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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission file number 0-14695
NTS-PROPERTIES VI, a Maryland Limited Partnership
(Exact name of registrant as specified in its charter)
Maryland 61-1066060
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 426-4800
---------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Exhibit Index: See page 37
Total Pages: 41
TABLE OF CONTENTS
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Pages
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PART I
------
Items 1 and 2 Business and Properties 3-11
Item 3 Legal Proceedings 11
Item 4 Submission of Matters to a Vote
of Security Holders 11
PART II
-------
Item 5 Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 12
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14-21
Item 8 Financial Statements and Supplementary
Data 22-34
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 35
PART III
--------
Item 10 Directors and Executive Officers of
the Registrant 35
Item 11 Management Remuneration and Transactions 35-36
Item 12 Security Ownership of Certain Beneficial
Owners and Management 36
Item 13 Certain Relationships and Related
Transactions 36
PART IV
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Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 37-40
Signatures 41
- 2 -
PART I
Items 1. and 2. Business and Properties
General
- -------
The registrant, NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership"), is a limited partnership formed in December 1984 under the laws
of the State of Maryland. The general partner is NTS-Properties Associates VI, a
Kentucky limited partnership. As of December 31, 1995, the Partnership owned the
following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex located on
a 13 acre tract in Orlando, Florida, constructed by the Partnership.
- Park Place Apartments Phase I, a 180-unit luxury apartment complex
located on an 18 acre tract in Lexington, Kentucky, constructed by
the Partnership.
- Willow Lake Apartments, a 207-unit luxury apartment complex located
on an 18 acre tract in Indianapolis, Indiana, constructed by the
Partnership.
- A joint venture interest in Golf Brook Apartments, a 195-unit luxury
apartment complex located on a 16 acre tract in Orlando, Florida,
constructed by the joint venture between the Partnership and NTS-
Properties IV., Ltd. ("NTS-Properties IV"), an affiliate of the
general partner of the Partnership. The Partnership's percentage
interest in the joint venture was 96% at December 31, 1995.
- A joint venture interest in Plainview Point III Office Center, an
office center with approximately 62,000 net rentable square feet,
located in Louisville, Kentucky, constructed by the joint venture
between the Partnership and NTS-Properties IV. The Partnership's
percentage interest in the joint venture was 95% at December 31,
1995.
The Partnership also owns approximately 15 acres of land in Lexington, Kentucky
which is zoned for 163 apartment units (Park Place Apartments Phase III). The
Partnership intends to use the land to construct Park Place Apartments Phase
III. This was the result of the Partnership receiving a market analysis which
shows it to be advantageous to build additional apartment units at Park Place
Apartments. Efforts to sell the land have not produced attractive prices. The
Partnership is currently considering a phased development of apartment units on
this land utilizing cash reserves and a portion of cash flow. As of December 31,
1995, no commitments have been made in connection with this project.
The Partnership or Joint Venture in which the Partnership is a partner has a fee
title interest in the above listed properties. In the opinion of the
Partnership's management, the properties are adequately covered by insurance.
Sabal Park Apartments 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, 1995 was $4,805,719
($2,883,431 and $1,922,288). Both mortgages currently bear a fixed interest rate
of 7.25% and are due January 5, 2003. Current monthly principal payments on both
mortgages are based upon a 27-year amortization schedule. The outstanding
balance at maturity based on the current rate of amortization would be
$4,122,326 ($2,473,396 and $1,648,930).
- 3 -
Items 1. and 2. Business and Properties - Continued
General - Continued
- -------------------
Park Place Apartments Phase I 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, 1995 was $5,015,374
($4,050,879 and $964,495). Both mortgages currently bear a fixed interest rate
of 8.375% for the first 60 months and are due October 5, 2002. Current monthly
principal payments on both mortgages are based upon a 27- year amortization
schedule. The outstanding principal balance at maturity based on the current
rate of amortization would be $4,413,955 ($3,565,118 and $848,837).
Willow Lake Apartments Phase I is encumbered by a permanent mortgage with an
insurance company. The outstanding balance at December 31, 1995 was $8,631,951.
The mortgage currently bears interest at a fixed rate of 9.20%. Monthly
principal payments are based upon a 25-year amortization schedule. The mortgage
is due November 1, 1997. The outstanding balance at maturity based on the
current rate of amortization will be $8,433,356.
Golf Brook Apartments, a joint venture between the Partnership and NTS-
Properties IV is encumbered by a mortgage payable to an insurance company. The
mortgage replaced the loan which the Partnership had obtained to fund a portion
of its capital contribution to the Joint Venture. The mortgage is recorded as a
liability by the Partnership in accordance with the Joint Venture Agreement. The
outstanding balance at December 31, 1995 was $9,200,000. The mortgage bears a
fixed interest rate of 8.625% and the unpaid balance of $9,200,000 is due August
1, 1997.
Plainview Point III Office Center and the 15 acres of land in Lexington,
Kentucky are not encumbered by any outstanding mortgages at December 31, 1995.
For a further discussion regarding the terms of the debt financings see
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7).
In addition to the construction of Park Place Apartments Phase III as discussed
on page 3, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements at the Partnership's commercial
property as required by lease negotiations. Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to accommodate a tenant's needs,
new carpeting and paint and/or wallcovering. The extent and cost of 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 flow from operations
and/or cash reserves. The Partnership had no material commitments for
renovations or capital improvements at December 31, 1995.
On October 15, 1993, the $600,000 Certificate of Deposit which had been
purchased with 1991 loan proceeds (a requirement of the loan secured by Willow
Lake Apartments) was applied against the principal balance of the loan. (See
Item 7 for a discussion of this mortgage payable and Certificate of Deposit.)
The Partnership is presently engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate. A presentation of information concerning industry segments is not
applicable.
- 4 -
Items 1. and 2. Business and Properties - Continued
General - Continued
- -------------------
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to purchase and develop parcels of unimproved or
partially improved land, directly or by joint venture, in order to construct and
otherwise develop thereon apartment complexes, business parks and/or retail,
industrial and office buildings and to own and operate the completed properties.
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. The General Partner of the Partnership is currently
exploring the marketability of certain of its properties, and has not yet
determined if any of the properties might be sold in the next 12 months.
Sabal Park Apartments
- ---------------------
Units at Sabal Park Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, ovens, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, swimming pool and tennis courts.
Monthly rental rates at Sabal Park Apartments start at $869 for two-bedroom
apartments and $1,159 for three-bedroom apartments, 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 98% (1995), 91% (1994), 94% (1993), 93% (1992) and 80% (1991).
Park Place Apartments Phase I
- -----------------------------
Units at Park Place Apartments Phase I include one and two-bedroom apartments
and two-bedroom townhomes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices. The amenities are
shared with Phase II of the Park Place development. Park Place Apartments Phase
II is owned by NTS-Properties VII, Ltd., an affiliate of the general partner of
the Partnership. The cost to construct and operate the common amenities is
shared proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase I start at $669 for
one-bedroom apartments, $859 for two-bedroom apartments and $1,069 for
two-bedroom townhomes, 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 92% (1995), 93%
(1994), $93% (1993), 96% (1992) and 88% (1991).
- 5 -
Items 1. and 2. Business and Properties - Continued
Willow Lake Apartments
- ----------------------
Units at Willow Lake Apartments include one and two-bedroom apartments and
two-bedroom townhomes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices.
Monthly rental rates at Willow Lake Apartments start at $730 for one-bedroom
apartments, $950 for two-bedroom apartments and $1,125 for two-bedroom
townhomes, 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 93% (1995), 92% (1994), 84%
(1993), 87% (1992) and 87% (1991).
Golf Brook Apartments
- ---------------------
Units at Golf Brook Apartments include two and three bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, pool and tennis courts.
Monthly rental rates at Golf Brook Apartments start at $1,100 for two-bedroom
apartments and $1,320 for three-bedroom apartments, 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 91% (1995), 93% (1994), 91% (1993), 94% (1992) and 87% (1991).
Plainview Point III Office Center
- ---------------------------------
Base annual rents, which include the cost of utilities, range from $14.25 to
$15.00 per square foot for first and second floor office space and $13.00 per
square foot for lower level office space. The average base annual rental for all
types of space leased as of December 31, 1995 was $14.23 per square foot. Office
space is ordinarily leased for between two and six years with the majority of
current square footage being leased for a term of five and one-half years.
