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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13400
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NTS-PROPERTIES V, a Maryland Limited Partnership
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(Exact name of registrant as specified in its charter)
Maryland 61-1051452
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (502) 426-4800
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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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 47
Total Pages: 51
TABLE OF CONTENTS
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Pages
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PART I
Items 1 and 2. Business and Properties 3-13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote
of Security Holders 13
PART II
Item 5. Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 16-24
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 25
Item 8. Financial Statements and Supplementary
Data 26-42
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 43
PART III
Item 10. Directors and Executive Officers of
the Registrant 44
Item 11. Management Remuneration and Transactions 45
Item 12. Security Ownership of Certain Beneficial
Owners and Management 45
Item 13. Certain Relationships and Related
Transactions 46
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 47-50
Signatures 51
- 2 -
PART I
Items 1. and 2. Business and Properties
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Development of Business
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NTS-Properties V, a Maryland Limited Partnership, (the "Partnership") is a
limited partnership organized under the laws of the State of Maryland on April
30, 1984. The General Partner is NTS-Properties Associates V (a Kentucky limited
partnership). As of December 31, 1999, the Partnership owned the following
properties:
- Commonwealth Business Center Phase II, a business center with
approximately 66,000 net rentable square feet located in
Louisville, Kentucky, constructed by the Partnership.
- A joint venture interest in The Willows of Plainview Phase II,
a 144-unit luxury apartment complex located in Louisville,
Kentucky, constructed by the joint venture between the
Partnership and NTS- Properties IV, an affiliate of the
General Partner of the Partnership. The Partnership's
percentage interest in the joint venture was 90% at December
31, 1999.
- A joint venture interest in the Lakeshore/University II Joint
Venture (L/U II Joint Venture). The L/U II Joint Venture was
formed on January 23, 1995 among the Partnership and
NTS-Properties IV, NTS-Properties Plus Ltd. and NTS/Fort
Lauderdale, Ltd., affiliates of the General Partner of the
Partnership. The Partnership's percentage interest in the
joint venture was 79% at December 31, 1999. A description of
the properties owned by the L/U II Joint Venture appears
below:
- Lakeshore Business Center Phase I - a business center
---------------------------------
with approximately 103,000 net rentable square feet
located in Fort Lauderdale, Florida, acquired
complete by the joint venture.
- Lakeshore Business Center Phase II - a business
--------------------------------------
center with approximately 97,000 net rentable square
feet located in Fort Lauderdale, Florida, acquired
complete by the joint venture.
- Outparcel Building Site - approximately 3.8 acres of
------------------------
land adjacent to the Lakeshore Business Center
Development upon which construction of Lakeshore
Business Center Phase III has commenced.
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. The General Partner believes that
the Partnership's properties are adequately covered by insurance.
- 3 -
Development of Business - Continued
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As of December 31, 1999, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/99
-------- ---- ---- -----------
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 2,649,944 (2)
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 1,582,663 (2)
Lakeshore Business Center Phase I 8.125% 08/01/08 (3) $ 3,609,836 (4)(5)
Lakeshore Business Center Phase II 8.125% 08/01/08 (3) $ 3,883,797 (4)(5)
(1) Current monthly principal payments are based upon a 15-year
amortization schedule. At maturity, the mortgages will have been repaid
based on the current rate of amortization.
(2) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1999. The outstanding balance of the
mortgages at December 31, 1999 were $2,949,626 and $1,761,647,
respectively.
(3) Current monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(4) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1999. The outstanding balance of the
mortgage at December 31, 1999 was $4,543,531 for Phase I and $4,888,353
for Phase II.
(5) These amounts as compared to 1998, have been increased due to the
Partnership's increased ownership of the Lakeshore/University II Joint
Venture resulting from a capital contribution made by the Partnership
to the Joint Venture on July 1, 1999. See below for details of this
transaction.
Commonwealth Business Center Phase II is not encumbered by an outstanding
mortgage at December 31, 1999.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's commercial properties. Changes to current
tenant finish improvements are a typical part of any lease negotiation.
Improvements generally include a revision to the current floor plan to
accommodate a tenant's needs, new carpeting and paint and/or wallcovering. The
extent and cost of these improvements are determined by the size of the space
and whether the improvements are for a new tenant or incurred because of a lease
renewal. The tenant finish improvements will be funded by cash flow from
operations, cash reserves and additional financing where necessary.
On September 17, 1999, the Partnership closed on the sale of University III
vacant land to Silver City Properties, Ltd. for a purchase price of $801,000.
The Partnership reflects a loss of approximately $23,000 associated with this
sale in the third quarter of 1999.
- 4 -
Development of Business - Continued
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On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of
land adjacent to the Lakeshore Business Center for a purchase price of $528,405.
The Partnership had a 79.45% interest in the Joint Venture at that date. The
Partnership reflects a gain of approximately $75,000 associated with this sale
in the third quarter of 1999 and expects to use the net proceeds from the land
sales to help fund the construction of Lakeshore Business Center Phase III as
described below.
As of December 31, 1999, the L/U II Joint Venture has a commitment, pursuant to
a contract signed December 6, 1999, to construct a building to be known as
Lakeshore Business Center Phase III on the 3.8 acres of land it owns at the
Lakeshore Business Center Development. Site work began in December 1999 and
shell construction began the first quarter of 2000. The construction costs are
currently estimated to be $4,000,000 and will be funded by a $1,737,000 capital
contribution from the Partnership made in July 1999 and approximately $2,680,000
debt financing obtained subsequent to December 31, 1999. On July 1, 1999, NTS-
Properties V contributed capital of $1,737,000 to the L/U II Joint Venture for
the construction of the Lakeshore Business Center Phase III. At that time, NTS-
Properties Plus and NTS-Properties IV, were not in a position to contribute
additional capital required for the construction of Lakeshore Business Center
Phase III. NTS-Properties Plus and NTS-Properties IV agreed that NTS-Properties
V would make a capital contribution to the L/U II Joint Venture with the
knowledge that their Joint Venture interests would, as a result, decrease. See
Item 8 Note 14 for details of financing obtained for the construction of
Lakeshore Business Center Phase III subsequent to December 31, 1999.
The Partnership had no other material commitments for renovations or capital
improvements at December 31, 1999.
Financial Information About Industry Segments
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The Partnership is engaged solely in the business of developing, constructing,
owning and operating residential apartments and commercial real estate, although
the Partnership may also develop retail centers. See Item 8 Note 13 for
information regarding the Partnership's operating segments.
General
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The current business of the Partnership is consistent with the original purpose
of the Partnership which was to invest in real property, which was either under
development or proposed for development, on which it would develop, construct,
own and operate apartment complexes, business parks, and retail, industrial and
office buildings. The original purpose of the Partnership also includes the
ability by the Partnership to invest in fully improved properties, either
directly or by joint venture. The Partnership'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.
- 5 -
Commonwealth Business Center Phase II
- -------------------------------------
As of December 31, 1999, there were 11 tenants leasing space aggregating
approximately 57,000 square feet of rentable area at Commonwealth Business
Center Phase II. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance and real estate taxes. The tenants who occupy
Commonwealth Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include
engineering and an encoding center. Three tenants individually lease more than
10% of Commonwealth Business Center Phase II's rentable area. The occupancy
levels at the business center as of December 31 were 86% (1999), 79% (1998), 78%
(1997), 84% (1996) and 67% (1995). See Item 7 for average occupancy levels for
the periods ending December 31, 1999, 1998 and 1997.
The following table contains approximate data concerning the major leases in
effect on December 31, 1999.
Sq. Ft. and Current Annual
% of Net Rental
Year of Expiration Rentable Area per Square Foot
------------------ ------------- ---------------
Major Tenant (1):
1 2004 11,674 (17.5%) $ 7.15
2 2001 13,846 (20.7%) $ 9.00
3 2003 8,037 (12.0%) $10.00
(1) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
The Willows of Plainview Phase II
- ---------------------------------
Units at The Willows of Plainview Phase II include one and two-bedroom lofts and
deluxe apartments and two-bedroom town homes. All units have wall-to-wall
carpeting, individually controlled heating and air conditioning, dishwashers,
ranges, refrigerators and garbage disposals. All units, except one-bedroom
lofts, have washer/dryer hook-ups. The one-bedroom lofts have stackable washers
and dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, swimming pool, whirlpool and tennis
courts.
Monthly rental rates at The Willows of Plainview Phase II start at $679 for one-
bedroom apartments, $939 for two-bedroom apartments and $1,059 for two-bedroom
town homes, with additional monthly rental amounts for special features and
locations. Tenants pay all costs of heating, air conditioning and electricity.
Most leases are for a period of one year. Units will be rented in some cases,
however, on a shorter term basis at an additional charge. The occupancy levels
at the apartment complex as of December 31 were 87% (1999), 92% (1998), 90%
(1997), 92% (1996) and 94% (1995). See Item 7 for average occupancy levels for
the periods ending December 31, 1999, 1998 and 1997.
Lakeshore Business Center Phase I
- ---------------------------------
As of December 31, 1999, there were 29 tenants leasing space aggregating
approximately 76,000 square feet of the rentable area at Lakeshore Business
Center Phase I. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance, utilities and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include
telemarketing services, financial services and computer integration services.
There are no tenants that individually lease 10% or more of Lakeshore Business
Center Phase I's rentable area. The occupancy levels at the business center as
of December 31 were 73% (1999), 85% (1998), 96% (1997) and 92% (1996 and 1995).
See Item 7 for average occupancy levels for the periods ending December 31,
1999, 1998 and 1997.
- 6 -
Lakeshore Business Center Phase II
- ----------------------------------
As of December 31, 1999, there were 20 tenants leasing space aggregating
approximately 70,400 square feet of the rentable area at Lakeshore Business
Center Phase II. All leases provide for tenants to contribute toward the payment
of common area expenses, utilities, insurance and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include medical
equipment leasing, insurance services and management offices for the Florida
state lottery. One tenant individually leases more than 10% of Lakeshore
Business Center Phase II's rentable area. The occupancy levels at the business
center as of December 31 were 72% (1999), 79% (1998), 100% (1997), 89% (1996),
and 72% (1995). See Item 7 for average occupancy levels for the periods ending
December 31, 1999, 1998 and 1997.
The following table contains approximate data concerning the major lease in
effect on December 31, 1999:
Sq. Ft. and Current Annual
% of Net Rental
Year of Expiration Rentable Area per Square Foot
------------------ ------------- ---------------
Major Tenant (1):
1 2002 14,665 (15.1%) $15.30
(1) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Annual
Federal Realty Realty
Tax Basis Tax Rate Taxes
--------- -------- -----
Wholly-Owned Properties
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Commonwealth Business Center Phase II $ 4,673,107 $ .010710 $ 45,132
Property Owned in Joint Venture with
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NTS-Properties IV
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The Willows of Plainview Phase II 7,865,171 .010910 65,528
Properties Owned Through Lakeshore/
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University II Joint Venture (L/U II
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Joint Venture)
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Lakeshore Business Center Phase I 10,273,821 .025496 162,680
Lakeshore Business Center Phase II 12,263,794 .025496 174,122
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, 5-30
years for amenities and life of the lease for tenant improvements.
- 7 -
Investment in Joint Ventures
- ----------------------------
NTS Willows Phase II Joint Venture - On September 1, 1984, the Partnership
entered into a joint venture agreement with NTS-Properties IV to develop,
construct, own and operate a 144-unit luxury apartment complex on an 8.29 acre
site in Louisville, Kentucky known as The Willows of Plainview Phase II. The
term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than
its cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2028.
