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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 0-13400
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NTS-PROPERTIES V, A MARYLAND LIMITED PARTNERSHIP
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(Exact name of Registrant as specified in its charter)
Maryland 61-1051452
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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 3-13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
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Item 5. Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-24
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 25
Item 8. Financial Statements and Supplementary Data 26-43
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 44
PART III
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Item 10. Directors and Executive Officers of the Registrant 45-46
Item 11. Management Remuneration and Transactions 46
Item 12. Security Ownership of Certain Beneficial
Owners and Management 46-47
Item 13. Certain Relationships and Related Transactions 47-48
PART IV
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Item 14. Exhibits, Consolidated Financial Statement Schedules
and Reports on Form 8-K 49-52
Signatures 53
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 V, a Maryland Limited Partnership (the "Partnership"), is a
limited partnership organized under the laws of the state of Maryland on April
30, 1984. The General Partner is NTS-Properties Associates V, a Kentucky
limited partnership. As of December 31, 2000, the Partnership owned the
following properties and joint venture interests:
* Commonwealth Business Center Phase II, a business center with
approximately 66,000 net rentable square feet located in
Louisville, Kentucky, constructed by the Partnership.
* A joint venture interest in The Willows of Plainview Phase II, a
144-unit luxury apartment complex located in Louisville,
Kentucky, constructed by the joint venture between the
Partnership and NTS-Properties IV, an affiliate of the General
Partner of the Partnership. The Partnership's percentage interest
in the joint venture was 90.30% at December 31, 2000.
* A joint venture interest in the Lakeshore/University II Joint
Venture (the "L/U II Joint Venture"). The L/U II Joint Venture
was formed on January 23,1995 among the Partnership and
NTS-Properties IV, 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 81.19% at December 31, 2000. A description of the
properties owned by the L/U II Joint Venture 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 joint venture in which the Partnership is a partner has a fee
title interest in the above properties. The General Partner believes that the
Partnership's properties are adequately covered by insurance.
3
Development of Business - Continued
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As of December 31, 2000, the Partnership's properties or joint ventures were
encumbered by mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/00
- -------- ---- ---- -----------
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 2,808,716
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 1,677,489
Lakeshore Business Center Phase I 8.125% 08/01/08 (2) $ 4,166,849
Lakeshore Business Center Phase II 8.125% 08/01/08 (2) $ 4,483,083
Lakeshore Business Center Phase III 9.121% (3) 09/08/03 $ 1,300,327
(1) Current monthly principal payments are based upon a 15-year amortization
schedule. At Maturity, the mortgages will have been repaid based on the
current rate of amortization.
(2) Current monthly principal payments are based upon a 12-year amortization
schedule. At maturity, the mortgages will have been repaid based on the
current rate of amortization.
(3) Represents variable rate of 7.58% at December 31, 2000, based on LIBOR
daily rate plus 2.3%.
Commonwealth Business Center Phase II is not encumbered by an outstanding
mortgage at December 31, 2000.
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 10 for information regarding the Partnership's operating
segments.
General
- -------
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's properties are in a condition
suitable for their intended use.
The Partnership intends to hold the properties until such time as sale or other
disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a property, the Partnership will consider
factors such as potential capital appreciation, cash flow and federal income tax
considerations, including possible adverse federal income tax consequences to
the limited partners.
4
Description of Real Property
- ----------------------------
Commonwealth Business Center Phase II
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As of December 31, 2000, there were 9 tenants leasing space aggregating
approximately 48,000 square feet of rentable area at Commonwealth Business
Center Phase II. 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 II are professional service oriented
organizations. The principal occupations/professions practiced include
engineering and an encoding center. Three tenants individually lease more than
10% of Commonwealth Business Center Phase II's rentable area. The occupancy
levels at the business center as of December 31 were 73% (2000), 86% (1999), 79%
(1998), 78% (1997) and 84% (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 11,674 (17.8%) $ 7.15
2 2001 13,846 (21.1%) $ 9.00
3 2003 8,037 (12.2%) $10.00
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
The Willows of Plainview Phase II
- ---------------------------------
Units at The Willows of Plainview Phase II 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, swimming pool, whirlpool and tennis
courts.
Monthly rental rates at The Willows of Plainview Phase II start at $689 for
one-bedroom apartments, $959 for two-bedroom apartments and $1,079 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 89% (2000), 87%
(1999), 92% (1998), 90% (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 I
- ---------------------------------
As of December 31, 2000, there were 34 tenants leasing space aggregating
approximately 87,700 square feet of the 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
5
Lakeshore Business Center Phase I - Continued
- ---------------------------------------------
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, utilities, insurance 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.
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.
6
Description of Real Property - Continued
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Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Wholly-Owned Properties Tax Basis Tax Rate Realty Taxes
- ----------------------- --------- -------- ------------
Commonwealth Business Center Phase II $ 4,766,479 .010520 $ 33,137
Properties Owned in Joint Venture with NTS-
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Properties IV
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The Willows of Plainview II 8,034,572 .010720 64,332
Properties Owned Through
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Lakeshore/University II Joint Venture
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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
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, 3-7 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 IV 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;
7
NTS Willows Phase II Joint Venture - Continued
- ----------------------------------------------
(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 approximately $7,455,000, the construction and
carrying costs of the apartment complex, and NTS-Properties IV contributed land
valued at $800,000. No future contributions are anticipated as of December 31,
2000.
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 balance of the mortgages at December 31, 2000 is $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. Monthly principal payments are based upon a 15-year
amortization schedule. 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 respective percentage interests. The Partnership's ownership share was
90.30% at December 31, 2000, 1999 and 1998.
NTS Ft. Lauderdale Office Joint Venture
- ---------------------------------------
On April 1, 1985, the Partnership entered into a joint venture agreement with
NTS-Properties IV to develop, construct, own and operate an office warehouse
building in Ft. Lauderdale, Florida known as Lakeshore Business Center Phase I.
The Partnership contributed approximately $9,170,000, the cost of constructing
and leasing the building and NTS-Properties IV contributed land valued at
$1,752,982. On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the newly formed
L/U II Joint Venture. See below for a further discussion of the L/U II Joint
Venture.
8
NTS University Boulevard Joint Venture
- --------------------------------------
On January 3, 1989, the Partnership entered into a joint venture agreement with
NTS-Properties Plus Ltd. to develop, construct, own and operate Phase II of the
University Business Center development in Orlando, Florida.
The Partnership contributed land valued at $1,460,000 and NTS-Properties Plus
Ltd. contributed development and carrying costs of approximately $8,000,000. In
connection with the construction of University Business Center Phase II, the
Partnership incurred the cost of developing certain common areas which are used
by both University Business Center Phase I and Phase II. In 1989, NTS-Properties
Plus Ltd. Paid approximately $747,000 to the Partnership for Phase II's share of
the common area costs. During the second quarter of 1994, the Partnership made
an approximate $79,000 capital contribution to the joint venture. The capital
contribution increased the Partnership's ownership percentage in the joint
venture from approximately 16% to approximately 17%. The contribution was made
to fund a portion of the joint venture's operating costs. On January 23, 1995,
the Partners of the NTS University Boulevard Joint Venture contributed
University Business Center Phase II to the newly formed L/U II Joint Venture.
See below for a further discussion of the L/U II Joint Venture.
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 IV, 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 NTS-Properties Plus Ltd.
Business Center development (3.8 acres)
Undeveloped land adjacent to the Lakeshore NTS/Fort Lauderdale, Ltd.
Business Center development (2.4 acres)
University Business Center Phase II NTS-Properties V and
NTS Properties Plus Ltd.
9
Lakeshore/University II Joint Venture - Continued
- -------------------------------------------------
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.
Each of the properties were 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 NTS-Properties IV 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
69.23% partnership interest in the joint venture.
