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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-11655
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NTS-PROPERTIES IV, LTD.
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(Exact name of Registrant as specified in its charter)
Kentucky 61-1026356
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal (Zip Code)
executive offices)
(502) 426-4800
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(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days. [X] Yes [ ] 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 the 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. [ ]
TABLE OF CONTENTS
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PART I
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Pages
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Items 1. and 2. Business and Properties 3-19
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
PART II
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Item 5. Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 20
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22-30
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 31
Item 8. Financial Statements and Supplementary Data 32-61
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 62
PART III
--------
Item 10. Directors and Executive Officers of the Registrant 63-64
Item 11. Management Remuneration and Transactions 64
Item 12. Security Ownership of Certain Beneficial
Owners and Management 65
Item 13. Certain Relationships and Related Transactions 66
PART IV
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Item 14. Exhibits, Consolidated Financial Statement Schedules
and Reports on Form 8-K 67-69
Signatures 70
2
PART I
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Items 1. and 2. Business and Properties
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Development of Business
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NTS-Properties IV, Ltd. (the "Partnership" or "NTS-Properties IV"), is a limited
partnership organized under the laws of the Commonwealth of Kentucky on May 13,
1983. The General Partner is NTS-Properties Associates IV (the "General
Partner"), a Kentucky limited partnership. As of December 31, 2000, the
Partnership owned the following properties and joint venture interests:
* Commonwealth Business Center Phase I - a business center with
approximately 82,000 net rentable square feet in Louisville, Kentucky,
constructed by the Partnership.
* Plainview Point Office Center Phases I and II - an office center with
approximately 57,000 net rentable square feet in Louisville, Kentucky,
acquired complete by the Partnership.
* The Willows of Plainview Phase I - a 118-unit luxury apartment complex
in Louisville, Kentucky, constructed by the Partnership.
* A joint venture interest in The Willows of Plainview Phase II, a
144-unit luxury apartment complex in Louisville, Kentucky, constructed
by the joint venture between the Partnership and NTS-Properties V, a
Maryland Limited Partnership, an affiliate of the General Partner of
the Partnership, ("NTS-Properties V"). The Partnership's percentage
interest in the joint venture was 9.70% at December 31, 2000.
* A joint venture interest in Golf Brook Apartments, a 195-unit luxury
apartment complex in Orlando, Florida, constructed by the joint
venture between the Partnership and NTS- Properties VI, a Maryland
Limited Partnership, an affiliate of the General Partner of the
Partnership, ("NTS-Properties VI"). The Partnership's percentage
interest in the joint venture was 3.97% at December 31, 2000.
* A joint venture interest in Plainview Point III Office Center, an
office center with approximately 62,000 net rentable square feet in
Louisville, Kentucky, constructed by the joint venture between the
Partnership and NTS-Properties VI. The Partnership's percentage
interest in the joint venture was 4.96% at December 31, 2000.
* A joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground floor
square feet and approximately 50,000 net rentable mezzanine square
feet located in Louisville, Kentucky, acquired complete by the joint
venture between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
affiliates of the General Partner of the Partnership. The
Partnership's percentage interest in the joint venture was 29.61% at
December 31, 2000.
3
Development of Business - Continued
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* A joint venture interest in the Lakeshore/University II Joint Venture
("L/U II Joint Venture"). The L/U II Joint Venture was formed on
January 23, 1995 among the Partnership and NTS-Properties V,
NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of
the General Partner of the Partnership. The Partnership's percentage
interest in the joint venture was 10.92% at December 31, 2000.
A description of the properties owned by the L/U II Joint Venture as of December
31, 2000 appears below:
* Lakeshore Business Center Phase I - a business center with
---------------------------------------
approximately 103, 000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
* Lakeshore Business Center Phase II - a business center with
----------------------------------------
approximately 97,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
* Lakeshore Business Center Phase III - a business center with
----------------------------------------
approximately 39,000 net rentable square feet located in Fort
Lauderdale, Florida, constructed by the L/U II Joint Venture.
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. In the opinion of the Partnership's
management, the properties are adequately covered by insurance.
4
Development of Business - Continued
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As of December 31, 2000, the Partnership's properties and joint venture
investments were encumbered by mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/00
-------- ---- ---- -----------
Commonwealth Business Center Phase I 8.80% 10/01/04 (1) $ 1,417,758
Plainview Point Office Center
Phases I and II -- -- $ --
Willows of Plainview Phase I 7.15% 01/05/13 (2) $ 1,756,662
Willows of Plainview Phase I 7.15% 01/05/13 (2) $ 1,672,258
Willows of Plainview Phase II 7.20% 01/05/13 (2) $ 2,808,716
Willows of Plainview Phase II 7.20% 01/05/13 (2) $ 1,677,489
Golf Brook Apartments -- -- See Below (3)
Plainview Point Office Center
Phase III -- -- See Below (4)
Blankenbaker Business Center 1A 8.500% 11/15/05 (5) $ 2,697,393
Lakeshore Business Center Phase I 8.125% 08/01/08 (6) $ 4,166,849
Lakeshore Business Center Phase II 8.125% 08/01/08 (6) $ 4,483,083
Lakeshore Business Center Phase III 9.121% 09/08/03 (7) $ 1,300,327
(1) Currently monthly principal payments are based upon a 10-year amortization
schedule. At maturity, the mortgage will have been repaid based on the
current rate of amortization.
(2) Current monthly principal payments are based upon a 15-year amortization
schedule. At maturity, the loan will have been repaid based on the current
rate of amortization.
(3) Golf Brook Apartments, a joint venture between the Partnership and NTS-
Properties VI, is encumbered by a mortgage payable to an insurance company.
The $8,426,706 mortgage payable is recorded as a liability by
NTS-Properties VI in accordance with the joint venture agreement. The
mortgage bears interest at a fixed rate of 7.57% and matures May 15, 2009.
(4) Plainview Point Office Center Phase III, a joint venture between the
Partnership and NTS-Properties VI, is encumbered by a mortgage payable to a
bank. The $3,200,000 mortgage payable is recorded as a liability by
NTS-Properties VI in accordance with the joint venture agreement. The
mortgage bears interest at 8.38% and matures December 1, 2010.
(5) Current monthly principal payments are based upon an 11-year amortization
schedule. At maturity, the mortgage payable will have been repaid based on
the current rate of amortization.
(6) Currently monthly principal payments are based upon a 12-year amortization
schedule. At maturity, the mortgage will have been repaid based on the
current rate of amortization.
(7) The construction loan for Lakeshore Business Center Phase III requires
interest payments only. Principal payments begin 13 months from the date of
completion.
Financial Information About Industry Segments
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The Partnership is engaged solely in the business of developing, constructing,
owning and operating residential apartments and commercial real estate. See Part
II, Item 8, Note 9 for information regarding the Partnership's operating
segments.
5
Narrative Description of Business
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General
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The current business of the Partnership is consistent with the original purpose
of the Partnership which was to invest in real property, which was either under
development or proposed for development, on which it would develop, construct,
own and operate apartment complexes, business parks, and retail, industrial and
office buildings. The original purpose of the Partnership also includes the
ability by the Partnership to invest in fully improved properties, either
directly or by joint venture. The Partnership 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.
Commonwealth Business Center Phase I
- ------------------------------------
As of December 31, 2000, there were 10 tenants leasing space aggregating
approximately 70,500 square feet of rentable area at Commonwealth Business
Center Phase I. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance and real estate taxes. The tenants who occupy
Commonwealth Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include insurance
and machinery sales/services. One tenant individually leases more than 10% of
Commonwealth Business Center Phase I's rentable area. The occupancy levels at
the business center as of December 31 were 86% (2000), 93% (1999), 89% (1998),
87% (1997) and 86% (1996). See Part II, Item 7 for average occupancy levels for
the periods ending December 31, 2000, 1999 and 1998.
The following table contains approximate data concerning the major lease in
effect on December 31, 2000:
Square Feet Current Annual
Year of and % of Rental per
Expiration Net Rentable Area Square Foot
---------- ----------------- -----------
Major Tenant (1) :
1 2004 40,079 (48.6%) $ 7.59
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
6
Plainview Point Office Center Phase I and II
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As of December 31, 2000, there were 5 tenants leasing space aggregating
approximately 44,000 square feet of rentable area at Plainview Point Office
Center Phases I and II. All leases provide for tenants to contribute toward the
payment of common area expenses, insurance and real estate taxes. The tenants
who occupy Plainview Point Office Center Phases I and II are professional
service oriented organizations. The principal occupations/professions practiced
include a business school, mortgage company and insurance. Two tenants
individually lease more than 10% of Plainview Point Office Center's rentable
area. The occupancy levels at the office center as of December 31 were 77%
(2000), 79% (1999), 65% (1998), 73% (1997) and 88% (1996). See Part II, Item 7
for average occupancy levels for the periods ending December 31, 2000, 1999, and
1998.
The following table contains approximate data concerning the major leases in
effect on December 31, 2000:
Square Feet Current Annual
Year of and % of Rental per
Expiration Net Rentable Area Square Foot
---------- ----------------- -----------
Major Tenant (1) :
1 2004 28,675 (50.5%) $10.75
2 2004 7,428 (13.1%) $13.60
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
The Willows of Plainview Phase I
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Units at The Willows of Plainview Phase I include one and two-bedroom lofts and
deluxe apartments and two-bedroom town homes. All units have wall-to-wall
carpeting, individually controlled heating and air conditioning, dishwashers,
ranges, refrigerators and garbage disposals. All units, except one-bedroom lofts
have washer/dryer hook-ups. The one-bedroom lofts have stackable washers and
dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, pool, whirlpool and tennis courts.
Monthly rental rates at The Willows of Plainview Phase I start at $689 for
one-bedroom apartments, $959 for two-bedroom apartments and $1,059 for
two-bedroom town homes, with additional monthly rental amounts for special
features and locations. Tenants pay all costs of heating, air conditioning and
electricity. Most leases are for a period of one year. Units will be rented in
some cases, however, on a shorter term basis at an additional charge. The
occupancy levels at the apartment complex as of December 31 were 87% (2000), 96%
(1999), 86% (1998), 92% (1997) and 89% (1996). See Part II, Item 7 for average
occupancy levels for the periods ending December 31, 2000, 1999 and 1998.
The following is information regarding the joint venture properties in which the
Partnership has a 10% or greater interest as of and for the year ending December
31, 2000. The Partnership had a 9.7%, 4.96% and 3.97% interest in The Willows of
Plainview Phase II, Plainview Point III Office Center and Golf Brook Apartments,
respectively, as of and for the year ending December 31, 2000.
7
Blankenbaker Business Center Joint Venture
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Sykes Health Plan Services Bureau, Inc. ("SHPS, Inc.") has leased 100% of the
Blankenbaker Business Center 1A building. The annual base rent, which excludes
the cost of utilities is $7.48 per square foot. The lease term is for 11 years
and expires in July 2005. The lease provides for the tenant to contribute toward
the payment of common area expenses, insurance and real estate taxes. SHPS, Inc.
is a professional service- orientated organization which deals in insurance
claim processing. The occupancy level at the business center as of December 31,
2000, 1999, 1998, 1997 and 1996 was 100%. See Part II, Item 7 for average
occupancy levels for the periods ending December 31, 2000, 1999 and 1998.
The following table contains approximate data concerning the lease in effect on
December 31, 2000:
Square Feet Current Annual
Year of and % of Rental per
Name Expiration Net Rentable Area (1) Square Foot
---- ---------- --------------------- -----------
Sykes Health Plan
Services Bureau, Inc. 2005 100,640 (100%) $ 7.48
(1) Rentable area includes ground floor and mezzanine square feet.
It has previously been reported that SHPS, Inc. intended to consolidate its
operations and build its corporate headquarters in Jefferson County, Kentucky.
SHPS, Inc. occupies 100% of Blankenbaker Business Center 1A. The Partnership
believes that SHPS, Inc. no longer intends to build a corporate headquarters. As
of December 31, 2000, it is the Partnership's understanding that SHPS, Inc.,
intends to occupy the space at Blankenbaker Business Center 1A through the
duration of lease term, which expires in July 2005.
Lakeshore Business Center Phase I
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As of December 31, 2000, there were 34 tenants leasing space aggregating
approximately 87,700 square feet of rentable area at Lakeshore Business Center
Phase I. All leases provide for tenants to contribute toward the payment of
common area expenses, insurance, utilities and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include
telemarketing services, financial services and computer integration services.
There are no tenants that individually lease 10% or more of Lakeshore Business
Center Phase I's rentable area. The occupancy levels at the business center as
of December 31 were 85% (2000), 73% (1999), 85% (1998), 96% (1997) and 92%
(1996). See Part II, Item 7 for average occupancy levels for the periods ending
December 31, 2000, 1999 and 1998.
Lakeshore Business Center Phase II
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As of December 31, 2000, there were 21 tenants leasing space aggregating
approximately 83,300 square feet of the rentable area at Lakeshore Business
Center Phase II. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance, utilities and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include medical
equipment leasing, insurance services and management offices for the Florida
state lottery. One tenant individually leases more than 10% of Lakeshore
Business Center Phase II's rentable area. The occupancy levels at the business
center as of December 31 were 86% (2000), 72% (1999), 79% (1998), 100% (1997)
and 89% (1996). See Part II, Item 7 for average occupancy levels for the periods
ending December 31, 2000, 1999 and 1998.