Current leases terminate between 1996 and 2001. Some leases provide for renewal
options of between two and five years at rates which are based upon increases in
the consumer price index and/or are negotiated between lessor and lessee. All
leases provide for tenants to contribute toward the payment of increases in
common area maintenance expenses, insurance, utilities and real estate taxes. As
of December 31, 1995, there were six tenants leasing space aggregating
approximately 40,180 square feet of rentable area. The tenants who occupy
Plainview Point III Office Center are professional service oriented
organizations. The principal occupations/professions practiced include real
estate and insurance. Three tenants lease more than 10% of the office center's
rentable area: The Prudential Company of America (10.4%), Underwriters Safety &
Claims, Inc. (16.6%) and Re/max Properties East, Inc. (22.5%). The occupancy
levels at the office center as of December 31 were 91% (1995), 91% (1994), 87%
(1993), 95% (1992) and 96% (1991).
- 6 -
Items 1. and 2. Business and Properties - Continued
Plainview Point III Office Center - Continued
- ---------------------------------------------
The following table contains approximate data concerning the leases in effect on
December 31, 1995.
Major Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
The Prudential Company
of America 1997 6,474 (10.4%) $ 95,964 (16.8%) 1 Five-Year
Underwriters Safety &
Claims, Inc. 2001 10,343 (16.6%) $134,460 (23.5%) None
Re/max Properties East,
Inc. 1999 14,001 (22.5%) $204,000 (35.7%) 1 Two-Year
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- ---- ------ -------
2 1996 7,223 (11.6%) $106,452 (18.6%) None
1 1997 2,139 ( 3.4%) $ 31,008 ( 5.4%) 1 Three-Year
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments $11,209,808 $.01895 $140,478
Park Place Apartments
Phase I 11,218,067 .00991 111,800
Willow Lake Apartments 15,526,270 .09235 235,531
Properties Owned in Joint
Venture with NTS-
Properties IV
- -------------
Golf Brook Apartments 16,100,810 .01895 224,493
Plainview Point III
Office Center 4,246,199 .01141 35,667
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
Depreciation for book purposes is computed using the straight-line method over
the estimated useful lives of the assets which are 5 - 30 years for land
improvements, 30 years for buildings, 5 - 30 years for building improvements and
3 - 30 for amenities. The estimated realty taxes on any construction relating to
Park Place Apartments Phase III is unknown at this time because the Partnership
has not finalized any plans in connection with this project. The estimated
realty taxes on all other planned renovations, primarily tenant improvements,
would not be material.
- 7 -
Items 1. and 2. Business and Properties - Continued
Plainview Point III Office Center - Continued
- ---------------------------------------------
See Management's Discussion and Analysis of Financial Condition and Results
of Operations (Item 7) for explanations regarding the fluctuations of income
and occupancy at the Partnership's properties.
Investment in Joint Ventures
- ----------------------------
NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV, an affiliate of
the general partner of the Partnership, to develop, construct, own and operate a
158-unit luxury apartment complex on a 13.15 acre site in Orlando, Florida known
as Golf Brook Apartments Phase I. On January 1, 1987, the joint venture
agreement was amended to include Golf Brook Apartments Phase II, a 37-unit
luxury apartment complex located on a 3.069-acre site adjacent to Golf Brook
Apartments Phase I. The term of the Joint Venture shall continue until
dissolved. Dissolution shall occur upon, but not before, the first to occur of
the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
The Partnership contributed approximately $15.8 million, the cost of
constructing and leasing the apartments. NTS-Properties IV contributed land
valued at $1,900,000 with a related note payable to a bank of $1,200,000. The
Partnership also contributed funds to retire the $1,200,000 note payable to a
bank. No future contributions are anticipated as of December 31, 1995.
Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. This mortgage payable replaced the Contribution Loan which the
Partnership had obtained to fund a portion of its capital contribution to the
Joint Venture. The $9,200,000 mortgage payable is recorded as a liability by the
Partnership in accordance with the Joint Venture Agreement. The mortgage bears a
fixed interest rate of 8.625%. The unpaid balance of the loan ($9,200,000) is
due August 1, 1997.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
- 8 -
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 96%
at December 31, 1995.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties IV, an affiliate of the
general partner, to develop, construct, own and operate an office building in
Louisville, Kentucky known as Plainview Point III Office Center. The terms of
the Joint Venture shall continue until dissolved. Dissolution shall occur upon,
but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property, unless such
disposition is, in whole or in part, represented by a promissory
note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
The Partnership contributed approximately $4.1 million, the cost to construct
and lease the building. NTS-Properties IV contributed land valued at $790,000
with an outstanding note of $550,000 which was secured by the land. The
Partnership also contributed the funds to retire the $550,000 note payable to
the bank. No future contributions are anticipated as of December 31, 1995.
As of December 31, 1995, Plainview Point III Office Center is not encumbered by
any mortgage indebtedness.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 95%
at December 31, 1995.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
- 9 -
Items 1. and 2. Business and Properties - Continued
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, 1995, there are no properties under construction
in the respective vicinities in which the properties are located except for the
following: In close proximity to Sabal Park Apartments and Golf Brook
Apartments, there are 240 apartment units currently under construction which are
scheduled to be completed during the second quarter of 1996. In the vicinity
near Park Place Apartments, there are currently 330 apartment units currently
under construction which are scheduled to be completed during the third quarter
of 1996. Also, in the vicinity of Willow Lake Apartments, there are currently
314 apartment units under construction. It is anticipated that construction of
these units will be completed during the second quarter of 1996. At this time it
is unknown the effect these new units will have on occupancy at the
Partnership's properties. The Partnership has not commissioned a formal market
analysis of competitive conditions in any market in which it owns properties,
but relies upon the market condition knowledge of the employees of NTS
Development Company who manage and supervise leasing for each property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates VI, 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 VI. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received a total of $441,861
for the year ended December 31, 1995. $24,485 was received from the commercial
property and $417,376 was received from residential properties. The fee is equal
to 6% of gross revenues from the commercial property and 5% of gross revenues
from residential properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods, unless cancelled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1995, the
Management Agreement is still in effect.
- 10 -
Items 1. and 2. Business and Properties - Continued
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 judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. With respect to these potential conflicts of interest, the general
partner and its affiliates retain a free right to compete with the Partnership's
properties including the right to develop competing properties now and in the
future, in addition to those existing properties which may compete directly or
indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
general partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
- 11 -
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 4,610 limited partners as of
February 29, 1996. Cash distributions and allocations of net income (loss) are
made as described in Note 1C to the Partnership's 1995 financial statements.
Annual distributions totalling $20.00, $18.75 and $15.00 per limited partnership
unit were paid during the years ended December 31, 1995, 1994 and 1993,
respectively. Quarterly distributions are determined based on current cash
balances, cash flow being generated by operations and cash reserves needed for
future leasing costs, tenant finish costs and capital improvements.
Distributions were paid quarterly as follows:
1995 1994 1993
---------- ---------- ---------
First quarter $ 5.00 $ 3.75 $ 3.75
Second quarter 5.00 5.00 3.75
Third quarter 5.00 5.00 3.75
Fourth quarter 5.00 5.00 3.75
------ ------ ------
$20.00 $18.75 $15.00
====== ====== ======
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, 1995, 1994 and 1993.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $ (324,417) $ 948,700 $ 948,700
1994 (803,780) 889,380 889,380
1993 (1,022,967) 711,525 711,525
General Partner:
1995 $ (3,277) $ 9,583 $ 9,583
1994 (8,119) 8,984 8,984
1993 (10,333) 7,187 7,187
- 12 -
Item 6. Selected Financial Data
Years ended December 31, 1995, 1994, 1993, 1992 and 1991.
