UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17589
NTS-PROPERTIES VII, LTD.
| Florida | 61-1119232 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| incorporation or organization) |
10172 Linn Station Road, Louisville, Kentucky 40223
(Address of Principal Executive Offices)
(502) 426-4800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 whether Registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No [X]
TABLE OF CONTENTS
PART I
| Pages | ||||
| Item 1. | Financial Statements | |||
| Balance Sheets as of March 31, 2003 and December 31, 2002 | 4 | |||
| Statement of Partners' Equity as of March 31, 2003 | 4 | |||
| Statements of Operations for the Three Months | ||||
| Ended March 31, 2003 and 2002 | 5 | |||
| Statements of Cash Flows for the Three Months | ||||
| Ended March 31, 2003 and 2002 | 6 | |||
| Notes to Financial Statements | 7-11 | |||
| Item 2. | Management's Discussion and Analysis of Financial | |||
| Condition and Results of Operations | 12-17 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 | ||
| Item 4. | Controls and Procedures | 17 | ||
PART II
| Item 1. | Legal Proceedings | 18 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 18 | ||
| Item 3. | Defaults Upon Senior Securities | 18 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 18 | ||
| Item 5. | Other Information | 18 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 18-19 | ||
| Signatures | 20 | |||
| Certifications | 21-22 |
2
Some of the statements included in this Form 10-Q, particularly those included in Part I, Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A"), may be considered "forward-looking statements" because the statements relate to
matters which have not yet occurred. For example, phrases such as "we anticipate," "believe," or
"expect" indicate that it is possible that the event anticipated, believed or expected may not occur.
If these events do not occur, the result which we expected also may not occur, or may occur in a
different manner which may be more or less favorable to us. We do not undertake any obligations
to publicly release the result of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances. Any forward-looking statements included in MD&A, or elsewhere in this report, reflect our general
partner's best judgment based on known factors, but involve risks and uncertainties. Actual results
could differ materially from those anticipated in any forward-looking statements as a result of a
number of factors, including but not limited to those described in our filings with the Securities and
Exchange Commission, particularly our Form 10-K for the year ended December 31, 2002. Any
forward-looking information provided by us pursuant to the safe harbor established by securities
legislation should be evaluated in the context of these factors. 3
PART I - FINANCIAL INFORMATION NTS-PROPERTIES VII, LTD. NTS-PROPERTIES VII, LTD. The accompanying notes to financial statements are an integral part of these statements. 4
NTS-PROPERTIES VII, LTD. The accompanying notes to financial statements are an integral part of these statements. 5
NTS-PROPERTIES VII, LTD. The accompanying notes to financial statements are an integral part of these statements. 6
NTS-PROPERTIES VII, LTD. The unaudited financial statements included herein should be read in conjunction with NTS-
Properties VII, Ltd.'s 2002 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission on March 31, 2003. In the opinion of our general partner, all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation have been made to the
accompanying financial statements for the three months ended March 31, 2003 and 2002. The
results of operations for the interim periods are not necessarily indicative of the results that may be
expected for the full year or any other interim period. As used in this Quarterly Report on Form 10-
Q the terms "we," "us" or "our," as the context requires, may refer to the Partnership or its interests
in its properties and joint venture. The financial statements include the accounts of all wholly-owned properties. Intercompany
transactions and balances have been eliminated. The less than 50% owned joint venture is accounted
for under the equity method. The preparation of financial statements in accordance with Accounting Principles Generally
Accepted in the United States 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. We own and operate, through a joint venture, a commercial rental property - Blankenbaker Business
Center 1A, in Louisville, Kentucky. The sole tenant which occupies 100% of the property is a
business which has operations in the Louisville area. We also own and operate apartment
communities - The Park at the Willows, in Louisville, Kentucky and Park Place Apartments Phase
II, in Lexington, Kentucky. Our financial instruments that are exposed to concentrations of credit risk consist of cash and
equivalents. We maintain our cash accounts primarily with banks located in Kentucky. Cash
balances are insured by the FDIC up to $100,000 per bank account. We may at times, in certain
accounts, have deposits in excess of $100,000. 7
NTS-PROPERTIES VII, LTD. Cash and equivalents include cash on hand and short-term, highly liquid investments with initial