8
Lakeshore Business Center Phase II - Continued
- ----------------------------------------------
The following table contains approximate data concerning the major lease in
effect on December 31, 2000:
Square Feet Current Annual
Year of and % of Rental per
Expiration Net Rentable Area Square Foot
---------- ----------------- -----------
Major Tenant (1):
1 2002 28,312 (29.1%) $12.13
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
Lakeshore Business Center Phase III
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As of December 31, 2000, there was one tenant leasing approximately 4,700 square
feet of the rentable area at Lakeshore Business Center Phase III. The lease
provides for the tenant to contribute toward the payment of common area
expenses, insurance, utilities and real estate taxes. The tenant who occupies
space at Lakeshore Business Center Phase III is a professional service oriented
organization. The principal occupation/profession practiced is insurance
services. The occupancy level taken by this tenant at the business center, which
was constructed during the year 2000, as of December 31, 2000 was 12%. See Part
II, Item 7 for average occupancy levels for the period ending December 31, 2000.
The following table contains approximate data concerning the major lease in
effect on December 31, 2000:
Square Feet Current Annual
Year of and % of Rental per
Expiration Net Rentable Area Square Foot
---------- ----------------- -----------
Major Tenant (1) :
1 2006 4,689 (11.9%) $13.50
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
Additional Operating Data
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Additional operating data regarding the Partnership's properties is furnished in
the following table:
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Wholly-Owned Properties
-----------------------
Commonwealth Business Center Phase I $ 4,120,182 $ .010520 $ 33,881
Plainview Point Office Center
Phases I and II 3,627,774 .010720 19,435
The Willows of Plainview Phase I 7,480,263 .010720 59,211
Property Owned in Joint Venture
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with NTS-Properties V
---------------------
The Willows of Plainview Phase II 8,034,572 .010720 64,332
Properties Owned in Joint Venture
---------------------------------
with NTS-Properties VI
----------------------
Golf Brook Apartments 16,606,041 .017681 284,097
Plainview Point III Office Center 4,840,137 .010720 33,415
Property Owned in Joint Venture
-------------------------------
with NTS-Properties VII
-----------------------
and NTS-Properties Plus Ltd.
----------------------------
Blankenbaker Business Center 1A 7,354,221 .010520 54,677
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I 10,524,607 .025265 168,058
Lakeshore Business Center Phase II 12,389,430 .025265 165,657
Lakeshore Business Center Phase III 4,415,883 .025265 25,025
9
Additional Operating Data - Continued
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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, 3-30 years for buildings and improvements, 3-30 years for
amenities and the applicable lease term for tenant improvements.
Investment in Joint Ventures
- ----------------------------
The Emerging Issues Tasks Force ("EITF") of the Financial Accounting Standards
Board ("FASB") has reached a consensus on Issue No. 00-1, "Applicability of the
Pro Rata Method of Consolidation to Investments in Certain Partnerships and
Other Unincorporated Joint Ventures." The EITF reached a consensus that a
proportionate gross financial statement presentation (referred to as
"proportionate consolidation" in the Notes to Financial Statements) is not
appropriate for an investment in an unincorporated legal entity accounted for by
the equity method of accounting, unless the investee is in either the
construction industry or an extractive industry where there is a longstanding
practice of its use.
The consensus is applicable to financial statements for annual periods ending
after June 15, 2000. The Partnership now uses the equity method to account for
its joint venture investments for the year ending December 31, 2000. The
Partnership has applied the consensus to all comparative financial statements,
restating them to conform with the consensus for all periods presented. The
application of this consensus did not result in a restatement of previously
reported partners' equity or net results of operations, but did result in a
recharacterization or reclassification of certain financial statements' captions
and amounts.
NTS Willows Phase II Joint Venture
- ----------------------------------
On September 1, 1984, the Partnership entered into a joint venture agreement
with NTS-Properties V to develop, construct, own and operate a 144 - unit luxury
apartment complex on an 8.29 acre site in Louisville, Kentucky known as The
Willows of Plainview Phase II. The term of the joint venture shall continue
until dissolved.
Dissolution shall occur upon, but not before, the first to occur of the
following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash equivalent assets;
(c) The vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2028.
The Partnership contributed land valued at $800,000 and NTS-Properties V
contributed approximately $7,455,000, the construction and carrying costs of the
apartment complex. No future contributions are anticipated as of December 31,
2000.
10
NTS Willows Phase II Joint Venture - Continued
- ----------------------------------------------
The apartment complex is encumbered by permanent mortgages with two insurance
companies. Both loans are secured by a first mortgage on the property. The
outstanding balances of the mortgages at December 31, 2000 are $4,486,205
($2,808,716 and $1,677,489). The mortgages are recorded as a liability of the
joint venture. Both mortgages bear interest at a fixed rate of 7.2% and are due
January 5, 2013. At maturity, the loans will have been repaid based on the
current rate of amortization.
The net cash flow for each calendar quarter is distributed to the Partners in
accordance with their respective percentage interests. The term Net Cash Flow
means the excess, if any, of (A) the gross receipts from the operations of the
joint venture property (including investment income) for such period plus any
funds released from previously established reserves (referred to in clause (iv)
below), over (B) the sum of (i) all cash operating expenses paid by the joint
venture property during such period in the course of business, (ii) capital
expenditures during such period not funded by capital contributions, loans or
paid out of previously established reserves, (iii) payments during such period
on account of amortization of the principal of any debts or liabilities of the
joint venture property and (iv) reserves for contingent liabilities and future
expenses of the joint venture property. Percentage Interest means that
percentage which the capital contributions of a Partner bears to the aggregate
capital contributions of all Partners.
Net income or net loss is allocated between the Partners in accordance with
their joint venture agreement. The Partnership's ownership share was 9.70% at
December 31, 2000, 1999 and 1998.
NTS Sabal Golf Villas Joint Venture
- -----------------------------------
On September 1, 1985, the Partnership entered into a joint venture agreement
with NTS-Properties VI to develop, construct, own and operate a 158-unit luxury
apartment complex on a 13.15 acre site in Orlando, Florida known as Golf Brook
Apartments Phase I. On January 1, 1987, the joint venture agreement was amended
to include Golf Brook Apartments Phase II, a 37-unit luxury apartment complex
located on a 3.069 acre site adjacent to Golf Brook Apartments Phase I. The term
of the joint venture shall continue until dissolved. Dissolution shall occur
upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
The Partnership contributed land valued at $1,900,000 with a related note
payable to a bank of $1,200,000. NTS-Properties VI contributed
approximately$15,800,000, the cost of constructing and leasing apartments.
NTS-Properties VI also contributed funds to retire the $1,200,000 note payable
to a bank. No future contributions are anticipated as of December 31, 2000.
11
NTS Sabal Golf Villas Joint Venture - Continued
- -----------------------------------------------
Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. The original borrowings obtained by NTS-Properties VI for Golf Brook
Apartments were used to fund a portion of NTS- Properties VI's contribution to
the joint venture. The contribution loan has subsequently been refinanced. The
current mortgage payable of $8,426,706 is recorded as a liability by
NTS-Properties VI in accordance with the joint venture agreement. The mortgage
payable bears interest at a fixed rate of 7.57%, is due May 15, 2009 and is
secured by the assets of Golf Brook Apartments. Monthly principal payments are
based upon a 12-year amortization schedule. At maturity, the loan will have been
repaid based on the current rate of amortization.
The net cash flow for each calendar quarter is distributed to the Partners in
accordance with their respective percentage interests. The Term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the joint
venture property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the joint venture
property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the joint venture property, and (iv)
reserves for contingent liabilities and future expenses of the joint venture
property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken into account only to the
extent not funded by capital contributions or paid out of previously established
reserves. Percentage Interest means that percentage which the capital
contributions of a Partner bears to the aggregate capital contributions of all
the Partners.
Net income or net loss is allocated between the Partners in accordance with
their joint venture agreement. The Partnership's ownership share was 3.97% at
December 31, 2000, 1999 and 1998.
Plainview Point III Joint Venture
- ---------------------------------
On March 1, 1987, the Partnership entered into a joint venture agreement with
NTS-Properties VI to develop, construct, own and operate an office building in
Louisville, Kentucky known as Plainview Point III Office Center. The terms of
the joint venture shall continue until dissolved. Dissolution shall occur upon,
but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the real property, unless such
disposition is, in whole or in part, represented by a promissory note
of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
12
Plainview Point III Joint Venture - Continued
- ---------------------------------------------
The Partnership contributed land valued at $790,000 with an outstanding note
payable to a bank of $550,000 which was secured by the land. NTS-Properties VI
contributed approximately $4,100,000, the cost to construct and lease the
building. NTS-Properties VI also contributed funds to retire the $550,000 note
payable to the bank. No future contributions are anticipated as of December 31,
2000.
Plainview Point III Office Center is encumbered by a mortgage payable to a bank.
The current mortgage payable of $3,200,000 is recorded as a liability by
NTS-Properties VI in accordance with the joint venture agreement. The mortgage
payable bears interest at 8.38%, matures December 1, 2010 and is secured by the
assets of Plainview Point III Office Center. At maturity, the loan will have
been repaid based on the current rate of amortization.
The net cash flow for each calendar quarter is distributed to the Partners in
accordance with their respective percentage interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the joint
venture property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the joint venture
property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the joint venture property, and (iv)
reserves for contingent liabilities and future expenses of the joint venture
property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken into account only to the
extent not funded by capital contributions or paid out of previously established
reserves. Percentage Interest means that percentage which the capital
contributions of a Partner bears to the aggregate capital contributions of all
the Partners.
Net income or net loss is allocated between the Partners in accordance with
their joint venture agreement. The Partnership's ownership share was 4.96% at
December 31, 2000, 1999 and 1998.
Blankenbaker Business Center Joint Venture
- ------------------------------------------
On August 16, 1994, the Blankenbaker Business Center joint venture agreement was
amended to admit the Partnership to the joint venture. The joint venture was
originally formed on December 28, 1990 between NTS-Properties Plus Ltd. and
NTS-Properties VII, Ltd., affiliates of the General Partner of the Partnership,
to own and operate Blankenbaker Business Center 1A and to acquire an
approximately 2.49 acre parking lot that was being leased by the business center
from an affiliate of the General Partner. The use of the parking lot is a
provision of the tenant's lease agreement with the business center. The terms of
the joint venture shall continue until dissolved. Dissolution shall occur upon,
but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the real property and parking lot
and the sale and/or collection of any evidences of indebtedness
received in connection therewith;
13
Blankenbaker Business Center Joint Venture - Continued
- ------------------------------------------------------
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
In 1990, when the joint venture was originally formed, NTS-Properties VII, Ltd.
contributed $450,000, which was used for additional tenant improvements to the
business center, and contributed $325,000 to purchase the 2.49 acre parking lot.
The additional tenant improvements were made to the business center and the
parking lot was purchased in 1991. NTS-Properties Plus Ltd. contributed
Blankenbaker Business Center 1A together with improvements and personal property
subject to mortgage indebtedness of $4,715,000. During November 1994, this note
payable was replaced with permanent financing in the amount of $4,800,000. The
outstanding balance at December 31, 2000 was $2,697,393. The mortgage is
recorded as a liability of the joint venture. The mortgage bears interest at a
fixed rate of 8.5% and is due November 15, 2005. Monthly principal payments are
based upon an 11-year amortization schedule. At maturity, the mortgage will have
been repaid based on the current rate of amortization.
On April 28, 1994, the joint venture obtained $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which were associated with
the SHPS, Inc. lease renewal and expansion. The $1,100,000 note bore interest at
the Prime Rate +1.5 %. In order for the joint venture to obtain the $4,800,000
of permanent financing discussed above, it was necessary for the joint venture
to seek an additional joint venture partner to provide the funds necessary for
the tenant finish and leasing costs instead of debt financing. The $1,100,000
note was retired in August 1994. This resulted in the joint venture's debt being
at a level where permanent financing could be obtained and serviced.
On August 16, 1994, NTS-Properties IV contributed $1,100,000 and NTS-Properties
VII, Ltd. contributed $500,000 in accordance with the agreement to amend the
joint venture agreement. The need for additional capital by the joint venture
was a result of the lease renewal and expansion which was signed April 28, 1994
between the joint venture and SHPS, Inc. NTS-Properties Plus Ltd. was not in a
position to contribute additional capital, nor was NTS-Properties VII, Ltd. in a
position to contribute all of the capital required for this project.
NTS-Properties IV was willing to participate in the joint venture and to
contribute, together with NTS-Properties VII, Ltd., the capital necessary with
respect to the project. NTS-Properties Plus Ltd. agreed to the admission of
NTS-Properties IV to the joint venture, and to the capital contributions by NTS-
Properties IV and NTS-Properties VII, Ltd. with the knowledge that its joint
venture interest would, as a result, decrease. With this expansion, SHPS, Inc.
occupied 100% of the business center. No future contributions are anticipated as
of December 31, 2000.
The net cash flow for each calendar quarter is distributed to the Partners in
accordance with the respective percentage interests. The term Net Cash Flow for
any period shall mean the excess, if any, of (A) the sum of (i) the gross
receipts of the joint venture property for such period, other than capital
contributions, plus (ii) any funds released by the Partners from previously
established reserves (referred to in clause (B) (iv) below), over (B) the sum of
(i) all cash operating expenses paid by the joint venture property during such
period in the course of the business, (ii) capital expenditures paid in cash
during such period, (iii) payments during such period on account of amortization
of the principal of any debts or liabilities of the joint venture
14
Blankenbaker Business Center Joint Venture - Continued
- ------------------------------------------------------
property and (iv) reserves for contingent liabilities and future expenses of the
joint venture property as established by the Partners; provided, however, that
the amounts referred to in (B) (i), (ii) and (iii) above shall only be taken
into account to the extent not funded by capital contributions or paid out of
previously established reserves. Percentage Interest means that percentage which
the capital contributions of a Partner bears to the aggregate capital
contributions of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their joint venture agreement. The Partnership's ownership share was 29.61% at
December 31, 2000, 1999 and 1998.