The properties of the L/U II Joint Venture are encumbered by mortgages payable
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 and NTS-Properties V sold University Business Center Phases I
and II office building to Silver City Properties, Ltd. ("the Purchaser") for an
aggregate purchase price of $17,950,000 ($8,975,000 for Phase I and $8,975,000
for Phase II). University Business Center Phase II was owned by the L/U II Joint
Venture of which the Partnership owned a 69.23% interest as of October 6, 1998.
Portions of the proceeds from this sale were immediately used to pay the
remainder of the outstanding debt (including interest and prepayment
10
Lakeshore/University II Joint Venture - Continued
- -------------------------------------------------
penalties) of approximately $10,672,643 ($4,739,261 for Phase I and $5,933,382
for Phase II) on these properties. See Part II, Item 8 - Note 8 for details of
this transaction. During the first quarter of 1999, a portion of the proceeds
from the sale were used to make a special cash distribution of $37.50 per
limited partnership Unit totaling $1,252,275.
On September 17, 1999, the Partnership closed on the sale of University III
vacant land to Silver City Properties, Ltd. for a purchase price of $801,000. On
July 23, 1999, 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
Partnership had a 79.45% interest in the Joint Venture at that date. The
Partnership reflects a net gain of approximately $71,000 associated with those
sales for the year ended December 31, 1999.
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 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 V's percentage of ownership in the L/U II
Joint Venture is 81.19% as compared to 79.45% prior to July 1, 2000, and 69.23%
prior to July 1, 1999.
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 respective percentage interests pursuant to the joint venture agreements.
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, there are no properties under construction
in the vicinities in which the properties are located. The Partnership has not
commissioned a formal market analysis of competitive conditions in any market in
which it owns properties, but relies upon the market condition knowledge of the
employees of NTS Development Company who manage and supervise leasing for each
property.
11
Management of Properties
- ------------------------
NTS Development Company, an affiliate of the NTS-Properties Associates V, 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 V. Under the agreement, NTS Development Company establishes rental
policies and rates and directs the marketing activity of leasing personnel. NTS
Development Company 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 $271,852 for the year ended December 31, 2000, $204,993 was received
from the commercial properties and $66,859 was received from the residential
property. 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 and 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 for an initial period of 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 agreement is
still in effect.
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
Seasonal Operations
- -------------------
The Partnership does not consider its operations to be seasonal to any material
degree.
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.
12
Conflict of Interest - Continued
- --------------------------------
In addition, the partnership agreement provides for indemnification of the
General Partner by 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. The
agreement with the Property Manager is on terms no less favorable to the
Partnership than those which could be obtained from a third party for similar
services in the same geographical region in which the properties are located.
The contract is terminable by either party without penalty upon 60-days written
notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. See Part II, Item 8 - Note 7 for further discussion of related party
transactions.
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
13
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,
nor is one likely to develop. The Partnership had 1,749 limited partners as of
February 28, 2001. Cash distributions and allocations of income (loss) are made
as described in Note 1D to the Partnership's 2000 consolidated financial
statements.
Annual distributions totaling $37.50 were paid per limited partnership unit
during 1999. No distributions were paid during 2000 or 1998. Quarterly
distributions are determined based on current cash balances, cash flow being
generated by operations and required cash reserves, as determined by the General
Partner, for future leasing costs, tenant finish costs, and capital
improvements. Distributions were paid quarterly as follows:
2000 1999 1998
---- ---- ----
First quarter $ -- $ 37.50 $ --
Second quarter -- -- --
Third quarter -- -- --
Fourth quarter -- -- --
----------- ----------- -----------
$ -- $ 37.50 $ --
=========== =========== ===========
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 2000, 1999 and 1998. Distributions were funded by cash
flow derived from investing activities.
Net Income (Loss) Cash Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited partners:
2000 $ (37,825) $ -- $ --
1999 (78,477) 1,252,275 1,252,275
1998 3,956,082 -- --
General Partners
2000 $ (382) $ -- $ --
1999 (793) 12,649 12,649
1998 39,961 -- --
14
Item 6. Selected Financial Data
-----------------------
Years ended December 31, 2000, 1999, 1998, 1997, and 1996.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Rental and other income $ 4,915,420 $ 4,871,091 $ 7,067,738 $ 7,173,083 $ 6,958,452
Gain on sale of property -- 71,439 5,364,026 -- --
Total expenses 4,963,750 5,033,030 6,924,566 7,867,222 7,928,627
------------- ------------- ------------- ------------- -------------
(Loss) income before
minority interest and
extraordinary item (48,330) (90,500) 5,507,198 (694,139) (970,175)
Minority interest (10,123) (11,230) 203,291 (140,659) (206,554)
------------- ------------- ------------- ------------- -------------
(Loss) income after
minority interest before
extraordinary item (38,207) (79,270) 5,303,907 (553,480) (763,621)
Extraordinary item -- -- (1,307,864) (54,544) (72,349)
------------- ------------- ------------- ------------- -------------
Net income (loss) $ (38,207) $ (79,270) $ 3,996,043 $ (608,024) $ (835,970)
============= ============= ============= ============= =============
Net income (loss)
allocated to:
General Partner $ (382) $ (793) $ 39,961 $ (6,080) $ (8,360)
Limited partners $ (37,825) $ (78,477) $ 3,956,082 $ (601,944) $ (827,610)
Net income (loss) per
limited partnership Units $ (1.24) $ (2.39) $ 114.89 $ (17.13) $ (23.23)
Weighted average number
of limited partnership
Units 30,620 32,861 34,433 35,136 35,632
Cumulative net income
(loss) allocated to:
General Partner $ 66,174 $ 66,556 $ 67,349 $ 27,388 $ 33,468
Limited partners $ (4,714,737) $ (4,676,912) $ (4,598,435) $ (8,554,517) $ (7,952,573)
Cumulative taxable
income (loss) allocated to:
General Partner $ 165,329 $ 146,496 $ 189,030 $ 153,955 $ 149,844
Limited partners $ (5,864,636) $ (5,723,508) $ (3,720,315) $ (7,160,797) $ (7,217,069)
Distributions declared:
General Partner $ -- $ 12,649 $ -- $ -- $ --
Limited partners $ -- $ 1,252,275 $ -- $ -- $ --
Cumulative distributions
declared to:
General Partner $ 168,176 $ 168,176 $ 155,527 $ 155,527 $ 155,527
Limited partners $ 16,641,479 $ 16,641,479 $ 15,389,204 $ 15,389,204 $ 15,389,204
At year end:
Land, buildings and
amenities, net $ 22,074,949 $ 19,908,042 $ 21,132,411 $ 31,301,853 $ 32,911,268
Total assets $ 24,186,003 $ 23,880,328 $ 26,670,378 $ 33,361,738 $ 35,384,491
Mortgages and notes
payable $ 14,436,464 $ 14,143,157 $ 15,073,762 $ 27,159,234 $ 28,476,266
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.
15
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 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 II (2) 73% 86% 79%
Properties Owned in Joint Venture with NTS-
-------------------------------------------
Properties IV (ownership % at December 31, 2000)
------------------------------------------------
The Willows of Plainview Phase II (90.30%) 89% 87% 92%
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 12% N/A N/A
(1) Current occupancy levels are considered adequate to continue the 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 81.19%, 79.45% and 69.23% at December 31, 2000,
1999 and 1998, respectively
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 II 83% 79% 80%
University Business Center Phase I N/A N/A 100% (1)
Properties Owned in Joint Venture with NTS-
-------------------------------------------
Properties IV (ownership % at December 31, 2000)
------------------------------------------------
The Willows of Plainview Phase II (90.30%) 92% 93% 87%
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I (2) 78% 74% 88%
Lakeshore Business Center Phase II (2) 86% 85% 91%
Lakeshore Business Center Phase III 12% N/A N/A
University Business Center Phase II (1) N/A N/A 91%
(1) Represent average occupancy through October 6, 1998.
(2) Ownership percentage was 81.19%, 79.45% and 69.23% as of December 31,
2000, 1999 and 1998, respectively.