The Partnership contributed approximately $7,455,000, the construction and
carrying costs of the apartment complex, and NTS-Properties IV contributed land
valued at $800,000. No future contributions are anticipated as of December 31,
1999.
The apartment complex is encumbered by permanent mortgages with two insurance
companies. Both loans are secured by a first mortgage on the property. The
outstanding balance of the mortgages at December 31, 1999 is $4,711,273,
($2,949,626 and $1,761,647). The mortgages are recorded as a liability of the
Joint Venture. The Partnership's proportionate interest in the mortgages at
December 31, 1999 is $4,232,607 ($2,649,944 and $1,582,663). Both mortgages
currently bear interest at a fixed rate of 7.2% and are due January 5, 2013.
Monthly principal payments are based upon a fifteen-year amortization schedule.
At maturity, the loans will have been repaid based on the current rate of
amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the gross receipts from the operations of the
Joint Venture Property (including investment income) for such period plus any
funds released from previously established reserves (referred to in clause (iv)
below), over (B) the sum of (i) all cash operating expenses paid by the Joint
Venture Property during such period in the course of business, (ii) capital
expenditures during such period not funded by capital contributions, loans or
paid out of previously established reserves, (iii) payments during such period
on account of amortization of the principal of any debts or liabilities of the
Joint Venture Property and (iv) reserves for contingent liabilities and future
expenses of the Joint Venture Property. Percentage Interest means that
percentage which the capital contributions of a Partner bears to the aggregate
capital contributions of all 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 90%
at December 31, 1999.
NTS Ft. Lauderdale Office Joint Venture - On April 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV to develop,
construct, own and operate an office warehouse building in Ft. Lauderdale,
Florida known as Lakeshore Business Center Phase I.
The Partnership contributed approximately $9,170,000, the cost of constructing
and leasing the building and NTS-Properties IV contributed land valued at
$1,752,982. On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the newly formed
Lakeshore/University II (L/U II) Joint Venture. See below for a further
discussion of the Lakeshore/University II Joint Venture.
- 8 -
Investment in Joint Ventures - Continued
- ----------------------------------------
NTS University Boulevard Joint Venture - On January 3, 1989, the Partnership
entered into a joint venture agreement with NTS-Properties Plus Ltd. to develop,
construct, own and operate Phase II of the University Business Center
development in Orlando, Florida.
The Partnership contributed land valued at $1,460,000 and NTS-Properties Plus
Ltd. contributed development and carrying costs of approximately $8,000,000. In
connection with the construction of University Business Center Phase I, the
Partnership incurred the cost of developing certain common areas which are used
by both University Business Center Phase I and Phase II. In 1989, NTS-Properties
Plus Ltd. paid approximately $747,000 to the Partnership for Phase II's share of
the common area costs. During the second quarter of 1994, the Partnership made
an approximate $79,000 capital contribution to the Joint Venture. The capital
contribution increased the Partnership's ownership percentage in the Joint
Venture from approximately 16% to approximately 17%. The contribution was made
to fund a portion of the Joint Venture's operating costs. On January 23, 1995,
the partners of the NTS University Boulevard Joint Venture contributed
University Business Center Phase II to the newly formed L/U II Joint Venture.
See below for a further discussion of the L/U II Joint Venture.
Lakeshore/University II Joint Venture - On January 23, 1995, a joint venture
known as the Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties IV, NTS-Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of the Partnership,
for purposes of owning Lakeshore Business Center Phases I and II, University
Business Center Phase II (property sold during 1998 - see below for details
regarding the transaction) and certain undeveloped tracts of land adjacent to
the Lakeshore Business Center development.
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
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Lakeshore Business Center Phase I NTS-Properties IV and
NTS-Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center Phase II NTS-Properties V and
NTS-Properties Plus Ltd.
The term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the Real Property and the sale and/or
collection of any evidences of indebtedness received in
connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
- 9 -
Investment in Joint Ventures - Continued
- ----------------------------------------
Each of the properties were contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture and on Lakeshore Business Center Phase I in
the amount of $5,500,000 subsequent to the formation of the L/U II Joint
Venture. In addition to the above, NTS-Properties IV contributed $750,000 to the
L/U II Joint Venture. As a result of the valuation of the properties contributed
to the L/U II Joint Venture, the Partnership obtained a 69% partnership interest
in the joint venture.
The properties of the L/U II Joint Venture are encumbered by mortgages payable
to an insurance company as follows:
Loan Balance
at 12/31/99 Encumbered Property
----------- -------------------
$4,543,531 Lakeshore Business Center Phase I
$4,888,353 Lakeshore Business Center Phase II
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the loans at December 31, 1999 is $7,493,633
($3,609,836 and $3,883,797). The mortgages bear interest at a fixed rate of
8.125% and are due August 1,2008. Monthly principal payments are based upon a
12- year amortization schedule. At maturity, the loans will have been repaid
based on the current rate of amortization.
On October 6, 1998 pursuant to a contract executed on September 8, 1998, the
Lakeshore/University II Joint Venture ("L/U II") and NTS Properties V sold
University Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser") for an aggregate purchase price of
$17,950,000 ($8,975,000 for Phase I and $8,975,000 for Phase II). University
Business Center Phase II was owned by the L/U II Joint Venture of which the
Partnership owned a 69% interest as of October 6, 1998. Portions of the proceeds
from this sale were immediately used to pay the remainder of the outstanding
debt (including interest and prepayment penalties) of approximately $10,672,643
($4,739,261 for Phase I and $5,933,382 for Phase II) on these properties. (See
Item 8 Note 11 for details of this transaction). During the first quarter of
1999, a portion of the proceeds from the sale were used to make a special cash
distribution of $37.50 per limited partnership Unit totaling $1,252,275.
On September 17, 1999, the Partnership closed on the sale of University III
vacant land to Silver City Properties, Ltd. for a purchase price of $801,000.
The Partnership reflects a loss of approximately $23,000 associated with this
sale in the third quarter of 1999.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of
land adjacent to the Lakeshore Business Center for a purchase price of $528,405.
The Partnership had a 79.45% interest in the Joint Venture at that date. The
Partnership reflects a gain of approximately $75,000 associated with this sale
in the third quarter of 1999 and expects to use the net proceeds from the land
sale to help fund the construction of Lakeshore Business Center Phase III.
On July 1, 1999, NTS-Properties V contributed $1,737,000 to the L/U II Joint
Venture. The other partners in the Joint Venture did not make capital
contributions at that time. Accordingly, the ownership percentages of the other
partners in the Joint Venture decreased. Effective July 1, 1999, NTS-Properties
V's percentage of ownership in the Joint Venture increased from 69% to 79%.
- 10 -
Investment in Joint Ventures - Continued
- ----------------------------------------
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B)(iv) below), over (B) the sum of (i) all cash
operating expenses paid by the Joint Venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the Joint Venture and (iv) reserves for contingent
liabilities and future expenses of the Joint Venture, as established by the
Partners; provided, however, that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 79%
at December 31, 1999.
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 services provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1999, in the vicinity of the Willows of Plainview
Phase II, there is one new apartment complex under construction which is
scheduled to be completed by the fourth quarter of 2000. The number of units in
this complex is unknown at this time. As of December 31, 1999, there are no
other properties under construction in the respective vicinities in which the
properties are located. The Partnership has not commissioned a formal market
analysis of competitive conditions in any market in which it owns properties,
but relies upon the market condition knowledge of the employees of NTS
Development Company who manage and supervise leasing for each property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates V, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a wholly-
owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties
Associates V. Under the agreement, 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 $221,467
for the year ended December 31, 1999. $156,711 was received from commercial
properties and $64,756 was received from the residential property. The fee is
equal to 6% of gross revenues from commercial properties and 5% of gross
revenues from residential properties.
- 11 -
Management of Properties - Continued
- ------------------------------------
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 period of five years, and thereafter for
succeeding one-year periods, unless cancelled. The Agreement is subject to
cancellation by either party upon sixty days written notice. As of December 31,
1999, the Management Agreement is still in effect.
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
Seasonal Operations
- -------------------
The Partnership does not consider its operations to be seasonal to any material
degree.
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 arm's length
negotiations but through the exercise of the General Partner's good judgement
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. The General Partner and its affiliates retain a free right to compete
with the Partnership's properties including the right to develop competing
properties now and in the future in addition to those existing properties which
may compete directly or indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from third parties 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 than those previously described.
- 12 -
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. (See Item 8 Note 10 for further discussion of related party
transactions).
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
- 13 -
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
-----------------------------------------------------------------------
Partner Matters
---------------
There is no established trading market for the limited partnership interests,
nor is one likely to develop. The Partnership had 2,013 limited partners as of
February 29, 2000. Cash distributions and allocations of net income (loss) are
made as described in Note 1C to the Partnership's 1999 financial statements in
Item 8.
Annual distributions totaling $37.50 were paid per limited partnership unit
during 1999. No distributions were paid during 1998 or 1997. Quarterly
distributions are determined based on current cash balances, cash flow being
generated by operations and required cash reserves, as determined by the General
Partner, for future leasing costs, tenant finish costs, and capital
improvements. Distributions were paid quarterly as follows:
1999 1998 1997
---- ---- ----
First Quarter $ 37.50 $ -- $ --
Second Quarter -- -- --
Third Quarter -- -- --
Fourth Quarter -- -- --
------- ------- -------
$ 37.50 $ -- $ --
======= ======= =======
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1999, 1998 and 1997. Distributions were funded by cash
flow derived from investing activities.
Cash
Net Income Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1999 $ (78,477) $ 1,252,275 $ 1,252,275
1998 $ 3,956,082 $ -- $ --
1997 $ (601,944) $ -- $ --
General Partners:
1999 $ (793) $ 12,649 $ 12,649
1998 $ 39,961 $ -- $ --
1997 $ (6,080) $ -- $ --
- 14 -
Item 6. Selected Financial Data
-----------------------
For the years ended December 31, 1999, 1998, 1997, 1996 and 1995.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Rental and other income $ 4,031,973 $ 5,752,977 $ 5,906,286 $ 5,693,700 $ 5,388,726
Gain on sale of
property 52,051(1) 5,004,628(2) -- -- --
Total expenses (4,163,294) (5,719,124) (6,464,964) (6,479,552) (6,685,340)
------------ ------------ ------------ ----------- -----------
Income (loss) before
extraordinary item (79,270) 5,038,481 (558,678) (785,852) (1,296,614)
Extraordinary item - (1,042,438) (49,346) (50,118) --
------------ ------------ ------------ ----------- -----------
Net income (loss) $ (79,270) $ 3,996,043 $ (608,024) $ (835,970) $ (1,296,614)
============ ============ ============ =========== ===========
Net income (loss)
allocated to:
General Partner $ (793) $ 39,961 $ (6,080) $ (8,360) $ (12,966)
Limited partners $ (78,477) $ 3,956,082 $ (601,944) $ (827,610) $ (1,283,648)
Net income (loss) per
limited partnership
unit $ (2.39) $ 114.89 $ (17.13) $ (23.23) $ (35.78)
Weighted average number
of limited partnership
units 32,861 34,433 35,136 35,632 35,876
Cumulative net income
(loss) allocated to:
General Partner $ 66,556 $ 67,349 $ 27,388 $ 33,468 $ 41,828
Limited partners $ (4,676,912) $ (4,598,435) $ (8,554,517) $ (7,952,573) $ (7,124,963)
Cumulative taxable income
(loss) allocated to:
General Partner $ 146,496 $ 189,030 $ 153,955 $ 149,844 $ 145,990
Limited partners $ (5,723,508) $ (3,720,315) $ (7,160,797) $ (7,217,069) $ (6,835,826)
Distributions declared:
General Partner $ 12,649 $ -- $ -- $ -- $ --
Limited partners $ 1,252,275 $ -- $ -- $ -- $ --
Cumulative
distributions
declared (2):
General Partner $ 168,176 $ 155,527 $ 155,527 $ 155,527 $ 155,527
Limited partners $ 16,641,479 $ 15,389,204 $ 15,389,204 $ 15,389,204 $ 15,389,204
At year end:
Land, buildings and
amenities, net $ 17,008,482 $ 16,801,857 $ 27,028,887 $ 28,404,616 $ 29,735,774
Total assets $ 20,475,809 $ 22,041,345 $ 28,712,898 $ 30,334,256 $ 31,537,473
Mortgages and notes
payable $ 11,726,240 $ 11,450,225 $ 21,662,821 $ 22,688,331 $ 22,839,940
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.