Lakeshore/University II Joint Venture
- -------------------------------------
On January 23, 1995, a joint venture known as the Lakeshore/University II Joint
Venture (the "L/U II Joint Venture") was formed among the Partnership and
NTS-Properties V, NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd.,
affiliates of the General Partner of the Partnership, for purposes of owning
Lakeshore Business Center Phases I and II, University Business Center Phase II
(property sold during 1998 - see below for details regarding this transaction)
and certain undeveloped tracts of land adjacent to the Lakeshore Business Center
development.
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and
NTS-Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the
Lakeshore Business Center
development (3.8 acres) NTS-Properties Plus Ltd.
Undeveloped land adjacent to the
Lakeshore Business Center
development (2.4 acres) NTS/Fort Lauderdale, Ltd.
University Business Center Phase II NTS-Properties V and
NTS Properties Plus Ltd.
The term of the joint venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the real property and the sale and/or collection
of any evidences of indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
15
Lakeshore/University II Joint Venture - Continued
- -------------------------------------------------
Each of the properties was contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture and on Lakeshore Business Center Phase I in
the amount of $5,500,000 subsequent to the formation of the L/U II Joint
Venture. In addition to the above, the Partnership also contributed $750,000 to
the L/U II Joint Venture. As a result of the valuation of the properties
contributed to the L/U II Joint Venture, the Partnership obtained a 17.86%
partnership interest in the joint venture.
The properties of the L/U II Joint Venture are encumbered by mortgages payable
to an insurance company as follows:
Loan Balance
at 12/31/00 Encumbered Property
----------- -------------------
$ 4,166,849 Lakeshore Business Center Phase I
$ 4,483,083 Lakeshore Business Center Phase II
$ 1,300,327 Lakeshore Business Center Phase III
The loans are recorded as liabilities of the joint venture. The mortgages of
Lakeshore Business Center Phases I and II bear interest at a fixed rate of
8.125% and are due August 1, 2008. Monthly principal payments are based upon a
12-year amortization schedule. At maturity, the loans will have been repaid
based on the current rate of amortization. The mortgage of Lakeshore Business
Center Phase III bears interest at a variable rate based on LIBOR daily rate
plus 2.3% and is due September 8, 2003.
On October 6, 1998, pursuant to a contract executed on September 8, 1998, the
L/U II Joint Venture sold University Business Center Phase II office building to
Silver City Properties, Ltd. ("the Purchaser") for $8,975,000. University
Business Center Phase II was owned by the L/U II Joint Venture of which the
Partnership owned a 17.86% interest as of October 6, 1998. Portions of the
proceeds from this sale were immediately used to pay the remainder of the
outstanding debt of approximately $5,933,382 on University Business Center Phase
II (including interest and prepayment penalty). Net cash proceeds received by
the partnership from the L/U II Joint Venture as a result of a cash distribution
of the proceeds from the sale were approximately $442,000.
On July 1, 2000 and July 1, 1999, NTS-Properties V contributed $500,000 and
$1,737,000, respectively, to the L/U II Joint Venture. The other partners in the
joint venture, including NTS-Properties IV, did not make capital contributions
at that time. Accordingly, the ownership percentages of the other partners in
the joint venture decreased. Effective July 1, 2000, NTS Properties IV's
percentage of ownership in the joint venture was 10.92%, as compared to 11.93%
prior to July 1, 2000, and 17.86% prior to July 1, 1999.
On July 23, 1999, the L/U II Joint Venture sold 2.4 acres of land adjacent to
the Lakeshore Business Center for a purchase price of $528,405. The Partnership
had an 11.93% interest in the joint venture at that date.
16
Lakeshore/University II Joint Venture - Continued
- -------------------------------------------------
The net cash flow for each calendar quarter is distributed to the Partners in
accordance with their respective percentage interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the joint
venture properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B) (iv) below), over (B) the sum of (i) all cash
operating expenses paid by the joint venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the joint venture and (iv) reserves for contingent
liabilities and future expenses of the joint venture, as established by the
Partners; provided, however, that the amounts referred to in (B) (i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the partners in accordance with
their joint venture agreement. The Partnership's ownership share was 10.92%,
11.93% and 17.86% at December 31, 2000, 1999 and 1998, respectively.
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, amenities 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, 2000, one apartments community was under
construction in the vicinity of Golf Brook Apartments. The scheduled completion
date is unknown at this time. In the vicinity of The Willows of Plainview, there
is one new apartment community with 328 units completed as of March 1, 2001.
Currently, the effect these new properties will have on occupancy at Golf Brook
Apartments and the Willows of Plainview is unknown. 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 the NTS-Properties Associates IV, 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 IV. Under the agreement, NTS Development Company 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, NTS Development Company received a total of
$137,432 for the year ended December 31, 2000. $76,929 was received from
commercial properties and $60,503 was received from residential properties.
17
Management of Properties - Continued
- ------------------------------------
The fee is equal to 6% of gross revenues from commercial properties and 5% of
gross revenues from residential properties.
In addition, the agreement requires the Partnership to purchase all insurance
relating to the managed properties, to pay the direct out-of-pocket expenses of
NTS Development Company in connection with the operation of the properties,
including the cost of goods and materials used for an on behalf of the
Partnership, and to reimburse NTS Development Company for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the agreement between NTS Development Company and the Partnership
was initially for five years, and thereafter for succeeding one-year periods,
unless cancelled. The agreement is subject to cancellation by either party upon
60-days written notice. As of December 31, 2000, the management agreement is
still in effect.
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management's 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.
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 by and is operated by the
General Partner, these conflicts are not resolved through arms-length
negotiations but through the exercise of the General Partner's good judgement
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 by the General Partner of the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. 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. In management's opinion, the agreement with
NTS Development Company 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.
18
Conflict of Interest - Continued
- --------------------------------
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than that 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 allocated costs of providing such
services. See Part II, Item 8 - Note 7 for further discussions 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.
19
PART II
-------
Item 5. Market for Registrant's Limited Partnership Interests and Related
--------------------------------------------------------------------
Partner Matters
---------------
There is no established trading market for the limited partnership interests.
The Partnership had 1,578 limited partners as of February 28, 2001. Cash
distributions and allocations of income and loss are made as described in Note
1D to the Partnership's 2000 consolidated financial statements in Item 8.
No distributions were paid during 2000, 1999 or 1998. 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 2000, 1999 or 1998, the
table which presents that portion of the distributions that represent a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
20
Item 6. Selected Financial Data
-----------------------
Years ended December 31, 2000, 1999, 1998, 1997 and 1996.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Rental and other income $ 2,474,093 $ 2,333,381 $ 2,273,371 $ 2,486,019 $ 2,360,496
Income (loss) from
investments in joint ventures 29,819 3,264 77,538 (154,477) (181,330)
Total expenses (2,267,517) (2,339,336) (2,252,613) (2,308,879) (2,225,347)
------------- ------------- ------------- ------------- -------------
Income (loss) before
extraordinary item $ 236,395 $ (2,691) $ 98,296 $ 22,663 $ (46,181)
Extraordinary item -- -- -- (71,713) --
------------- ------------- ------------- ------------- -------------
Net income (loss) $ 236,395 $ (2,691) $ 98,296 $ (49,050) $ (46,181)
============= ============= ============= ============= =============
Net income (loss)
allocated to:
General Partner $ 2,364 $ (27) $ 983 $ (490) $ (462)
Limited partners $ 234,031 $ (2,664) $ 97,313 $ (48,560) $ (45,719)
Net income (loss) per
limited partnership Units $ 9.67 $ (0.11) $ 3.75 $ (1.82) $ (1.63)
Weighted average number
of limited partnership Units 24,208 24,778 25,918 26,708 28,012
Cumulative net income
(loss) allocated to:
General Partner $ 6,236 $ 3,872 $ 3,899 $ 2,916 $ 3,406
Limited partners $ 617,220 $ 383,189 $ 385,853 $ 288,540 $ 337,100
Cumulative taxable income
(loss) allocated to:
General Partner $ (25,603) $ (27,678) $ (26,810) $ (24,092) $ (24,618)
Limited partners $ (2,535,209) $ (2,740,689) $ (2,654,795) $ (2,385,433) $ (2,437,521)
Distributions declared:
General Partner $ -- $ -- $ -- $ -- $ 2,251
Limited partners $ -- $ -- $ -- $ -- $ 222,842
Cumulative distributions
declared to:
General Partner $ 218,253 $ 218,253 $ 218,253 $ 218,253 $ 218,253
Limited partners $ 21,607,636 $ 21,607,636 $ 21,607,636 $ 21,607,636 $ 21,607,636
At year end:
Land, buildings and
amenities, net $ 6,907,615 $ 7,301,116 $ 7,457,476 $ 7,687,969 $ 8,126,119
Total assets $ 8,615,520 $ 9,024,075 $ 9,578,845 $ 10,113,096 $ 10,470,535
Mortgages and notes payable $ 4,846,678 $ 5,317,257 $ 5,750,946 $ 6,138,591 $ 6,396,556
The above selected financial data should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
Form 10-K report.
21
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 ("MD&A") is structured in four major sections. The first section
provides information related to occupancy levels and information regarding
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 consolidated financial statements in Item
8 and the cautionary statements below.
Occupancy Levels
- ----------------
The occupancy levels at the Partnership's properties and joint ventures as of
December 31 were as follows:
2000(1) 1999 1998
------- ---- ----
Wholly-Owned Properties
-----------------------
Commonwealth Business Center Phase I (2) 86% 93% 89%
Plainview Point Office Center
Phases I and II (2) 77% 79% 65%
The Willows of Plainview Phase I (2) 87% 96% 86%
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties V
----------------------
(ownership % at December 31, 2000)
----------------------------------
The Willows of Plainview Phase II (9.70%) 89% 87% 92%
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties VI
-----------------------
(ownership % at December 31, 2000)
----------------------------------
Golf Brook Apartments (3.97%) (2) 87% 95% 96%
Plainview Point III Office Center (4.96%) (2) 73% 86% 81%
Property Owned in Joint Venture
-------------------------------
with NTS- Properties VII, Ltd.
------------------------------
and NTS-Properties Plus Ltd.
----------------------------
(ownership % at December 31, 2000)
----------------------------------
Blankenbaker Business Center 1A (29.61%) 100% 100% 100%
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I (3) 85% 73% 85%
Lakeshore Business Center Phase II (3) 86% 72% 79%
Lakeshore Business Center Phase III (4) 12% N/A N/A
University Business Center Phase III (5) N/A N/A N/A
(1) Current occupancy levels are considered adequate to continue operation of
the Partnership's properties.
(2) 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.
(3) Ownership percentage was 10.92%, 11.93% and 17.86% as of December 31, 2000,
1999 and 1998, respectively. (4) Ownership was 10.92% as of December 31,
2000.
(5) On October 6, 1998, University Center Phase II was sold. See below for the
details of this transaction.
22
Occupancy Levels - Continued
- ----------------------------
The average occupancy levels at the Partnership's properties and joint ventures
as of December 31 were as follows:
2000 1999 1998
---- ---- ----
Wholly-Owned Properties
-----------------------
Commonwealth Business Center Phase I (1) 91% 95% 88%
Plainview Point Office Center
Phases I and II 75% 58% 70%
The Willows of Plainview Phase I 94% 94% 90%
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties V
----------------------
(ownership % at December 31, 2000)
----------------------------------
The Willows of Plainview Phase II (9.70%) (1) 92% 93% 87%
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties VI
-----------------------
(ownership % at December 31, 2000)
----------------------------------
Golf Brook Apartments (3.97%) (1) 92% 94% 96%
Plainview Point III Office Center (4.96%) (1) 88% 91% 92%
Property Owned in Joint Venture
-------------------------------
with NTS- Properties VII, Ltd.
------------------------------
and NTS-Properties Plus Ltd.
----------------------------
(ownership % at December 31, 2000)
Blankenbaker Business Center 1A (29.61%) 100% 100% 100%
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I (2) 78% 74% 88%
Lakeshore Business Center Phase II (1) (2) 83% 85% 91%
Lakeshore Business Center Phase III (3) 12% N/A N/A
University Business Center Phase II (4) N/A N/A 91% (5)
(1) In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
(2) Ownership percentage was 10.92%, 11.93% and 17.86% as of December 31, 2000,
1999 and 1998, respectively. (3) Ownership percentage was 10.92% as of
December 31, 2000.
(4) On October 6, 1998, University Center Phase II was sold. See below for the
detail of this transaction. (5) Represents average occupancy through
October 6, 1998.
23
Rental and Other Income
- -----------------------
The rental and other income generated by the Partnership's properties and joint
ventures for the years ended December 31, 2000, 1999 and 1998 were as follows:
2000 1999 1998
---- ---- ----
Wholly-Owned Properties
-----------------------
Commonwealth Business Center Phase I $ 756,598 $ 793,230 $ 705,009
Plainview Point Office Center
Phases I and II $ 512,900 $ 331,212 $ 457,904
The Willows of Plainview Phase I $1,187,368 $1,182,573 $1,148,200
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties V
----------------------
(ownership % at December 31, 2000)
----------------------------------
The Willows of Plainview Phase II (9.70%) $1,318,620 $1,341,677 $1,341,511
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties VI
-----------------------
(ownership % at December 31, 2000)
----------------------------------
Golf Brook Apartments (3.97%) $3,271,227 $2,980,021 $3,047,139
Plainview Point III Office Center (4.96%) $ 848,522 $ 852,836 $ 822,168
Property Owned in Joint Venture
-------------------------------
with NTS- Properties VII, Ltd.
------------------------------
and NTS-Properties Plus Ltd.