maturities of three months or less. We have a cash management program which provides for the
overnight investment of excess cash balances. Under an agreement with a bank, excess cash is
invested in a repurchase agreement for U.S. government or agency securities each night. As of
March 31, 2003, approximately $372,000 of our overnight investment was included in cash and cash
equivalents. Cash and equivalents - restricted represents funds received for residential security deposits. Land, buildings and amenities are stated at historical cost, less accumulated depreciation. 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 7-30 years for land improvements, 5-30 years for buildings and improvements and 5-30
years for amenities. The aggregate cost of our properties for federal tax purposes is approximately
$12,823,000. Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If such review indicates that the carrying amount of an asset exceeds
the sum of its expected future cash flows, the asset's carrying value must be written down to fair
value. Application of this standard during the period ended March 31, 2003, did not result in an
impairment loss. Blankenbaker Business Center Joint Venture (the "Joint Venture') was organized on December 28,
1990, by us and NTS-Properties Plus Ltd. to own and operate Blankenbaker Business Center 1A and
to acquire an approximately 2.49 acre parking lot that was being leased by the business center from
an affiliate of our general partner. On August 16, 1994, the Blankenbaker Business Center Joint
Venture agreement was amended to admit NTS-Properties IV to the Joint Venture. For the three months ended March 31, 2003 and 2002, Blankenbaker Business Center 1A had total
revenues of $237,334 and $240,098, respectively, and net income of $91,077 and $69,264,
respectively. 8
NTS-PROPERTIES VII, LTD. Mortgage and notes payable consist of the following: As of March 31, 2003, the fair value of long-term debt is approximately $3,717,000, based on the
borrowing rates currently available to us for mortgages with similar terms and average maturities. Our mortgage may be prepaid but is subject to a yield-maintenance premium. Pursuant to an agreement with us, NTS Development Company, an affiliate of our general partner,
receives property management fees on a monthly basis. The fees are paid in an amount equal to 5%
of the gross revenues from our apartment communities. Also pursuant to an agreement, NTS
Development Company receives a repair and maintenance fee equal to 5.9% of the costs incurred
which relates to capital improvements and major repair and renovation projects. These repair and
maintenance fees are capitalized as part of land, buildings and amenities. We were charged the following amounts from NTS Development Company for the three months
ended March 31, 2003 and 2002. 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. 9
NTS-PROPERTIES VII, LTD. As an owner of real estate, we are subject to various environmental laws of federal, state and local
governments. Our compliance with existing laws has not had a material adverse effect on our
financial condition and results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or properties that we may acquire in the future. We are jointly and severally liable under the mortgage loan agreement for the Blankenbaker
Business Center 1A debt. The outstanding balance on this mortgage on March 31, 2003 is
$1,601,085, which is not reflected in our financial statements. On December 12, 2001, three individuals filed an action in the Superior Court of the State of
California for the County of Contra Costa against our general partner, the general partners of four
public partnerships affiliated with us and several individuals and entities affiliated with us. The
action purports to bring claims on behalf of a class of limited partners based on, among other things,
tender offers made by the public partnerships and an affiliate of our general partner. The plaintiffs
allege, among other things, that the prices at which limited partnership interests were purchased in
these tender offers were too low. The plaintiffs are seeking monetary damages and equitable relief,
including an order directing the disposition of the properties owned by the public partnerships and
the distribution of the proceeds. No amounts have been accrued as a liability for this action in our
financial statements. Under an indemnification agreement with our general partner, we are
responsible for the costs of defending this action. 10
NTS-PROPERTIES VII, LTD. On September 24, 2002, in connection with the above-described lawsuit, the plaintiffs voluntarily
dismissed two of the individuals and one of the entities that had objected to the lawsuit on personal
jurisdiction grounds. This dismissal was the result of an agreement under which some defendants
agreed not to contest jurisdiction and the plaintiffs agreed to dismiss other defendants. Additionally,
on October 22, 2002, the court issued an order sustaining the demurrer of our general partner and
the general partners of two limited partnerships affiliated with us. The effect of this ruling is that
our general partner and the other two general partners are no longer parties to the lawsuit. On the
same date the court overruled the demurrer of the general partners of two of the partnerships