16
Rental and Other Income
- -----------------------
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 II $ 636,495 $ 584,567 $ 591,913
University Business Center Phase I N/A N/A $1,167,893(1)
Properties Owned in Joint Venture
---------------------------------
with NTS- Properties IV
-----------------------
(Ownership % at December 31, 2000)
----------------------------------
The Willows of Plainview Phase II (90.30%) $1,318,620 $1,341,677 $1,328,990
Properties Owned Through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
Lakeshore Business Center Phase I (2) $1,404,217 $1,284,362 $1,493,648
Lakeshore Business Center Phase II (2) $1,414,306 $1,408,339 $1,638,695
Lakeshore Business Center Phase III (3) $ 5,122 N/A N/A
University Business Center Phase II N/A N/A $ 779,945(1)
(1) On October 6, 1998, University Business Centers Phases I and II were sold.
Revenues shown here represent 1998 income through the date of disposition.
Ownership of University Business Center Phase II was 69.23% on October 6,
1998.
(2) Represents ownership percentage of 81.19% for the six months ended December
31, 2000, 79.45% for the six months ended June 30, 2000 and December 31,
1999, and 69.23% for the six months ended June 30, 1999 and the twelve
months ended December 31, 1998.
(3) Property was constructed in 2000. Ownership was 81.19% at December 31,
2000.
The following is an analysis of material changes in results of 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 eliminated
from this discussion.
Rental income decreased approximately $2,370,000, or 34%, from 1998 to 1999,
primarily as a result of the sale of University Business Center Phases I and II
in October 1998. See Item 8 - Note 9 for a further discussion of the sale.
Approximately $1,168,000 and $780,000 of revenues were generated by University
Business Center Phase I and II, respectively for the twelve months ended
December 31, 1998. Also contributing to the decrease is a decrease in average
occupancy at Lakeshore Business Center Phases I and II.
Period ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages, which are
more representative of the entire period's results.
In cases of tenants who cease making rental payments or abandon the premises in
breach of the lease terms, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it thought there could be a possible collection. There have
been no funds recovered as a result of these actions during the years ended
December 31, 2000, 1999 or 1998. As of December 31, 2000 no action is being
taken against any tenants to collect funds through the remedies discussed above.
17
Rental and Other Income - Continued
- -----------------------------------
The 1999 gain on sale of asset is a result of the sale of University III vacant
land to Silver City Properties, Ltd. on September 17, 1999 and the result of the
Lakeshore/University II Joint Venture (the "L/U II Joint Venture") sale of 2.4
acres of land on July 23, 1999 (see Item 8 - Note 8).
The 1998 gain on sale of asset is the result of selling University Business
Center Phases I and II. On October 6, 1998 pursuant to a contract executed on
September 8, 1998, the L/U II Joint Venture and NTS Properties V, an affiliate
of the General Partner of the Partnership, sold University Business Center
Phases I and II office buildings to Silver City Properties, Ltd. ("the
Purchaser"), for $17,950,000 ($8,975,000 for Phase I and $8,975,000 for Phase
II). University Business Center Phase II was owned by the L/U II Joint Venture
of which the Partnership owned a 69.23% interest as of the date of the sale.
Portions of the proceeds from this sale were immediately used to pay outstanding
debt (including interest and prepayment penalty) of $10,672,643 ($4,739,261 for
Phase I and $5,933,382 for Phase II) on these properties. During October 1998
the Partnership used proceeds from the sale to pay outstanding debt of
approximately $1,448,000 on Commonwealth Business Center Phase II.
Interest and other income includes income earned from short-term investments
made by the Partnership with cash reserves. Interest income decreased
approximately $106,000, or 40%, from 1999 to 2000, as a result of a decrease in
cash reserves available for investment. Interest income increased approximately
$174,000 from 1998 to 1999, as a result of an increase in cash reserves
available for investment.
Operating expenses decreased approximately $257,000, or 19%, from 1998 to 1999,
primarily due to the sale of University Business Center Phases I and II in
October 1998 and decreased exterior repairs at Commonwealth Business Center
Phase II and The Willows of Plainview Phase II.
Operating expenses - affiliated decreased approximately $44,000, or 7%, from
1998 to 1999, primarily as a result of the sale of University Business Center
Phases I and II in October 1998. Operating expenses - affiliated are expenses
incurred for services by employees of NTS Development Company, an affiliate of
the General Partner of the Partnership.
The 2000 loss on disposal of assets can be attributed to the retirement of
assets at Lakeshore Business Center Phases I and II and The Willows of Plainview
Phase II which were not fully depreciated. The retirements were due to common
area renovations at Lakeshore Business Center Phases I and II and to wood and
exterior renovations at The Willows of Plainview Phase II.
The 1999 and 1998 loss on disposal of assets is primarily the result of the
retirement of improvements and amenities at The Willows of Plainview Phase II
which were not fully depreciated. The retirements were due to alarm system and
signage replacements, pool renovations and clubhouse remodeling.
Interest expense decreased approximately $156,000, or 13%, from 1999 to 2000,
primarily due to regular principal payments on Lakeshore Business Center Phases
I and II mortgages and The Willows of Plainview Phase II mortgages.
18
Rental and Other Income - Continued
- -----------------------------------
Interest expense decreased approximately $967,000, or 45%, from 1998 to 1999,
primarily as a result of the reduction in debt from the sale of University
Business Center Phase I and II in October 1998 and from regular principal
payments.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is recorded on the accrual basis. As a result,
the fluctuations of revenues between periods will differ from the fluctuations
of management fee expense. The approximate $141,000 decrease in management fees
from 1998 to 1999 is primarily the result of the sale of University Business
Center Phases I and II in October 1998.
Real estate taxes decreased approximately $38,700, or 8%, from 1999 to 2000,
primarily due to a decrease in assessment at Commonwealth Business Center Phase
II and to the sale of 2.4 acres of land by the L/U II Joint Venture in July 1999
and the sale of University Phase III vacant land in September 1999.
Real estate taxes decreased approximately $158,000, or 25%, from 1998 to 1999,
primarily as a result of the sale of University Business Center Phases I and II
in October 1998.
Professional and administrative expenses decreased approximately $74,000, or
34%, from 1999 to 2000, primarily as a result of decreased legal and accounting
fees relating to the tender offers.
Professional and administrative expenses increased approximately $85,000, or
64%, from 1998 to 1999, primarily as a result increased legal fees relating to
the tender offers and increased accounting fees.
Professional and administrative expenses - affiliated decreased approximately
$32,000, or 18%, from 1999 to 2000, and approximately $28,000, or 13%, from 1998
to 1999. These decreases are primarily due to the decreased salary expenses
allocated from NTS Development Company following the sales of University
Business Center Phases I and II and changes in personnel. Professional and
administrative expenses - affiliated are expenses incurred for services
performed by employees of NTS Development Company, an affiliate of the General
Partner, on behalf of the Partnership.
Depreciation and amortization expense increased approximately $60,000, or 6%,
from 1999 to 2000, primarily as a result of additional assets placed in service
at Lakeshore Business Center Phases I and II as a result of common area
renovations.
Depreciation and amortization decreased approximately $400,000, or 29%, from
1998 to 1999. The decrease is the result of the sale of University Business
Center Phases I and II in October 1998. 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,
and 3-7 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 $40,569,924.
19
Rental and Other Income - Continued
- -----------------------------------
The 1998 extraordinary item - early extinguishment of debt relates to the sale
of University Business Center Phases I and II. A portion of the proceeds from
the sale was used to retire a $4,358,191 mortgage payable on University Business
Center Phase I (maturity of February 2008), a $5,128,872 mortgage payable on
University Business Center Phase II (maturity of August 2008) and a $1,435,051
mortgage payable on Commonwealth Business Center Phase II (maturity of February
2009). As a result of the prepayment of the University Business Center Phase I
and II mortgages, penalties of $348,655 and $ 763,995 respectively, were
required by the insurance companies who held the mortgages. Unamortized loan
costs connected with these loans were also expensed due to the fact that the
mortgages were repaid prior to their maturity.