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------
Total revenues $ 8,939,055 $ 8,796,072 $ 8,515,951 $ 7,831,434 $ 7,788,597
Total expenses (9,266,749) (9,607,971) (9,549,251) (9,794,478) (10,193,963)
------------ ------------ ------------ ------------ ------------
Net loss $ (327,694) $ (811,899) $ (1,033,300) $ (1,963,044) $ (2,405,366)
============ ============ ============ ============ ============
Net income (loss)
allocated to:
General partner $ (3,277) $ (8,119) $ (10,333) $ (19,630) $ (24,054)
Limited partners $ (324,417) $ (803,780) $ (1,022,967) $ (1,943,414) $ (2,381,312)
Net loss per limited
partnership unit $ (6.83) $ (16.94) $ (21.57) $ (40.97) $ (50.20)
Weighted average
number of limited
partnership units 47,435 47,435 47,435 47,435 47,435
Cumulative net income
(loss) allocated to:
General partner $ (78,207) $ (74,930) $ (66,811) $ (56,478) $ (36,848)
Limited partners $(12,533,124) $(12,208,707) $(11,404,927) $(10,381,960) $ (8,438,546)
Cumulative net
taxable income (loss)
allocated to:
General partner $ 78,617 $ 64,858 $ 55,986 $ 46,533 $ (129,768)
Limited partners $(15,401,294) $(14,859,402) $(13,885,668) $(12,769,887) $(11,278,624)
Distributions
declared:
General partner $ 9,583 $ 8,984 $ 7,187 $ 5,390 $ 1,797
Limited partners $ 948,700 $ 889,380 $ 711,525 $ 533,643 $ 177,881
Cumulative
distributions
declared:
General partner $ 94,494 $ 84,911 $ 75,927 $ 68,740 $ 63,350
Limited partners $ 9,354,906 $ 8,406,206 $ 7,516,826 $ 6,805,301 $ 6,271,658
At year end:
Cash and equivalents $ 867,902 $ 1,617,604 $ 1,394,905 $ 1,530,572 $ 1,182,601
Investment
securities $ 1,151,355 $ -- $ -- $ -- $ --
Land, buildings and
amenities, net $ 42,196,272 $ 43,872,072 $ 45,799,467 $ 47,621,659 $ 49,956,895
Total assets $ 46,813,791 $ 48,267,884 $ 50,221,728 $ 52,751,897 $ 55,165,881
Mortgages and note
payable $ 27,653,044 $ 27,883,025 $ 28,101,474 $ 28,900,767 $ 28,943,324
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
- 13 -
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
Percentage
Ownership
at 12/31/95 1995 1994 1993
----------- -------- -------- --------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 100% 98% 91% 94%
Park Place Apartments
Phase I 100% 92% 93% 93%
Willow Lake Apartments 100% 93% 92% 84%
Properties Owned in Joint
Venture with NTS-
Properties IV
- -------------
Golf Brook Apartments 96% 91% 93% 91%
Plainview Point III
Office Center 95% 91% 91% 87%
Rental and other income generated by the Partnership's properties for the years
ended December 31, 1995, 1994 and 1993 were as follows:
Percentage
Ownership
at 12/31/95 1995 1994 1993
----------- ---------- ---------- ----------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 100% $1,675,795 $1,650,135 $1,575,343
Park Place Apartments
Phase I 100% $1,739,626 $1,694,519 $1,623,184
Willow Lake Apartments 100% $2,287,408 $2,101,194 $2,021,122
Properties Owned in Joint
Venture with NTS-
Properties IV
- -------------
Golf Brook Apartments 96% $2,722,451 $2,631,630 $2,560,828
Plainview Point III
Office Center 95% $ 428,269 $ 670,057 $ 679,995
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 14 -
Results of Operations - Continued
- ---------------------------------
Sabal Park Apartments' year-ending occupancy increased from 91% in 1994 to 98%
in 1995; however, average occupancy decreased from 93% in 1994 to 92% in 1995.
Occupancy at residential properties fluctuate on a continuous basis. Year-ending
occupancy percentages represent occupancy only on a specific date; therefore, it
is more meaningful to consider average occupancy percentages which are more
representative of the entire year's results. Rental and other income at Sabal
Park Apartments increased from 1994 to 1995 due to increased rental rates and
increased charges to applicants for credit checks.
Sabal Park Apartments' year-ending occupancy decreased 3% from 1993 to 1994 and
average occupancy remained constant (93%) from 1993 to 1994. In the opinion of
the General Partner of the Partnership, the decrease in 1994 year-ending
occupancy was only a temporary fluctuation and did not represent a downward
occupancy trend. Rental and other income at Sabal Park Apartments increased from
1993 to 1994 as a result of increased rental rates, decreased rent concessions,
increased fees collected upon early lease terminations and late rental payments
and increased income from the rental of washers and dryers.
Park Place Apartments Phase I's year-ending occupancy decreased from 93% in 1994
to 92% in 1995; however average occupancy remained constant (94%) from 1994 to
1995. Rental and other income at Park Place Apartments Phase I increased from
1994 to 1995 as a result of increased rental rates, increased charges to
applicants for credit checks and decreased rental concessions. The increases in
rental and other income at Park Place Apartments Phase I from 1994 to 1995 are
partially offset by decreased income from fully furnished units. Fully furnished
units are apartments which rent at an additional premium above base rent.
Therefore, it is possible for occupancy to increase and revenues to decrease
when the number of fully furnished units has decreased.
Year-ending occupancy at Park Place Apartments Phase I remained constant (93%)
from 1993 to 1994 and average occupancy increased from 93% in 1993 to 94% in
1994. Rental and other income at Park Place Apartments Phase I increased from
1993 to 1994 as a result of the increase in average occupancy, increased rental
rates, decreased rent concessions, increased fees collected upon early lease
termination and increased income from fully furnished units.
Willow Lake Apartments' year-ending occupancy increased from 92% in 1994 to 93%
in 1995 and average occupancy increased from 87% in 1994 to 92% in 1995. Rental
income increased from 1994 to 1995 as a result of the 5% increase in average
occupancy, increased rental rates, decreased rental concessions, increased
charges to applicants for credit checks and increased charges to residents for
the cable TV service which is provided to residents. The increases in rental
income from 1994 to 1995 are partially offset by decreased other income. 1994
other income included a $23,000 settlement received from the insurance company
of the manufacturer of the pipe fittings which were used in construction of
Willow Lake Apartments. The reimbursement was for certain repair expenses the
Partnership incurred from 1987 to 1991. The repair costs were expensed at the
time they were incurred due to the length of time it has taken to negotiate the
settlement.
Willow Lake Apartments year-ending occupancy increased 8% from 1993 to 1994;
however average occupancy remained constant (87%) in 1993 and 1994. Rental and
other income at Willow Lake Apartments increased from 1993 to 1994 as a result
of increased rental rates, decreased rental concessions, increased income
collected from the rental of fully furnished units and as a result of a $23,000
settlement (recorded as other income)received during the first quarter of 1994
as discussed above.
- 15 -
Results of Operations - Continued
- ---------------------------------
Golf Brook Apartments' year-ending occupancy decreased 2% from 1994 to 1995
while average occupancy remained constant at 94% in 1994 and 1995. Rental and
other income at Golf Brook Apartments increased from 1994 to 1995 as a result of
increased rental rates, decreased rental concessions and increased charges to
applicants for credit checks.
Golf Brook Apartments' year-ending occupancy increased 2% from 1993 to 1994
while average occupancy remained constant (94%) in 1993 and 1994. Rental and
other income at Golf Brook Apartments increased from 1993 to 1994 as a result of
increased rental rates, decreased rent concessions and increased fees collected
upon early lease terminations.
Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and
1994 as a result of the following new leases and tenant move-outs. New leases
during 1995 consist of a 10,343 square foot 63 month lease (took occupancy
September 1, 1995) and a 16,727 square foot five-year lease (took occupancy
December 27, 1995). The leases are offset by two tenant move-outs totalling
approximately 26,000 square feet. Of this total, 16,400 square feet represents a
tenant who vacated the office center at the end of the lease term due to the
company's decision to consolidate its Louisville processing center with one
located in another city. The tenant occupied 27% of the office center's rentable
area. Approximately 9,600 square feet of the total move-outs represents a tenant
who vacated the premises January 31, 1995. The tenant's lease was on a
month-to-month basis at the time of move- out. The tenant's original lease term
was for a period of four years. The tenant occupied approximately 16% of the
office center's rentable area. Average occupancy for the 12 month period ended
December 31 decreased from 92% (1994) to 55% (1995). Rental and other income
decreased at Plainview Point III Office Center for the 12 months ended December
31, 1995 as compared to the same period in 1994 as a result of the decrease in
average occupancy during 1995.
During February 1996, a current tenant of Plainview Point III Office Center
expanded its leased space by approximately 4,400 square for a period of seven
months. This expansion improved the office center's occupancy to 98%.
The 4% increase in occupancy at Plainview Point III Office Center from 1993 to
1994 can be attributed to one new lease totalling approximately 2,500 square
feet. There were no tenant move-outs during the year. Average occupancy at
Plainview Point III Office Center increased from 83% in 1993 to 92% in 1994. The
change in rental and other income at Plainview Point III Office Center is not
consistent with the change in average occupancy due to the fact that two tenants
vacated (in 1993) prior to the end of the lease terms but continued to make
monthly rental payments.
If present trends continue, the Partnership will be able to continue at its
current level of operations without the need of any additional financing.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties.