(1) See Item 8 Note 11 for details of the sale of University Phase III
Vacant Land and 2.4 acres of land adjacent to the Lakeshore Business
Center.
(2) See Item 8 Note 11 for details of the sale of University Business
Centers Phase I and II to Silver City Properties, Ltd. on October 6,
1998.
- 15 -
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations is structured in four major sections. The first section provides
information related to occupancy levels and rental and other income generated by
the Partnership's properties. The second analyzes results of operations on a
consolidated basis. The final sections address consolidated cash flows and
financial condition. Discussion of certain market risks and our cautionary
statements also follow. Management's analysis should be read in conjunction with
the financial statements in Item 8 and the cautionary statements below.
Occupancy Levels
- ----------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
1999 (1) 1998 1997
-------- ---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II 86% 79% 78%
University Business Center Phase I (2) N/A N/A 100%
Properties Owned in Joint Venture
- ---------------------------------
with NTS-Properties IV (ownership % at
- --------------------------------------
December 31, 1999)
- ------------------
The Willows of Plainview Phase II (90%)(3) 87% 92% 90%
Properties Owned Through
- ------------------------
Lakeshore/University II Joint Venture
- -------------------------------------
(L/U II Joint Venture)
- ----------------------
Lakeshore Business Center Phase I (3)(4)(5) 73% 85% 96%
Lakeshore Business Center Phase II (3)(4) 72% 79% 100%
University Business Center Phase II (2)(6) N/A N/A 99%
(1) Current occupancy levels are considered adequate to continue the
operation of the Partnership's properties.
(2) On October 6, 1998, University Business Center Phases I and II were
sold.
(3) In the opinion of the General Partner of the Partnership, the decrease
in year ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(4) Ownership percentage was 79% at December 31, 1999 and 69% at December
31, 1998 and 1997. See Item 8 Note 5D for a description of the
transaction affecting the change in ownership.
(5) As of December 31, 1999, one new five-year lease totaling 2,406 square
feet was signed at Lakeshore Business Center Phase I. The tenant took
occupancy during the first quarter of 2000. With this new lease, the
business center's occupancy has improved to 76%.
(6) Ownership percentage of University Business Center Phase II was 69% at
December 31, 1997.
- 16 -
Occupancy Levels - Continued
- ----------------------------
The average occupancy levels at the Partnership's properties as of December 31
were as follows:
1999 1998 1997
---- ---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II (1) 79% 80% 74%
University Business Center Phase I (2) N/A 100%(3) 100%
Properties Owned in Joint Venture
- ---------------------------------
with NTS-Properties IV (ownership % at
- --------------------------------------
December 31, 1999)
- ------------------
The Willows of Plainview Phase II (90%) 93% 87% 91%
Properties Owned Through
- ------------------------
Lakeshore/University II Joint Venture
- -------------------------------------
(L/U II Joint Venture)
- ----------------------
Lakeshore Business Center Phase I (1)(4) 74% 88% 96%
Lakeshore Business Center Phase II (1)(4) 85% 91% 94%
University Business Center Phase II (2)(5) N/A 91%(3) 99%
(1) In the opinion of the General Partner of the Partnership, the decrease
in average occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(2) On October 6, 1998, University Business Center Phase I and II were
sold. See below for the details of this transaction.
(3) Represents average occupancy through October 6, 1998.
(4) Ownership percentage was 79% as of December 31, 1999 and 69% as of
December 31, 1998 and 1997. See Item 8 Note 5D for a description of the
transaction affecting the change in ownership.
(5) Ownership percentage was 69% as of December 31, 1997.
Rental and Other Income
- -----------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
---- ---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II $ 584,567 $ 600,124 $ 541,348
University Business Center Phase I N/A $1,167,893 (1) $1,530,842
Revenues shown in the table above and below for properties owned through a joint
venture represent only the Partnership's percentage interest in those revenues.
(Continued on next page)
- 17 -
Rental and Other Income - Continued
- -----------------------------------
1999 1998 1997
---- ---- ----
Properties Owned in Joint Venture
- ---------------------------------
with NTS-Properties IV (ownership %
- -----------------------------------
at December 31, 1999)
- ---------------------
The Willows of Plainview Phase II (90%) $1,211,534 $1,211,384 $ 1,283,576
Properties Owned Through
- ------------------------
Lakeshore/University II Joint Venture
- -------------------------------------
(L/U II Joint Venture)
- ----------------------
Lakeshore Business Center Phase I (2) $ 951,914 $1,034,468 $ 984,446
Lakeshore Business Center Phase II (2) $1,044,945 $1,134,469 $ 977,016
University Business Center Phase II N/A $ 539,956 (1) $ 576,088
(1) On October 6, 1998, University Business Centers Phases I and II were sold.
See below for the details of this transaction. Revenues shown here
represent 1998 income through the date of disposition. Ownership of
University Business Center Phase II was 69% on October 6, 1998 and December
31, 1997.
(2) Ownership was 69% at December 31, 1997 and 1998, 69% for the six months
ended June 30, 1999 and 79% for the six months ended December 31, 1999.
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1999, 1998 and 1997. Items that did not have a
material impact on operations for the periods listed above have been eliminated
from this discussion.
Rental income decreased approximately $1,881,000 or 33% in 1999 primarily as a
result of the sale of University Business Center Phases I and II in October
1998. (See Item 8 Note 11 for a further discussion of the sale). Approximately
$1,165,000 and $540,000 of revenues were generated by University Business Center
Phase I and II, respectively for the twelve months ended December 31, 1998. Also
contributing to the decrease is a decrease in average occupancy at Lakeshore
Business Center Phases I and II.
Period ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages, which are
more representative of the entire period's results.
Rental income decreased approximately $166,000 or 3% in 1998. The decrease was
primarily a result of decreased rental income at University Business Center
Phases I and II as a result of the sale of these properties in October 1998. The
decrease is partially offset by increased common area maintenance income at
Commonwealth Business Center Phase II and Lakeshore Business Center Phase I and
II and increased lease buyout income at Lakeshore Business Center Phase I and II
in 1998 compared to 1997.
The 1999 gain on sale of assets is the result of the sale of University III
vacant land to Silver City Properties, Ltd. on September 17, 1999 and the result
of the Partnership's share of the Lakeshore/University II Joint Venture sale of
2.4 acres of land on July 23, 1999 (See Item 8 Note 11).
The 1998 gain on sale of assets is the result of selling University Business
Center Phase I and II. On October 6, 1998 pursuant to the contract executed on
September 8, 1998, the Lakeshore/University II Joint Venture ("L/U II") and NTS
Properties V, an affiliate of the General Partner of the Partnership, sold
University Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser"), for an aggregate purchase price of
$17,950,000 ($8,975,000 for Phase I and $8,975,000 for Phase II). University
Business Center Phase II was owned by the L/U II Joint Venture
- 18 -
Rental and Other Income - Continued
- -----------------------------------
of which the Partnership owned a 69% interest as of the date of the sale.
Portions of the proceeds from this sale were immediately used to pay outstanding
debt (including interest and prepayment penalties) of $10,672,643 ($4,739,261
for Phase I and $5,933,382 for Phase II) on these properties. During October
1998 the Partnership used proceeds from the sale to pay outstanding debt of
approximately $1,448,000 on Commonwealth Business Center Phase II.
Interest and other income includes interest income earned from short-term
investments made by the Partnership with cash reserves. Interest income
increased approximately $160,000 in 1999 and approximately $13,000 in 1998 as a
result of an increase in cash reserves available for investment.
Operating expenses decreased approximately $227,000 or 20% in 1999 primarily due
to the sale of University Business Center Phases I and II in October 1998 and
decreased exterior repairs at Commonwealth Business Center Phase II and The
Willows of Plainview Phase II.
Operating expenses decreased approximately $42,000 or 4% in 1998 due primarily
to the sale of University Business Center Phase I and II in October 1998. The
decrease is partially offset by increased janitorial and exterior improvements
at Commonwealth Business Center Phase II and increased executive unit expenses
at The Willows of Plainview Phase II. (Executive units are fully-furnished
apartments that rent at a premium above base rent).
Operating expenses - affiliated decreased approximately $27,000 or 5% in 1999
and approximately $48,000 or 8% in 1998, primarily as a result of the sale of
University Business Center Phases I and II in October 1998. Operating expenses -
affiliated are expenses incurred for service performed by NTS Development
Company, an affiliate of the General Partner.
The 1999 and 1998 Write-off of unamortized land improvements and amenities is
primarily the result of the retirement of improvements and amenities at The
Willows of Plainview Phase II which were not fully depreciated.
Interest expense decreased approximately $596,000 or 40% in 1999 and
approximately $257,000 or 15% in 1998 primarily as a result of the reduction in
debt from the sale of University Business Center Phases I and II in October 1998
and from regular principal payments.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is recorded on the accrual basis. As a result,
the fluctuations of revenues between periods will differ from the fluctuations
of management fee expense. The approximate $111,000 decrease in management fees
in 1999 is primarily the result of the sale of University Business Center Phases
I and II in October 1998.
Real estate taxes decreased approximately $120,000 or 24% in 1999 primarily as a
result of the sale of University Business Center Phases I and II in October
1998.
Real estate taxes decreased approximately $79,000 or 14% in 1998 as a result of
decreased property tax assessments for Lakeshore Business Center Phases I and II
and the sale of University Business Center Phases I and II in October 1998.
Professional and administrative expenses increased approximately $80,000 or 62%
and approximately $12,000 or 10% in 1999 and 1998, respectively, primarily as a
result of increased legal fees relating to the Tender Offers and increased
accounting fees.
- 19 -
Rental and Other Income - Continued
- -----------------------------------
Professional and administrative expenses - affiliated decreased approximately
$29,000 or 14% and approximately $18,000 or 8% in 1999 and 1998, respectively.
These decreases are primarily due to the decreased salary expenses allocated
from NTS Development Company following the sales of University Business Center
Phases I and II. Professional and administrative expenses - affiliated are
expenses incurred for services performed by employees of NTS Development
Company, an affiliate of the General Partner, on behalf of the Partnership.
Depreciation and amortization decreased approximately $544,000 or 39% and
approximately $309,000 or 18% in 1999 and 1998, respectively. The decrease is
the result of the sale of University Business Center Phases I and II in October
1998. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5-30 years for land improvements, 30 years
for buildings, 5-30 years for building improvements, 5-30 years for amenities
and the life of the lease for tenant improvements. The aggregate cost of the
Partnership for Federal Tax purposes is approximately $30,084,265.