----------------------------
(ownership % at December 31, 2000)
----------------------------------
Blankenbaker Business Center 1A (29.61%) $ 908,100 $ 914,526 $ 934,059
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I (1) $1,404,217 $1,284,362 $1,494,248
Lakeshore Business Center Phase II (1) $1,414,306 $1,408,339 $1,638,695
Lakeshore Business Center Phase III $ 5,122 N/A N/A
University Business Center Phase II N/A N/A $ 779,945(2)
(1) Ownership percentage was 10.92% for the six months ended December 31, 2000,
11.93% for the six months ended June 30, 2000 and December 31, 1999 and
17.86% for the six months ended June 30, 1999 and twelve months ended
December 31, 1998.
(2) On October 6, 1998, University Business Center Phase II was sold. Revenues
shown here represent 1998 income through the date of disposition. Ownership
of University Business Center Phase II was 17.86% on October 6, 1998.
Results of Operations
- ---------------------
The following is an analysis of material changes in results for operations for
the periods ending December 31, 2000, 1999 and 1998. Items that did not have a
material impact on operations for the periods listed above have been omitted
from this discussion.
Rental income increased approximately $151,000, or 7%, from 1999 to 2000,
primarily as a result of increased average occupancy and increased common area
reimbursement income at Plainview Point Office Center Phases I and II. The
increase is partially offset by decreased income at Commonwealth Business Center
Phase I as a result of a decrease in average occupancy.
Interest and other income decreased approximately $14,500, or 30%, and $10,000,
or 29%, from 1999 to 2000, and from1998 to 1999, respectively, as a result of
decreased cash reserves available for investment.
24
Results of Operations - Continued
- ---------------------------------
Income from joint ventures increased approximately $26,000 from 1999 to 2000.
The increase is the result of Blankenbaker Business Center Joint Venture
decreased net loss of approximately $5,000 and Golf Brook Apartments increased
net income of approximately $25,000.
Income from joint ventures decreased approximately $74,000 from 1998 to 1999.
The decrease is primarily the result of decreased net income from the
Lakeshore/University II Joint Venture due primarily to the sale of University
Business Center Phase II.
Operating expenses increased approximately $58,800, or 12%, from 1998 to 1999,
primarily as a result of increased landscape expense at The Willows of Plainview
Phase II and increased repair and maintenance expense at The Willows of
Plainview Phase II and Plainview Point Office Center Phases I and II.
Operating expenses - affiliated decreased approximately $30,000, or 7%, from
1999 to 2000, primarily as a result of decreased salary and overhead costs
allocated to the Partnership as a result of decreased property management and
leasing expenses. Operating expenses - affiliated are expenses for services
performed by employees of NTS Development Company, an affiliate of the General
Partner of the Partnership.
Operating expenses - affiliated increased approximately $59,000, or 17%, from
1998 to 1999, primarily as a result of increased administrative salaries at
Plainview Point Office Center Phases I and II and Commonwealth Business Center
Phase I.
The 2000 loss on disposal of assets can be attributed to the retirement of
building costs at The Willows of Plainview Phase I and Plainview Point Office
Center Phases I and II. The losses are the result of exterior wood replacements
at The Willows of Plainview Phase I and common area renovations at Plainview
Point Office Center Phases I and II.
The 1999 loss on disposal of assets can be attributed to the retirement of
building costs at Plainview Point Office Center Phases I and II and The Willows
of Plainview Phase I. The losses are the result of common area renovations at
Plainview Point Office Center Phases I and II and alarm system replacement at
The Willows of Plainview Phase I.
Interest expense decreased approximately $29,600, or 7%, and $44,000, or 9%,
from 1999 to 2000, and from 1998 to 1999, respectively, as a result of required
principal payments on the mortgages payable of The Willows of Plainview Phase I
and Commonwealth Business Center Phase I.
Professional and administrative expenses decreased approximately $22,800, or
22%, from 1999 to 2000, primarily as a result of decreased costs incurred in
connection with the tender offers (see Part II, Item 8 - Note 3).
Professional and administrative expenses increased approximately $22,400, or
27%, from 1998 to 1999, primarily as a result of costs incurred in connection
with the tender offers.
25
Results of Operations - Continued
- ---------------------------------
Depreciation and amortization increased approximately $38,600, or 9%, from 1999
to 2000, primarily as a result of assets placed in service at The Willows of
Plainview Phase I and Plainview Point Office Center Phases I and II.
Depreciation and amortization decreased approximately $58,700, or 12%, from 1998
to 1999, as a result of a portion of the assets at the Partnership's properties
becoming fully depreciated.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5-30 years for land improvements, 3-30
years for buildings and improvements, 3-30 years for amenities and the
applicable lease term for tenant improvements. The aggregate cost of the
Partnership's properties for federal tax purposes is approximately $15,277,131.
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements and other capital additions and were funded by operating activities
or cash reserves. Cash flows used in investing activities are also for the
purchase 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 cash reserves. The Partnership held the securities
until maturity. Cash flows provided by investing activities were from the
maturity of investment securities. Cash flows used in financing activities are
for principal payments on mortgages payable, repurchases of limited partnership
Units and an increase in funds reserved by the Partnership for the repurchase of
limited partnership Units through the tender offer or the Interest Repurchase
Reserve.
In the next 12 months, the demand on future liquidity is anticipated to increase
as the Partnership continues its efforts in the leasing of the Partnership's
commercial properties. There may be significant demands of future liquidity due
to the lease up of Lakeshore Business Center Phase III. At this time, the future
leasing and tenant finish costs which will be required to renew the current
leases or obtain new tenants are unknown. It is anticipated that the cash flows
from operations and cash reserves will be sufficient to meet the needs of the
Partnership.
Cash flows provided by (used in):
2000 1999 1998
---- ---- ----
Operating activities $ 609,746 $ 666,678 $ 512,522
Investing activities (102,988) (211,388) 459,361
Financing activities (493,579) (659,189) (620,563)
----------- ----------- -----------
Net increase (decrease)
in cash and equivalents $ 13,179 $ (203,899) $ 351,320
=========== =========== ===========
26
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
Net cash provided by operating activities decreased approximately $57,000, or
9%, in 2000. The decrease was primarily driven by a decrease in accounts
payable, an increase in accounts receivable and is partially offset by an
increase in net income from operations.
Net cash provided by operating activities increased approximately $154,000, or
30%, in 1999, primarily as a result of increased accounts payable and restricted
cash.
Net cash used in investing activities decreased approximately $108,000, or 51%,
in 2000. The decrease in cash used in investing activities was primarily driven
by decreased need for capital expenditures.
Net cash provided by investing activities decreased approximately $671,000 in
1999. The decrease is primarily a result of a decrease in distributions from
joint ventures due to the prior year sale of University Business Center Phase
II.
The approximate $166,000 decrease in net cash used in financing activities in
2000 is primarily driven by a decrease in the repurchase of limited partnership
Units. The approximate $38,000 increase in net cash used in financing activities
in 1999 is primarily driven by increased principal payments on mortgages
payable.
The Partnership has not made any cash distributions since the quarter ended
September 30, 1996. Distributions will be resumed once the Partnership has
established adequate cash reserves and is generating cash from operations which,
in management's opinion, is sufficient to warrant future distributions. The
primary source of future liquidity and distributions is expected to be derived
from cash generated by the Partnership's properties after adequate cash reserves
are established for future leasing costs, tenant finish costs and other capital
improvements. Cash reserves (which are unrestricted cash and equivalents and
investment securities as shown on the Partnership's balance sheet as of December
31) were $389,963 and $376,784 at December 31, 2000 and 1999, respectively.
Due to the fact that no distributions were made during 2000, 1999 or 1998, the
table which presents that portion of the distribution that represents a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations at the Partnership's commercial 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 wall covering.
The extent and cost of the improvements are determined by the size of the space
being leased and whether the improvements are for a new tenant or incurred
because of a lease renewal. The tenant finish improvements will be funded by
cash flows from operations, cash reserves or additional financing where
necessary.
As of December 31, 2000, the L/U II Joint Venture has a commitment for
approximately $122,000 for tenant improvements on 6,190 square feet at Lakeshore
Business Center Phase III. This commitment will be funded from existing debt
financing. The joint venture has incurred approximately $77,000 of this cost as
of December 31, 2000.
27
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore Business
Center Phase I for a cost of approximately $400,000.
The Partnership had no other material commitments for renovations or capital
improvements as of December 31, 2000.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in June 1996. During the years ended December 31, 1998, 1997 and 1996, the
Partnership funded $201,565, $45,000, and $575,070, respectively, to the
reserve. Through November 20, 1998 (the commencement of the First Tender Offer),
the Partnership had repurchased 4,436 Units for $700,920 at a price ranging from
$150 to $205 per Unit. 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, 2000 was $0.
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "Offerors"), commenced a tender offer (the "First Tender
Offer") to purchase up to 1,200 of the Partnership's limited partnership Units
at a price of $205 per Unit as of the date of the First Tender Offer. The First
Tender Offer expired February 19, 1999, at which time 1,259 Units were tendered
pursuant to the First Tender Offer. The Partnership repurchased 600 Units and
ORIG, LLC purchased 659 Units at a total cost of $258,095 plus offering
expenses.
On July 28, 1999, the Partnership and ORIG, LLC, an affiliate of the Partnership
(the "Offerors"), commenced a second tender offer (the "Second Tender Offer") to
purchase up to 1,000 of the Partnership's limited partnership Units at a price
of $205 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 extended to December 8, 1999. A total of 2,245 Units were
tendered, pursuant to the Second Tender Offer, and the Offerors accepted all
Units. The Partnership repurchased 500 Units and ORIG, LLC purchased 1,745 Units
at a total cost of $460,225 plus offering expenses.
On September 22, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "Offerors"), commenced a third tender offer (the "Third Tender
Offer") to purchase up to 200 of the Partnership's limited partnership Units at
a price of $205 per Unit as of the date of the Third Tender Offer. The
expiration date of the Third Tender Offer was December 22, 2000. A total of
3,092 Units were tendered, pursuant to the Third Tender Offer, and the Offerors
accepted all Units tendered. The Partnership repurchased 100 Units and ORIG, LLC
purchased 2,992 Units at a total cost of $633,860 plus offering expenses.
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.
28
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 commercial properties. The leasing and
renewal negotiations at the Lakeshore Business Center development are handled by
an on-site leasing agent, an employee of NTS Development Company, (an affiliate
of the General Partner of the Partnership), 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 the Partnership's remaining commercial
properties are handled by leasing agents, employees of NTS Development Company,
located in Louisville, Kentucky. The leasing agents are located in the same city
as commercial properties. All advertising for these properties is coordinated by
NTS Development Company's marketing staff located in Louisville, Kentucky. In an
effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential tenants, coordinates local advertising with NTS
Development Company's marketing staff, makes visits to local companies to
promote fully furnished units and negotiates lease renewals with current
residents.
Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A,
and Lakeshore Business Center Phases I, II and III provide for tenants to
contribute toward the payment of common area expenses, insurance and real estate
taxes. Leases at Plainview Point Office Center Phases I and II and Plainview
Point III Office Center provide for tenants to contribute toward the payment of
increases in common area maintenance expenses, insurance, utilities and real
estate taxes. These lease provisions, along with the fact that residential
leases are generally for a period of one year, should protect the Partnership's
operations from the impact of inflation and changing prices.
Cautionary Statements
- ---------------------
Some of the statements included in 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 Management'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.
29
Cautionary Statements - Continued
- ---------------------------------
The Partnership's liquidity, capital resources and results of operations are
subject to a number of risks and uncertainties including, but not limited to the
following: the ability of the Partnership to achieve planned revenues; the
ability of the Partnership to make payments due under its debt agreements; the
ability of the Partnership to negotiate and maintain terms with vendors and
service providers for operating expenses; competitive pressures from other real
estate companies, including large commercial and residential real estate
companies, which may affect the nature and viability of the Partnership's
business strategy; trends in the economy as a whole which may affect consumer
confidence and demand for the types of rental property held by the Partnership;
the ability of the Partnership to predict the demand for specific rental
properties; the ability of the Partnership to attract and retain tenants;
availability and costs of management and labor employed; real estate occupancy
and development costs, including the substantial fixed investment costs
associated with renovations necessary to obtain new tenants and retain existing
tenants; and the risk of a major commercial tenant defaulting on its lease due
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.
30
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. At December 31, 2000, a hypothetical 100 basis point increase in
interest rates would result in an approximate $193,000 decrease in the fair
value of debt.
31
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties IV, Ltd.:
We have audited the accompanying balance sheets of NTS-Properties IV, Ltd. (a
Kentucky limited partnership) as of December 31, 2000 and 1999, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 2000. 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 IV, Ltd. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000 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 68
through 69 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the basic 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 9, 2001
32
NTS-PROPERTIES IV, LTD.
-----------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 2000 AND 1999
--------------------------------
2000 1999
---- ----
ASSETS
- ------
Cash and equivalents $ 389,963 $ 376,784
Cash and equivalents - restricted 39,544 38,008
Accounts receivable 230,025 258,951
Land, buildings and amenities, net 6,907,615 7,301,116
Investment in and advances to joint ventures 850,089 853,270
Other assets 198,284 195,946
---------- ----------
TOTAL ASSETS $8,615,520 $9,024,075
========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $4,846,678 $5,317,257
Accounts payable 39,176 173,784
Security deposits 31,035 44,553
Other liabilities 23,426 26,671
---------- ----------
TOTAL LIABILITIES 4,940,315 5,562,265
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' EQUITY 3,675,205 3,461,810
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $8,615,520 $9,024,075
========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
33
NTS-PROPERTIES IV, LTD.