Interest and other income includes interest income from investments made by the
Partnership with excess cash. The increase in interest income from 1994 to 1995
is the result of increased cash being available for investment.
The decrease in interest income from 1993 to 1994 is a result of declining
interest rates on short-term investments and a result of less interest being
earned due to the fact that the $600,000 Certificate of Deposit was applied
against the principal balance of the mortgage payable secured by Willow Lake
Apartments in October 1993. See page 19 for a discussion regarding the $600,000
Certificate of Deposit. The decrease is partially offset by increased other
income at the Partnership's residential properties.
- 16 -
Results of Operations - Continued
- ---------------------------------
Operating expenses decreased from 1994 to 1995 as a result of decreased repair
and maintenance costs at Park Place Apartments Phase I, Golf Brook Apartments,
Sabal Park Apartments and Plainview Point III Office Center, decreased utility
costs at Willow Lake Apartments, Park Place Apartments Phase I and Plainview
Point III Office Center, decreased advertising costs at Sabal Park and Golf
Brook Apartments, decreased janitorial costs at Plainview Point III Office
Center and decreased snow removal costs at Park Place Apartments Phase I, Willow
Lake Apartments and Plainview Point III Office Center. These decreases are
partially offset by increased repair and maintenance costs at Willow Lake
Apartments and increased landscaping costs at Golf Brook and Sabal Park
Apartments.
The increase in operating expenses from 1993 to 1994 is the result of increased
repair and maintenance costs at the Partnership's properties. These increased
costs include increased exterior painting costs at the Partnership's residential
properties, increased air conditioning repairs, electrical repairs and exterior
stair repairs at Plainview Point III Office Center, increased wood replacement
and air conditioning repairs at Sabal Park Apartments, increased general
building and parking lot repairs at Willow Lake Apartments, increased drainage
repairs and roof repairs at Park Place Apartments Phase I and increased air
conditioning and garage repairs at Golf Brook Apartments. Also contributing to
the increase in operating expenses from 1993 to 1994 are increased landscaping
renovation costs at Park Place Apartments Phase I and increased utilities (water
and sewer) as a result of increased rates and consumption at all the
Partnership's properties. Operating expenses also increased from 1993 to 1994 as
a result of the extreme winter weather experienced at Park Place Apartments
Phase I, Willow Lake Apartments, and Plainview Point III Office Center. The
extreme weather resulted in increased snow and ice removal costs and increased
repair costs due to freeze damage. The increases in operating expenses are
partially offset by decreased wood replacement expenses at Golf Brook Apartments
and decreased landscaping costs and carpet and wallcovering replacement expenses
at Golf Brook and Sabal Park Apartments.
Operating expenses - affiliated remained fairly constant for the 12 months ended
December 31, 1995 as compared to the same period in 1994. Operating expenses -
affiliated are expenses incurred for services performed by employees of NTS
Development Company, an affiliate of the General Partner of the Partnership.
Operating expenses - affiliated decreased from 1993 to 1994 primarily as a
result of decreased property management and administrative salaries at the
Partnership's residential properties and decreased leasing salaries at Plainview
Point III Office Center. Also contributing to the decrease in operating expenses
- - affiliated from 1993 to 1994 was a decrease in maintenance salaries at Golf
Brook Apartments and Park Place Apartments Phase I. These decreases were
partially offset by increased maintenance salaries at Sabal Park Apartments and
Willow Lake Apartments.
Amortization of capitalized leasing costs has decreased from 1993 to 1994 and
from 1994 to 1995 as a result of a portion of the costs capitalized during
start-up having become fully amortized. Capitalized leasing costs were fully
amortized during the second quarter of 1995.
The increase in interest expense from 1994 to 1995 is the result of an interest
rate change (in accordance with the mortgage agreement) effective December 1,
1994. The interest rate on the Willow Lake Apartments permanent financing
($8,631,951 mortgage payable) increased from 8.75% to 9.20%. The increase in
interest expense from 1994 to 1995 is partially offset by the Partnership's
decreasing debt level as a result of principal payments made.
- 17 -
Results of Operations - Continued
- ---------------------------------
The decrease in interest expense from 1993 to 1994 can be attributed to a
decrease in the Partnership's debt level as a result of principal payments made.
See the Capital Resources and Liquidity section of this item for details
regarding the Partnership's debt.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations of
management fee expense.
Repair and maintenance fees are calculated as a percentage (5.9%) of major
renovation and repair costs. The 1994 repair and maintenance fees are associated
with the wood replacement costs at Sabal Park and Golf Brook Apartments. This
fee was paid to NTS Development Company, an affiliate of the general partner of
the Partnership, pursuant to an agreement with the Partnership.
Real estate taxes have remained fairly constant from 1994 to 1995. The increase
in real estate taxes from 1993 to 1994 is a result of increased property
assessments for Golf Brook and Sabal Park Apartments and increased tax rates for
Park Place Apartments Phase I and Willow Lake Apartments. The assessment for
Plainview Point III Office Center remained constant from 1993 to 1994.
Professional and administrative expenses have remained fairly constant from 1994
to 1995. Professional and administrative expenses have decreased from 1993 to
1994 as a result of decreased outside legal fees.
Professional and administrative expenses - affiliated have remained fairly
constant from 1993 to 1994 and from 1994 to 1995. Professional and
administrative expenses - affiliated are expenses incurred for services
performed by employees of NTS Development Company, an affiliate of the General
Partner of the Partnership.
Depreciation and amortization decreased from 1993 to 1994 and from 1994 to 1995
due to a portion of the assets with shorter lives at the Partnership's
residential properties having become fully depreciated and as a result of a
portion of the original tenant improvements at Plainview Point III Office Center
becoming fully depreciated. Depreciation is computed using the straight-line
method over the useful lives of the assets which are 5 - 30 years for land
improvements, 30 years for buildings, 5 - 30 years for building and improvements
and 5 - 30 years for amenities. The aggregate cost of the Partnership's
properties for Federal tax purposes is approximately $59,300,000.
Capital Resources and Liquidity
- -------------------------------
Cash provided from operations was $1,648,106, $1,288,415 and $1,033,547 during
the years ended December 31, 1995, 1994 and 1993, respectively. These funds in
conjunction with cash on hand were used to make a 2% (annualized) cash
distribution of approximately $958,000 in 1995, 1.875% (annualized) cash
distribution of approximately $898,000 in 1994 and a 1.5% (annualized) cash
distribution of approximately $719,000 in 1993. The annualized distribution rate
is calculated as a percent of the original capital contribution. The limited
partners received 99% and the general partner received 1% of these
distributions. The primary source of future liquidity and distributions is
expected to be derived from cash generated by the Partnership's properties after
adequate cash reserves are established for future leasing costs, tenant finish
costs and capital improvements. Cash reserves (which are unrestricted cash and
equivalents and investment securities as shown on the Partnership's balance
sheet as of December 31) were $2,019,257, $1,617,604 and $1,394,905 at December
31, 1995, 1994 and 1993, respectively.
- 18 -
Capital Resources and Liquidity - Continued
- -------------------------------------------
As of December 31, 1995, the Partnership had a mortgage payable to an insurance
company in the amount of $8,631,951. The mortgage bore a fixed interest rate of
8.75% through the first three Loan Years (note dated October 16, 1991). The
interest rate was adjusted at the end of the third Loan Year (November 1, 1994)
to a fixed interest rate of 9.20%; an interest rate two hundred ten (210) basis
points greater than the yield on 3-year U.S. Treasury Notes as published in the
Treasury Yield Curve of Moody's Bond Survey for the reference date closest to
the end of the third Loan Year. The mortgage payable is due November 1, 1997 and
is secured by the land, buildings and amenities of Willow Lake Apartments. Upon
obtaining permanent financing (October 16, 1991), $600,000 of the proceeds were
held back by the Lender and used to purchase a Certificate of Deposit. The
Certificate of Deposit was held by the Lender until Willow Lake Apartments, the
apartment property covered by the mortgage, generated annual gross revenues in
an amount not less than $2,006,580 for a period of six consecutive months. The
loan provided that in the event the level of gross revenues was not achieved by
October 1993, the proceeds of the collateral would be applied against the
principal balance of the loan outstanding at the time. The $600,000 certificate
of deposit was applied against the principal balance of the loan in October
1993. Monthly principal payments through the first three Loan Years were based
on a 28-year amortization schedule. Effective upon acceptance of the adjusted
interest rate (November 1, 1994), monthly principal payments are now based upon
a 25-year amortization schedule. The outstanding balance at maturity based on
the current rate of amortization will be $8,433,356.