Partially offsetting all of the decreases discussed above for the twelve months
ended December 31, 1999, is an increase in ownership of the Lakeshore/University
II Joint Venture from 69% to 79% effective July 1, 1999. See Item 8 Note 5D for
details of a capital contribution made to the Joint Venture by NTS-Properties V
affecting the change in ownership.
The 1998 extraordinary item - early extinguishment of debt relates to the sale
of University Business Center Phases I and II. A portion of the proceeds from
the sale was used to retire a $4,358,191 mortgage payable on University Business
Center Phase I (maturity of February 2008), a $5,128,872 mortgage payable on
University Business Center Phase II (maturity of August 2008) and a $1,435,051
mortgage payable on Commonwealth Business Center Phase II (maturity of February
2009). As a result of the prepayment of the University Business Center Phase I
and II mortgages, penalties of $348,655 and $763,995 respectively, were required
by the insurance companies who held the mortgages. The Partnership's
proportionate share of the University Business Center Phase II penalty was
$528,914. Unamortized loan costs connected with these loans were also expensed
due to the fact that the mortgages were repaid prior to their maturity.
The 1997 extraordinary item - early extinguishment of debt relates to
unamortized loan costs associated with The Willows of Plainview Phase II's notes
payable. The unamortized loan costs were expensed due to the fact that the notes
were retired in 1997 prior to their maturity (December 5, 2003).
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is typically derived from operating
activities. Cash flows provided by investing activities in 1998 are the result
of the sale of University Business Center Phase I and II (see Items 1 and 2 for
detail discussion of the sale). Cash flows used in investing activities are for
tenant finish improvements and for other capital additions and are funded by
operating activities and cash reserves. Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to accommodate a tenant's needs,
new carpeting and paint and/or wallcovering. The extent and cost of these
improvements are determined by the size of the space and whether the
improvements are for a new tenant or incurred because of a lease renewal. Cash
flows provided by financing activities are from debt fundings. Cash flows used
in financing activities are for loan costs, principal payments on mortgages and
notes payable, repurchases of limited partnership Units and an increase in funds
reserved by the Partnership for the repurchase of limited partnership Units
through the Tender Offer or the Interest Repurchase Reserve. The Partnership
utilizes the proportionate consolidation method of accounting for joint venture
properties. The Partnership's interest in the joint 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.
- 20 -
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
In the next 12 months, the Partnership expects the demand on future liquidity to
increase as a result of future leasing activity at Commonwealth Business Center
Phase II and Lakeshore Business Center Phases I, II and III. At this time, the
future leasing and tenant finish costs which will be required to renew the
current leases or obtain new tenants are unknown. It is anticipated that the
cash flow from operations and cash reserves will be sufficient to meet the needs
of the Partnership.
Cash flow provided by (used in):
1999 1998 1997
---- ---- ----
Operating activities $ 1,001,917 $ 1,462,038 $ 1,666,522
Investing activities (116,217) 13,990,823 (431,992)
Financing activities (2,622,168) (11,382,557) (1,076,984)
------------ ------------ ------------
Net increase (decrease) in
cash and equivalents $ (1,736,468) $ 4,070,304 $ 157,546
============ ============ ===========
Net cash provided by operating activities decreased approximately $460,000 or
31% in 1999. The decrease was primarily driven by a decrease in net income from
operations as a result of the sale of University Business Center Phases I and II
in October 1998 and by changes in working capital accounts.
Net cash provided by operating activities decreased approximately $204,000 or
12% in 1998. The decrease was driven by an increase in accounts payable and
other liabilities.
Net cash provided by (used in) investing activities in 1999 decreased compared
to 1998 due to approximately $13,280,000 in proceeds from the sale of University
Business Center Phases I and II being included in 1998 and increased capital
spending and a change in ownership of the Lakeshore/University II Joint Venture
(See Item 8 Note 5D) in 1999. The decrease is partially offset by approximately
$1,149,000 proceeds received in 1999 from the sale of University Phase III and
2.4 acres of land adjacent to the Lakeshore Business Center (See Item 8 Note
11).
The approximate $14,423,000 increase in net cash provided by investing
activities in 1998 was primarily the result of the sale of University Business
Center Phase I and II.
The approximate $8,760,000 decrease in net cash used in financing activities is
primarily driven by decreased principal payments offset by increased purchases
of limited partnership Units and a cash distributions made in the first quarter
of 1999.
The approximate $10,306,000 increase in net cash used in financing activities in
1998 was primarily the result of retirement of mortgages payable on Commonwealth
Business Center II and University Business Center I and II from the proceeds of
the sale of University Business Center I and II and from repurchases of limited
partnership Units.
- 21 -
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
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, 1999, 1998 and 1997. Distributions were funded by cash
flow derived from investing activities.
Cash
Net Income Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1999 $ (78,477) $ 1,252,275 $ 1,252,275
1998 $ 3,956,082 $ -- $ --
1997 $ (601,944) $ -- $ --
General Partners:
1999 $ (793) $ 12,649 $ 12,649
1998 $ 39,961 $ -- $ --
1997 $ (6,080) $ -- $ --
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's commercial properties. Changes to current
tenant finish improvements are a typical part of any lease negotiation.
Improvements generally include a revision to the current floor plan to
accommodate a tenant's needs, new carpeting and paint and/or wallcovering. The
extent and cost of these improvements are determined by the size of the space
and whether the improvements are for a new tenant or incurred because of a lease
renewal. The tenant finish improvements will be funded by cash flow from
operations, cash reserves and additional financing where necessary.
As of December 31, 1999, the L/U II Joint Venture has a commitment, pursuant to
a contract signed December 6, 1999, to construct a building to be known as
Lakeshore Business Center Phase III on the 3.8 acres of land it owns at the
Lakeshore Business Center Development. Site work began in December 1999 and
shell construction began the first quarter of 2000. The construction costs are
currently estimated to be $4,000,000 and will be funded by a $1,737,000 capital
contribution from the Partnership made in July 1999 and approximately $2,680,000
debt financing obtained subsequent to December 31, 1999. Construction is
expected to be completed by the fourth quarter of 2000. See Item 8 Note 5D for
details of the capital contribution made by the Partnership to the
Lakeshore/University II Joint Venture and Note 14 for details of debt financing
obtained subsequent to December 31, 1999.
The Partnership has no other material commitments for renovations or capital
improvements as of December 31, 1999.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in June 1996. During the years ended December 31, 1998, 1997 and 1996, the
Partnership funded $177,930, $0, and $99,900, respectively, to the reserve.
Through October 25, 1998, (the commencement date of the First Tender Offer), the
Partnership had repurchased a total of 1,882 Units for $277,830 at a price
ranging from $135 to $160 per Unit. The offering price per Unit was established
by the General Partner in its sole discretion and does not purport to represent
the fair market value or liquidation value of the Units at that date.
Repurchased Units are retired by the Partnership, thus increasing the percentage
of ownership of each remaining limited partner investor. The Interest Repurchase
Reserve was funded from cash reserves. The balance in the reserve at December
31, 1999 was $0.
- 22 -
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
On October 13, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), commenced a tender offer (the "First Tender Offer")
to purchase up to 1,200 of the Partnership's limited partnership Units at a
price of $205 per Unit as of the date of the First Tender Offer. The initial
expiration date of the First Tender Offer was January 11, 1999 and this
expiration date was subsequently extended through February 5, 1999. A total of
2,458 Units were tendered, pursuant to the First Tender Offer, and the bidders
accepted all Units tendered. The Partnership repurchased 600 Units and ORIG, LLC
purchased 1,858 Units at a total cost of $503,890 plus offering expenses.
On June 25, 1999, the Partnership commenced a second tender offer (the "Second
Tender Offer") to purchase up to 1,000 of the Partnership's limited partnership
Units at a price of $167.50 per Unit as of the date of the Second Tender Offer.
The initial expiration date of the Second Tender Offer was August 31, 1999. On
August 18, 1999, the price was increased to $180 per Unit and the expiration
date was extended to September 30, 1999. On August 31, 1999, the price was
increased again to $205 per Unit and the expiration date remained September 30,
1999. A total of 2,523 Units were tendered, pursuant to the Second Tender Offer,
and the Partnership accepted all Units at a total cost of $517,215 plus offering
expenses. ORIG, LLC did not participate in the Second Tender Offer.
On November 5, 1999, the Partnership and ORIG, LLC (the "bidders"), commenced a
third tender offer (the "Third Tender Offer") to purchase up to 500 limited
partnership Units at a price of $215 per Unit as of the date of the Third Tender
Offer. The initial expiration date of the offer was December 23, 1999. On
December 22, 1999, the price was increased to $230 per Unit and the expiration
date was extended to December 31, 1999. A total of 1,196 Units were tendered,
pursuant to the Third Tender Offer, and the bidders accepted all Units tendered.
The Partnership repurchased 250 Units and ORIG, LLC repurchased 946 Units at a
total costs of $275,080 plus offering expenses.
On September 17, 1999, the Partnership closed the sale of University III vacant
land to Silver City Properties, Ltd. for a purchase price of $801,000.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of
land adjacent to the Lakeshore Business Center for a purchase price of $528,405.
The Partnership had a 79% interest in the Joint Venture at that date. The
Partnership expects to use the net proceeds from the land sale to help fund the
construction of Lakeshore Business Center Phase III as described above.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Commonwealth Business
Center Phase II, the leasing and renewal negotiations are handled by leasing
agents, employees of NTS Development Company, located in Louisville, Kentucky.
The leasing agents are located in the same city as the property. All advertising
is coordinated by NTS Development Company's marketing staff located in
Louisville, Kentucky. The leasing and renewal negotiations at Lakeshore Business
Center Phases I and II are handled by a leasing agent, an employee of NTS
Development Company, located at the Lakeshore Business Center development. At
The Willows of Plainview Phase II, the Partnership has an on-site leasing staff,
employees of NTS Development Company, who handle all on-site visits from
potential tenants, make visits to local companies to promote fully furnished
units, negotiate lease renewals with current residents and coordinate all local
advertising with NTS Development Company's marketing staff.
Leases at the Partnership's commercial properties provide for tenants to
contribute toward the payment of common area expenses, insurance and real estate
taxes. These lease provisions, along with the fact that residential leases are
generally for a period of one year, should protect the Partnership's operations
from the impact of inflation and changing prices.
- 23 -
Year 2000
- ---------
During 1999, all divisions of NTS Corporation, including NTS-Properties V, the
General Partner of the Partnership, reviewed the effort necessary to prepare
NTS' information systems (IT) and non-information technology with embedded
technology (ET) for the Year 2000. The information technology solutions were
addressed separately for the Year 2000 since the Partnership saw the need to
move to more advance management and accounting systems made available by new
technology and software development during the decade of the 1990's. NTS'
property management staff surveyed vendors to evaluate embedded technology in
our alarm systems, HVAC controls, telephone systems and other computer
associated facilities. Some equipment was replaced, while others had circuitry
upgrades.
In 1999, the PILOT software system, purchased in the early 1990's, was replaced
by a windows based network system both for NTS' headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California was selected to replace PILOT.
The Yardi system is fully implemented and operational as of December 31, 1999.
Our system for multi-family apartment locations was converted to GEAC's Power
Site System earlier in 1998. There have been no Year 2000 related problems with
either system.
The cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since we had already identified the need to move to a
network based system regardless of the Year 2000. The Partnership's share of the
costs involved were estimated to be approximately $60,000 over 1998 and 1999.
These costs include primarily the purchase, lease and maintenance of hardware
and software.
At the date of this filing the Partnership did not experience any significant
operating issues relative to the Year 2000 issue. Despite diligent preparation,
unanticipated third-party failures, inability of our tenants to pay rent when
due, more general public infrastructure failures or failure of our remediation
efforts as planned could have a material adverse impact on our results of
operations, financial conditions and/or cash flows in 2000 and beyond.
Cautionary Statements
- ---------------------
Some of the statements included in Item 1 and 2, Business and Properties and
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, may be considered to be "forward-looking statements" since such
statements relate to matters which have not yet occurred. For example, phrases
such as " the Partnership anticipates ", "believes" or "expects" indicate that
it is possible that the event anticipated, believed or expected may not occur.
Should such event not occur, then the result which the Partnership expected also
may occur or occur in a different manner, which may be more or less favorable to
the Partnership. The Partnership does not undertake any obligations to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
office buildings, business centers and an apartment complex. If a major
commercial tenant or a large number of apartment lessees default on their
leases, the Partnership's ability to make payments due under its debt
agreements, payment of operating costs and other partnership expenses would be
directly impacted. A lessee's ability to make payments are subject to risks
generally associated with real estate, many of which are beyond the control of
the Partnership, including general or local economic conditions, competition,
interest rates, real estate tax rates, other operating expenses and acts of God.
- 24 -
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate. At December 31, 1999, a hypothetical 100 basis point increase in
interest rates would result in an approximately $490,000 decrease in the fair
value of debt.
- 25 -
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties V, a Maryland Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties V, a Maryland
Limited Partnership, as of December 31, 1999 and 1998, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties V as of December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 48
through 50 are presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations and are not a required part of the
basic financial statements. These schedules have been subjected to the auditing
procedures applied in 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
March 24, 2000
- 26 -
NTS-PROPERTIES V
----------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
1999 1998
---- ----
ASSETS
- ------
Cash and equivalents $ 2,807,198 $ 4,543,666
Cash and equivalents - restricted 117,220 208,682
Accounts receivable, net of allowance
for doubtful accounts of $0 (1999) and
$4,678 (1998) 103,245 77,560
Land, buildings and amenities, net 17,008,482 16,801,857
Other assets 439,664 409,580
----------- -----------
$20,475,809 $22,041,345
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages and notes payable $11,726,240 $11,450,225
Accounts payable - operations 154,958 116,056
Accounts payable - construction 125,833 47,150
Security deposits 159,642 124,309
Other Liabilities 159,337 111,897
----------- -----------
12,326,010 11,849,637
Commitments and contingencies (Note 12)
Partners' equity 8,149,799 10,191,708
----------- -----------
$20,475,809 $22,041,345
=========== ===========
The accompanying notes to financial statements are an integral part of
these statements.
- 27 -
NTS-PROPERTIES V
----------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1999 1998 1997
---- ---- ----
Revenues:
- ---------
Rental income, net of provision for
doubtful accounts of $0 (1999 and 1998)
and $3,045 (1997) $ 3,783,946 $ 5,665,370 $ 5,831,544
Gain on sale of assets 52,051 5,004,628 --
Interest and other income 248,027 87,607 74,742
------------ ------------ -----------
4,084,024 10,757,605 5,906,286
Expenses:
- ---------
Operating expenses 920,334 1,147,506 1,189,163
Operating expenses - affiliated 491,956 518,742 566,492
Write-off of unamortized land
improvements & amenities 30,913 14,390 --
Interest expense 901,591 1,497,171 1,753,841
Management fees 221,467 332,161 352,933
Real estate and income taxes 378,628 498,318 576,997
Professional and administrative
expenses 209,046 129,066 117,016
Professional and administrative
expenses - affiliated 174,341 203,157 221,034
Depreciation and amortization 835,018 1,378,613 1,687,488
------------ ------------ -----------
4,163,294 5,719,124 6,464,964
------------ ------------ -----------
Income (loss) before extraordinary item (79,270) 5,038,481 (558,678)
Extraordinary item - early extinguishment
of debt -- (1,042,438) (49,346)
------------ ------------ -----------
Net income (loss) $ (79,270) $ 3,996,043 $ (608,024)
============ ============ ===========
Net income (loss) allocated to the limited partners:
Income (loss) before extraordinary item $ (78,477) $ 4,988,096 $ (553,091)
Extraordinary item -- (1,032,014) (48,853)
------------ ------------ -----------
Net income (loss) $ (78,477) $ 3,956,082 $ (601,944)
============ ============ ===========
Net income (loss) per limited partnership
Unit:
Income (loss) before extraordinary item $ 2.39 $ 144.86 $ (15.74)
Extraordinary item -- (29.97) (1.39)
------------ ------------ -----------
Net income (loss) $ 2.39 $ 114.89 $ (17.13)
============ ============ ===========
Weighted average number of limited
partnership Units 32,861 34,433 35,136
============ ============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 28 -
NTS-PROPERTIES V
----------------
STATEMENTS OF PARTNERS' EQUITY (1)
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
Limited General
Partners Partners Total
-------- -------- -----
Balances at December 31, 1996 $ 7,103,578 $(121,959) $ 6,981,619
Net loss (601,944) (6,080) (608,024)
------------ --------- ------------
Balances at December 31, 1997 6,501,634 (128,039) 6,373,595
Net income 3,956,082 39,961 3,996,043
Repurchase of Limited Partnership
Units (177,930) -- (177,930)
------------ --------- ------------
Balances at December 31, 1998 10,279,786 (88,078) 10,191,708
Net loss (78,477) (793) (79,270)
Cash distributions (1,252,275) (12,649) (1,264,924)
Repurchase of Limited Partnership
Units (697,715) -- (697,715)
------------ --------- ------------
Balances at December 31, 1999 $ 8,251,319 $(101,520) $ 8,149,799
============ ========= ============
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented, there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board, Statement
of Financial Accounting Standards Statement No. 130, Reporting
Comprehensive Income.
- 29 -
NTS-PROPERTIES V
----------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $ (79,270) $ 3,996,043 $ (608,024)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Gain on sale of assets (52,051) (5,004,628) --
Extraordinary item-early extinguishment of
debt -- 1,042,438 49,346
Provision for doubtful accounts -- -- 3,045
Write-off of unamortized land improvements
& amenities 30,913 14,390 --
Depreciation and amortization 835,018 1,378,613 1,687,488
Changes in assets and liabilities:
Cash and equivalents - restricted 25,961 (15,924) 15,134
Accounts receivable (25,685) 213,944 222,718
Other assets 66,672 126,932 104,065
Accounts payable - operations 117,585 (168,773) 28,378
Security deposits 35,333 (43,288) 14,666
Other liabilities 47,441 (77,709) 149,706
----------- ------------ -----------
Net cash provided by operating activities 1,001,917 1,462,038 1,666,522
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from sale of land 1,149,317 -- --
Proceeds from sale of building before payment
of debt -- 13,279,721 --
Additions to land, buildings and amenities (762,629) (482,942) (431,992)
Asset held for development -- 1,179,268 --
Change in ownership of Joint Venture (502,905) -- --
Other -- 14,776 --
----------- ------------ -----------
Net cash provided by (used in) investing
activities (116,217) 13,990,823 (431,992)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in mortgages payable -- 200,000 4,585,920
Principal payments on mortgages and notes
payable (725,029) (10,412,596) (5,611,430)
Early principal payment penalty -- (877,569) --
Decrease (increase) in loan costs -- 8,438 (51,474)
Cash distributions (1,264,924) -- --
Repurchase of limited partnership Units (697,715) (177,930) --
Decrease (increase) in cash and
equivalents - restricted 65,500 (122,900) --
----------- ------------ -----------
Net cash used in financing activities (2,622,168) (11,382,557) (1,076,984)
----------- ------------ -----------
Net increase in cash and equivalents (1,736,468) 4,070,304 157,546
=========== ============ ===========
CASH AND EQUIVALENTS, beginning of year 4,543,666 473,362 315,816
=========== ============ ===========
CASH AND EQUIVALENTS, end of year $ 2,807,198 $ 4,543,666 $ 473,362
=========== ============ ===========
Interest paid on a cash basis $ 906,179 $ 1,545,240 $ 1,865,183
=========== ============ ===========
The accompanying notes to financial statements are an integral part of these
statements.
- 30 -
NTS-PROPERTIES V
----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties V, a Maryland limited partnership, (the
"Partnership") is a limited partnership organized on April 30,
1984. The General Partner is NTS-Properties Associates V, a
Kentucky limited partnership. The Partnership is in the
business of developing, constructing, owning and operating
residential apartments and commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Commonwealth Business Center Phase II, a business
center with approximately 66,000 net rentable square
feet located in Louisville, Kentucky.
- A 90% joint venture interest in The Willows of
Plainview Phase II, a 144-unit luxury apartment
complex located in Louisville, Kentucky.
- A 79% joint venture interest in the
Lakeshore/University II Joint Venture. A description
of the properties owned by the Joint Venture appears
below:
- Lakeshore Business Center Phase I - a
--------------------------------------
business center with approximately 103,000
net rentable square feet located in Fort
Lauderdale, Florida.
- Lakeshore Business Center Phase II - a
--------------------------------------
business center with approximately 97,000
net rentable square feet located in Fort
Lauderdale, Florida.
- Outparcel Building Site - approximately 3.8
------------------------
acres of undeveloped land adjacent to the
Lakeshore Business Center development upon
which construction of Lakeshore Business
Center Phase III has commenced.
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Operating Net Cash Receipts, as defined in the partnership
agreement and which are made available for distribution, will
be distributed 1) 99% to the limited partners and 1% to the
General Partner until the limited partners have received their
8% Preferred Return as defined in the partnership agreement;
2) to the General Partner in an amount equal to approximately
10% of the limited partners 8% Preferred Return; 3) the
remainder, 90% to the limited partners and 10% to the General
Partner. Net operating income (loss), exclusive of
depreciation, is allocated to the limited partners and the
General Partner in proportion to their respective cash
distributions. Net operating income, exclusive of
depreciation, in excess of cash distributions shall be
allocated as follows: (1) pro rata to all partners with a
negative capital account in an amount to restore their
respective negative capital account to zero; (2) 99% to the
limited partners and 1% to the General Partner until the
limited partners have received cash distributions from all
sources equal to their original capital; (3) the balance, 75%
to the limited partners and 25% to the General Partner.
Depreciation expense is allocated 99% to the limited partners
and 1% to the General Partner for all periods presented in the
accompanying Financial Statements.
- 31 -
1. Significant Accounting Policies - Continued
-------------------------------------------
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 income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
1999 1998 1997
---- ---- ----
Net income (loss) $ (79,270) $ 3,996,043 $(608,024)
Items handled differently for
tax purposes:
Gain/loss on sale of
assets (1,765,152) (982,892) --
Depreciation and
amortization (177,825) 421,204 342,809
Capitalized leasing
costs 2,622 11,930 14,484
Rental income (32,996) 44,212 353,677
Allowance for doubtful
accounts (4,698) (8,626) (2,596)
Write-off of unamortized
tenant improvements (24,787) (6,314) (39,966)
Other 36,379 -- --
----------- ----------- ---------
Taxable income (loss) $(2,045,727) $ 3,475,557 $ 60,384
=========== =========== =========
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.