-----------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
2000 1999 1998
---- ---- ----
REVENUES
- --------
Rental income $ 2,449,691 $ 2,298,847 $ 2,224,342
Income from investment in joint ventures 29,819 3,264 77,538
Interest and other income 24,402 34,534 49,029
------------ ------------ ------------
TOTAL REVENUES 2,503,912 2,336,645 2,350,909
EXPENSES
- --------
Operating expenses 529,115 536,237 477,466
Operating expenses - affiliated 387,017 417,342 358,367
Loss on disposal of assets 43,220 46,042 10,766
Interest expense 398,435 428,042 472,446
Management fees 137,432 130,281 130,044
Real estate taxes 112,527 112,835 104,416
Professional and administrative expenses 81,730 104,520 82,158
Professional and administrative expenses - affiliated 91,772 116,320 110,494
Depreciation and amortization 486,269 447,717 506,456
------------ ------------ ------------
TOTAL EXPENSES 2,267,517 2,339,336 2,252,613
------------ ------------ ------------
Net income (loss) $ 236,395 $ (2,691) $ 98,296
============ ============ ============
Net income (loss) allocated to the limited partners $ 234,031 $ (2,664) $ 97,313
============ ============ ============
Net income (loss) per limited partnership Unit $ 9.67 $ (0.11) $ 3.75
============ ============ ============
Weighted average number of limited
Partnership Units 24,208 24,778 25,918
============ ============ ============
The accompanying notes to financial statements are an integral part of these
statements.
34
NTS-PROPERTIES IV, LTD.
-----------------------
STATEMENTS OF PARTNERS' EQUITY (1)
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
-----------------------------------------------------
Limited General
Partners Partner Total
-------- ------- -----
PARTNERS' EQUITY/(DEFICIT)
- --------------------------
Balances at December 31, 1997 $ 4,049,563 $ (215,338) $ 3,834,225
Net income 97,313 983 98,296
Repurchase of limited partnership Units (242,520) -- (242,520)
------------ ------------ ------------
Balances at December 31, 1998 3,904,356 (214,355) 3,690,001
Net loss (2,664) (27) (2,691)
Repurchase of limited partnership Units (225,500) -- (225,500)
------------ ------------ ------------
Balances at December 31, 1999 3,676,192 (214,382) 3,461,810
Net income 234,031 2,364 236,395
Repurchase of limited partnership Units (23,000) -- (23,000)
------------ ------------ ------------
Balances at December 31, 2000 $ 3,887,223 $ (212,018) $ 3,675,205
============ ============ ============
(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."
The accompanying notes to financial statements are an integral part of these
statements.
35
NTS-PROPERTIES IV, LTD.
-----------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
-----------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $ 236,395 $ (2,691) $ 98,296
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Accrued interest on investment securities -- 2,569 (2,569)
Loss on disposal of assets 43,220 46,042 10,766
Depreciation and amortization 493,977 455,425 513,979
Income from investment in joint ventures (29,819) (3,264) (77,538)
Changes in assets and liabilities:
Cash and equivalents - restricted (1,536) 122,005 (74,907)
Accounts receivable 28,926 (21,278) 22,131
Other assets (10,046) (39,240) 24,746
Accounts payable (134,608) 106,851 12,357
Security deposits (13,518) (857) (10,635)
Other liabilities (3,245) 1,116 (4,104)
------------ ------------ ------------
Net cash provided by operating activities 609,746 666,678 512,522
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings and amenities (135,988) (337,399) (275,064)
Purchase of investment securities -- -- (1,125,550)
Maturity of investment securities -- 140,000 1,407,886
Investment in and advances to (from) joint ventures 33,000 (13,989) 452,089
------------ ------------ ------------
Net cash (used in) provided by investing activities (102,988) (211,388) 459,361
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal payments on mortgages payable (470,579) (433,689) (387,645)
Decrease in loan costs -- -- 9,602
Repurchase of limited partnership Units (23,000) (225,500) (242,520)
------------ ------------ ------------
Net cash used in financing activities (493,579) (659,189) (620,563)
------------ ------------ ------------
Net increase (decrease) in cash and equivalents 13,179 (203,899) 351,320
------------ ------------ ------------
CASH AND EQUIVALENTS, beginning of year 376,784 580,683 229,363
------------ ------------ ------------
CASH AND EQUIVALENTS, end of year $ 389,963 $ 376,784 $ 580,683
============ ============ ============
Interest paid on a cash basis $ 391,080 $ 427,970 $ 449,477
============ ============ ============
The accompanying notes to financial statements are an integral part of these
statements.
36
NTS-PROPERTIES IV, LTD.
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties IV, Ltd. (the "Partnership") is a limited
partnership organized under the laws of the Commonwealth of
Kentucky on May 13, 1983. The General Partner is NTS- Properties
Associates IV, a Kentucky limited partnership. The Partnership is
in the business of developing, constructing, owning and operating
residential apartments and commercial real estate.
B) Basis of Presentation and Joint Venture Accounting
--------------------------------------------------
The financial statements include the accounts of all wholly-owned
properties. Intercompany transactions and balances have been
eliminated. Less than 50% owned joint ventures are accounted for
under the equity method. In conformity with Generally Accepted
Accounting Principles, management has used estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
From inception, the Partnership used the proportionate
consolidation method of accounting for joint venture properties.
The Partnership's proportionate interest in the joint venture's
assets, liabilities, revenues, expenses and cash flows were
combined on a line-by-line basis with the Partnership's own
assets, liabilities, revenues, expenses and cash flows. All
intercompany accounts and transactions were eliminated in
consolidation.
Proportionate consolidation was utilized by the Partnership due
to the fact that the ownership of joint venture properties, in
substance, was not subject to joint control. The managing General
Partners of the sole General Partner of the NTS sponsored
partnerships, which have formed joint ventures, are substantially
the same. As such, decisions regarding financing, development,
sale or operations did not require the approval of different
partners. Additionally, the joint venture properties are in the
same business/industry as their respective joint venture partners
and their asset, liability, revenue and expense accounts
correspond with the accounts of such partners. It is the belief
of the General Partner of the Partnership that the financial
statement disclosures resulting from proportionate consolidation
provided the most meaningful presentation of assets, liabilities,
revenues, expenses and cash flows given the commonality of the
Partnership's operations.
37
B) Basis of Presentation and Joint Venture Accounting - Continued
--------------------------------------------------------------
The Emerging Issues Tasks Force ("EITF") of the Financial
Accounting Standards Board ("FASB") has reached a consensus on
Issue No. 00-1, "Applicability of the Pro Rata Method of
Consolidation to Investments in Certain Partnerships and Other
Unincorporated Joint Ventures." The EITF reached a consensus that
a proportionate gross financial statement presentation (referred
to as "proportionate consolidation" in the Notes to Consolidated
Financial Statements) is not appropriate for an investment in an
unincorporated legal entity accounted for by the equity method of
accounting, unless the investee is in either the construction
industry or an extractive industry where there is a longstanding
practice of its use.
The consensus is applicable to financial statements for annual
periods ending after June 15, 2000. The Partnership now uses the
equity method to account for its joint venture investments for
the year ending December 31, 2000. The Partnership has applied
the consensus to all comparative financial statements, restating
them to conform with the consensus for all periods presented. The
application of this consensus did not result in a restatement of
previously reported partners' equity or net results of
operations, but did result in a recharacterization or
reclassification of certain financial statements' captions and
amounts.
Please see the accompanying NTS-Properties IV combined joint
ventures' financial statements and notes, which include the
combined financial statements of the joint ventures listed in
Note 1C.
C) Wholly Owned and Joint Venture Properties
-----------------------------------------
The Partnership owns and operates the following properties:
* Commonwealth Business Center Phase I, a business Center with
approximately 82,000 net rentable square feet in Louisville,
Kentucky.
* Plainview Point Office Center Phases I and II, an office
center with approximately 57,000 net rentable square feet in
Louisville, Kentucky.
* The Willows of Plainview Phase I, a 118-unit luxury
apartment community in Louisville, Kentucky.
* A 9.70% joint venture interest in The Willows of Plainview
Phase II, a 144-unit luxury apartment community in
Louisville, Kentucky.
* A 3.97% joint venture interest in Golf Brook Apartments, a
195-unit luxury apartment community in Orlando, Florida.
* A 4.96% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net
rentable square feet in Louisville, Kentucky.
38
C) Properties - Continued
----------------------
* A 29.61% joint venture interest in Blankenbaker Business
Center 1A , a business center with approximately 50,000 net
rentable ground floor square feet and approximately 50,000
net rentable mezzanine square feet in Louisville, Kentucky.
* A 10.92% joint venture interest in the Lakeshore/University
II Joint Venture. A description of the properties owned by
the Joint Venture appears below:
- Lakeshore Business Center Phase I - a business center
-----------------------------------
with approximately 103,000 rentable square feet located
in Fort Lauderdale, Florida.
- Lakeshore Business Center Phase II - a business center
-----------------------------------
with approximately 97,000 net rentable square feet
located in Fort Lauderdale, Florida.
- Lakeshore Business Center Phase III - a business center
-----------------------------------
with approximately 39,000 net rentable square feet
located in Fort Lauderdale, Florida.
D) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Net cash receipts made available for distribution, as defined in
the partnership agreement, will be distributed 1) 99% to the
limited partners and 1% to the General Partner until the limited
partners have received their 8% preference distribution as
defined in the partnership agreement; 2) to the General Partner
in an amount equal to approximately 10% of the limited partners'
8% preference distribution; and 3) the remainder, 90% to the
limited partners and 10% to the General Partner. Starting
December 31, 1996, the Partnership has indefinitely interrupted
distributions.
Net cash proceeds, as defined in the partnership agreement, which
are available for distribution will be distributed 1) 99% to the
limited partners and 1% to the General Partner until the limited
partners have received distributions from all sources equal to
their original capital plus the amount of any deficiency in their
8% cumulative distribution as defined in the partnership
agreement; and 2) the remainder, 75% to the limited partners and
25% to the General Partner. Net income (loss) is to be allocated
99% to the limited partners and 1% to the General Partner for all
periods presented in the accompanying financial statements.
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.
39
E) Tax Status - Continued
----------------------
A reconciliation of net income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
2000 1999 1998
---- ---- ----
Net income (loss) $ 236,395 $ (2,691) $ 98,296
Items handled differently
for tax purposes:
Gain on sale of assets - (9,274) (329,513)
Depreciation and amortization 4,669 (107,141) (46,238)
Capitalized leasing costs - 526 324
Rental income - 10,779 28,217
Write-off of unamortized
tenant improvements - - (25,037)
Allowance for doubtful accounts - (2,032) 1,865
Other (33,509) 23,071 -
---------- ---------- ----------
Taxable income (loss) $ 207,555 $ (86,762) $(272,086)
========== ========== ==========
F) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed
with mortgage companies for property taxes and insurance in
accordance with the loan agreements with said mortgage companies.
G) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost less
accumulated depreciation to the Partnership. Costs directly
associated with the acquisition, development and construction of
a project are capitalized. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets which are 5-30 years for land improvements, 3-30 years for
buildings and improvements, 3-30 years for amenities and the
applicable lease term 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 market value.
Application of this standard by management during the years ended
December 31, 2000, 1999 and 1998 did not result in an impairment
loss.
H) Revenue Recognition - Rental Income and Capitalized Leasing Costs
-----------------------------------------------------------------
The Partnership recognizes revenue in accordance with each
tenant's respective lease agreement. Certain of the Partnership's
lease agreements for the commercial properties 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 $118,528 and $108,799
at December 31, 2000 and 1999, respectively.
40
H) Revenue Recognition - Rental Income and Capitalized Leasing Costs
-----------------------------------------------------------------
All commissions paid to commercial leasing agents and incentives
paid to tenants are deferred and amortized on a straight-line
basis over the applicable lease term.
I) Advertising
-----------
The Partnership expenses advertising costs as incurred.
Advertising expense was immaterial to the Partnership during the
years ended December 31, 2000, 1999 and 1998.
J) 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.
2. Concentration of Credit Risk
----------------------------
NTS-Properties IV owns and operates commercial properties in
Louisville, Kentucky and Fort Lauderdale, Florida. In Louisville,
Kentucky, one tenant occupies 100% of the Blankenbaker Business Center
1A property. The Partnership also owns and operates, either wholly or
through a joint venture, residential properties in Louisville,
Kentucky and Orlando, Florida.
3. Tender Offers
-------------
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of
the Partnership (the "Offerors"), commenced a tender offer (the "First
Tender Offer") to purchase up to 1,200 of the Partnership's limited
partnership Units at a price of $205 per Unit as of the date of the
First Tender Offer. The First Tender Offer expired February 19, 1999,
at which time 1,259 Units were tendered pursuant to the First Tender
Offer. The Partnership repurchased 600 Units and ORIG, LLC purchased
659 Units at a total cost of $258,095 plus offering expenses.
On July 28, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "Offerors"), commenced a second tender offer (the
"Second Tender Offer") to purchase up to 1,000 of the Partnership's
limited partnership Units at a price of $205 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
extended to December 8, 1999. A total of 2,245 Units were tendered,
pursuant to the Second Tender Offer, and the Offerors accepted all
Units. The Partnership repurchased 500 Units and ORIG, LLC purchased
1,745 Units at a total cost of $460,225 plus offering expenses.
On September 22, 2000, the Partnership and ORIG, LLC, an affiliate of
the Partnership (the "Offerors"), commenced a third tender offer (the
"Third Tender Offer") to purchase up to 200 of the Partnership's
limited partnership Units at a price of $205 per Unit as of the date
of the Third Tender Offer. The expiration date of the Third Tender
Offer was December 22, 2000. A total of 3,092 Units were tendered,
pursuant to the Third Tender Offer, and the Offerors accepted all
Units tendered. The Partnership repurchased 100 Units and ORIG, LLC
purchased 2,992 Units at a total cost of $633,860 plus offering
expenses.