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is typically derived from operating
activities. Cash flows provided by investing activities in 1998 are the result
of the sale of University Business Center Phases I and II. Cash flows provided
by investing activities in 1999 are the result of the sale of University Phase
III land and the sale of 2.4 acres of land by the L/U II Joint Venture. Cash
flows used in investing activities are for tenant finish improvements and for
other capital additions and are funded by operating activities and cash
reserves. Cash flows provided by financing activities are from debt fundings.
Cash flows used in financing activities are for cash distributions, loan costs,
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 offers.
In the next 12 months, the Partnership expects the demand on future liquidity to
increase as a result of future leasing activity at Commonwealth Business Center
Phase II and Lakeshore Business Center Phases I, II and III. There may be
significant demands on 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 $ 1,048,397 $ 1,093,626 $ 1,934,977
Investing activities (3,379,935) 301,021 15,635,527
Financing activities 232,667 (2,827,744) (13,490,614)
------------- ------------- -------------
Net (decrease) increase
in cash and equivalents $ (2,098,871) $ (1,433,097) $ 4,079,890
============= ============= =============
Net cash provided by operating activities decreased approximately $45,000, or
4%, in 2000. The decrease was primarily driven by a loss on disposal of assets
and decreased other assets.
Net cash provided by operating activities decreased approximately $840,000, or
43%, in 1999. The decrease was primarily driven by a decrease in net income from
operations as a result of the sale of University Business Center Phases I and II
in October 1998 and by changes in working capital accounts.
Net cash used in investing activities increased approximately $3,680,000 in 2000
as compared to 1999. The increase is the result of increased capital
expenditures primarily at Lakeshore Business Center Phase III.
20
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
Net cash provided by investing activities in 1999 decreased compared to 1998 due
to approximately $14,460,000 in proceeds from the sale of University Business
Center Phases I and II being included in 1998 and increased capital spending.
The decrease is partially offset by approximately $1,245,000 proceeds received
in 1999 from the sale of University Phase III and 2.4 acres of land adjacent to
the Lakeshore Business Center.
The approximate $3,060,000 decrease in cash used in financing activities is
partially the result of an approximate $1,265,000 cash distribution paid in
March 1999. No distributions were paid during the year ended December 31, 2000.
Also contributing to the decrease is a decrease in the repurchase of limited
partnership Units and an increase due to funds drawn on the Lakeshore Business
Center Phase III loan which was closed September 8, 2000.
The approximate $10,660,000 decrease in net cash used in financing activities in
1999 was primarily the result of the retirement of mortgages payable on
Commonwealth Business Center II and University Business Center I and II from the
proceeds of the sale of University Business Center I and II in October 1998.
The table below presents that portion of the distributions which represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 2000, 1999 and 1998. Distributions were funded by cash
derived from investing activities.
Net (Loss) Income Cash Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited partners:
2000 $ (37,825) $ -- $ --
1999 (78,477) 1,252,275 1,252,275
1998 3,956,082 -- --
General Partner:
2000 $ (382) $ -- $ --
1999 (793) 12,649 12,649
1998 39,961 -- --
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 Partnership had incurred approximately $77,000 of this cost as of
December 31, 2000.
21
Consolidated Cash Flows and Financial Conditions - Continued
- ------------------------------------------------------------
The Partnership has 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 $177,930, $0, and $99,900, respectively, to the reserve.
Through October 25, 1998, (the commencement date of the First Tender Offer), the
Partnership had repurchased a total of 1,882 Units for $277,830 at a price
ranging from $135 to $160 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 October 13, 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
initial expiration date of the First Tender Offer was January 11, 1999 and this
expiration date was subsequently extended through February 5, 1999. A total of
2,458 Units were tendered, pursuant to the First Tender Offer, and the Offerors
accepted all Units tendered. The Partnership repurchased 600 Units and ORIG, LLC
purchased 1,858 Units at a total cost of $503,890 plus offering expenses.
On June 25, 1999, the Partnership 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 $167.50 per Unit as of the date of the Second Tender Offer.
The initial expiration date of the Second Tender Offer was August 31, 1999. On
August 18, 1999, the price was increased to $180 per Unit and the expiration
date was extended to September 30, 1999. On August 31, 1999, the price was
increased again to $205 per Unit and the expiration date remained September 30,
1999. A total of 2,523 Units were tendered, pursuant to the Second Tender Offer,
and the Partnership accepted all Units at a total cost of $517,215 plus offering
expenses. ORIG, LLC did not participate in the Second Tender Offer.
On November 5, 1999, the Partnership and ORIG, LLC, (the "Offerors"), commenced
a third tender offer (the "Third Tender Offer") to purchase up to 500 limited
partnership Units at a price of $215 per Unit as of the date of the Third Tender
Offer. The initial expiration date of the offer was December 23, 1999. On
December 22, 1999, the price was increased to $230 per Unit and the expiration
date was extended to December 31, 1999. A total of 1,196 Units were tendered,
pursuant to the Third Tender Offer, and the Offerors accepted all Units
tendered. The Partnership repurchased 250 Units and ORIG, LLC purchased 946
Units at a total cost of $275,080 plus offering expenses.
On September 22, 2000, the Partnership and ORIG, LLC (the "Offerors"), commenced
a fourth tender offer (the "Fourth Tender Offer") to purchase up to 200 of the
Partnership's limited partnership Units at a price of $230 per Unit as of the
date of the Fourth Tender Offer. The expiration date of the offer was December
22, 2000. A total of 2,710 Units were tendered, pursuant to the Fourth Tender
Offer, and the Offerors accepted all Units tendered. The Partnership repurchased
100 Units and ORIG, LLC purchased 2,610 Units at a total cost of $623,300 plus
offering expenses.
22
Consolidated Cash Flows and Financial Conditions - 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 at that date.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Commonwealth Business
Center Phase II, the leasing and renewal negotiations are handled by leasing
agents, employees of NTS Development Company, located in Louisville, Kentucky.
The leasing agents are located in the same city as the property. All advertising
is coordinated by NTS Development Company's marketing staff located in
Louisville, Kentucky. The leasing and renewal negotiations at Lakeshore Business
Center Phases I and II are handled by a leasing agent, an employee of NTS
Development Company, located at the Lakeshore Business Center Development. At
The Willows of Plainview Phase II, the Partnership has an on-site leasing staff,
employees of NTS Development Company, who handle all on-site visits from
potential tenants, make visits to local companies to promote fully furnished
units, negotiate lease renewals with current residents and coordinate all local
advertising with NTS Development Company's marketing staff.
Leases at the Partnership's commercial properties provide for tenants to
contribute toward the payment of common area expenses, insurance 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 Items 1 and 2, Business and Properties and
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, may be considered to be "forward-looking statements" since such
statements relate to matters which have not yet occurred. For example, phrases
such as "the Partnership anticipates", "believes" or "expects" indicate that it
is possible that the event anticipated, believed or expected may not occur.
Should such event not occur, then the result which the Partnership expected also
may not occur or occur in a different manner, which may be more or less
favorable to the Partnership. The Partnership does not undertake any obligations
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
Any forward looking statements included in 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.
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
23
Cautionary Statements - Continued
- ---------------------------------
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.
24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate with the exception of the $1,300,327 mortgage payable on Lakeshore
Business Center Phase III. At December 31, 2000, a hypothetical 100 basis point
increase in interest rates would result in an approximate $514,000 decrease in
the fair value of all debt and would increase interest expense on the variable
rate mortgage by approximately $12,000 for the year.