Proportionate consolidation is utilized by the Partnership due
to the fact that the ownership of the joint venture
properties, in substance, is not subject to joint control. The
managing General Partners of the sole General Partner of the
NTS sponsored partnerships which have formed joint ventures
are substantially the same. As such, decisions regarding
financing, development, sale or operations do not require the
approval of different partners. Additionally, the joint
venture properties are in the same business/industry as their
respective joint venture partners and their asset, liability,
revenue and expense accounts correspond with
- 32 -
1. Significant Accounting Policies - Continued
-------------------------------------------
F) Joint Venture Accounting - Continued
------------------------------------
the accounts of such partner. It is the belief of the General
Partner of the Partnership that the financial statement
disclosures resulting from proportionate consolidation
provides the most meaningful presentation of assets,
liabilities, revenues, expenses and cash flows for the years
presented given the commonality of the Partnership operations.
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents 1) funds received
for residential security deposits, 2) funds which have been
escrowed with mortgage companies for property taxes in
accordance with the loan agreements with said mortgage
companies and 3) funds reserved by the Partnership for the
repurchase of limited partnership Units.
H) 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 life of lease
for tenant improvements.
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long- Lived Assets to be Disposed Of, specifies circumstances
in which certain long-lived assets must be reviewed for
impairment. If such review indicates that the carrying amount
of an asset exceeds the sum of its expected future cash flows,
the asset's carrying value must be written down to fair value.
Application of this standard by management during the years
ended December 31, 1999, 1998 and 1997 did not result in an
impairment loss.
I) Rental Income and Capitalized Leasing Costs
-------------------------------------------
Certain of the Partnership's lease agreements for the
commercial properties are structured to include scheduled and
specified rent increases over the lease term. For financial
reporting purposes, the income from these leases is being
recognized on a straight-line basis over the lease term.
Accrued income connected with these leases is included in
accounts receivable and totaled $24,534 and $34,901 as of
December 31, 1999 and 1998, respectively.
All commissions paid to commercial leasing agents and
incentives paid to tenants are deferred and amortized on a
straight-line basis over the applicable lease term.
J) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during
the years ended December 31, 1999, 1998 and 1997.
K) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents
include cash on hand and short-term, highly liquid investments
with initial maturities of three months or less.
L) Reclassification of 1998 and 1997 Financial Statements
------------------------------------------------------
Certain reclassifications have been made to the December 31,
1998 and 1997 financial statements to conform with December
31, 1999 classifications. These classifications have no
material effect on previously reported operations.
- 33 -
2. Concentration of Credit Risk
----------------------------
NTS-Properties V owns and operates or has a joint venture investment in
commercial properties in Kentucky (Louisville) and Florida (Ft.
Lauderdale). Substantially all of the tenants are local businesses or
are businesses which have operations in the location in which they
lease space. The Partnership also has a joint venture investment in a
residential property in Louisville, Kentucky. The apartment unit is
generally the principal residence of the tenant.
3. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an
Interest Repurchase Reserve in June 1996. During the years ended
December 31, 1998, 1997 and 1996, the Partnership funded $177,930, $0,
and $99,900, respectively, to the reserve. Through October 25, 1998
(the commencement date of the First Tender Offer), the Partnership had
repurchased a total of 1,882 Units for $277,830 at a price ranging from
$135 to $160 per Unit. The offering price per Unit was established by
the General Partner in its sole discretion and does not purport to
represent the fair market value or liquidation value of the Units at
that date. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited
partner investor. The Interest Repurchase Reserve was funded from cash
reserves. The balance in the reserve at December 31, 1999 was $0.
4. Tender Offers
-------------
On October 13, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), commenced a tender offer (the "First
Tender Offer") to purchase up to 1,200 of the Partnership's limited
partnership Units at a price of $205 per Unit as of the date of the
First Tender Offer. The initial expiration date of the First Tender
Offer was January 11, 1999 and this expiration date was subsequently
extended through February 5, 1999. A total of 2,458 Units were
tendered, pursuant to the First Tender Offer, and the bidders accepted
all Units tendered. The Partnership repurchased 600 Units and ORIG, LLC
purchased 1,858 Units at a total cost of $503,890 plus offering
expenses.
On June 25, 1999, the Partnership commenced a second tender offer (the
"Second Tender Offer") to purchase up to 1,000 of the Partnership's
limited partnership Units at a price of $167.50 per Unit as of the date
of the Second Tender Offer. The initial expiration date of the Second
Tender Offer was August 31, 1999. On August 18, 1999, the price was
increased to $180 per Unit and the expiration date was extended to
September 30, 1999. On August 31, 1999, the price was increased to $205
per Unit and the expiration date remained September 30, 1999. A total
of 2,523 Units were tendered, pursuant to the Second Tender Offer, and
the Partnership accepted all Units at a total cost of $517,215 plus
offering expenses. ORIG, LLC did not participate in the Second Tender
Offer.
On November 5, 1999, the Partnership and ORIG, LLC (the "bidders"),
commenced a third tender offer (the "Third Tender Offer") to purchase
up to 500 limited partnership Units at a price of $215 per Unit as of
the date of the Third Tender Offer. The initial expiration date of the
offer was December 23, 1999. On December 22, 1999, the price was
increased to $230 per Unit and the expiration date was extended to
December 31, 1999. A total of 1,196 Units were tendered, pursuant to
the Third Tender Offer, and the bidders accepted all Units tendered.
The Partnership repurchased 250 Units and ORIG, LLC repurchased 946
Units at a total costs of $275,080 plus offering expenses.
5. Investment in Joint Ventures
----------------------------
A) NTS Willows Phase II Joint Venture
----------------------------------
In 1984, the Partnership entered into a joint venture
agreement with NTS-Properties IV, an affiliate of the General
Partner of the Partnership, to develop and construct a 144
unit luxury apartment complex on an 8.29-acre site in
Louisville, Kentucky known as The Willows of Plainview Phase
II. NTS-Properties IV contributed land
- 34 -
5. Investment in Joint Ventures - Continued
----------------------------------------
A) NTS Willows Phase II Joint Venture - Continued
----------------------------------------------
valued at $800,000 and the Partnership contributed
approximately $7,455,000, the construction and carrying costs
of the apartment complex. The project was completed in August
1985. Net income or net loss is allocated each calendar
quarter based on the respective partnership's contribution.
The Partnership's ownership share was 90% at December 31,
1999. The Partnership's share of the joint venture's revenues
was $1,211,534 (1999), $1,211,384 (1998) and $1,283,576
(1997). The Partnership's share of the joint venture's
expenses was $1,212,171 (1999), $1,207,379 (1998) and
$1,260,767 (1997).
B) NTS Ft. Lauderdale Office Joint Venture
---------------------------------------
In 1985, the Partnership entered into a joint venture
agreement with NTS-Properties IV to develop an approximately
103,000 square-foot commercial business center known as
Lakeshore Business Center Phase I, located in Fort Lauderdale,
Florida.
NTS-Properties IV contributed land valued at $1,752,982 and
the Partnership contributed approximately $9,170,000, the
construction and carrying costs of the business center. The
net income or net loss is allocated each calendar quarter
based on the respective partnership's contribution.
On January 23, 1995, the partners of the NTS Ft. Lauderdale
Office Joint Venture contributed Lakeshore Business Center
Phase I to the newly formed Lakeshore/University II (L/U II)
Joint Venture. Refer to Note 5D for a further discussion of
the new joint venture.
C) NTS University Boulevard Joint Venture
--------------------------------------
In 1989, the Partnership entered into a joint venture
agreement with NTS-Properties Plus Ltd., an affiliate of the
General Partner of the Partnership, to develop an
approximately 88,000 square foot commercial business center
(includes 10,000 square feet of mezzanine space) known as
University Business Center Phase II, located in Orlando,
Florida. The Partnership contributed land valued at $1,460,000
and NTS-Properties Plus Ltd. contributed development and
carrying costs of approximately $8,000,000. In connection with
the construction of University Business Center Phase I, the
Partnership incurred the cost of developing certain common
areas which are used by both University Business Center Phase
I and Phase II. In 1989, NTS-Properties Plus Ltd. paid
approximately $747,000 to the Partnership for Phase II's share
of the common area costs. The net income or net loss is
allocated each calendar quarter based on the respective
partnership's contribution.
On January 23, 1995, the partners of the NTS University
Boulevard Joint Venture contributed University Business Center
Phase II to the newly formed L/U II Joint Venture. Refer to
Note 5D for a further discussion of the new joint venture.
D) Lakeshore/University II Joint Venture
-------------------------------------
On January 23, 1995, a joint venture known as the
Lakeshore/University II Joint Venture (L/U II Joint Venture)
was formed among the Partnership and NTS-Properties IV,
NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd.,
affiliates of the General Partner of the Partnership, for
purposes of owning Lakeshore Business Center Phases I and II,
University Business Center Phase II (sold October 1998 - see
Note 11) and certain undeveloped tracts adjacent to the
Lakeshore Business Center development. The table below
identifies which properties were contributed to the L/U II
Joint Venture and the respective owners of such properties
prior to the formation of the joint venture.
- 35 -
5. Investment in Joint Ventures - Continued
----------------------------------------
D) Lakeshore/University II Joint Venture - Continued
-------------------------------------------------
Property (Net Asset Contributed) Contributing Owner
-------------------------------- ------------------
Lakeshore Business Center NTS-Properties IV and
Phase I ($6,249,667) NTS-Properties V
Lakeshore Business Center NTS-Properties Plus Ltd.
Phase II (-$1,023,535)
Undeveloped land adjacent to the NTS - Properties Plus Ltd.
Lakeshore Business Center
Development (3.8 acres)(-$670,709)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
Development (2.4 acres)($27,104)
University Business Center NTS-Properties V and
Phase II ($953,236)(Note 11) NTS-Properties Plus Ltd.
Each of the properties were contributed to the L/U II Joint
Venture subject to existing indebtedness, except for Lakeshore
Business Center Phase I which was contributed to the joint
venture free and clear of any mortgage liens, and all such
indebtedness was assumed by the L/U II Joint Venture.
Mortgages were recorded on University Business Center Phase II
in the amount of $3,000,000, in favor of the banks which held
the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts
prior to the formation of the joint venture and on Lakeshore
Business Center Phase I in the amount of $5,500,000 subsequent
to the formation of the L/U II Joint Venture. In addition to
the above, NTS/Properties IV contributed $750,000 to the L/U
II Joint Venture. The Partnership's ownership share was 79% at
December 31, 1999. The Partnership's share of the joint
ventures revenues was $2,122,444 (1999), $3,521,941 (1998) and
($2,539,973) (1997). The Partnership's share of the joint
ventures expenses was $2,157,058 (1999), $3,219,909 (1998) and
$3,066,313 (1997).
On July 1, 1999, NTS-Properties V contributed $1,737,000 to
the L/U II Joint Venture. The other partners in the Joint
Venture did not make capital contributions at that time.
Accordingly, the ownership percentages of the other partners
in the Joint Venture decreased. Effective July 1, 1999,
NTS-Properties V's percentage of ownership in the Joint
Venture increased from 69% to 79%.
6. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1999 1998
---- ----
Land and improvements $ 8,721,304 $ 8,994,279
Buildings, improvements
and amenities 23,406,278 21,215,905
----------- -----------
32,127,582 30,210,184
Less accumulated depreciation 15,119,100 13,408,327
----------- -----------
$17,008,482 $16,801,857
=========== ===========
- 36 -
7. Asset Held for Development
--------------------------
As of December 31, 1999, the L/U II Joint Venture intends to use the
3.8 acres of the land it owns at the Lakeshore Business Center
Development to construct Lakeshore Business Center Phase III. See Note
12 for discussion of a contract for the construction of Lakeshore
Business Center Phase III signed December 6, 1999.
8. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1999 1998
---- ----
Mortgage payable with an insurance
company bearing interest at fixed
rate of 8.125%, due August 1, 2008,
secured by land and building $ 3,883,797 $ 3,642,952
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 8.125%, due August 1, 2008
secured by land and building 3,609,836 3,385,979
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and
amenities 2,649,944 2,768,077
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and
amenities 1,582,663 1,653,217
----------- -----------
$11,726,240 $11,450,225
=========== ===========
For the Years Ended December 31, Amount
------------------------------- ------
2000 $ 823,462
2001 890,911
2002 963,900
2003 1,042,884
2004 1,128,358
Thereafter 6,876,725
-----------
$11,726,240
===========
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 $11,400,000.
9. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1999:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 1,715,418
2001 1,247,913
2002 790,675
2003 428,288
2004 266,709
Thereafter 34,467
-----------
$ 4,483,470
===========
- 37 -
10. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees
of $221,467 (1999), $332,161 (1998) and $352,933 (1997) were paid to
NTS Development Company, an affiliate of the General Partner. The fee
is equal to 5% of gross revenues from residential properties and 6% of
gross revenues from commercial properties. Also pursuant to an
agreement, NTS Development Company will receive a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital
improvements. The Partnership has incurred $39,684 and $29,004 as a
repair and maintenance fee during the years ended December 31, 1999 and
1998, respectively, and has capitalized this cost as part of land,
building and amenities.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the years ended
December 31, 1999, 1998 and 1997. These charges included 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, building and amenities.
1999 1998 1997
---- ---- ----
Leasing $261,757 $254,266 $216,100
Administrative 266,390 184,283 279,933
Property manager 226,104 324,439 353,002
Other 7,211 22,230 5,752
-------- -------- --------
$761,462 $785,218 $854,787
======== ======== ========
11. Sale of Assets
--------------
On October 6, 1998 pursuant to a contract executed on September 8,
1998, the Lakeshore/University II Joint Venture ("L/U II Joint
Venture") and NTS Properties V sold University Business Center Phases I
and II office buildings to Silver City Properties, Ltd. ("the
Purchaser") for an aggregate purchase price of $17,950,000 ($8,975,000
for Phase I and $8,975,000 for Phase II). University Business Center
Phase II was owned by the L/U II Joint Venture of which the Partnership
owned a 69% interest as of the date of sale. Portions of the proceeds
from this sale were immediately used to pay the remainder of the
outstanding debt (including interest and prepayment penalties) of
approximately $10,672,643 ($4,739,261 for Phase I and $5,933,382 for
Phase II) on these properties. During October 1998, a portion of the
proceeds was also used to pay the outstanding debt balance of
$1,447,195 on Commonwealth Business Center Phase II. NTS-Properties V
reflected a gain of approximately $5,000,000 associated with this sale
in the fourth quarter of 1998. NTS-Properties V used a portion of the
remaining proceeds after pay down of mortgages to make a $37.50 per
unit distribution totaling $1,252,275 paid to the limited partners
during the first quarter of 1999.
On September 17, 1999, NTS-Properties V closed on the sale of
University Phase III vacant land to Silver City Properties Ltd. for a
purchase price of $801,000. In March 1999, NTS-Properties V sold a
portion of the University Phase III land to Orange County Florida for
$216,648 for which Silver City Properties, Ltd. received net
condemnation proceeds of $145,824. The Partnership reflects a loss of
approximately $23,000 associated with this sale in the third quarter of
1999.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4
acres of land adjacent to the Lakeshore Business Center for a sales
price of $528,405. The Partnership reflects a gain of approximately
$75,000 associated with this sale in the third quarter of 1999.
- 38 -
12. Commitments and Contingencies
-----------------------------
Pursuant to a contract signed on December 6, 1999, the
Lakeshore/University II Joint has a commitment to construct a building
to be known as Lakeshore Business Center Phase III on the 3.8 acres of
land it owns at the Lakeshore Business Center Development. The
construction costs are currently estimated to be $4,000,000 and will be
funded by a $1,737,000 capital contribution from the Partnership made
in July 1999 and approximately $2,680,000 debt financing obtained
subsequent to December 31, 1999. NTS-Properties Plus and NTS-Properties
IV, which prior to July 1, 1999 had a 12% and 18% interest
respectively, in the L/U II Joint Venture were not in a position to
contribute additional capital required for the construction of
Lakeshore Business Center Phase III. NTS- Properties Plus, together
with NTS-Properties IV agreed that NTS- Properties V would make the
capital contribution to the L/U II Joint Venture with the knowledge
that their Joint Venture interest would, as a result, decrease to 8%
and 12% respectively. See Item 8 Note 14 for information of debt
financing obtained for the construction of Lakeshore Business Center
Phase III subsequent to December 31, 1999.
13. Segment Reporting
-----------------
The Partnership's reportable operating segments include Residential and
Commercial real estate operations. The Residential operations represent
the Partnership's ownership and operating results relative to an
apartment complex known as The Willows of Plainview Phase II. The
Commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known as
Commonwealth Business Center Phase II and Lakeshore Business Center
Phases I and II. In addition, the table below includes the properties
known as University Business Center Phases I and II up until their
disposition in October 1998 (see Note 11 for details of this
transaction).
The financial information of the operating segments has been prepared
using a management approach, which is consistent with the basis and
manner in which the Partnership management internally disaggregates
financial information for the purposes of assisting in making internal
operating decisions. The Partnership evaluates performance based on
stand-alone operating segment net income.
1999
Residential Commercial TOTAL
----------- ---------- -----
Rental income $ 1,209,798 $ 2,574,148 $ 3,783,946
Other income 1,736 7,278 9,014
----------- ----------- -----------
Total net revenues $ 1,211,534 $ 2,581,426 $ 3,792,960
=========== =========== ===========
Operating expenses $ 417,294 $ 994,996 $ 1,412,290
Write-off of unamortized land
improvements and amenities 30,383 530 30,913
Interest expense 312,631 -- 312,631
Management fees 64,756 156,711 221,467
Real estate taxes 59,221 297,248 356,469
Professional and administrative 135,450 -- 135,450
Depreciation expense 192,436 578,272 770,708
----------- ----------- -----------
Net income (loss) $ (637) $ 553,669 $ 553,032
=========== =========== ===========
Net income (loss)
Land, buildings and amenities,
net $ 3,654,867 $13,094,688 $16,749,555
=========== =========== ===========
Expenditures for land,
buildings and amenities $ 70,835 $ 679,602 $ 750,437
=========== =========== ===========
Segment liabilities $ 4,429,124 $ 405,911 $ 4,835,035
=========== =========== ===========
- 39 -
13. Segment Reporting - Continued
-----------------------------
1998
Residential Commercial TOTAL
----------- ---------- -----
Rental income $1,204,762 $ 4,460,608 $ 5,665,370
Other income 6,622 20,733 27,355
Gain on sale of assets -- (3,099,716) (3,099,716)
---------- ------------ ------------
Total net revenues $1,211,384 $ 1,381,625 $ 2,593,009
========== ============ ============
Operating expenses $ 481,674 $ 1,184,574 $ 1,666,248
Write Off of unamortized land
improvements and amenities 14,109 281 14,390
Interest expense 330,418 813,525 1,143,943
Management fees 60,350 271,811 332,161
Real estate taxes 52,701 420,086 472,787
Professional and administrative 81,270 -- 81,270
Depreciation expense 186,857 1,026,857 1,213,714
---------- ------------ ------------
Net income (loss) before
extraordinary item $ 4,005 $ (2,335,509) $ (2,331,504)
Extraordinary item - early
extinguishment of debt -- (597,188) (597,188)
---------- ------------ ------------
Net income (loss) $ 4,005 $ (2,932,697) $ (2,928,692)
========== ============ ============
Land, buildings and amenities,
net $3,866,398 $ 12,919,052 $ 16,785,450
========== ============ ============
Expenditures for land,
buildings and amenities $ 138,231 $ 328,304 $ 466,535
========== ============ ============
Segment liabilities $4,568,302 $ 7,355,004 $ 11,923,306
========== ============ ============
1997
Residential Commercial TOTAL
----------- ---------- -----
Rental income $ 1,228,350 $ 4,603,194 $ 5,831,544
Other income 55,226 8,968 64,194
----------- ----------- ------------
Total net revenues $ 1,283,576 $ 4,612,162 $ 5,895,738
=========== =========== ============
Operating expenses $ 450,118 $ 1,305,537 $ 1,755,655
Interest expense 341,390 934,842 1,276,232
Management fees 61,217 291,716 352,933
Real estate taxes 52,436 497,924 550,360
Professional and administrative 117,390 -- 117,390
Depreciation expense 188,962 1,287,372 1,476,334
----------- ----------- ------------
Net income (loss) before
extraordinary item $ 72,063 $ 294,771 $ 366,834
Extraordinary item - early
extinguishment of debt (49,346) -- (49,346)
----------- ----------- ------------
Net income (loss) $ 22,717 $ 294,771 $ 317,488
=========== =========== ============
Land, buildings and amenities,
net $ 3,920,638 $23,108,249 $ 27,028,887
=========== =========== ============
Expenditures for land,
buildings and amenities $ 28,892 $ 403,100 $ 431,992
=========== =========== ============
Segment liabilities $ 4,758,365 $11,773,240 $ 16,531,605
=========== =========== ============
- 40 -
13. Segment Reporting- Continued
----------------------------
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is necessary
given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes:
1999 1998 1997
---- ---- ----
NET REVENUES
- ------------
Total revenues for reportable
segments $ 3,792,960 $ 2,593,009 $ 5,895,738
Other income for partnership 239,013 60,252 10,548
Gain (loss) on sale of assets 52,051 8,104,344 --
----------- ------------ -----------
Total consolidated net revenues $ 4,084,024 $ 10,757,605 $ 5,906,286
=========== ============ ===========
INTEREST EXPENSE
- ----------------
Interest expense for reportable
segments $ 312,631 $ 1,143,943 $ 1,276,232
Interest expense for partnership
level 588,960 353,228 477,609
----------- ------------ -----------
Total interest expense $ 901,591 $ 1,497,171 $ 1,753,841
=========== ============ ===========
REAL ESTATE AND INCOME TAXES
- ----------------------------
Total real estate taxes for
reportable segments $ 356,469 $ 472,787 $ 550,360
Real estate and income taxes for
partnership 22,159 25,531 26,637
----------- ------------ -----------
Total real estate taxes $ 378,628 $ 498,318 $ 576,997
=========== ============ ===========
PROFESSIONAL AND ADMINISTRATIVE
- -------------------------------
Total professional and admin for
reportable segments $ 135,450 $ 81,270 $ 117,390
Professional and admin for
partnership level 247,937 250,953 220,660
----------- ------------ -----------
Total professional and administrative $ 383,387 $ 332,223 $ 338,050
=========== ============ ===========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization
for reportable segments $ 770,708 $ 1,213,714 $ 1,476,334
Depreciation and amortization for
partnership level 33,329 152,608 198,863
Eliminations 30,981 12,291 12,291
----------- ------------ -----------
Total depreciation and amortization $ 835,018 $ 1,378,613 $ 1,687,488
=========== ============ ===========
NET INCOME (LOSS) BEFORE
- ------------------------
EXTRAORDINARY ITEM
------------------
Net income (loss) before
extraordinary item for reportable
segments $ 553,032 $ (2,331,504) $ 366,834
Net income (loss) before
extraordinary item for partnership (636,575) 6,822,212 (1,416,751)
Eliminations 4,273 547,773 491,239
----------- ------------ -----------
Total net income (loss) before
extraordinary item $ (79,270) $ 5,038,481 $ (558,678)
=========== ============ ===========
EXTRAORDINARY ITEM-EARLY
- ------------------------
EXTINGUISHMENT OF DEBT
----------------------
Total extraordinary item for
reportable segments $ -- $ (597,188) $ (49,346)
Extraordinary item for partnership -- (445,250) --
----------- ------------ -----------
Total extraordinary item-early
extinguishment of debt $ -- $ (1,042,438) $ (49,346)
=========== ============ ===========
TOTAL NET INCOME (LOSS) $ (79,270) $ 3,996,043 $ (608,024)
=========== ============ ===========
(Continued on next page)
- 41 -
13. Segment Reporting - Continued
1999 1998 1997
---- ---- ----
LAND, BUILDINGS AND AMENITIES
- -----------------------------
Total land, buildings and amenities
for reportable segments $16,749,555 $ 16,785,450 $27,028,887
Partnership level 258,927 16,407 --
----------- ------------ -----------
Total land, buildings and amenities,
net $17,008,482 $ 16,801,857 $27,028,887
=========== ============ ===========
TOTAL EXPENDITURES
- ------------------
Total expenditures for land,
buildings and amenities for
reportable segments $ 750,437 $ 466,535 $ 431,992
Expenditures for land, buildings and
amenities for partnership level 12,192 16,407 --
----------- ------------ -----------
Total expenditures for land,
buildings and amenities $ 762,629 $ 482,942 $ 431,992
=========== ============ ===========
LIABILITIES
- -----------
Total liabilities for reportable
segments $ 4,835,035 $ 11,923,306 $16,531,605
Liabilities for partnership 7,490,975 (73,669) 5,807,698
----------- ------------ -----------
Total liabilities $12,326,010 $ 11,849,637 $22,339,303
=========== ============ ===========
14. Subsequent Events
-----------------
Subsequent to December 31, 1999, ORIG, LLC., an affiliate of the
partnership purchased Interests in the Partnership pursuant to an
Agreement, Bill of Sale and Assignment dated February 7, 2000, by and
among the Affiliate and four investors in the Partnership (the "Purchase
Agreement"). The Affiliate purchased 1,604 Interests in the Partnership
from one of the investors for total consideration of $425,949 or an
average price of $265.55 per Interest. The Affiliate paid these
investors a premium above the purchase price previously offered for
Interests pursuant to prior tender offer because this purchase allowed
the Affiliate to purchase substantial numbers of Interests without
incurring the significant expenses involved with a tender offer and
multiple transfers.