As of December 31, 1995, the Partnership also had a mortgage payable to an
insurance company in the amount of $9,200,000. These funds were obtained July
24, 1992 and were used to retire $9,200,000 of the construction loan. The
$9,200,000 mortgage payable bears a fixed interest rate of 8.625% and is secured
by the land, buildings and amenities of Golf Brook Apartments. The unpaid
balance of the loan is due August 1, 1997.
As of December 31, 1995, the Partnership had two mortgage loans each with an
insurance company in the amount of $4,050,879 and $964,495. The permanent
financings were obtained September 8, 1992 in the amount of $4,200,000 and
$1,000,000. Both mortgages payable are due October 5, 2002, bear a fixed
interest rate of 8.375% for the first 60 months, and are secured by the land,
buildings and amenities of Park Place Apartments Phase I. At the end of the 56th
month from the date of the notes, the insurance companies will notify the
Partnership of the interest rate which is their then prevailing interest rate
for loans with a term of five years on properties comparable to the apartments
(the "Modified Rate"). The Partnership will have 30 days to accept or reject the
Modified Rate. If the Modified Rate is rejected by the Partnership, the entire
unpaid principal balance is due with the 60th installment of interest. If the
Partnership accepts the Modified Rate, it becomes effective the 61st month from
the date of the note. Current monthly principal payments on both mortgages are
based upon a 27-year amortization schedule. If the Partnership accepts the
Modified Rate, the principal balance of both mortgages will be amortized using a
22-year amortization schedule beginning the 61st month. The outstanding balance
at maturity based on the current rate of amortization would be $4,413,955
($3,565,118 and $848,837). These funds were used to retire $5,200,000 of the
construction loan.
As of December 31, 1995, the Partnership also had two mortgage loans each with
an insurance company in the amount of $2,883,431 and $1,922,288. The permanent
financings were obtained December 21, 1992 in the amount of $3,000,000 and
$2,000,000. Both mortgages payable are due January 5, 2003, bear interest at a
fixed rate of 7.25% for the first 60 months and are secured by the land,
buildings and amenities of Sabal Park Apartments. At the end of the 56th month
from the date of the notes, the insurance
- 19 -
Capital Resources and Liquidity - Continued
- -------------------------------------------
companies will notify the Partnership of the interest rate which is their then
prevailing interest rate for loans with a term of five years on properties
comparable to the apartments (the "Modified Rate"). The Partnership will have 30
days to accept or reject the Modified Rate. If the Modified Rate is rejected by
the Partnership, the entire unpaid principal balance is due with the 60th
installment of interest. If the Partnership accepts the Modified Rate, it
becomes effective the 61st month from the date of the note. Current monthly
principal payments on both mortgages are based upon a 27-year amortization
schedule. If the Partnership accepts the Modified Rate, the principal balance of
both mortgages will be amortized using a 22-year amortization schedule beginning
the 61st month. The outstanding balance at maturity based on the current rate of
amortization would be $4,122,326 ($2,473,396 and $1,648,930). These funds were
used, in part, to retire the remaining balance of the construction loan payable
to a bank which was due January 15, 1993. The remaining proceeds were used to
fund loan closing costs.
The General Partner of the Partnership is presently exploring the possibility of
refinancing some or all of the mortgages payable encumbering the Partnership's
properties.
The majority of the Partnership's cash flow is derived from operating
activities. The decrease in accounts receivable during 1995 represents a
settlement received from the insurance company of the manufacturer of the pipe
fittings which were used in the construction of Willow Lake Apartments. Cash
flows used in investing activities are for capital improvements at the
Partnership's properties. The capital improvements are funded by cash flow from
operations. Cash flows used in financing activities are also for the purchase of
investment securities. As part of its cash management activities, the
Partnership has purchased Certificates of Deposit or securities issued by the
U.S. Government with initial maturities of greater than three months to improve
the return on its excess cash. The Partnership intends to hold the securities
until maturity. Cash flows provided by investing activities are derived from the
maturity of investment securities and from increases in accounts payable -
construction. Cash flows used in financing activities are for cash
distributions, principal payments on mortgages payable and payment of loan
costs. Cash flows provided by financing activities are derived from the proceeds
of the $600,000 Certificate of Deposit (discussed on page 19). The Partnership
does not expect any material changes in the mix and relative cost of capital
resources from those in 1995 except that which is discussed in the following
paragraph.
In the next 12 months, the demand on future liquidity is anticipated to increase
as a result of 11,600 in square feet of leases expiring at Plainview Point III
Office Center in 1996. 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. As of December 31, 1995, the Partnership had no material commitments
for renovations or capital improvements which it has not accrued as of year-end.
It is anticipated that the cash flow from operations and cash reserves will be
sufficient to meet the needs of the Partnership.
The demand on future liquidity may also increase during the next 12 months due
to the Partnership's receipt of a market analysis which shows it to be
advantageous to build additional apartment units (Phase III) at Park Place
Apartments on the 15 acres of land owned by the Partnership. Efforts to sell the
land have not produced attractive prices. A phased development of apartment
units on this land utilizing cash reserves and a portion of cash flow is being
considered. As of December 31, 1995, no commitments have been made in connection
with this project.
- 20 -
Capital Resources and Liquidity - Continued
- -------------------------------------------
As of December 31, 1995, the Partnership established an Interest Repurchase
Reserve in the amount of $474,350 pursuant to Section 16.4 of the Partnership's
Amended and Restated Agreement of Limited Partnership. Under Section 16.4,
limited partners may request the Partnership to repurchase their respective
interests (Units) in the Partnership. With this Interest Repurchase Reserve, the
Partnership will be able to repurchase up to 1,897 Units at a price of $250 per
Unit. The Partnership notified the limited partners by letter dated February 1,
1996 of the establishment of the Interest Repurchase Reserve and the opportunity
to request that the Partnership repurchase Units at the established price.
Repurchased Units will be retired by the Partnership, thereby reducing the total
number of Units outstanding. The Interest Repurchase Reserve was funded from
Investment Securities.
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, 1995, 1994 and 1993.
Cash
Net Loss Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $ (324,417) $ 948,700 $ 948,700
1994 (803,780) 889,380 889,380
1993 (1,022,967) 711,525 711,525
General Partner:
1995 $ (3,277) $ 9,583 $ 9,583
1994 (8,119) 8,984 8,984
1993 (10,333) 7,187 7,187
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential tenants, coordinates local advertising with NTS
Development Company's marketing staff, makes visits to local companies to
promote fully furnished units and negotiates lease renewals with current
residents.
The leasing and renewal negotiations for the Partnership's commercial property
are handled by leasing agents, employees of NTS Development Company, located in
Louisville, Kentucky. The leasing agent's are located in the same city as the
commercial property. All advertising for the commercial property is coordinated
by NTS Development Company's marketing staff located in Louisville, Kentucky.
Leases at Plainview Point III Office Center provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. Leases at the office center also provide for
rent increases which are based upon increases in the consumer price index. 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.
The Partnership owns approximately 15 acres of land, adjacent to the Park Place
Apartments development, in Lexington, Kentucky which is zoned for 163 apartment
units (Park Place Apartments Phase III). Included in the cost of approximately
$1,751,000 is land cost, capitalized interest, common area costs and amenity
costs. The Partnership intends to use the land to construct Park Place
Apartments Phase III as discussed on page 20.