41
3. Tender Offers - Continued
-------------------------
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.
4. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
2000 1999
---- ----
Land and improvements $ 3,247,261 $ 3,247,261
Buildings, improvements and amenities 12,066,027 12,029,272
------------ ------------
Total land, buildings and amenities 15,313,288 15,276,533
Less accumulated depreciation 8,405,673 7,975,417
------------ ------------
Land, buildings and amenities, net $ 6,907,615 $ 7,301,116
============ ============
5. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
2000 1999
---- ----
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.8%, payable in monthly
installments through October 1, 2004,
secured by land and building. $ 1,417,758 $ 1,715,679
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.15%, payable in monthly
installments through January 5, 2013,
secured by land, buildings and amenities. 1,756,662 1,845,116
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.15%, payable in monthly
installments through January 5, 2013,
secured by land, buildings and amenities. 1,672,258 1,756,462
------------ ------------
$ 4,846,678 $ 5,317,257
============ ============
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2001 $ 510,637
2002 554,140
2003 601,386
2004 579,587
2005 246,597
Thereafter 2,354,331
-----------
$ 4,846,678
===========
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 $4,800,000.
42
6. Rental Income Under Operating Lease
-----------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 2000:
For the Years Ended December 31, Amount
-------------------------------- ------
2001 $ 1,065,071
2002 1,016,452
2003 968,283
2004 694,339
2005 116,706
Thereafter 33,216
-----------
$ 3,894,067
===========
7. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, NTS Development
Company, an affiliate of the General Partner of the Partnership,
receives property management fees on a monthly basis. The fees are
paid in an amount equal to 5% of the gross revenues from the
residential property and 6% of the gross revenues from the commercial
properties. Also permitted by an agreement, NTS Development Company
receives a repair and maintenance fee equal to 5.9% of costs incurred
which relate to capital improvements. These repair and maintenance
fees are capitalized as part of land, buildings and amenities.
The Partnership was charged the following amounts from NTS Development
Company for the years ended December 31, 2000, 1999 and 1998. 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.
For the Twelve Months Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Property management fees $ 137,432 $ 130,281 $ 130,044
--------- --------- ---------
Property management 249,007 286,325 220,096
Leasing 69,283 88,011 86,970
Administrative - operating 61,442 30,125 29,820
Other 7,285 12,881 21,481
--------- --------- ---------
Total operating expenses
- affiliated 387,017 417,342 358,367
--------- --------- ---------
Professional and administrative
expenses - affiliated 91,772 116,320 110,494
--------- --------- ---------
Repairs and maintenance fee 13,448 15,827 15,069
Leasing commissions 10,022 19,607 6,521
Loan costs -- -- 4,603
--------- --------- ---------
Total related party transactions
capitalized 23,470 35,434 26,193
--------- --------- ---------
Total related party transactions $ 639,691 $ 699,377 $ 625,098
========= ========= =========
43
7. Related Party Transactions - Continued
--------------------------------------
On February 7, 2000, ORIG, LLC (the "Affiliate") purchased Interests
in the Partnership pursuant to an Agreement, Bill of Sale and
Assignment, by and among the Affiliate and four investors in the
Partnership (the "Purchase Agreement"). The Affiliate purchased 565
Interests in the Partnership for total consideration of $136,629, or
an average price of $241.82 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 a substantial number of Interests
without incurring the significant expenses involved with a tender
offer and multiple transfers.
8. Commitments and Contingencies
-----------------------------
The Partnership, as an owner of real estate, is subject to various
environmental laws of federal, state and local governments. Compliance
by the Partnership with existing laws has not had a material adverse
effect on the Partnership's financial condition or results of
operations. However, the Partnership cannot predict the impact of new
or changed laws or regulations on its current properties or on
properties that it may acquire in the future.
The Partnership does not believe there is any litigation threatened
against the Partnership other than routine litigation arising out of
the ordinary course of business some of which is expected to be
covered by insurance, none of which is expected to have a material
effect on the balance sheets and statements of operations of the
Partnership.
9. Segment Reporting
-----------------
The Partnership's reportable operating segments include Residential
and Commercial real estate operations. The Residential operations
represent the Partnership's ownership and operating results relative
to an apartment community known as The Willows of Plainview Phase I.
The Commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known
as Commonwealth Business Center Phase I and Plainview Point Office
Center Phases I and II.
The financial information of the operating segments have been prepared
using a management approach, which is consistent with the basis and
manner in which the Partnership's management internally reports
financial information for the purposes of assisting in making internal
operating decisions. The Partnership's management evaluates
performance based on stand-alone operating segment net income.
44
9. Segment Reporting - Continued
-----------------------------
2000
----
Residential Commercial Total
----------- ---------- -----
Rental income $1,185,725 $1,263,966 $2,449,691
Other income 1,643 5,533 7,176
---------- ---------- ----------
Total revenues $1,187,368 $1,269,499 $2,456,867
========== ========== ==========
Operating expenses and operating expenses -
affiliated $ 425,461 $ 490,671 $ 916,132
Loss on disposal of assets 36,067 7,153 43,220
Interest expense 255,780 142,655 398,435
Management fees 60,503 76,929 137,432
Real estate taxes 59,211 53,316 112,527
Depreciation expense 198,720 281,433 480,153
---------- ---------- ----------
Total expenses 1,035,742 1,052,157 2,087,899
---------- ---------- ----------
Net income $ 151,626 $ 217,342 $ 368,968
========== ========== ==========
Land, buildings and amenities, net $3,521,674 $3,353,903 $6,875,577
========== ========== ==========
Expenditures for land, buildings and amenities $ 24,900 $ 111,088 $ 135,988
========== ========== ==========
Segment liabilities $3,479,057 $1,466,546 $4,945,603
========== ========== ==========
1999
----
Residential Commercial Total
----------- ---------- -----
Rental income $1,180,538 $1,118,309 $2,298,847
Other income 2,035 6,134 8,169
---------- ---------- ----------
Total revenues $1,182,573 $1,124,443 $2,307,016
========== ========== ==========
Operating expenses and operating expenses -
affiliated $ 405,128 $ 548,451 $ 953,579
Loss on disposal of assets 18,993 27,049 46,042
Management fees 63,111 67,170 130,281
Real estate taxes 60,728 52,107 112,835
Depreciation and amortization 192,105 252,188 444,293
---------- ---------- ----------
Total expenses 740,065 946,965 1,687,030
---------- ---------- ----------
Net income $ 442,508 $ 177,478 $ 619,986
========== ========== ==========
Land, buildings and amenities, net $3,731,562 $3,531,401 $7,262,963
========== ========== ==========
Expenditures for land, buildings and amenities $ 95,600 $ 228,083 $ 323,683
========== ========== ==========
Segment liabilities $ 53,855 $ 145,141 $ 198,996
========== ========== ==========
45
9. Segment Reporting - Continued
-----------------------------
1998
----
Residential Commercial Total
----------- ---------- -----
Rental income $1,065,776 $1,158,566 $2,224,342
Other income 3,165 6,319 9,484
---------- ---------- ----------
Total revenues $1,068,941 $1,164,885 $2,233,826
========== ========== ==========
Operating expenses and operating expenses -
affiliated $ 366,300 $ 469,533 $ 835,833
Loss on disposal of assets 8,952 1,814 10,766
Management fees 57,712 72,332 130,044
Real estate taxes 50,494 53,655 104,149
Depreciation and amortization 189,100 316,622 505,722
---------- ---------- ----------
Total expenses 672,558 913,956 1,586,514
---------- ---------- ----------
Net income $ 396,383 $ 250,929 $ 647,312
========== ========== ==========
A reconciliation of the totals reported for the operating segments to
the applicable line items in the consolidated financial statements is
necessary given amounts recorded at the Partnership level and not
allocated to the operating properties for internal reporting purposes:
2000 1999 1998
---- ---- ----
TOTAL REVENUES
--------------
Total revenues for reportable segments $ 2,456,867 $ 2,307,016 $ 2,233,826
Other income for Partnership 37,534 38,713 200,394
Eliminations 9,508 (9,084) (83,311)
------------ ------------ ------------
Total consolidated revenues $ 2,503,909 $ 2,336,645 $ 2,350,909
=========== =========== ===========
INTEREST EXPENSE
----------------
Interest expense for reportable segments $ 398,435 $ -- $ --
Interest expense for Partnership -- 428,042 472,446
------------ ------------ ------------
Total interest expense $ 398,435 $ 428,042 $ 472,446
=========== =========== ===========
REAL ESTATE TAXES
-----------------
Total real estate taxes for reportable segments $ 112,527 $ 112,835 $ 104,149
Real estate taxes for Partnership -- -- 267
------------ ------------ ------------
Total real estate taxes $ 112,527 $ 112,835 $ 104,416
=========== =========== ===========
DEPRECIATION AND AMORTIZATION
-----------------------------
Total depreciation and amortization for reportable
segments $ 480,153 $ 444,293 $ 505,722
Depreciation and amortization for Partnership 6,116 3,424 734
------------ ------------ ------------
Total depreciation and amortization $ 486,269 $ 447,717 $ 506,456
=========== =========== ===========
46
9. Segment Reporting - Continued
-----------------------------
2000 1999 1998
---- ---- ----
NET INCOME (LOSS)
-----------------
Total net income for reportable segments $ 368,968 $ 619,986 $ 647,312
Net income (loss) for Partnership (136,265) (607,774) (459,887)
Eliminations 3,692 (14,903) (89,129)
------------ ------------ ------------
Total net income (loss) $ 236,395 $ (2,691) $ 98,296
============ ============ ============
LAND, BUILDINGS AND AMENITIES
-----------------------------
Total land, buildings and amenities for reportable
segments $ 6,875,577 $ 7,262,963
Partnership level 32,038 38,153
------------ ------------
Total land, buildings and amenities $ 6,907,615 $ 7,301,116
============ ============
TOTAL EXPENDITURES
------------------
Total expenditures for land, buildings and
amenities for reportable segments $ 135,988 $ 323,683
Expenditures for land, buildings and amenities for
Partnership -- 13,716
------------ ------------
Total expenditures for land, buildings and
amenities $ 135,988 $ 337,399
============ ============
LIABILITIES
Total liabilities for reportable segments $ 4,945,603 $ 198,996
Liabilities for Partnership (5,288) 5,363,269
------------ ------------
Total liabilities $ 4,940,315 $ 5,562,265
============ ============
10. Selected Quarterly Financial Data (Unaudited)
---------------------------------------------
For the Quarters Ended
----------------------
2000 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues $ 841,926 $ 831,377 $ 863,095 $ 832,449
Total expenses 843,167 765,323 762,474 761,488
Net income (loss) (1,241) 66,054 100,621 70,961
Net income (loss) allocated to the
limited partners (1,229) 65,393 99,615 70,252
Net income (loss) per limited
partnership Unit (0.05) 2.70 4.11 2.91
For the Quarters Ended
----------------------
1999 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues $ 854,518 $ 860,279 $ 814,296 $ 788,626
Total expenses 870,177 858,259 824,093 767,881
Net income (loss) (15,659) 2,020 (9,797) 20,745
Net income (loss) allocated to the
limited partners (15,502) 2,000 (9,699) 20,537
Net income (loss) per limited
partnership Unit (0.62) 0.08 (0.39) 0.82
47
10. Selected Quarterly Financial Data (Unaudited) - Continued
---------------------------------------------------------
The information presented in the table above is based on previously
filed 10-Q and 10-K reports which were prepared using the
proportionate consolidation method. See Note 1B of the Partnership's
consolidated financial statements for further information regarding
the Partnership's change from the proportionate consolidation method
to the equity method.
48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties IV, Ltd.:
We have audited the accompanying combined balance sheets of NTS-Properties IV,
Ltd. Combined Joint Ventures (the "Combined Joint Ventures" as defined in Note 1
to these combined financial statements) as of December 31, 2000 and 1999, and
the related combined statements of operations, partners' equity and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Combined Joint Ventures'
management. Our responsibility is to express an opinion on these combined
financial statements 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Combined Joint
Ventures as of December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 9, 2001
49
NTS-PROPERTIES IV, LTD.
-----------------------
COMBINED JOINT VENTURES
-----------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 2000 AND 1999
--------------------------------
2000 1999
---- ----
ASSETS
- ------
Cash and equivalents $ 330,716 $ 1,930,835
Cash and equivalents - restricted 132,158 188,908
Accounts receivable 199,447 166,979
Land, buildings and amenities, net 35,289,634 33,603,232
Other assets 1,020,530 796,338
----------- -----------
TOTAL ASSETS $36,972,485 $36,686,292
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $17,133,857 $17,264,630
Accounts payable 1,136,086 938,396
Security deposits 366,656 288,820
Other liabilities 329,629 227,515
----------- -----------
TOTAL LIABILITIES $18,966,228 $18,719,361
=========== ===========
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' EQUITY 18,006,257 17,966,931
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $36,972,485 $36,686,292
=========== ===========
The accompanying notes to combined financial statements are an integral part of
these statements.
50
NTS-PROPERTIES IV, LTD.