affiliated with us and one individual and two entities affiliated with us. The entities and individuals
whose demurrers were overruled remain defendants in the lawsuit. These parties believe the lawsuit
is without merit, and are vigorously defending it. On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our general partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of another public partnership
affiliated with us and a partnership that was affiliated with us but is no longer in existence. In the
amended complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. No
amounts have been accrued as a liability for this action in our financial statements. Our general
partner believes that this action is without merit, and is vigorously defending it. We do not believe there is any other litigation threatened against us other than routine litigation
arising out of the ordinary course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material effect on our financial position or results of operations,
except as discussed herein. Our reportable operating segments include only one segment - Apartment Community Operations. 11
This Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") should be read in conjunction with the Financial Statements in Item 1 and the
Cautionary Statements below. The accompanying consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States. Application of these accounting principles
requires us to make estimates about the future resolution of existing uncertainties; as a result, actual
results could differ from these estimates. In preparing these financial statements, we have made our
best estimates and judgements of the amounts and disclosures included in the financial statements,
giving due regard to materiality. Our most critical business assumption is that our properties' occupancy will remain at a level which
provides for debt payments and adequate working capital, currently and in the future. If occupancy
were to fall below that level and remain at or below that level for a significant period of time, then
our ability to make payments due under our debt agreements and to continue paying daily
operational costs would be greatly impaired. We review properties for impairment on a property-by-property basis whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. These circumstances
include, but are not limited to, declines in cash flows and occupancy. We may recognize an
impairment of property when the estimated undiscounted operating income before depreciation and
amortization is less than the carrying value of the property. To the extent an impairment has
occurred, we charge to income the excess of the carrying value of the property over its estimated fair
value. We may decide to sell properties that are held for use. The sales prices of these properties
may differ from their carrying values. The following table includes our selected summarized operating data for the three months ended
March 31, 2003 and March 31, 2002. This data should be read in conjunction with our financial
statements, including the notes thereto, in Part I, Item 1 of this report. 12
Rental and other income generated by our properties and joint venture for the three months ended
March 31, 2003 and 2002 were as follows: The occupancy levels at our properties and joint venture as of March 31, 2003 and 2002 were as
follows: The average occupancy levels at our properties and joint venture for the three months ended March
31, 2003 and 2002 were as follows: We are making efforts to improve occupancy at our apartment communities. We have an on-site
leasing staff, who are 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 apartments and works with current residents on lease renewals. 13
The following discussion relating to changes in our results of operations includes only those line
items within our Statements of Operations for which there was a material change between the three
months ending March 31, 2002 and March 31, 2003. Rental income increased approximately $74,000, or 21%, for the three months ended March 31,
2003, as compared to the same period in 2002. The increase is primarily due to an increase in
average occupancy at Park Place Apartments Phase II and The Park at the Willows. Income from investment in joint venture increased approximately $7,000, or 32%, for the three
months ended March 31, 2003, as compared to the same period in 2002. The increase is a result of
increased income at Blankenbaker Business Center 1A primarily due to decreased interest expense
and operating expenses. Operating expenses increased approximately $14,000, or 16%, for the three months ended March
31, 2003, as compared to the same period in 2002. The increase is primarily the result of increased
repairs and maintenance expenses at Park Place Apartments Phase II. The increase is also a result
of increased water and sewer expense at Park Place Apartments Phase II and The Park at the
Willows. Operating expenses - affiliated increased $14,000, or 24%, for the three months ended March 31,
2003, as compared to the same period in 2002. The increase is primarily a result of increased
landscaping salaries, leasing salaries and maintenance salaries at Park Place Apartments Phase II.