- 21 -
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties VI, a Maryland Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1995 and 1994, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 38
through 40 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 14, 1996
- 22 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
1995 1994
------------ -----------
ASSETS
Cash and equivalents $ 867,902 $ 1,617,604
Cash and equivalents - restricted 301,650 230,604
Investment securities 1,151,355 --
Accounts receivable 158,429 381,455
Land, buildings and amenities, net 42,196,272 43,872,072
Assets held for development, net 1,751,234 1,784,457
Other assets 386,949 381,692
----------- -----------
$46,813,791 $48,267,884
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $27,653,044 $27,883,025
Accounts payable 305,779 265,153
Accounts payable - construction 70,456 --
Distributions payable 239,571 239,571
Security deposits 235,187 282,517
Other liabilities 21,122 23,009
----------- -----------
28,525,159 28,693,275
Partners' equity 18,288,632 19,574,609
----------- -----------
$46,813,791 $48,267,884
=========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 23 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
----------- ----------- -----------
Revenues:
Rental income, net of provision for
doubtful accounts of $0 (1995 and
1994) and $5,623 (1993) $ 8,817,265 $ 8,679,772 $ 8,395,880
Interest and other income 121,790 116,300 120,071
----------- ----------- -----------
8,939,055 8,796,072 8,515,951
Expenses:
Operating expenses 2,382,093 2,578,341 2,196,458
Operating expenses - affiliated 1,055,190 1,053,486 1,137,760
Amortization of capitalized leasing
costs 1,091 28,783 176,152
Interest expense 2,365,542 2,351,670 2,404,250
Management fees 441,861 438,523 428,395
Repairs and maintenance fees -- 15,011 --
Real estate taxes 746,200 749,915 709,218
Professional and administrative
expenses 141,948 142,593 163,531
Professional and administrative
expenses - affiliated 191,677 188,131 192,755
Depreciation and amortization 1,941,147 2,061,518 2,140,732
----------- ----------- -----------
9,266,749 9,607,971 9,549,251
----------- ----------- -----------
Net loss $ (327,694) $ (811,899) $(1,033,300)
=========== =========== ===========
Net loss allocated to the limited
partners $ (324,417) $ (803,780) $(1,022,967)
=========== =========== ===========
Net loss per limited partnership $ (6.83) $ (16.94) $ (21.57)
=========== =========== ===========
unit
Weighted average number of limited
partnership units 47,435 47,435 47,435
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 24 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Limited General
Partners Partners Total
------------ ------------ ------------
Balances at December 31, 1992 $ 23,162,002 $ (125,118) $ 23,036,884
Net loss (1,022,967) (10,333) (1,033,300)
Distributions declared (711,525) (7,187) (718,712)
------------ ------------ ------------
Balances at December 31, 1993 21,427,510 (142,638) 21,284,872
Net loss (803,780) (8,119) (811,899)
Distributions declared (889,380) (8,984) (898,364)
------------ ------------ ------------
Balances at December 31, 1994 19,734,350 (159,741) 19,574,609
Net loss (324,417) (3,277) (327,694)
Distributions declared (948,700) (9,583) (958,283)
------------ ------------ ------------
Balances at December 31, 1995 $ 18,461,233 $ (172,601) $ 18,288,632
============ ============ ============
The accompanying notes to financial statements are an integral part of these
statements.
- 25 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (327,694) $ (811,899) $(1,033,300)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Accrued interest on investment securities (14,875) -- --
Amortization of capitalized leasing costs 1,091 28,783 176,152
Depreciation and amortization 1,941,147 2,061,518 2,140,732
Provision for doubtful accounts -- -- 5,623
Changes in assets and liabilities:
Cash and equivalents - restricted (71,046) 114,977 (102,034)
Accounts receivable 223,026 (30,079) (178,531)
Other assets (94,952) 10,140 3,769
Accounts payable 40,626 (72,951) 51,791
Security deposits (47,330) (9,435) (21,183)
Other liabilities (1,887) (2,639) (9,472)
----------- ----------- -----------
Net cash provided by operating activities 1,648,106 1,288,415 1,033,547
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to land, buildings and
amenities (143,520) (8,796) (194,487)
Additions to accounts payable -
construction 70,456 -- --
Purchase of investment securities (2,642,085) -- --
Maturity of investment securities 1,505,605 -- --
----------- ----------- -----------
Net cash used in investing activities (1,209,544) (8,796) (194,487)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (229,981) (218,449) (799,293)
Cash distributions (958,283) (838,471) (718,712)
Additions to loan costs -- -- (56,722)
Cash and equivalents - restricted -- -- 600,000
----------- ----------- -----------
Net cash used in financing activities (1,188,264) (1,056,920) (974,727)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (749,702) 222,699 (135,667)
CASH AND EQUIVALENTS, beginning of year 1,617,604 1,394,905 1,530,572
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 867,902 $ 1,617,604 $ 1,394,905
=========== =========== ===========
Interest paid on a cash basis $ 2,367,146 $ 2,349,889 $ 2,393,879
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 26 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership") is a limited partnership organized under the laws of
the State of Maryland on December 27, 1984. The general partner is
NTS-Properties Associates VI, (a Kentucky limited partnership). The
Partnership is in the business of developing, constructing, owning
and operating apartment complexes and commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex in
Orlando, Florida
- Park Place Apartments Phase I, a 180-unit luxury apartment
complex in Lexington, Kentucky
- Willow Lake Apartments, a 207-unit luxury apartment complex in
Indianapolis, Indiana
- A 96% joint venture interest in Golf Brook Apartments, a 195-
unit luxury apartment complex in Orlando, Florida
- A 95% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net rentable
square feet located in Louisville, Kentucky
The Partnership also owns approximately 15 acres of land in
Lexington, Kentucky which is zoned for 163 apartment units (Park
Place Apartments Phase III).
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Pre-Termination Date Net Cash Receipts and Interim Net Cash
Receipts, as defined in the partnership agreement and which are
made available for distribution, will be distributed 99% to the
limited partners and 1% to the general partner. Net Cash Proceeds,
as defined in the partnership agreement, will be distributed 1) 99%
to the limited partners and 1% to the general partner until the
limited partners have received cash distributions from all sources
(except Pre-Termination Date Net Cash Receipts) equal to their
Original Capital; and 2) the remainder, 80% to the limited partners
and 20% to the general partner. Net operating income shall be
allocated to the limited partners and the general partner in
proportion to their respective cash distributions.
- 27 -
1. Significant Accounting Policies - Continued
-------------------------------------------
C) Allocation of Net Income (Loss) and Cash Distributions - Continued
------------------------------------------------------------------
Net Operating Income in excess of cash distributions and Net Gains
from Sales shall be allocated as follows: (1) pro rata to all
partners with a negative capital account in an amount to restore
the negative capital account to zero; (2) 99% to the limited
partners and 1% to the general partner until the limited partners
have received an amount equal to their Original Capital less cash
distributions except distributions of Pre-Termination Date Net Cash
Receipts; 3) the balance, 80% to the limited partners and 20% to
the general partner. Net Operating Losses shall be allocated 99% to
the limited partners and 1% to the general partner.
D) 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 for financial statement purposes
versus that for income tax reporting is as follows:
1995 1994 1993
----------- ----------- -----------
Net loss $ (327,694) $ (811,899) $(1,033,300)
Items handled differently
for tax purposes:
Depreciation and
amortization (195,060) (211,507) (237,825)
Capitalized leasing
costs 35,750 61,669 198,680
Allowance for doubtful
accounts -- -- (52,277)
Write-off of unamortized
tenant improvements (22,832) 424 (43,364)
Rental income (18,296) (3,549) 61,758
----------- ----------- -----------
Taxable loss $ (528,132) $ (964,862) $(1,106,328)
=========== =========== ===========
E) Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F) Joint Venture Accounting
------------------------
The Partnership has adopted the proportionate consolidation method
of accounting for joint venture properties. The Partnership's
proportionate interest in the venture's assets, liabilities,
revenues, expenses and cash flows are combined on a line-by-line
basis with the Partnership's own assets, liabilities, revenues,
expenses and cash flows. All intercompany accounts and transactions
have been eliminated in consolidation.
- 28 -
1. Significant Accounting Policies - Continued
-------------------------------------------
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed
with mortgage companies for property taxes and insurance in
accordance with the loan agreements.
1993 financing activity cash flow from cash and equivalents
restricted represents the proceeds from a $600,000 certificate of
deposit. The Partnership's interest was pledged to the lender of
the approximately $8.6 million note. The lender was to release the
collateral when Willow Lake Apartments, the apartment complex
located on the property covered by the mortgage, was generating
annual gross revenues in an amount not less than $2,006,580 for a
period of six consecutive months. The loan provided that in the
event the level of gross revenues was not achieved by October 1993,
the proceeds of the collateral would be applied against the
principal balance of the loan outstanding at the time. The $600,000
certificate of deposit was applied against the principal balance of
the loan during October 1993.
H) Investment Securities
---------------------
Investment securities represent investments in Certificates of
Deposit or securities issued by the U.S. Government with initial
maturities of greater than three months. The investments are
carried at cost which approximates market value. The Partnership
intends to hold the securities until maturity. During 1995, the
Partnership sold no investment securities. The following provides
details regarding the investments held at December 31, 1995:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
FHLB Discount Note $ 269,271 01/18/96 $ 270,000
FNMA Discount Note 183,637 02/20/96 185,000
Certificate of Deposit 416,469 02/28/96 419,972
FNMA Discount Note 281,978 03/13/96 285,000
--------- ---------
$1,151,355 $1,159,972
========= =========
The Partnership held no investment securities with initial
maturities greater than three months during 1994 or 1993.
I) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost 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, 5-30 years for building and improvements, 5 - 30
years for amenities and the applicable lease term for tenant
improvements.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (the "Statement") on accounting for the
impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to assets to be held and used. The Statement
also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The
- 29 -
1. Significant Accounting Policies - Continued
-------------------------------------------
I) Basis of Property and Depreciation - Continued
----------------------------------------------
Partnership is required to adopt the Statement no later than
January 1, 1996, although earlier implementation is permitted. The
Statement is required to be applied prospectively for assets to be
held and used. The initial application of the Statement to assets
held for disposal is required to be reported as the cumulative
effect of a change in accounting principle.
The Partnership plans to adopt the Statement as of January 1, 1996.
Based on a preliminary review, the Partnership does not anticipate
that any material adjustments will be required.
J) Capitalized Leasing Costs
-------------------------
The Partnership has capitalized certain costs associated with the
initial leasing of the properties. These costs are being amortized
over a five year period.
K) Rental Income and Deferred Leasing Commissions
----------------------------------------------
Certain of the Partnership's lease agreements at Plainview Point
III Office Center 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 totalled
$112,897 and $93,852 at December 31, 1995 and 1994, respectively.
All commissions paid to commercial leasing agents are deferred and
amortized over the term of the lease to which they apply.
L) 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.
M) Reclassification of 1994 and 1993 Financial Statements
------------------------------------------------------
Certain reclassifications have been made to the December 31, 1994
and 1993 financial statements to conform with December 31, 1995
classifications. These reclassifications have no effect on
previously reported operations.
2. Concentration of Credit Risk
----------------------------
The Partnership owns and operates residential properties in Kentucky
(Louisville and Lexington), Indiana (Indianapolis) and Florida (Orlando).
The apartment unit is generally the principal residence of the tenant.
The Partnership also owns and operates, through a joint venture, a
commercial property in Louisville, Kentucky. Substantially all of the
tenants are local businesses or are businesses which have operations in
the Louisville area.
3. Investment in Joint Ventures
----------------------------
A) NTS Sabal Golf Villas Joint Venture
-----------------------------------
In 1985, the Partnership entered into a joint venture agreement
with NTS-Properties IV to develop and construct a 158-unit luxury
apartment complex on a 13.15-acre site located in Orlando, Florida,
known as Golf Brook Apartments Phase I. NTS-Properties IV
- 30 -
3. Investment in Joint Ventures
----------------------------
A) NTS Sabal Golf Villas Joint Venture - Continued
-----------------------------------------------
contributed land valued at $1,900,000 with an outstanding note
payable to a bank of $1,200,000 which was secured by the land. The
Partnership contributed the construction and carrying costs of the
apartment complex.
In 1987, the joint venture agreement was amended to include Golf
Brook Apartments Phase II, a 37-unit luxury apartment complex
located on a 3.069 acre site adjacent to Golf Brook Apartments
Phase I. The Partnership contributed land, construction costs, and
the cost of the initial leasing of this second phase.
The Partnership made contributions of approximately $15.8 million
for construction and carrying costs and retired the $1,200,000 note
payable in 1987, which increased the Partnership's percentage
interest in the joint venture. The net income and net loss is
allocated based on the respective partnership's contribution as of
the end of each calendar quarter. The Partnership's ownership share
was 96% at December 31, 1995. The Partnership's share of the joint
venture's net operating income was $1,058,691 (1995), $816,229
(1994) and $739,403 (1993).
B) Plainview Point III Joint Venture
---------------------------------
In 1987, the Partnership entered into a joint venture agreement
with NTS-Properties IV to develop and construct an approximately
62,000 square foot office building located in Louisville, Kentucky
known as Plainview Point III Office Center.
NTS-Properties IV contributed land valued at $790,000 with an
outstanding note payable to a bank of $550,000 which was secured by
the land. The Partnership contributed the construction and carrying
costs of the complex. The Partnership made contributions of
approximately $4.1 million for construction and carrying costs and
retired the $550,000 note payable in 1987, which increased the
Partnership's percentage interest in the joint venture. The net
income and net loss is allocated based on the respective
partnership's contribution as of the end of each calendar quarter.
The Partnership's ownership share was 95% at December 31, 1995. The
Partnership's share of the joint venture's net operating income
(loss) was $12,423 (1995), $(59,399) (1994) and $(113,983) (1993).
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:
1995 1994
----------- -----------
Land and improvements $14,862,974 $14,852,864
Buildings and improvements 45,170,635 45,090,923
Amenities 1,511,656 1,507,312
---------- ----------
61,545,265 61,451,099
Less accumulated depreciation 19,348,993 17,579,027
---------- ----------
$42,196,272 $43,872,072
========== ==========
- 31 -
5. Assets Held for Development
---------------------------
The Partnership owns approximately 15 acres of land, adjacent to the Park
Place Apartments development, in Lexington, Kentucky which is zoned for
163 apartment units (Park Place Apartments Phase III). Included in the
cost of approximately $1,751,000 is land cost, capitalized interest,
common area costs and amenity costs. The Partnership intends to use the
land to construct Park Place Apartments Phase III. This was the result of
the Partnership receiving a market analysis which shows it to be
advantageous to build additional apartment units at Park Place
Apartments. Efforts to sell the land have not produced attractive prices.
The Partnership is currently considering a phased development of
apartment units on this land utilizing cash reserves and a portion of
cash flow. As of December 31, 1995, no commitments have been made in
connection with this project.
6. Interest Repurchase Reserve
---------------------------
As of December 31, 1995, the Partnership established an Interest
Repurchase Reserve in the amount of $474,350 pursuant to Section 16.4 of
the Partnership's Amended and Restated Agreement of Limited Partnership.
Under Section 16.4, limited partners may request the Partnership to
repurchase their respective interests (Units) in the Partnership. With
this Interest Repurchase Reserve, the Partnership will be able to
repurchase up to 1,897 Units at a price of $250 per Unit. The Partnership
notified the limited partners by letter dated February 1, 1996 of the
establishment of the Interest Repurchase Reserve and the opportunity to
request that the Partnership repurchase Units at the established price.
Repurchased Units will be retired by the Partnership, thereby reducing
the total number of Units outstanding. The Interest Repurchase Reserve
was funded from Investment Securities.
7. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1995 1994
----------- ------------
Mortgage payable with an insurance
company bearing interest at 8.375%,
due October 5, 2002 secured by
certain land, buildings and
amenities $ 4,050,879 $ 4,102,291
Mortgage payable with an insurance
company bearing interest at 8.375%,
due October 5, 2002 secured by
certain land, buildings and
amenities 964,495 976,736
Mortgage payable with an insurance
company bearing interest at 8.625%,
due August 1, 1997 secured by
certain land, buildings and
amenities 9,200,000 9,200,000
Mortgage payable with an insurance
company bearing interest at 9.20%,
due November 1, 1997 secured by
certain land, buildings and
amenities 8,631,951 8,727,008
(continued next page)
- 32 -
7. Mortgages Payable - Continued
-----------------------------
1995 1994
----------- ------------
Mortgage payable with an insurance
company bearing interest at 7.25%,
due January 5, 2003 secured by
certain land, buildings and $ 2,883,431 $ 2,926,194
amenities
Mortgage payable to an insurance
company, bearing interest at 7.25%,
due January 5, 2003 secured by
certain land, buildings and
amenities 1,922,288 1,950,796
---------- ----------
$27,653,044 $27,883,025
========== ==========
The mortgages are payable in monthly installments of $280,642 which
includes principal, interest, property taxes and insurance. Scheduled
maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
1996 $ 249,987
1997 17,885,345
1998 170,294
1999 184,046
2000 198,916
Thereafter 8,964,456
-----------
$27,653,044
===========
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 $33,800,000.
8. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1995:
For the Years Ended December 31, Amount
-------------------------------- ------
1996 $ 637,471
1997 547,579
1998 499,752
1999 375,599
2000 334,214
Thereafter 113,241
-----------
$ 2,507,856
===========
9. Related Party Transactions
--------------------------
Pursuant to the partnership agreement, property management fees of
$441,861 (1995), $438,523 (1994) and $428,395 (1993) were paid to NTS
Development Company, an affiliate of the general partner. The fee is
equal to 5% and 6% of gross revenues from the residential properties and
commercial properties, respectively. Also pursuant to the partnership
agreement, the NTS Development Company will receive a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital
improvements and major repair and renovation projects. The
- 33 -
9. Related Party Transactions - Continued
--------------------------------------
Partnership has incurred $6,200 (1995) and $15,212 (1994) as a repair and
maintenance fee. The Partnership has capitalized $6,200 (1995) and $201
(1994) as part of land, buildings and amenities and expensed $15,011
(1994) as a repair and maintenance fee. The Partnership was also charged
the following amounts from NTS Development Company for the years ended
December 31, 1995, 1994 and 1993. 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.