25
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties V, a Maryland Limited Partnership:
We have audited the accompanying consolidated balance sheets of NTS-Properties
V, a Maryland Limited Partnership, as of December 31, 2000 and 1999, and the
related consolidated statements of operations, partners' equity and cash flows
for each of the three years in the period ended December 31, 2000. These
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NTS-Properties V 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 consolidated
financial statements taken as a whole. The schedules included on pages 50
through 52 are presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations and are not a required part of the
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in our audits of the consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 9, 2001
26
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31, 2000 AND 1999
--------------------------------
2000 1999
---- ----
ASSETS
- ------
Cash and equivalents $ 1,096,857 $ 3,195,728
Cash and equivalents - restricted 48,389 128,990
Accounts receivable 167,429 114,506
Land, buildings and amenities, net 22,074,949 19,908,042
Other assets 798,379 533,062
----------- -----------
TOTAL ASSETS $24,186,003 $23,880,328
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $14,436,464 $14,143,157
Accounts payable 367,158 353,297
Security deposits 227,091 193,963
Other liabilities 213,312 183,062
----------- -----------
TOTAL LIABILITIES 15,244,025 14,873,479
MINORITY INTEREST 853,386 857,050
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' EQUITY 8,088,592 8,149,799
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $24,186,003 $23,880,328
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
27
NTS PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
2000 1999 1998
---- ---- ----
REVENUES
- --------
Rental income $ 4,756,468 $ 4,605,597 $ 6,976,273
Gain on sale of assets -- 71,439 5,364,026
Interest and other income 158,952 265,494 91,465
------------- ------------- -------------
TOTAL REVENUES 4,915,420 4,942,530 12,431,764
EXPENSES
- --------
Operating expenses 1,138,598 1,126,065 1,383,261
Operating expenses - affiliated 581,189 585,072 629,332
Loss on disposal of assets 195,722 34,314 15,957
Interest expense 1,006,032 1,162,058 2,129,322
Management fees 271,852 270,555 412,025
Real estate taxes 433,269 471,991 629,947
Professional and administrative expenses 143,324 216,980 132,458
Professional and administrative expenses - affiliated 149,221 180,957 208,495
Depreciation and amortization 1,044,543 985,038 1,383,769
------------- ------------- -------------
TOTAL EXPENSES 4,963,750 5,033,030 6,924,566
------------- ------------- -------------
Income (loss) before minority interest and
extraordinary item (48,330) (90,500) 5,507,198
Minority interest (10,123) (11,230) 203,291
------------- ------------- -------------
Income (loss) before extraordinary item (38,207) (79,270) 5,303,907
Extraordinary item -- -- (1,307,864)
------------- ------------- -------------
Net income (loss) $ (38,207) $ (79,270) $ 3,996,043
============= ============= =============
Net income (loss) allocated to the limited partners:
Income (loss) before extraordinary item $ (37,825) $ (78,477) $ 5,250,867
Extraordinary item -- -- (1,294,785)
------------- ------------- -------------
Net income (loss) $ (37,825) $ (78,477) $ 3,956,082
============= ============= =============
Net income (loss ) per limited partnership Unit:
Income (loss) before extraordinary item $ (1.24) $ (2.39) $ 152.49
Extraordinary Item -- -- (37.60)
------------- ------------- -------------
Net income (loss) per limited partnership Unit $ (1.24) $ (2.39) $ 114.89
============= ============= =============
Weighted average number of limited partnership
Units 30,620 32,861 34,433
============= ============= =============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
28
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
CONSOLIDATED STATEMENT 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 $ 6,501,634 $ (128,039) $ 6,373,595
Net income 3,956,082 39,961 3,996,043
Repurchase of limited partnership Units (177,930) -- (177,930)
------------- ------------- -------------
Balances at December 31, 1998 10,279,786 (88,078) 10,191,708
Net loss (78,477) (793) (79,270)
Cash distributions (1,252,275) (12,649) (1,264,924)
Repurchase of limited partnership Units (697,715) -- (697,715)
------------- ------------- -------------
Balances at December 31, 1999 8,251,319 (101,520) 8,149,799
Net loss (37,825) (382) (38,207)
Repurchase of limited partnership Units (23,000) -- (23,000)
------------- ------------- -------------
Balances at December 31, 2000 $ 8,190,494 $ (101,902) $ 8,088,592
============= ============= =============
(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 consolidated financial statements are an integral part
of these statements.
29
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net (loss) income $ (38,207) $ (79,270) $ 3,996,043
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Gain on sale of assets -- (71,439) (5,364,026)
Extraordinary item - early extinguishment of debt -- -- 1,307,864
Loss on disposal of assets 195,722 34,314 15,957
Depreciation and amortization 1,077,196 1,007,292 1,618,846
Changes in assets and liabilities:
Cash and equivalents - restricted 23,101 41,092 (29,925)
Accounts receivable (52,923) (353) 248,156
Other assets (223,608) (17,755) (128,114)
Accounts payable 13,861 125,457 195,587
Security deposits 33,128 29,165 (39,233)
Other liabilities 30,250 36,353 (89,469)
Minority interest (loss) income (10,123) (11,230) 203,291
------------- ------------- -------------
Net cash provided by operating activities 1,048,397 1,093,626 1,934,977
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from the sale of land and buildings -- 1,245,335 14,462,617
Additions to land, buildings and amenities (3,386,394) (947,033) (524,087)
Minority interest distributions 6,459 2,719 1,696,997
------------- ------------- -------------
Net cash (used in) provided by investing activities (3,379,935) 301,021 15,635,527
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in mortgages payable 1,300,327 -- 200,000
Principal payments on mortgages payable (1,007,020) (930,605) (12,285,472)
Early principal payment penalty -- -- (1,112,650)
Cash distributions -- (1,264,924) 8,438
(Increase) decrease in loan costs (95,140) -- --
Repurchase of limited partnership units (23,000) (697,715) (177,930)
Decrease (increase) in cash and equivalents - restricted 57,500 65,500 (123,000)
------------- ------------- -------------
Net cash provided by (used in) financing activities 232,667 (2,827,744) (13,490,614)
------------- ------------- -------------
Net (decrease) increase in cash and equivalents (2,098,871) (1,433,097) 4,079,890
CASH AND EQUIVALENTS, beginning of year 3,195,728 4,628,825 548,935
------------- ------------- -------------
CASH AND EQUIVALENTS, end of year $ 1,096,857 $ 3,195,728 $ 4,628,825
============= ============= =============
Interest paid on a cash basis $ 1,069,527 $ 1,145,941 $ 1,953,614
============= ============= =============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
30
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Consolidation Policy and Joint Venture Accounting
-------------------------------------------------
The consolidated financial statements included the accounts of
all wholly-owned properties and majority-owned joint ventures.
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.
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.
31
A) Consolidation Policy and Joint Venture Accounting - Continued
-------------------------------------------------------------
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 investment 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.
B) Organization
------------
NTS-Properties V, a Maryland Limited Partnership (the
"Partnership"), is a limited partnership organized on April 30,
1984. The General Partner is NTS-Properties Associates V, a
Kentucky limited partnership. The Partnership is in the business
of developing, constructing, owning and operating residential
apartments and commercial real estate.
C) Properties
----------
The Partnership owns and operates the following properties:
* Commonwealth Business Center Phase II, a business Center
with approximately 66,000 net rentable square feet located
in Louisville, Kentucky.
* A 90.30% joint venture interest in The Willows of Plainview
Phase II, a 144-unit luxury apartment complex located in
Louisville, Kentucky.
* An 81.19% 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
------------------------------------------------------
Operating net cash receipts, as defined in the partnership
agreement and which are made available for distribution will be
distributed 1) 99% to the limited partners and 1% to the General
Partner until the limited partners have received their 8%
preferred return as defined in the partnership agreement; 2) to
the General Partner in an amount equal to approximately
32
D) Allocation of Net Income (Loss) and Cash Distributions- Continued
-----------------------------------------------------------------
10% of the limited partners 8% preferred return and 3) the
remainder, 90% to the limited partners and 10% to the General
Partner. Net operating income (loss), exclusive of depreciation,
is allocated to the limited partners and the General Partner in
proportion to their cash distributions. Net operating income,
exclusive of depreciation, in excess of cash distributions shall
be allocated as follows: (1) pro rata to all partners with a
negative capital account to in an amount to restore their
respective negative capital account to zero; (2) 99% to the
limited partners and 1% to the General Partner until the limited
partners have received cash distributions from all sources equal
to their original capital; (3) the balance, 75% to the limited
partners and 25% to the General Partner. Depreciation expense is
allocated 99% to the limited partners and 1% to the General
Partner for all periods presented in the accompanying
consolidated 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 the
Partnership interests for inclusion on their individual income
tax returns.
