, Mr. Rizzo was an officer of the
Huntington Group and prior to 1985 was an employee of NTS Development Company.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Brian F.
Lavin and Gregory A. Wells.
- 31 -
Item 10. Directors and Executive Officers of the Registrant - Continued
--------------------------------------------------------------
Brian F. Lavin
- --------------
Mr. Lavin (age 46), President of NTS Corporation and NTS Development Company
joined the Manager in June 1997. From November 1994 through June 1997, Mr. Lavin
served as President of the Residential Division of Paragon Group, Inc., and as
a Vice President of Paragon's Midwest Division prior to November 1994. In this
capacity, he directed the development, marketing, leasing and management
operations for the firms expanding portfolios. Mr. Lavin attended the University
of Missouri where he received his Bachelor's Degree in Business Administration.
He has served as a Director of the Louisville Apartment Association. He is a
licensed Kentucky Real Estate Broker and Certified Property Manager. Mr. Lavin
is a member of the Institute of Real Estate Management,and council member of the
Urban Land Institute. He currently serves on the University of Louisville Board
of Overseers and is on the Board of Directors of the National Multi-Housing
Council and the Louisville Science Center.
Gregory A. Wells
- ----------------
Mr. Wells (age 41), Senior Vice President and Chief Financial Officer of NTS
Corporation and NTS Development Company joined the Manager in July, 1999. From
May 1998 through July 1999, Mr. Wells served as Chief Financial Officer of
Hokanson Companies, Inc. and as Secretary and Treasurer of Hokanson Construction
Inc., Indianapolis, Indiana from January 1995 through May 1998. In these
capacities he directed financial and operational activities for commercial
rental real estate, managed property, building and suite renovations, out of
ground commercial and residential construction and third party property
management. Mr. Wells previously served as Vice President of Operations and
Treasurer of Executive Telecom Systems, Inc. a subsidiary of the Bureau of
National Affairs, Inc. (Washington, D.C.). Mr. Wells attended George Mason
University, where he received a Bachelor's Degree in Business Administration.
Mr. Wells is a Certified Public Accountant in both Virginia and Indiana and is
active in various charitable and philanthropic endeavors in the Louisville and
Indianapolis areas.
Mr. Richard L. Good, who was Vice Chairman and former President of NTS Capital
Corporation and NTS Development Company, retired effective September 3, 1999.
Item 11. Management Remuneration and Transactions
----------------------------------------
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company. The
Partnership is also required to pay to NTS Development Company a repair and
maintenance fee on costs related to specific projects. Also, NTS Development
Company provides certain other services to the Partnership. See Note 8 to the
financial statements which sets forth transactions with NTS Development Company
for the years ended December 31, 1999, 1998 and 1997.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. Generally, the General Partner is
entitled to a 10% non-cumulative annual return on its capital contributions from
the cash income of the Partnership (after payment of a like amount to the
limited partners). At such time as the limited partners have received cash
distributions from all sources equal to their original capital contributions,
cash flow will be distributed 52% to limited partners and 48% to the General
Partner. In no event, however, will the portion of any item of Partnership
income, gain, loss, deduction or credit allocated to the General Partner be less
than 1%.
- 32 -
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following provides details regarding owners of more than 5% of the total
outstanding limited partnership Units as of February 25, 2000.
ORIG, LLC
10172 Linn Station Road 1,233 Units (9.66%)
Louisville, Kentucky 40223
ORIG, LLC is a Kentucky limited liability company, the members of which are J.D.
Nichols and Brian F. Lavin, Chairman and President of NTS Capital Corporation, a
general partner of NTS Properties Associates, the general partner of the
Partnership.
The General Partner is NTS-Properties Associates, a Georgia limited partnership,
10172 Linn Station Road, Louisville, Kentucky 40223. The partners of the General
Partner and their total respective interests in NTS-Properties Associates are as
follows:
J. D. Nichols
10172 Linn Station Road 86.07%
Louisville, Kentucky 40223
L. C. Aroh
10904 Old Bridge Place 8.64%
Louisville, Kentucky 40223
Gary D. Adams
3300 University Boulevard, Suite 150 1.26%
Winter Park, Florida 32792
A. Toni Rizzo
515 Willowhurst Place 1.26%
Louisville, Kentucky 40223
NTS Capital Corporation
10172 Linn Station Road 2.67%
Louisville, Kentucky 40223
Alliance Realty Corporation
500 North Broadway 0.10%
St. Louis, Missouri 63102
- 33 -
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Property management fees of $157,290 (1999), $186,416 (1998) and $168,006 (1997)
were paid to NTS Development Company, an affiliate of the General Partner,
pursuant to an agreement with the Partnership. The fee is equal to 5% of gross
revenues from the Partnership's properties. Also permitted by an agreement with
the Partnership, NTS Development Company will receive a repair and maintenance
fee equal to 5.9% of costs incurred which relate to capital improvements. The
Partnership has incurred $141,626 and $80,897 as a repair and maintenance fee
during the years ended December 31, 1999 and 1998, respectively, and has
capitalized this cost as a part of land, buildings and amenities. As permitted
by an agreement, the Partnership also was charged the following amounts from NTS
Development Company for the years ended December 31, 1999, 1998 and 1997. These
charges include items which have been expensed as operating expenses -
affiliated or professional and administrative expenses - affiliated and items
which have been capitalized as other assets or as land, buildings and amenities.
1999 1998 1997
---- ---- ----
Leasing $262,508 $169,294 $279,851
Administrative 134,215 132,949 166,422
Property manager 252,627 230,315 171,324
Other 8,679 59,411 28,460
------- ------- -------
$658,029 $591,969 $646,057
======= ======= =======
During 1999, NTS Development Company leased 20,368 square feet in NTS Center at
a rental rate of $14.50 per square foot. The Partnership received approximately
$295,000 in rental payments from NTS Development Company during 1999, 1998 and
1997.