These charges were as follows:
1995 1994 1993
---------- ---------- ----------
Administrative $ 245,369 $ 240,133 $ 242,899
Property manager 786,667 803,635 869,006
Leasing 229,309 184,919 207,039
Other 9,285 16,024 74,965
--------- --------- ---------
$1,270,630 $1,244,711 $1,393,909
========= ========= =========
- 34 -
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
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 VI. 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 VI are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 54) is the managing general partner of NTS-Properties
Associates VI and Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
Richard L. Good
- ---------------
Mr. Good, (age 56) President and Chief Operating Officer of NTS Corporation and
President of NTS Development Company and Chairman of the Board of NTS
Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he
was Executive Vice President of Jacques-Miller, Inc., a real estate syndication,
property management and financial planning firm in Nashville, Tennessee.
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,
Richard L. Good and John W. Hampton.
John W. Hampton
- ---------------
John W. Hampton (age 46) is Senior Vice President of NTS Corporation with
responsibility for all accounting operations. Before joining NTS in March 1991,
Mr. Hampton was Vice President - Finance and Chief Financial Officer of the
Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for nine
years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is
a Certified Public Accountant and a graduate of the University of Louisville
with a Bachelor of Science degree in Commerce. He is a member of the American
Institute of CPA's and the Kentucky Society of CPA's.
Item 11. Management Remuneration and Transactions
The officers and/or directors of the corporate general partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company, 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. Also, NTS Development Company provides certain other services to the
Partnership. See Note 9 to the financial statements which sets forth
transactions with NTS Development Company for the years ended December 31, 1995,
1994 and 1993.
- 35 -
Item 11. Management Remuneration and Transactions - Continued
The general partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocation and cash
distributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The general partner is NTS-Properties Associates VI, 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 VI are as follows:
J. D. Nichols 38.60%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 9.95%
10172 Linn Station Road
Louisville, Kentucky 40223
Richard L. Good 10.00%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 41.45% interests are owned by various limited partners of NTS-
Properties Associates VI.
Item 13. Certain Relationships and Related Transactions
Pursuant to the partnership agreement, property management fees of $441,861
(1995), $438,523 (1994) and $428,395 (1993) were paid to NTS Development
Company, an affiliate of the general partner. The fee is equal to 5% and 6% of
gross revenues from the residential properties and commercial properties,
respectively. Also pursuant to the partnership agreement, the NTS Development
Company will receive a repair and maintenance fee equal to 5.9% of costs
incurred which relate to capital improvements and major repair and renovation
projects. The Partnership has incurred $6,200 (1995) and $15,212 (1994) as a
repair and maintenance fee. The Partnership has capitalized $6,200 (1995) and
$201 (1994) as part of land, buildings and amenities and expensed $15,011 (1994)
as a repair and maintenance fee. The Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31, 1995, 1994
and 1993. 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.
1995 1994 1993
---------- ---------- ----------
Administrative $ 245,369 $ 240,133 $ 242,899
Property manager 786,667 803,635 869,006
Leasing 229,309 184,919 207,039
Other 9,285 16,024 74,965
--------- --------- ---------
$1,270,630 $1,244,711 $1,393,909
========= ========= =========
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial statements
The financial statements for the years ended December 31, 1995, 1994 and
1993 together with the report of Arthur Andersen LLP, dated February 14,
1996, appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 38-40
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 *
Certificate of Limited Partnership
of NTS-Properties VI, a Maryland
limited partnership
3a. First Amendment to Amended and **
Restated Agreement of Limited
Partnership of NTS-Properties VI,
a Maryland limited partnership
10. Property Management and Construction *
Construction Agreement between
NTS Development Company and
NTS-Properties VI, a Maryland
limited partnership
27. Financial Data Schedule Included
herewith
* 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 March 22, 1985
(effective June 25, 1985) under Commission File No.2-96583.
** Incorporated by reference to Form 10-K filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 (Commission File No. 0-14695).
4. Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended December 31,
1995.
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NTS-PROPERTIES VI
A Maryland Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
Park Place
Sabal Park Apartments Willow Lake
Apartments Phase I Apartments
---------- ------- ----------
Encumbrances (A) (A) (B)
Initial cost to partnership:
Land $ 3,063,046 $ 2,320,938 $ 3,770,328
Buildings and improvements 8,417,719 9,630,935 12,616,655
Cost capitalized subsequent to
acquisition
Improvements 20,338 29,336 186,976
Carrying costs -- -- --
Gross amount at which carried
December 31, 1995:(C)
Land $ 3,063,046 $ 2,333,428 $ 3,770,328
Buildings and improvements 8,438,057 9,647,781 12,803,631
----------- ----------- -----------
Total $11,501,103 $11,981,209 $16,573,959
=========== =========== ===========
Accumulated depreciation $ 4,144,234 $ 3,758,151 $ 4,876,661
=========== =========== ===========
Date of construction 06/84 04/84 03/85
Date Acquired N/A N/A N/A
Life at which depreciation in
latest income statement is
computed (D) (D) (D)
(A) First mortgages held by two insurance companies.
(B) First mortgage held by an insurance company.
(C) Aggregate cost of real estate for tax purposes is $59,295,905.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
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NTS-PROPERTIES VI
A Maryland Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
Plainview
Golf Brook Point III Total
Apartments Office Center Pages 38-39
---------- ------------- -----------
Encumbrances (A) (B)
Initial cost to partnership:
Land $ 4,384,363 $ 1,268,339 $14,807,014
Buildings and improvements 12,302,319 2,270,729 45,238,357
Cost capitalized subsequent to
acquisition
Improvements 77,881 1,185,363 1,499,894
Carrying costs -- -- --
Gross amount at which carried
December 31, 1995:
Land $ 4,405,353 $ 1,290,819 $14,862,974
Buildings and improvements 12,359,210 3,433,612 46,682,291
----------- ----------- -----------
Total $16,764,563 $ 4,724,431 $61,545,265
=========== =========== ===========
Accumulated depreciation $ 5,003,314 $ 1,566,633 $19,348,993
=========== =========== ===========
Date of construction 05/88 01/88
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C)
(A) First mortgage held by an insurance company.
(B) None.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
- 39 -
NTS-PROPERTIES VI,
A Maryland Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Real Accumulated
Estate Depreciation
------ ------------
Balances at December 31, 1992 $ 61,345,148 $ 13,723,489
Additions during period:
Improvements (a) 196,251 --
Depreciation (b) -- 2,016,677
Deductions during period:
Retirements (94,404) (92,638)
------------ ------------
Balances at December 31, 1993 61,446,995 15,647,528
Additions during period:
Improvements (a) 12,539 --
Depreciation (b) -- 1,936,191
Deductions during period:
Retirements (8,435) (4,692)
------------ ------------
Balances at December 31, 1994 61,451,099 17,579,027
Additions during period:
Improvements (a) 141,550 --
Depreciation (b) -- 1,815,820
Deductions during period:
Retirements (47,384) (45,854)
------------ ------------
Balances at December 31, 1995 $ 61,545,265 $ 19,348,993
============ ============
(a) The additions to real estate on this schedule will differ from the
expenditures for land, buildings and amenities on the Statements of Cash
Flows as a result of minor changes in the Partnership's joint venture
investment ownership percentages. Changes that may occur in the
ownership percentages are less than one percent.
(b) The additions charged to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statements of Cash
Flows due to the amortization of loan costs and depreciation of a
portion of assets held for development.
- 40 -
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties VI, a Maryland Limited Partnership, has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NTS-PROPERTIES VI, a Maryland Limited
Partnership
(Registrant)
BY: NTS-Properties Associates VI,
General Partner,
BY: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
John W. Hampton
Senior Vice President
Date: March 28 , 1996
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
--------- -----
/s/ J. D. Nichols General Partner of NTS-Properties
J. D. Nichols Associates VI and Chairman of the
Board and Sole Director of NTS
Capital Corporation
/s/ Richard L. Good General Partner of NTS-Properties
Richard L. Good Associates VI and President of NTS
Capital Corporation
/s/ John W. Hampton Senior Vice President of NTS Capital
John W. Hampton Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
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