A reconciliation of net (loss) income for financial statement
purposes versus that for income tax reporting is as follows:
2000 1999 1998
---- ---- ----
Net income (loss) $ (38,207) $ (79,270) $ 3,996,043
Items handled differently
for tax purposes:
Gain/loss on sale of assets -- (1,765,152) (982,892)
Depreciation and amortization 18,893 (177,825) 421,204
Capitalized leasing costs -- 2,622 11,930
Rental income 11,084 (32,996) 44,212
Write-off of unamortized tenant -- (24,787) (6,314)
improvements
Allowance for doubtful accounts -- (4,698) (8,626)
Other (114,065) 36,379 --
------------ ------------ ------------
Taxable (loss) income $ (122,295) $(2,045,727) $ 3,475,557
============ ============ ============
F) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents 1) funds received
for residential security deposits, 2) funds which have been
escrowed with mortgage companies for property taxes in accordance
with the loan agreements with said mortgage companies and 3)
funds reserved by the Partnership for the repurchase of limited
partnership Units (1999 balance only).
33
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, 3-7 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 value. Application of
this standard 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 $55,357 and $28,433
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.
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 V owns and operates or has a joint venture investment
in commercial properties in Kentucky (Louisville), and Florida (Ft.
Lauderdale). The Partnership also has a joint venture investment in a
residential property in Louisville, Kentucky.
34
3. Tender Offers
-------------
On October 13, 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 initial expiration date of the First Tender
Offer was January 11, 1999, and this expiration date was subsequently
extended through February 5, 1999. A total of 2,458 Units were
tendered, pursuant to the First Tender Offer, and the Offerors
accepted all Units tendered. The Partnership repurchased 600 Units and
ORIG, LLC purchased 1,858 Units at a total cost of $503,890 plus
offering expenses.
On June 25, 1999, the Partnership 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 $167.50 per Unit as of the
date of the Second Tender Offer. The initial expiration date of the
Second Tender Offer was August 31, 1999. On August 18, 1999, the price
was increased to $180 per Unit and the expiration date was extended to
September 30, 1999. On August 31, 1999, the price was increased to
$205 per Unit and the expiration date remained September 30, 1999. A
total of 2,523 Units were tendered, pursuant to the Second Tender
Offer, and the Partnership accepted all Units at a total cost of
$517,215 plus offering expenses. ORIG, LLC did not participate in the
Second Tender Offer.
On November 5, 1999, the Partnership and ORIG, LLC (the "Offerors"),
commenced a third tender offer (the "Third Tender Offer") to purchase
up to 500 of the Partnership's limited partnership Units at a price of
$215 per Unit as of the date of the Third Tender Offer. The initial
expiration date of the offer was December 23, 1999. On December 22,
1999, the price was increased to $230 per Unit and the expiration date
was extended to December 31, 1999. A total of 1,196 Units were
tendered, pursuant to the Third Tender Offer, and the Offerors
accepted all Units tendered. The Partnership repurchased 250 Units and
ORIG, LLC repurchased 946 Units at a total cost of $275,080 plus
offering expenses.
On September 22, 2000, the Partnership and ORIG, LLC (the "Offerors"),
commenced a fourth tender offer (the "Fourth Tender Offer") to
purchase up to 200 of the Partnership's limited partnership Units at a
price of $230 per Unit as of the date of the Fourth Tender Offer. The
expiration date of the offer was December 22, 2000. A total of 2,710
Units were tendered, pursuant to the Fourth Tender Offer, and the
Offerors accepted all Units tendered. The Partnership repurchased 100
Units and ORIG, LLC purchased 2,610 Units at a total cost of $623,300
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 at that date.
35
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 $10,552,618 $28,608,873
Buildings, improvements and amenities 29,989,538 8,979,394
----------- -----------
40,542,156 37,588,267
Less accumulated depreciation 18,467,207 17,680,225
----------- -----------
$22,074,949 $19,908,042
=========== ===========
5. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
2000 1999
---- ----
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.125%,
due August 1, 2008,
secured by land and a building. $ 4,483,083 $ 4,888,353
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.125%,
due August 1, 2008,
secured by land and buildings. 4,166,849 4,543,531
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 7.2%,
due January 5, 2013,
secured by land, buildings and
amenities. 2,808,716 2,949,626
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 7.2%,
due January 5, 2013,
secured by land, buildings and
amenities. 1,677,489 1,761,647
Mortgage payable to a bank,
bearing interest at a variable rate
based on LIBOR daily rate plus 2.3%,
currently 7.58%, due on September 8, 2003,
secured by land and a building. 1,300,327 --
----------- -----------
$14,436,464 $14,143,157
=========== ===========
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2001 $ 1,089,724
2002 1,208,938
2003 1,308,524
2004 1,413,389
2005 1,526,893
Thereafter 7,888,996
-----------
$14,436,464
===========
36
5. Mortgages Payable - Continued
-----------------------------
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 $14,400,000.
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 $ 2,201,437
2002 1,563,304
2003 850,884
2004 582,298
2005 184,794
Thereafter 36,757
-----------
$ 5,419,474
===========
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 to 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 $ 271,852 $ 270,555 $ 412,025
---------- ---------- ----------
Property management 334,296 270,397 392,652
Leasing 164,736 213,389 155,811
Administrative - operating 78,121 93,255 59,695
Other 4,036 8,031 21,174
---------- ---------- ----------
Total operating expenses
- affiliated 581,189 585,072 629,332
---------- ---------- ----------
Professional and administrative
expenses - affiliated 149,221 180,957 208,495
---------- ---------- ----------
(Continued on next page)
37
7. Related Party Transactions - Continued
--------------------------------------
For the Twelve Months Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Repairs and maintenance fee 178,879 47,338 32,412
Leasing commissions 97,910 108,236 77,471
Loan costs -- -- --
Construction management 38 -- 4,157
Other -- -- 81
---------- ---------- ----------
Total related party transactions
capitalized 276,827 155,574 114,121
---------- ---------- ----------
Total related party transactions $1,279,089 $1,192,158 $1,363,973
========== ========== ==========
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 1,604
Interests in the Partnership for total consideration of $425,949, or
an average price of $265.55 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. Sale of Assets
--------------
On October 6, 1998 pursuant to a contract executed on September 8,
1998, the Lakeshore/University II Joint Venture ("L/U II Joint
Venture") and NTS Properties V sold University Business Center Phases
I and II office buildings to Silver City Properties, Ltd. ("the
Purchaser") for an aggregate purchase price of $17,950,000 ($8,975,000
for Phase I and $8,975,000 for Phase II). University Business Center
Phase II was owned by the L/U II Joint Venture of which the
Partnership owned a 69.23% interest as of the date of the sale.
Portions of the proceeds from this sale were immediately used to pay
the remainder of the outstanding debt (including interest and
prepayment penalties) of $10,672,643 ($4,739,261 for Phase I and
$5,933,382 for Phase II) on these properties. During October 1998, a
portion of the proceeds was also used to pay the outstanding debt
balance of $1,447,195 on Commonwealth Business Center Phase II.
NTS-Properties V used a portion of the remaining proceeds after pay
down of mortgages to make a $37.50 per unit distribution totaling
$1,252,275 paid to the limited partners during the first quarter of
1999. The Partnership reflects a extraordinary item of approximately
$1,308,000 for loan pre-payment penalties associated with this sale
for the year ended December 31, 1998.
On September 8, 1998, a contract was executed to sell a parcel of land
known as University Phase III for $801,000 to Silver City Properties
Ltd. On March 17, 1999, NTS-Properties V sold a highway easement on
this land to Orange County Florida for $216,648. On September 17,
1999, the closing was held for the September 8, 1998 contract. At
closing Silver City Properties, Ltd. was credited for $145,824 of the
$216,648 proceeds from the highway easement on this parcel of land.