During January 1997, NTS Development Company leased 23,160 square feet of the
available space in NTS Center at a base rent of $13.50 per square foot. During
February and March of 1997, NTS Development Company leased 20,368 square feet.
Effective April 1, 1997, the NTS Development Company lease was extended for five
years to March 2002 at a rental rate of $14.50 per square foot for 20,368 square
feet.
Effective November 19, 1999, the NTS Development Company lease was extended two
years to March 2004 at a rental rate of $14.50 per square foot for 20,368 square
feet. Leasing arrangements contemplated allowances for certain tenant finish.
Expenses related to such tenant finish were capitalized within the line item
land, buildings and amenities in the accompanying balance sheets. Such capital
expenditures were approximately $225,000 and $394,000 as of and for the years
ended December 31, 1999 and 1998, respectively.
- 34 -
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
1. Financial statements
--------------------
The financial statements for the years ended December 31 1999, 1998, 1997
together with the report of Arthur Andersen LLP dated March 24, 2000, appear
in Item 8. The following financial statement schedules should be read in
conjunction with such financial statements.
2. Financial statement schedules
-----------------------------
Schedules: Page No.
--------
III - Real Estate and Accumulated Depreciation 36-37
All other schedules have been omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
3. Exhibits
--------
Exhibit No. Page No.
----------- --------
3. Amended and Restated
Agreement and Certificate
of Limited Partnership of
NTS-Properties III *
10. Management Agreement between
NTS Development Company and
NTS-Properties III *
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the Securities and Exchange
Commission in connection with the filing of Registration Statements on Form S-11
on June 25, 1982 (effective October 13, 1982) under Commission File No. 2-78152.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the three month ended December 31,
1999.
- 35 -
NTS-PROPERTIES III
------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
Peachtree
NTS Plainview Corporate
Center Center Center Total
------ ------ ------ -----
Encumbrances (A) (B)
Initial cost to Partnership:
Land $ 1,379,172 $ 1,217,886 $ 1,408,375 $ 4,005,433
Buildings and improvements 4,963,604 4,512,172 6,231,114 15,706,890
Cost capitalized subsequent to acquisition:
Improvements 3,485,705 1,875,316 2,102,661 7,463,682
Carrying costs -- -- -- --
Gross amount at which carried December 31,1999(C):
Land $ 1,765,889 $ 1,384,663 $ 1,667,164 $ 4,817,716
Buildings, improvements and amenities 8,062,592 6,220,711 8,074,986 22,358,289
----------- ----------- ----------- -----------
Total (E) $ 9,828,481 $ 7,605,374 $ 9,742,150 $27,176,005
=========== =========== =========== ===========
Accumulated depreciation $ 5,406,075 $ 3,457,419 $ 7,014,381 $15,877,875
=========== =========== =========== ===========
Date of construction N/A N/A N/A
Date acquired 01/83 02/83 01/83
Life at which depreciation in
latest income statement is
computed (D) (D) (D)
(A) First mortgage held by an insurance company.
(B) First mortgage held by a bank.
(C) Aggregate cost of real estate for tax purposes is $26,214,477.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5 - 30 years for
land improvements, 5 - 30 years for buildings, improvements and 3 -
30 years for amenities and life of the lease for tenant improvements.
(E) Reconciliation, net of accumulated depreciation to consolidated
financial statements:
Total Gross Cost at December 31, 1999 $ 27,176,005
Additions to Partnership for computer hardware and
software in 1998 and 1999 20,931
--------------
Balance at December 31, 1999 27,196,936
Less Accumulated Depreciation per above (15,877,875)
Less Accumulated Depreciation - computer equipment (2,092)
--------------
Land, Buildings and amenities, net at December 31, 1999 $ 11,316,969
==============
- 36 -
NTS-PROPERTIES III
------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
Real Accumulated
Estate Depreciation
Balances at December 31, 1996 $ 24,497,620 $ 15,069,604
Additions during period:
Improvements 1,318,585 --
Depreciation (a) -- 831,231
Deductions during period:
Retirements (460,619) (374,211)
------------ ------------
Balances at December 31, 1997 25,355,586 15,526,624
Additions during period:
Improvements 1,418,950 --
Depreciation (a) -- 980,469
Deductions during period:
Retirements (433,336) (385,227)
------------ ------------
Balances at December 31, 1998 26,341,200 16,121,866
Additions during period:
Improvements 2,461,264 --
Depreciation (a) -- 1,031,295
Deductions during period:
Retirements (1,605,527) (1,273,193)
------------ ------------
Balances at December 31, 1999 $ 27,196,937 $ 15,879,968
============ ============
(a) The additions charged to accumulated depreciation on this schedule
will differ from the depreciation and amortization on the Statements
of Cash Flows due to the amortization of loan costs and capitalized
leasing costs.
- 37 -
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties III has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES III
------------------
(Registrant)
BY: NTS-Properties Associates,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
------------------------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: March 29, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
--------- -----
/s/ J. D. Nichols General Partner of NTS-Properties
- -------------------------------- Associates and Chairman of the Board
J. D. Nichols and Sole Director of NTS Capital
Corporation
/s/ Brian F. Lavin President and Chief Operating Officer
- -------------------------------- of NTS Capital Corporation
Brian F. Lavin
/s/ Gregory A. Wells Senior Vice President and
- -------------------------------- Chief Financial Officer of
Gregory A. Wells NTS Capital Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 38 -