-----------------------
COMBINED JOINT VENTURES
-----------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
2000 1999 1998
---- ---- ----
REVENUES
- --------
Rental income $ 8,833,624 $ 8,762,950 $10,018,809
Gain on sale of assets -- 94,347 4,464,689
Interest and other income 367,453 82,568 32,236
----------- ----------- -----------
TOTAL REVENUES 9,201,077 8,939,865 $14,515,734
----------- ----------- -----------
EXPENSES
- --------
Operating expenses 2,136,357 1,958,679 2,139,730
Operating expenses - affiliated 953,257 1,026,600 976,790
Loss on disposal of assets 279,835 177,950 35,022
Interest expense 1,261,036 1,451,607 1,894,261
Management fees 503,273 493,604 563,648
Real estate taxes 772,321 811,197 839,151
Professional and administrative expenses - affiliated 550,000 410,000 570,000
Depreciation and amortization 1,752,102 1,652,942 1,881,278
----------- ----------- -----------
TOTAL EXPENSES 8,208,181 7,982,579 8,899,880
----------- ----------- -----------
Income before extraordinary item 992,896 957,286 5,615,854
Extraordinary item - early extinguishment of debt -- -- 862,612
----------- ----------- -----------
Net income $ 992,896 $ 957,286 $ 4,753,242
=========== =========== ===========
The accompanying notes to combined financial statements are an integral part of
these statements.
51
NTS-PROPERTIES IV, LTD.
-----------------------
COMBINED JOINT VENTURES
-----------------------
STATEMENTS OF PARTNERS' EQUITY(1)
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
PARTNERS'
EQUITY
------
PARTNERS' EQUITY
- ----------------
Balance at December 31, 1997 $ 14,858,976
Net income 4,753,242
Distributions declared (4,232,760)
Capital contributions 583,168
-----------------
Balance at December 31, 1998 15,962,626
Net income 957,286
Distributions declared (1,701,581)
Capital contributions 2,748,600
-----------------
Balance at December 31, 1999 17,966,931
Net income 992,896
Distributions declared (1,937,713)
Capital contributions 984,143
-----------------
Balance at December 31, 2000 $ 18,006,257
=================
(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."
The accompanying notes to combined financial statements are an integral part of
these statements.
52
NTS-PROPERTIES IV, LTD.
-----------------------
COMBINED JOINT VENTURES
-----------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $ 992,896 $ 957,286 $ 4,753,242
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on sale of assets -- (94,347) (4,464,689)
Extraordinary item - early extinguishment of debt -- -- 862,612
Loss on disposal of assets 279,835 177,950 35,022
Depreciation and amortization 1,792,204 1,682,627 1,881,278
Changes in assets and liabilities:
Cash and equivalents - restricted 56,750 20,966 (113,887)
Accounts receivable (32,468) 64,716 120,410
Other assets (191,813) 40,897 104,859
Accounts payable 197,690 (45,191) 26,201
Security deposits 77,836 20,395 12,093
Other liabilities 102,114 66,856 (63,012)
------------- ------------- -------------
Net cash provided by operating activities 3,275,044 2,892,155 3,154,129
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from the sale of assets -- 467,243 8,377,441
Additions to land, buildings and amenities (3,695,680) (1,437,563) (599,144)
------------- ------------- -------------
Net cash (used in) provided by investing activities (3,695,680) (970,320) 7,778,297
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in mortgages payable 1,300,327 -- --
Principal payments on mortgages payable (1,431,100) (1,320,245) (6,576,409)
Mortgage pre-payment penalty -- -- (763,993)
Additions to loan costs (95,140) -- --
Cash distributions (1,937,713) (1,701,581) (4,232,760)
Capital contributions 984,143 2,748,600 583,168
------------- ------------- -------------
Net cash used in financing activities (1,179,483) (273,226) (10,989,994)
------------- ------------- -------------
Net (decrease) increase in cash and equivalents $ (1,600,119) $ 1,648,609 $ (57,568)
CASH AND EQUIVALENTS, beginning of year 1,930,835 282,226 339,794
------------- ------------- -------------
CASH AND EQUIVALENTS, end of year $ 330,716 $ 1,930,835 $ 282,226
============= ============= =============
Interest paid on a cash basis $ 2,207,871 $ 2,089,360 $ 1,876,703
============= ============= =============
The accompanying notes to combined financial statements are an integral part of
these statements.
53
NTS-PROPERTIES IV, LTD.
-----------------------
COMBINED JOINT VENTURES
-----------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
The "Combined Joint Ventures" consists of NTS/Willows Phase II
Joint Venture, NTS Sabal Golf Villas Joint Venture, Plainview
Point III Joint Venture, Blankenbaker Business Center Joint
Venture and Lakeshore/University II Joint Venture described as
follows:
* A 9.70% joint venture interest in The Willows of Plainview
Phase II, a 144-unit luxury apartment community in
Louisville, Kentucky.
* A 3.97% joint venture interest in Golf Brook Apartments, a
195-unit luxury apartment community in Orlando, Florida.
* A 4.96% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net
rentable square feet in Louisville, Kentucky.
* A 29.61% joint venture interest in Blankenbaker Business
Center 1A , a business center with approximately 50,000 net
rentable ground floor square feet and approximately 50,000
net rentable mezzanine square feet in Louisville, Kentucky.
* A 10.92% joint venture interest in the Lakeshore/University
II Joint Venture. A description of the properties owned by
the Joint Venture appears below:
- Lakeshore Business Center Phase I - a business center
-----------------------------------
with approximately 103,000 rentable square feet located
in Fort Lauderdale, Florida.
- Lakeshore Business Center Phase II - a business center
-----------------------------------
with approximately 97,000 net rentable square feet
located in Fort Lauderdale, Florida.
- Lakeshore Business Center Phase III - a business center
-----------------------------------
with approximately 39,000 net rentable feet located in
Fort Lauderdale, Florida.
B) Combination Policy
------------------
The Combined Joint Ventures' financial statements include the
accounts of all joint ventures considered significant.
Intercompany transactions and balances have been eliminated.
54
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
For each of the joint ventures, the net cash flow for each
calendar quarter is distributed to the partners in accordance
with their respective percentage interests. The term Net Cash
Flow for any period shall mean the excess, if any of (A) the sum
of ( i ) the gross receipts of the joint venture properties for
such period, other than capital contributions plus ( ii ) any
funds released by the Partners for previously established
reserves (referred to in clause (B) ( iv ) below), over (B) the
sum of ( i ) all cash operating expenses paid by the joint
venture properties during such period in the course of business,
( ii ) capital expenditures paid in cash during such period, (
iii ) payments during such period on account of amortization of
the principal of any debts or liabilities of the joint venture
properties and ( iv ) reserves for contingent liabilities and
future expenses of the joint venture properties as established by
the Partners; provided, however, that the amounts referred to in
(B) ( i ), ( ii ) and ( iii ) above shall only be taken into
account to the extent not funded by capital contributions or paid
out of previously established reserves. Percentage interest means
that percentage which the capital contribution of a Partner bears
to the aggregate capital contributions of all the Partners.
Net income or loss is allocated between the Partners in each
joint venture pursuant to each respective joint venture
agreement.
D) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed
with mortgage companies for property taxes and insurance in
accordance with the loan agreements with said mortgage companies.
E) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost less
accumulated depreciation to the joint ventures. Costs directly
associated with the acquisition, development and construction of
a project are capitalized. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets which are 5-30 years for land improvements, 3-30 years for
buildings and improvements, 3-30 years for amenities and the
applicable lease term 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 market value.
Application of this standard by management during the years ended
December 31, 2000, 1999 and 1998 did not result in an impairment
loss.
55
F) Revenue Recognition - Rental Income and Capitalized Leasing Costs
-----------------------------------------------------------------
The joint ventures generally recognize revenue in accordance with
each tenant's respective lease agreement. Certain of the joint
venture' lease agreements for the commercial properties 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 $75,132 and $65,941
at December 31, 2000 and 1999, respectively.
All commissions paid to commercial leasing agents and incentives
paid to tenants are deferred and amortized on a straight-line
basis over the applicable lease term.
G) Advertising
-----------
The joint ventures expense advertising costs as incurred.
Advertising expense was immaterial to the joint ventures during
the years ended December 31, 2000, 1999 and 1998.
H) 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.
2. Concentration of Credit Risk
----------------------------
The combined joint ventures own and operate commercial properties
in Louisville, Kentucky and Ft. Lauderdale, Florida.
Substantially all of the tenant's are local businesses or are
businesses which have operations in the location in which they
lease space. In Louisville, Kentucky, one tenant occupies 100% of
the Blankenbaker Business Center 1A property. The combined joint
ventures also own and operate two residential properties, one in
Louisville, Kentucky and one in Orlando, Florida.
3. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the joint ventures'
investment in property held for lease as of December 31:
2000 1999
---- ----
Land and improvements $16,582,694 $15,009,004
Buildings, improvements and amenities 47,083,933 45,569,072
----------- -----------
Total land, buildings and amenities 63,666,627 60,578,076
Less accumulated depreciation 28,376,993 26,974,844
----------- -----------
Land, buildings and amenities, net $35,289,634 $33,603,232
=========== ===========
56
4. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
2000 1999
---- ----
Mortgage payable with an insurance
company,bearing interest at a fixed
rate of 8.125%, due in monthly
installments through August 1, 2008,
secured by land and a building. $ 4,483,083 $ 4,888,353
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due in monthly
installments through August 1, 2008,
secured by land ,buildings and amenities. 4,166,849 4,543,531
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.5%, due in monthly
installments through November 15, 2005,
secured by land, buildings and amenities. 2,697,393 3,121,473
Mortgage payable to a bank, bearing
interest at a variable rate based on
LIBOR daily rate plus 2.3%,
which was 9.121% at December 31, 2000,
due September 8, 2003, secured by land
and a building. 1,300,327 --
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due in monthly
installments through January 5, 2013,
secured by land, buildings and amenities. 2,808,716 2,949,626
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due in monthly
installments through January 5, 2013,
secured by land, buildings and amenities. 1,677,489 1,761,647
----------- -----------
$17,133,857 $17,264,630
=========== ===========
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2001 $ 1,551,289
2002 1,711,301
2003 1,855,290
2004 2,008,485
2005 2,118,496
Thereafter 7,888,996
-----------
$17,133,857
===========
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 $17,125,000.
57
5. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 2000:
For the Years Ended December 31, Amount
-------------------------------- ------
2001 $ 3,462,011
2002 2,487,947
2003 1,844,661
2004 1,401,322
2005 674,888
Thereafter 36,757
-----------
$ 9,907,586
===========
6. Related Party Transactions
--------------------------
Pursuant to an agreement with the partnerships which formed the joint
ventures, NTS Development Company, an affiliate of the General Partner
of the partnerships, receives property management fees on a monthly
basis. The fee is equal to 5% of the gross revenues from the
residential property and 6% of the gross revenues from the commercial
properties. Under a similar agreement, NTS Development Company will
receive a repair and maintenance fee equal to 5.9% of costs incurred
which relate to capital improvements. These repair and maintenance
fees are capitalized as a part of land, buildings and amenities.
The combined joint ventures were charged the following amounts from
NTS Development Company for the years ended December 31, 2000, 1999
and 1998. 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
deferred leasing commissions, other assets or as land, buildings and
amenities.
For the Years Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Property management fees $ 503,273 $ 493,604 $ 563,648
---------- ---------- ----------
Property management 577,929 557,139 682,166
Leasing 199,458 260,283 188,363
Administrative - operating 169,549 204,708 79,231
Other 6,321 4,470 27,030
---------- ---------- ----------
Total operating expenses
- affiliated 953,257 1,026,600 976,790
---------- ---------- ----------
Professional and administrative
expenses - affiliated 550,000 410,000 570,000
---------- ---------- ----------
Repairs and maintenance fee 197,753 62,752 23,424
Leasing commissions 118,238 106,132 78,040
Other 38 -- 4,898
---------- ---------- ----------
Total related party
transactions capitalized 316,029 168,884 106,362
---------- ---------- ----------
Total related party transactions $2,322,559 $2,099,088 $2,216,800
========== ========== ==========
58
7. Sale of Asset
-------------
On October 6, 1998 pursuant to a contract executed on September 8,
1998, the L/U II Joint Venture sold the University Business Center
Phase II office building to Silver City Properties, Ltd. ("the
Purchaser") for $8,975,000. Portions of the proceeds from this sale
were immediately used to pay the remainder of the outstanding debt,
recorded on the joint venture's books of approximately $5,933,000, on
University Business Center Phase II (including interest and
pre-payment penalty). L/U II Joint Venture reflected a gain of
approximately $4,465,000 associated with this sale for the year ended
December 31, 1998.
On July 23, 1999, the Lakeshore/University II Joint Venture (the "L/U
II Joint Venture") closed on the sale of 2.4 acres of land adjacent to
the Lakeshore Business Center for a purchase price of $528,405. The
L/U II Joint Venture reflects a gain of approximately $94,000
associated with this sale for the year ended December 31, 1999. The
net proceeds from the land sale were used to help fund the
construction of Lakeshore Buinsess Center Phase III.
8. Commitments and Contingencies
-----------------------------
The combined joint ventures, as owners of real estate, are subject to
various environmental laws of federal, state and local governments.
Compliance by the combined joint ventures with existing laws has not
had a material adverse effect on the combined joint ventures'
financial condition and results of operations. However, the combined
joint ventures cannot predict the impact of new or changed laws or
regulations on the currently owned properties or on properties that
may be acquired in the future.
The combined joint ventures do not believe there is any litigation
threatened against the joint ventures other than routine litigation
arising out of the ordinary course of business some of which is
expected to be covered by insurance, none of which is expected to have
a material effect on the balance sheets and statements of operations
of the combined joint ventures.
As of December 31, 2000, the L/U II Joint Venture has a commitment for
approximately $122,000 for tenant improvements on 6,190 square feet at
Lakeshore Business Center Phase III. This commitment will be funded
from debt financing. The L/U II Joint Venture has incurred
approximately $77,000 of this cost as of December 31, 2000.