The Partnership reflects a loss of approximately $23,000 associated
with this sale for the year ended December 31, 1999.
38
8. Sale of Assets - Continued
--------------------------
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4
acres of land adjacent to the Lakeshore Business Center for a sales
price of $528,405. The Partnership reflects a gain of approximately
$94,000 associated with this sale for the year ended December 31,
1999.
9. 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 and 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 consolidated balance sheets and statements of operations
of the Partnership.
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 Partnership had incurred approximately
$77,000 of this cost as of December 31, 2000.
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore
Business Center Phase I for a cost of approximately $400,000.
10. 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 II.
The Commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known
as Commonwealth Business Center Phase II and Lakeshore Business Center
Phases I, II and III. In addition, the table below includes the
properties known as University Business Center Phases I and II up
until their disposition in October 1998 (see Note 8 for details of
this transaction).
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 evaluated
performance based on stand-alone operating segment net income.
39
10. Segment Reporting - Continued
-----------------------------
2000
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 1,313,898 $ 3,442,570 $ 4,756,468
Interest and other income 4,722 17,571 22,293
----------- ----------- -----------
Total net revenues $ 1,318,620 $ 3,460,141 $ 4,778,761
=========== =========== ===========
Operating expenses and operating expenses -
affiliated $ 515,038 $ 1,204,749 $ 1,719,787
Loss on disposal of assets 46,351 149,371 195,722
Interest expense 332,422 653,248 985,670
Management fees 66,859 204,993 271,852
Real estate taxes 64,332 368,937 433,269
Depreciation expense 215,555 778,798 994,353
----------- ----------- -----------
Total expenses 1,240,557 3,360,096 4,600,653
----------- ----------- -----------
Net income $ 78,063 $ 100,045 $ 178,108
=========== =========== ===========
Land, buildings and amenities, net $ 3,916,523 $18,141,681 $22,058,204
=========== =========== ===========
Expenditures for land, buildings and amenities $ 28,041 $ 3,358,353 $ 3,386,394
=========== =========== ===========
Segment liabilities $ 4,645,824 $10,677,693 $15,323,517
=========== =========== ===========
1999
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 1,339,755 $ 3,265,842 $ 4,605,597
Interest and other income 1,923 11,426 13,349
----------- ----------- -----------
Total net revenues $ 1,341,678 $ 3,277,268 $ 4,618,946
=========== =========== ===========
Operating expenses and operating expenses -
affiliated $ 462,118 $ 1,249,019 $ 1,711,137
Loss on disposal of assets 33,647 667 34,314
Interest expense 348,106 -- 348,106
Management fees 71,712 198,843 270,555
Real estate taxes 65,583 381,934 447,517
Depreciation expense 211,216 723,605 934,821
----------- ----------- -----------
Total expenses 1,192,382 2,554,068 3,746,450
----------- ----------- -----------
Net income $ 149,296 $ 723,200 $ 872,496
=========== =========== ===========
Land, buildings and amenities, net $ 4,155,396 $15,731,117 $19,886,513
=========== =========== ===========
Expenditures for land, buildings and amenities $ 112,480 $ 834,553 $ 947,033
=========== =========== ===========
Segment liabilities $ 4,930,013 $ 501,114 $ 5,431,127
=========== =========== ===========
40
10. Segment Reporting - Continued
-----------------------------
1998
----
Residential Commercial Total
----------- ---------- -----
Rental income $ 1,326,167 $ 5,650,106 $ 6,976,273
Interest and other income 2,823 21,989 24,812
Gain on sale of assets -- (11,630,723) (11,630,723)
------------- ------------- -------------
Total net revenues $ 1,328,990 $ (5,958,628) $ (4,629,638)
============= ============= =============
Operating expenses and operating expenses -
affiliated $ 520,896 $ 1,491,697 $ 2,012,593
Loss on disposal of assets 15,625 332 15,957
Interest expense 367,619 -- 367,619
Management fees 66,832 345,193 412,025
Real estate taxes 58,363 489,820 548,183
Depreciation expense 205,221 1,186,493 1,391,714
------------- ------------- -------------
Total expenses 1,234,556 3,513,535 4,748,091
------------- ------------- -------------
Net income (loss) $ 94,434 $ (9,472,163) $ (9,377,729)
============= ============= ============
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
---- ---- ----
NET REVENUES
- ------------
Total revenues for reportable segments $ 4,778,761 $ 4,618,947 $ (4,629,638)
Other income for Partnership 85,696 202,338 363,958
Gain on sale of assets -- 71,439 16,994,749
Eliminations 50,963 49,806 (297,305)
------------- ------------- -------------
Total consolidated net revenues $ 4,915,420 $ 4,942,530 $ 12,431,764
============= ============= =============
INTEREST EXPENSE
- ----------------
Interest expense for reportable segments $ 985,670 $ 348,106 $ 367,619
Interest expense for Partnership level 20,362 813,952 1,761,703
------------- ------------- -------------
Total interest expense $ 1,006,032 $ 1,162,058 $ 2,129,322
============= ============= =============
REAL ESTATE TAXES
- -----------------
Total real estate taxes for reportable segments $ 433,269 $ 447,517 $ 548,183
Real estate and income taxes for Partnership level -- 24,474 81,764
------------- ------------- -------------
Total real estate taxes $ 433,269 $ 471,991 $ 629,947
============= ============= =============
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization for reportable
segments $ 994,353 $ 934,821 $ 1,391,714
Depreciation and amortization for Partnership level 18,839 18,871 48,383
Eliminations 31,351 31,346 (56,328)
------------- ------------- -------------
Total depreciation and amortization $ 1,044,543 $ 985,038 $ 1,383,769
============= ============= =============
41
10. Segment Reporting - Continued
-----------------------------
2000 1999 1998
---- ---- ----
NET INCOME (LOSS) BEFORE EXTRAORDINARY
- --------------------------------------
ITEM
- ----
Net income (loss) before extraordinary item for
reportable segments $ 178,108 $ 872,496 $ (9,377,729)
Net income (loss) before extraordinary item for
Partnership (226,172) (952,357) 13,921,840
Minority interest for Partnership (10,123) (11,230) 203,291
Eliminations 19,980 11,821 556,505
------------- ------------- -------------
Total net income (loss) before extraordinary item $ (38,207) $ (79,270) $ 5,303,907
============= ============= =============
EXTRAORDINARY ITEM-EARLY
- ------------------------
EXTINGUISHMENT OF DEBT
- ----------------------
Total extraordinary item for reportable segments $ -- $ -- $ --
Extraordinary item for partnership -- -- (1,307,864)
------------- ------------- -------------
Total extraordinary item - early extinguishment of
debt $ -- $ -- $ (1,307,864)
============= ============= =============
TOTAL NET INCOME (LOSS) $ (38,207) $ (79,270) $ 3,996,043
============= ============= =============
LAND, BUILDINGS AND AMENITIES
- -----------------------------
Total land, buildings and amenities for reportable
segments $ 22,058,204 $ 19,886,513
Partnership level 16,745 21,529
------------- -------------
Total land, buildings and amenities, net $ 22,074,949 $ 19,908,042
============= =============
LIABILITIES
- -----------
Total liabilities for reportable segments $ 15,323,517 $ 5,431,127
Liabilities for Partnership (79,492) 9,442,352
------------- -------------
Total liabilities $ 15,244,025 $ 14,873,479
============= =============
11. Selected Quarterly Financial Data (Unaudited)
---------------------------------------------
For the Quarters Ended
----------------------
2000 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues $ 1,018,427 $ 1,103,758 $ 1,045,876 $ 1,057,895
Total expenses 1,165,903 1,046,370 1,018,494 1,033,396
Net income (loss) (147,476) 57,388 27,382 24,499
Net income (loss) allocated to the
limited partners (146,001) 56,814 27,108 24,254
Net income (loss) per limited
partnership Unit (4.77) 1.86 0.89 0.78
For the Quarters Ended
----------------------
1999 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues $ 985,233 $ 998,238 $ 1,128,882 $ 971,671
Total expenses 1,014,842 995,782 1,111,599 1,041,071
Net income (loss) (29,609) 2,456 17,283 (69,400)
Net income (loss) allocated to the
limited partners (29,313) 2,431 17,110 (68,705)
Net income (loss) per limited
partnership Unit (0.87) 0.07 0.51 (2.10)
42
11. 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 1A for further
information regarding the Partnership's change from the proportionate
consolidation method to the equity method.