Operating expenses - affiliated are expenses incurred for services performed by employees of NTS
Development Company, an affiliate of our general partner. These employee services include
property management, leasing, maintenance, security and other services necessary to manage and
operate our properties. Professional and administrative expense increased approximately $41,000 for the three months
ended March 31, 2003, as compared to the same period in 2002. The increase is primarily the result
of increased legal and professional fees related to our potential consolidation. 14
Depreciation and amortization decreased approximately $24,000, or 19%, for the three months ended
March 31, 2003, as compared to the same period in 2002. The decrease is primarily the result of the
roof assets at Park Place Apartments Phase II becoming fully depreciated by December 31, 2002. The following table sets forth the cash provided by or used in operating activities, investing activities
and financing activities for the three months ended March 31, 2003 and 2002. Cash flows provided by (used in): Net cash provided by operating activities increased approximately $47,000, or 59%, for the three
months ended March 31, 2003, as compared to the same period in 2002. The increase is primarily
driven by the changes in accounts payable and accounts receivable. The increase of approximately $41,000 in net cash provided by investing activities for the three
months ended March 31, 2003, as compared to the same period in 2002, was mainly the result of
decreased additions to land, buildings and amenities. Due to the fact that no distributions were made during the three months ended March 31, 2003 or
2002, the table which presents that portion of the distributions that represents a return of capital in
accordance with Accounting Principles Generally Accepted in the United States has been omitted. We believe the current occupancy levels are considered adequate to continue the operations of our
properties without additional financing. Our future liquidity depends significantly on our properties'
occupancy remaining at a level which provides for debt payments and adequate working capital,
currently and in the future. If occupancy were to fall below that level and remain at or below that
level for a significant period of time, then our ability to make payments due under our debt
agreements and to continue paying daily operational costs would be greatly impaired. 15
The primary source of future liquidity is expected to be derived from cash generated by our
properties after adequate cash reserves are established for future leasing, roof replacement and
renovation costs. It is anticipated that the cash flows from operations and cash reserves will be
sufficient to meet our needs. Cash reserves (which are unrestricted cash and equivalents as shown
on our balance sheet) were $466,449 on March 31, 2003. We are aware that our sole commercial tenant whose lease will expire soon is making efforts to seek
alternatives to renewing their expiring lease with us. The failure of this tenant to renew their lease
would result in a loss of annual rental revenue and operating expense recoveries of approximately
$938,000. Income from our investment in the joint venture that owns this property would decrease
accordingly. This would significantly impact our liquidity, and could result in significant costs to
refurbish the vacated space and locate a new tenant. At this time, we are not certain whether the
tenant intends to renew their lease as allowed by the lease agreement, or vacate their space. The demand on future liquidity is anticipated to increase as a result of the replacement of the roofs
at Park Place Apartments Phase II (18 buildings) all of which were installed using shingles produced
by a single manufacturer. The shingles appear to contain defects which may cause the roofs to fail.
As the shingle manufacturer has declared bankruptcy, we do not expect to be able to recover any
of the costs of the roof replacements in the event of any such failures. We do not have sufficient
working capital to make all of the roof replacements at one time. As of March 31, 2003, one roof
replacement has been completed. The total cost of replacing the remaining roofs is estimated to be
$340,000 ($20,000 per building). Nine roof replacements have been budgeted for 2003. Blankenbaker Business Center 1A is expected to require a new roof in 2003. The roof replacement
is expected to cost approximately $235,000. Our share of this cost is expected to be approximately
$74,000. We have no other material commitments for renovations or capital expenditures as of March 31,
2003. The lease at Blankenbaker Business Center 1A provides for the tenant to contribute their
proportionate share of common area maintenance expenses, insurance, utilities and real estate taxes.