The L/U II Joint Venture anticipates replacing the roofs in 2001 at
Lakeshore Business Center Phase I for a cost of approximately
$400,000.
59
9. Segment Reporting
-----------------
The financial information of the operating segments have been prepared
using a management approach, which is consistent with the basis and
manner in which the combined joint ventures' management internally
reports financial information for the purposes of assisting in making
internal operating decisions. Management evaluates performance based
on stand-alone operating segment net income.
2000
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 4,279,702 $ 4,553,922 $ 8,833,624
Other income 310,145 57,308 367,453
------------ ------------ ------------
Total revenues $ 4,589,847 $ 4,611,230 $ 9,201,077
============ ============ ============
Operating expenses and operating expenses -
affiliated $ 1,633,081 $ 1,456,533 $ 3,089,614
Loss on disposal of assets 119,406 160,429 279,835
Interest expense 332,422 928,614 1,261,036
Management fees 229,668 273,605 503,273
Real estate taxes 348,429 423,892 772,321
Professional and administrative - affiliated 110,000 440,000 550,000
Depreciation and amortization 704,555 1,047,547 1,752,102
------------ ------------ ------------
Total expenses 3,477,561 4,730,620 8,208,181
------------ ------------ ------------
Net income (loss) $ 1,112,286 $ (119,390) $ 992,896
============ ============ ============
Land, buildings and amenities, net $ 13,229,528 $ 22,060,106 $ 35,289,634
============ ============ ============
Expenditures for land, buildings and amenities $ 252,272 $ 3,443,408 $ 3,695,680
============ ============ ============
Segment liabilities $ 4,941,810 $ 14,024,418 $ 18,966,228
============ ============ ============
60
9. Segment Reporting - Continued
-----------------------------
1999
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 4,314,848 $ 4,448,102 $ 8,762,950
Other income 6,850 75,718 82,568
Gain on sale of assets -- 94,347 94,347
----------- ----------- -----------
Total revenues $ 4,321,698 $ 4,618,167 $ 8,939,865
=========== =========== ===========
Operating expenses and operating expenses -
affiliated $ 1,508,367 $ 1,476,912 $ 2,985,279
Loss on disposal of assets 159,656 18,294 177,950
Interest expense 348,106 1,103,501 1,451,607
Management fees 222,093 271,511 493,604
Real estate taxes 353,908 457,289 811,197
Professional and administrative - affiliated 150,000 260,000 410,000
Depreciation and amortization 675,239 977,703 1,652,942
----------- ----------- -----------
Total expenses 3,417,369 4,565,210 7,982,579
----------- ----------- -----------
Net income $ 904,329 $ 52,957 $ 957,286
=========== =========== ===========
Land, buildings and amenities, net $13,801,218 $19,802,014 $33,603,232
=========== =========== ===========
Expenditures for land, buildings and amenities $ 505,709 $ 931,854 $ 1,437,563
=========== =========== ===========
Segment liabilities $ 5,157,401 $13,561,960 $18,719,361
=========== =========== ===========
1998
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 4,370,432 $ 5,648,377 $10,018,809
Other income 5,697 26,539 32,236
Gain on sale of assets -- 4,464,689 4,464,689
----------- ----------- -----------
Total revenues $ 4,376,129 $10,139,605 $14,515,734
=========== =========== ===========
Operating expenses and operating expenses -
affiliated $ 1,598,089 $ 1,518,431 $ 3,116,520
Loss on disposal of assets 34,390 632 35,022
Interest expense 367,619 1,526,642 1,894,261
Management fees 219,239 344,409 563,648
Real estate taxes 338,472 500,679 839,151
Professional and administrative - affiliated 90,000 480,000 570,000
Depreciation and amortization 654,378 1,226,900 1,881,278
----------- ----------- -----------
Total expenses 3,302,187 5,597,693 8,899,880
----------- ----------- -----------
Net income before extraordinary item $ 1,073,942 $ 4,541,912 $ 5,615,854
Extraordinary item -- 862,612 862,612
----------- ----------- -----------
Net income $ 1,073,942 $ 3,679,300 $ 4,753,242
=========== =========== ===========
61
Item 9. Changes in and Disagreements with Accountants on Accounting and
----------------------------------------------------------------------
Financial Disclosures
---------------------
None.
62
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 IV. 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 IV are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 59) is the managing General Partner of NTS-Properties
Associates IV and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. At the present time its capital is $1,000 and it is not
anticipated that such capital will be significantly increased. J. D. Nichols is
Chairman of the Board and the sole director of NTS Capital Corporation.
NTS Sub-Partnership IV
- ----------------------
NTS Sub-Partnership IV is a Kentucky limited partnership whose primary business
purpose is to acquire, own and hold interest in NTS-Properties Associates IV.
The partners of NTS Sub-Partnership IV include various management personnel of
NTS Corporation and its affiliates.
Alliance Realty Corporation
- ---------------------------
Alliance Reality Corporation was formed in September 1982, and is a wholly-owned
subsidiary of SN Alliance, Inc. SN Alliance, Inc. is also the parent corporation
of Stifel, Nicolaus & Company, Inc., which acted as the Dealer Manager in
connection with the offering for the interests.
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.
Brian F. Lavin
- --------------
Mr. Lavin (age 47), 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
63
Brian F. Lavin - Continued
- --------------------------
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 42), 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.
Item 11. Management Remuneration and Transactions
----------------------------------------
The officers and/or directors of the corporate General Partner received no
direct remuneration in such capacities. The Partnership is required to pay a
property management fee based on gross revenues to NTS Development Company, an
affiliate of the General Partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specific
projects and a refinancing fee on net cash proceeds from the refinancing of any
Partnership property. Also, NTS Development Company provides certain other
services to the Partnership. See Note 7 to the consolidated financial statements
which sets forth transactions with affiliates to the General Partner for the
years ended December 31, 2000, 1999 and 1998.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1D to the consolidated
financial statements which describes the methods used to determine income
allocations and cash distributions.
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 28, 2001.
ORIG, LLC 6,459 Units (26.79%)
10172 Linn Station Rd.
Louisville, Kentucky 40223
64
Item 12. Security Ownership of Certain Beneficial Owners and Management -
--------------------------------------------------------------------
Continued
---------
ORIG, LLC is a Kentucky limited liability company, the members of which are J.
D. Nichols (1%), Barbara M. Nichols (J.D. Nichols' wife) (74%) and Brian F.
Lavin (25%). J.D. Nichols and Brian F. Lavin are the Chairman and President,
respectively, of NTS Capital Corporation, a general partner of NTS Properties
Associates V, the General Partner of the Partnership.
The General Partner is NTS-Properties Associates IV, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates IV are as follows:
J. D. Nichols 69.69%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Sub-Partnership IV 30.00%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 00.30%
10172 Linn Station Road
Louisville, Kentucky 40223
Alliance Realty Corporation 00.01%
500 North Broadway
St. Louis, Missouri 63102
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that
certain persons, including persons who own more than ten percent of the
Partnership's limited partnership interests, file initial statements of
beneficial ownership (Form 3), and statements of changes in beneficial ownership
(Forms 4 or 5), with the U.S. Securities and Exchange Commission (the "SEC").
The SEC requires that these persons furnish the Partnership with copies of all
forms filed with the SEC.
To the Partnership's knowledge, based solely on its review of the copies for the
forms received by it, or written representations from certain reporting persons
that no additional forms were required for those persons, the Partnership
believes that ORIG, LLC was late in filing one Form 4 relating to one purchase
of the Partnership's limited partnership interests in connection with a tender
offer made during 2000.
65
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Pursuant to an agreement with the Partnership, NTS Development Company, an
affiliate of the General Partner of the Partnership, receives property
management fees on a monthly basis. The fees are paid in an amount equal to 5%
of the gross revenues from the residential property and 6% of the gross revenues
from the commercial properties. Also permitted by an agreement, NTS Development
Company receives a repair and maintenance fee equal to 5.9% of costs incurred
which relate to capital improvements. These repair and maintenance fees are
capitalized as part of land, buildings and amenities.
The Partnership was charged the following amounts from NTS Development Company
for the years ended December 31, 2000, 1999 and 1998. 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.
For the Year Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Property management fees $137,432 $130,281 $130,044
-------- -------- --------
Property management 249,007 286,325 220,096
Leasing 69,283 88,011 86,970
Administrative - operating 61,442 30,125 29,820
Other 7,285 12,881 21,481
-------- -------- --------
Total operating expenses - affiliated 387,017 417,342 358,367
-------- -------- --------
Professional and administrative expenses - affiliated 91,772 116,320 110,494
-------- -------- --------
Repairs and maintenance fee 13,448 15,827 15,069
Leasing commissions 10,022 19,607 6,521
Loan costs -- -- 4,603
-------- -------- --------
Total related party transactions capitalized 23,470 35,434 26,193
-------- -------- --------
Total related party transactions $639,691 $699,377 $625,098
======== ======== ========
On February 7, 2000, ORIG, LLC (the "Affiliate") purchased Interests in the
Partnership pursuant to an Agreement, Bill of Sale and Assignment, by and among
the Affiliate and four investors in the Partnership (the "Purchase Agreement").
The Affiliate purchased 565 Interests in the Partnership for total consideration
of $136,629, or an average price of $241.82 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 a substantial number of Interests without incurring the
significant expenses involved with a tender offer and multiple transfers.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
66
PART IV
-------
Item 14. Exhibits, Consolidated Financial Statements Schedules, and Reports on
----------------------------------------------------------------------
Form 8-K
--------
1. Consolidated Financial Statements
---------------------------------
The consolidated financial statements for the years ended December 31,
2000, 1999 and 1998 along with the report from Arthur Andersen, LLP
dated March 9, 2001, appear in Part II, Item 8. The following
schedules should be read in conjunction with those consolidated
financial statements.
2. Consolidated Financial Statement Schedules
------------------------------------------
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation
All other schedules have been omitted because they are not applicable,
are 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 IV
10. Property Management Agreement and Construction *
Management Agreement between NTS Development
Company and NTS-Properties IV
* Incorporated by reference to documents filed with the Securities
and Exchange Commission in connection with the filing of the
Registration Statements on Form S- 11 on May 16, 1983 (effective
August 1, 1983) under Commission File No. 2-83771.
4. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three months ended
December 31, 2000.
67
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 2000
-----------------------
Commonwealth Plainview Point The Willows of
Business Center Office Center Plainview
Phase I Phases I and II Phase I Total
------- --------------- ------- -----
Encumbrances (A) None (B)
Initial cost to partnership:
Land $ 928,867 $ 356,048 $ 1,798,292 $ 3,083,207
Buildings and improvements 1,419,653 2,214,001 5,447,513 9,081,167
Cost capitalized subsequent to
acquisition:
Improvements (net of retirements) 1,784,225 1,066,739 271,039 3,122,003
Gross amount at which carried
December 31, 2000: (C)
Land $ 949,932 $ 455,804 $ 1,841,525 $ 3,247,261
Buildings and improvements 3,182,813 3,180,984 5,675,319 12,039,116
----------- ----------- ----------- -----------
Total (E) $ 4,132,745 $ 3,636,788 $ 7,516,844 $15,286,377
=========== =========== =========== ===========
Accumulated depreciation $ 2,638,604 $ 1,763,827 $ 3,995,170 $ 8,397,601
=========== =========== =========== ===========
Date of construction 06/84 N/A 03/85
Date acquired N/A 04/84 N/A
Life at which depreciation in
latest income statement is (D) (D) (D)
computed
(A) First mortgage held by an insurance company.
(B) First mortgage held by two insurance companies.
(C) Aggregate cost of real estate for tax purposes is $15,277,131.
(D) Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 3-30 years for land improvements, 3-30
years for buildings and improvements, 3-30 years for amenities and the
applicable lease term for tenant improvements.
(E)
Total gross cost at December 31, 2000 $ 15,286,377
Additions to Partnership for computer hardware
and software in 1998 and 1999 26,911
-------------
Balance at December 31, 2000 15,313,288
Less accumulated depreciation (8,397,601)
Less accumulated depreciation for computer
hardware and software (8,072)
-------------
Land, buildings and amenities, net at December 31, 2000 $ 6,907,615
=============
68
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
Real Accumulated
Estate Depreciation
------ ------------
Balance at December 31, 1997 $ 14,921,050 $ 7,233,086
Additions during period:
Improvements 275,064 --
Depreciation (a) -- 494,790
Deductions during period:
Retirements (119,056) (108,290)
------------- -------------
Balance at December 31, 1998 15,077,058 7,619,586
Additions during period:
Improvements 337,399 --
Depreciation (a) -- 447,713
Deductions during period:
Retirements (137,924) (91,882)
------------- -------------
Balance at December 31, 1999 15,276,533 7,975,417
Additions during period:
Improvements 135,988 --
Depreciation (a) -- 486,269
Deductions during period:
Retirements (99,233) (56,013)
------------- -------------
Balance at December 31, 2000 $ 15,313,288 $ 8,405,673
============= =============
(a) The additions 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.
69
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties IV has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NTS-PROPERTIES IV, LTD.
--------------------------------------------
(Registrant)
BY: NTS-Properties Associates IV, LTD.
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: April 6, 2001
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
- ----------------------------
J. D. Nichols General Partner of NTS-Properties
Associates IV and Chairman of the Board
and Sole Director of NTS Capital
Corporation
/s/ Brian F. Lavin
- ----------------------------
Brian F. Lavin President and Chief Operating Officer
of NTS Capital Corporation
/s/ Gregory A. Wells
- ----------------------------
Gregory A. Wells Senior Vice President and Chief
Financial Officer of NTS Capital
Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners. The Partnership will deliver to the limited partners an
annual report containing the Partnership's consolidated financial statements and
a message from the General Partner.
70