43
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------------
Financial Disclosure
--------------------
None.
44
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 V. 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 V are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 59) is the managing General Partner of NTS-Properties
Associates V 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. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
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 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
45
Gregory A. Wells - Continued
- ----------------------------
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
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 8 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.
Oceanridge Investments, Ltd.
6110 North Ocean Blvd, #37
Boynton Beach, Florida 33435 2,632 Units (8.62%)
Oceanridge Investments, Ltd. is a limited partnership controlled by members of
the family of Mr. J. D. Nichols, a general partner of the General Partner of the
Partnership.
ORIG, LLC 7,280 Units (23.85%)
10172 Linn Station Rd.
Louisville, Kentucky 40223
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.
46
Item 12. Security Ownership of Certain Beneficial Owners and Management
---------------------------------------------------------------------
- Continued
-----------
The General Partner is NTS-Properties Associates V, 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 V are as follows:
J. D. Nichols 59.90%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .10%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 40% interests are owned by various limited partners of NTS
Properties Associates V.
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.
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.
47
Item 13. Certain Relationships and Related Transactions - Continued
----------------------------------------------------------
For the Twelve Months Ended
December 31,
------------
2000 1999 1998
---- ---- ----
Property management fees $ 271,852 $ 270,555 $ 412,025
---------- ---------- ----------
Property management 334,296 270,397 392,652
Leasing 164,736 213,389 155,811
Administrative - operating 78,121 93,255 59,695
Other 4,036 8,031 21,174
---------- ---------- ----------
Total operating expenses - affiliated 581,189 585,072 629,332
---------- ---------- ----------
Professional and administrative expenses - affiliated 149,221 180,957 208,495
---------- ---------- ----------
Repairs and maintenance fee 178,879 47,338 32,412
Leasing commissions 97,910 108,236 77,471
Loan costs -- -- --
Construction management 38 -- 4,157
Other -- -- 81
---------- ---------- ----------
Total related party transactions capitalized 276,827 155,574 114,121
---------- ---------- ----------
Total related party transactions $1,279,089 $1,192,158 $1,363,973
========== ========== ==========
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 1,604 Interests in the Partnership for total
consideration of $425,949, or an average price of $265.55 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.
48
PART IV
-------
Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports
--------------------------------------------------------------------
on Form 8-K
-----------
1. Consolidated Financial Statements
---------------------------------
The financial statements for the years ended December 31, 2000, 1999
and 1998 together with the report of Arthur Andersen LLP dated March
9, 2001, appear in Part II, Item 8. The following financial statement
schedules should be read in conjunction with such financial
statements.
2. Financial Statement Schedules
-----------------------------
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 50-52
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 V, a Maryland
limited partnership
3a. First Amendment to Amended and Restated Agreement **
of Limited Partnership of NTS-Properties V, a Maryland
limited partnership
10. Property Management Agreement *
between NTS Development Company and
NTS-Properties V, a Maryland limited partnership
* 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 1, 1984 (effective
August 1, 1984) under Commission File No. 2-90818.
** Incorporated by reference to From 10-K filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 under Commission File No. 0-13400.
4. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three months ended
December 31, 2000.
49
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 2000
-----------------------
Commonwealth The Willows Lakeshore
Business Center of Plainview Business Center
Phase II Phase II Phase I
-------- -------- -------
Encumbrances N/A (A) (A)
Initial cost to Partnership:
Land and improvements $ 946,039 $ 1,775,547 $ 3,011,184
Buildings, improvements and amenities 1,574,747 6,240,105 5,053,025
Cost capitalized subsequent to acquisition:
Improvements (net of retirements) 2,324,371 210,126 2,677,992
Gross amount at which carried December 31, 2000:
Land and improvements $ 999,412 $ 1,807,176 $ 2,684,301
Buildings, improvements and amenities 3,845,745 6,418,602 8,057,900
----------- ----------- -----------
Total $ 4,845,157 $ 8,225,778 $10,742,201
=========== =========== ===========
Accumulated depreciation $ 3,012,773 $ 4,309,255 $ 5,764,540
=========== =========== ===========
Date of construction 09/85 08/85 05/86
Date acquired N/A N/A N/A
Life at which depreciation in latest income statement
is computed (B) (B) (B)
(A) First mortgage held by an insurance company.
(B) 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 and 3-7 years for amenities.
50
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 2000
-----------------------
Lakeshore Lakeshore
Business Business
Center Center Total
Phase II Phase III Pages 50-51
-------- --------- -----------
Encumbrances (A) (B)
Initial cost to Partnership:
Land $ 6,904,246 $ 2,258,235 $ 14,895,251
Buildings and improvements 14,424,541 -- 27,292,418
Cost capitalized subsequent to acquisition:
Improvements (net of retirements) (8,914,186) 2,032,262 (1,669,435)
Gross amount at which carried December 31, 2000:(C)
Land $ 3,696,131 $ 1,365,598 $ 10,552,618
Buildings and improvements 8,718,470 2,924,899 29,965,616
------------ ------------ ------------
Total $ 12,414,601 $ 4,290,497 $ 40,518,234 (E)
============ ============ ============
Accumulated depreciation $ 5,358,507 $ 14,955 $ 18,460,030 (E)
============ ============ ============
Date of construction N/A 12/00
Date acquired 01/95
Life at which depreciation in latest income statement
is computed (D) (D)
(A) First mortgage held by an insurance company.
(B) First mortgage held by a bank.
(C) Aggregate cost of real estate for tax purposes is $40,569,924.
(D) Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5-30 years for land improvements, 3-30
years for buildings and improvements and 3-7 years for amenities. (E)
Total gross cost at December 31, 2000 $ 40,518,234
Additions to Partnership for computer hardware
and software in 1998 and 1999 23,922
-------------
Balance at December 31, 2000 40,542,156
Less accumulated depreciation - per above (18,460,030)
Less accumulated depreciation for Partnership
computer hardware and software (7,177)
-------------
Land, buildings and amenities,
net at December 31, 2000 $ 22,074,949
=============
51
NTS-PROPERTIES V,
-----------------
A MARYLAND LIMITED PARTNERSHIP
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
----------------------------------------------------
Real Accumulated
Estate Depreciation
------ ------------
Balances at December 31, 1997 $ 54,768,915 $ 23,467,058
Additions during period:
Improvements 524,087 --
Depreciation (a) -- 1,578,983
Deductions during period:
Retirements (b) (17,278,757) (8,164,209)
------------- -------------
Balances at December 31, 1998 38,014,245 16,881,832
Additions during period:
Improvements 947,033 --
Depreciation (a) -- 962,468
Deductions during period:
Retirements (1,373,011) (164,075)
------------- -------------
Balances at December 31, 1999 37,588,267 17,680,225
Additions during period:
Improvements 3,386,394 1,023,765
Depreciation (a) -- --
Deductions during period:
Retirements (432,505) (236,783)
------------- -------------
Balances at December 31, 2000 $ 40,542,156 $ 18,467,207
============= =============
(a) The additions charged to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statement of Cash
Flows due to the amortization of loan costs.
(b) Includes the results of the Sale of University Business Center Phases I and
II on October 6, 1998.
52
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
---------------------------------------------
(Registrant)
BY: NTS-Properties Associates V,
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 2, 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 V 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.
53