This lease provision, along with the fact that residential leases are generally for a period of one year,
are intended to protect us, in part, from the impact of inflation and changing prices. Our general partner, along with the general partners of four other public limited partnerships
affiliated with us, is investigating a consolidation with other affiliated entities. In addition to these
affiliated entities, the consolidation would likely involve several private partnerships and our general
partner. The new combined entity would own all of the properties currently owned by the public 16
limited partnerships, and the limited partners or other owners of these entities would receive an
ownership interest in the combined entity. The number of ownership interests to be received by
limited partners and the other owners of the entities participating in the consolidation would likely
be determined based on the relative value of the assets contributed to the combined entity by each
public limited partnership, reduced by any indebtedness assumed by the entity. The majority of the
contributed assets would consist of real estate properties, whose relative values would be based on
appraisals. The potential benefits of consolidating the entities include: reducing the administrative
costs as a percentage of assets and revenues by creating a single public entity; diversifying limited
partners' investments in real estate to include additional markets and types of properties; and
creating an asset base and capital structure that may enable greater access to the capital markets.
There are, however, also a number of potential adverse consequences to a consolidation such as, the
expenses associated with a consolidation and the fact that the interests of our limited partners in the
combined entity would be smaller on a percentage basis than their interests in us. A consolidation
requires approval of our limited partners and the limited partners and other equity holders of the
other proposed participants to the consolidation. Accordingly, there is no assurance that the
consolidation will occur. Our website address is www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available and may
be accessed free of charge through the "About NTS" section of our website as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Our website and
the information contained therein or connected thereto are not incorporated into this Quarterly
Report on Form 10-Q. Our primary market risk exposure with regard to financial instruments stems from changes in interest
rates. Our mortgage payable bears interest at a fixed rate. A hypothetical 100 basis point increase
in interest rates would result in an approximate $196,000 decrease in the fair value of debt. The Chief Executive Officer and Chief Financial Officer of NTS Capital Corporation, the general
partner of our general partner, have concluded, based on their evaluation within 90 days of the filing
date of this report, that our disclosure controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in our reports filed under the Securities
Exchange Act of 1934. There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of the previously
mentioned evaluation. 17
PART II - OTHER INFORMATION On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our general partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of another public partnership
affiliated with us and a partnership that was affiliated with us but is no longer in existence. In the
amended complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. No
amounts have been accrued as a liability for this action in our financial statements. Our general
partner believes that this action is without merit, and is vigorously defending it. Item 2 - Changes in Securities and Use of Proceeds Item 3 - Defaults Upon Senior Securities Item 4 - Submission of Matters to a Vote of Security Holders Item 5 - Other Information Item 6 - Exhibits and Reports on Form 8-K 18
19
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 15, 2003 20
CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Brian F. Lavin, certify that: Date: May 15, 2003 /s/ Brian F. Lavin See also the certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is attached as an exhibit
to this report. 21
CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Gregory A. Wells, certify that: Date: May 15, 2003 /s/ Gregory A. Wells See also the certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is attached as an exhibit
to this report. 22
EXHIBIT INDEX
Item 1 - Financial Statements
BALANCE SHEETS
As of As of
March 31, December 31,
2003 2002
------------------- -------------------
(UNAUDITED)
ASSETS
Cash and equivalents $ 466,449 $ 382,533
Cash and equivalents - restricted 29,675 28,775
Accounts receivable 1,928 4,532
Land, buildings and amenities, net 7,198,177 7,299,579
Investment in and advances to joint venture 691,307 663,678
Other assets 52,470 53,133
------------------- -------------------
TOTAL ASSETS $ 8,440,006 $ 8,432,230
=================== ===================
LIABILITIES AND PARTNERS' EQUITY
Mortgage and notes payable $ 3,451,308 $ 3,494,218
Accounts payable 87,563 48,583
Security deposits 30,525 28,775
Other liabilities 60,210 40,910
------------------- -------------------
TOTAL LIABILITIES 3,629,606 3,612,486
COMMITMENTS AND CONTINGENCIES (Note 10)
PARTNERS' EQUITY 4,810,400 4,819,744
------------------- -------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 8,440,006 $ 8,432,230
=================== ===================
STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
Limited General
Partners Partner Total
------------------ ------------------ -------------------
PARTNERS' EQUITY/(DEFICIT)
Capital contributions, net of offering costs $ 10,935,700 $ 100 $ 10,935,800
Net loss - prior years (2,906,131) (29,354) (2,935,485)
Net loss - current year (9,251) (93) (9,344)
Cash distributions declared to date (2,717,046) (27,445) (2,744,491)
Repurchase of limited partnership interests (436,080) -- (436,080)
------------------ ------------------ -------------------
BALANCES ON MARCH 31, 2003 $ 4,867,192 $ (56,792)$ 4,810,400
================== ================== ===================
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------------------
2003 2002
------------------- -------------------
REVENUES
Rental income $ 431,371 $ 357,561
Interest and other income 1,423 1,444
Income from investment in joint venture 28,543 21,707
------------------- -------------------
TOTAL REVENUES 461,337 380,712
------------------- -------------------
EXPENSES
Operating expenses 97,940 84,242
Operating expenses - affiliated 72,966 58,883
Interest expense 63,895 66,846
Management fees 22,600 18,146
Real estate taxes 21,846 20,652
Professional and administrative expenses 60,549 19,658
Professional and administrative expenses - affiliated 29,483 28,663
Depreciation and amortization 101,402 124,919
------------------- -------------------
TOTAL EXPENSES 470,681 422,009
------------------- -------------------
Net loss $ (9,344) $ (41,297)
=================== ===================
Net loss allocated to the limited partners $ (9,251) $ (40,884)
=================== ===================
Net loss per limited partnership interest $ (0.02) $ (0.07)
=================== ===================
Weighted average number of limited partnership interests 552,236 552,236
=================== ===================
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------------------------
2003 2002
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (9,344) $ (41,297)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for doubtful accounts 862 --
Write-off of uncollectible accounts receivable (6,508) --
Depreciation and amortization 102,182 125,699
Income from investment in joint venture (28,543) (21,707)
Changes in assets and liabilities:
Cash and equivalents - restricted (900) (282)
Accounts receivable 8,250 958
Other assets (117) (9,493)
Accounts payable 38,980 4,506
Security deposits 1,750 475
Other liabilities 19,300 20,135
------------------- -------------------
Net cash provided by operating activities 125,912 78,994
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities -- (40,239)
Investment in and advances (to) from joint venture 914 --
------------------- -------------------
Net cash provided by (used in) investing activities 914 (40,239)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and notes payable (42,910) (41,188)
------------------- -------------------
Net cash used in financing activities (42,910) (41,188)
Net increase (decrease) in cash and equivalents 83,916 (2,433)
CASH AND EQUIVALENTS, beginning of period 382,533 431,232
------------------- -------------------
CASH AND EQUIVALENTS, end of period $ 466,449 $ 428,799
=================== ===================
Interest paid on a cash basis $ 63,243 $ 66,185
=================== ===================
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
March 31, December 31,
2003 2002
------------------ -------------------
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.37%, due
October 15, 2012, secured by land and buildings. $ 3,451,308 $ 3,488,518
Notes payable to a bank in monthly installments, bearing
interest at the Prime Rate, but not less than 6.00%, repaid in
March 2003. -- 5,700
------------------ -------------------
$ 3,451,308 $ 3,494,218
================== ===================
NOTES TO FINANCIAL STATEMENTS
Three Months Ended
March 31,
-------------------------------------------
2003 2002
------------------ -------------------
Property management fees $ 22,600 $ 18,146
------------------ -------------------
Property management 39,135 34,885
Leasing 7,525 4,864
Administrative - operating 21,153 18,797
Other 5,153 337
------------------ -------------------
Total operating expenses - affiliated 72,966 58,883
------------------ -------------------
Professional and administrative expenses - affiliated 29,483 28,663
------------------ -------------------
Repair and maintenance fees -- 2,015
Construction management -- 900
------------------ -------------------
Total related party transactions capitalized -- 2,915
------------------ -------------------
Total related party transactions $ 125,049 $ 108,607
================== ===================
Note 10 - Commitments and Contingencies
NOTES TO FINANCIAL STATEMENTS
Three Months Ended
March 31,
---------------------------------------
2003 2002
------------------ ------------------
Total revenues $ 461,337 $ 380,712
Operating expenses and operating expenses - affiliated 170,906 143,125
Interest expense 63,895 66,846
Depreciation and amortization 101,402 124,919
Net loss (9,344) (41,297)
Three Months Ended
March 31,
----------------------------------------------
2003 2002
------------------- -------------------
Wholly-Owned Properties
The Park at the Willows $ 83,954 $ 70,631
Park Place Apartments Phase II $ 347,886 $ 287,224
Joint Venture Property
(Ownership % on March 31, 2003)
Blankenbaker Business Center 1A (31.34%) $ 237,334 $ 240,098
Three Months Ended
March 31,
-------------------------------------------------
2003 2002
-------------------- -------------------
Wholly-Owned Properties
The Park at the Willows 92% 71%
Park Place Apartments Phase II 93% 78%
Joint Venture Property
(Ownership % on March 31, 2003)
Blankenbaker Business Center 1A (31.34%) 100% 100%
Three Months Ended
March 31,
-------------------------------------------------
2003 2002
------------------- -------------------
Wholly-Owned Properties
The Park at the Willows 94% 72%
Park Place Apartments Phase II 91% 77%
Joint Venture Property
(Ownership % on March 31, 2003)
Blankenbaker Business Center 1A (31.34%) 100% 100%
Three Months Ended
March 31,
-------------------------------------------
2003 2002
------------------- -------------------
Operating activities $ 125,912 $ 78,994
Investing activities 914 (40,239)
Financing activities (42,910) (41,188)
------------------- -------------------
Net increase (decrease) in cash and equivalents $ 83,916 $ (2,433)
=================== ===================
Cash Flows
None.
None.
None.
None.
(a) Exhibits
(3) Amended and Restated Agreement and Certificate of Limited Partnership of NTS-Properties
VII, Ltd., a Florida limited partnership. *
(99.1) Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. **
(99.2) Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. **
(b) Reports on Form 8-K
None.
* Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on May 15, 1987
(effective October 29, 1987) under Commission File No. 33-14308.
** Attached as an exhibit to this Quarterly Report on Form 10-Q.
NTS-PROPERTIES VII, LTD
By: NTS-Properties Associates VII,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ Brian F. Lavin
Brian F. Lavin
President of NTS Capital Corporation
/s/ Gregory A. Wells
Gregory A. Wells
Chief Financial Officer of NTS Capital Corporation
President of NTS Capital Corporation, General Partner of NTS-Properties Associates VII, General Partner of NTS-
Properties VII, Ltd.
Chief Financial Officer of NTS Capital Corporation, General Partner of NTS-Properties Associates VII, General Partner
of NTS-Properties VII, Ltd.
Exhibit Number Description of Document
3 Amended and Restated Agreement and Certificate of Limited
Partnership of NTS-Properties VII, Ltd., a Florida limited
partnership. *
99.1 Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. **
99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. **
* Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on May 15, 1987
(effective October 29, 1987) under Commission File No. 33-14308.
** Attached as an exhibit to this Quarterly Report on Form 10-Q.