Subsequent to December 31, 1999, NTS-Properties Plus, with the
Lakeshore/University II Joint Venture, serving as guarantor has obtained
a commitment from a bank for an amount not exceeding $2,680,000 to fund
the construction of Lakeshore Business Center Phase III. The funds will
be used by the Lakeshore/University II Joint Venture to construct
Lakeshore Business Center Phase III. The loan bears a variable interest
rate equal to a daily floating LIBOR rate as quoted for 30-day
investments, plus 230 basis points and is secured by 3.8 acres of land
located at the Lakeshore Business Center Development and the
improvements now and hereafter located on the land.
- 42 -
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
- 43 -
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates V. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The partners of NTS-Properties Associates V are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 58) is the managing General Partner of NTS-Properties
Associates V and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Brian F.
Lavin and Gregory A. Wells.
Brian F. Lavin
- --------------
Mr. Lavin (age 46) President of NTS Corporation and NTS Development Company
joined the Manager in June 1997. From November 1994 through June 1997, Mr. Lavin
served as President of the Residential Division of Paragon Group, Inc., and as a
Vice President of Paragon's Midwest Division prior to November 1994. In this
capacity, he directed the development, marketing, leasing and management
operations for the firm's expanding portfolios. Mr. Lavin attended the
University of Missouri where he received his Bachelor's Degree in Business
Administration. He has served as a Director of the Louisville Apartment
Association. He is a licensed Kentucky Real Estate Broker and Certified Property
Manager. Mr. Lavin is a member of the Institute of Real Estate Management, and
council member of the Urban Land Institute. He currently serves on the
University of Louisville Board of Overseers and is on the Board of Directors of
the National Multi-Housing Council and the Louisville Science Center.
Gregory A. Wells
- ----------------
Mr. Wells (age 41), Senior Vice President and Chief Financial Officer of NTS
Corporation and NTS Development Company joined the Manager in July, 1999. From
May 1998 through July 1999, Mr. Wells served as Chief Financial Officer of
Hokanson Companies, Inc. and as Secretary and Treasurer of Hokanson Construction
Inc., Indianapolis, Indiana from January 1995 through May 1998. In these
capacities, he directed financial and operational activities for commercial
rental real estate, managed property, building and suite renovations, out of
ground commercial and residential construction and third party property
management. Mr. Wells previously served as Vice President of Operations and
Treasurer of Executive Telecom Systems, Inc. a subsidiary of the Bureau of
National Affairs, Inc. (Washington, D.C.). Mr. Wells attended George Mason
University, where he received a Bachelor's Degree in Business Administration.
Mr. Wells is a Certified Public Accountant in both Virginia and Indiana and is
active in various charitable and philanthropic endeavors in the Louisville and
Indianapolis areas.
Mr. Richard L. Good, who was Vice Chairman and former President of NTS Capital
Corporation and NTS Development Company, retired effective September 3, 1999.
- 44 -
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 specified
projects. NTS Development Company provides certain other services to the
Partnership. See Note 10 to the financial statements which sets forth
transactions with affiliates of the General Partner for the years ended December
31, 1999, 1998 and 1997.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. 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 following provides details regarding owners of more than 5% of the total
outstanding limited partnership Units as of March 6, 1999.
Oceanridge Investments, Ltd.
6110 North Ocean Blvd, #37
Boynton Beach , Florida 33435 2,632 Units (8.50%)
Oceanridge Investments, Ltd. is a limited partnership controlled by members
of the family of Mr. J.D. Nichols, a general partner of the General Partner
of the Partnership.
ORIG, LLC
10172 Linn Station Road
Louisville, Kentucky 40223 4,432 Units (14.47%)
ORIG, LLC is a Kentucky limited liability company, the members of which are
J.D. Nichols and Brian F. Lavin, Chairman and President of NTS Capital
Corporation, a general partner of NTS Properties Associates V, the general
partner of the partnership.
The General Partner is NTS-Properties Associates V, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates V are as follows:
J. D. Nichols 59.90%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .10%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 40% interests are owned by various limited partners of NTS-
Properties Associates V.
- 45 -
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Pursuant to an agreement with the Partnership, property management fees of
$221,467 (1999), $332,161 (1998) and $352,933 (1997) were paid to NTS
Development Company, an affiliate of the General Partner. The fee is equal to 5%
of gross revenues from residential properties and 6% of gross revenues from
commercial properties. Also pursuant to an agreement, NTS Development Company
will receive a repair and maintenance fee equal to 5.9% of costs incurred which
relate to capital improvements. The Partnership has incurred $39,684 and $29,004
as a repair and maintenance fee during the years ended December 31, 1999 and
1998, respectively, and has capitalized this cost as a part of land, buildings
and amenities.
As permitted by an agreement, the Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31, 1999, 1998
and 1997. These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses - affiliated
and items which have been capitalized as other assets or as land, buildings and
amenities.
1999 1998 1997
---- ---- ----
Leasing agents $261,757 $254,266 $216,100
Administrative 266,390 184,283 279,933
Property manager 226,104 324,439 353,002
Other 7,211 22,230 5,752
-------- -------- --------
$761,462 $785,218 $854,787
======== ======== ========
There were no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 46 -
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
1. Financial statements
The financial statements for the years ended December 31, 1999, 1998 and
1997 together with the report of Arthur Andersen LLP, dated March 24,
2000, appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 48-50
All other schedules have been omitted because they are not applicable,
are not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement and *
Certificate of Limited Partnership
of NTS-Properties V, a Maryland
limited partnership
3a. First Amendment to Amended and Restated **
Agreement of Limited Partnership of
NTS-Properties V, a Maryland limited
partnership
10. Management Agreement between NTS *
Development Company and NTS-Properties
V, 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 May 1, 1984 (effective
August 1, 1984) under Commission File No. 2-90818.
** Incorporated by reference to Form 10-K filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 under Commission File No. 0-13400.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1999.
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NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
Commonwealth Lakeshore
Business The Willows Business
Center of Plainview Center
Phase II Phase II Phase I
-------- -------- -------
Encumbrances (A) (A)
Initial cost to partnership:
Land $ 946,039 $1,604,739 $ 2,250,741
Buildings and improvements 1,574,747 5,654,188 3,592,918
Cost capitalized subsequent
to acquisition
Improvements 2,324,074 201,794 2,675,386
Other (B) -- -- (1,351,170)
Other (C) -- -- 1,480,559
Gross amount at which carried December 31, 1999:
Land $1,001,187 $1,623,570 $ 2,137,627
Buildings and improvements 3,843,673 5,837,151 6,510,807
---------- ---------- -----------
Total $4,844,860 $7,460,721 $ 8,648,434
========== ========== ===========
Accumulated depreciation $2,848,544 $3,718,652 $ 4,464,922
========== ========== ===========
Date of construction 9/85 8/85 5/86
Date acquired N/A N/A N/A
Life at which depreciation in (D) (D) (D)
latest income statement is
computed
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties V's decreased interest in Lakeshore Business
Center Phase I as a result of the formation of the Lakeshore/University
II Joint Venture in 1995.
(C) Represents NTS-Properties V's increased interest in Lakeshore Business
Center Phase I as a result of a capital contribution made by the
Partnership to the Lakeshore /University II Joint Venture in July 1999.
See Note 5D.
(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, 5-30 years for
amenities and the life of the lease for tenant improvements.
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NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
Lakeshore Land Held
Business for Sale
Center and/or Total
Phase II Development Pages 48-49
-------- ----------- -----------
Encumbrances (A)
Initial cost to partnership:
Land $ 2,554,955 $ 1,953,868 $ 9,310,342
Buildings and improvements 5,849,946 -- 16,671,799
Cost capitalized subsequent to
acquisition
Improvements (148,090) (993,160) 4,060,004
Other (B) -- -- (1,351,170)
Other (C) 1,761,935 170,191 3,412,685
Gross amount at which carried December 31, 1999 (D):
Land $ 2,932,127 $ 1,026,793 $ 8,721,304
Buildings and improvements 7,086,619 104,106 23,382,356
------------ ----------- ------------
Total (F) $ 10,018,746 $ 1,130,899 $ 32,103,660
============ =========== ============
Accumulated depreciation $ 4,084,590 $ -- $ 15,116,708
============ =========== ============
Date of construction N/A N/A
Date acquired 01/95 N/A
Life at which depreciation in
latest income statement is
computed (E)
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties V's increased interest in University Business
Center Phase II as a result of the formation of the
Lakeshore/University II Joint Venture in 1995.
(C) Represents NTS-Properties V's increased interest in Lakeshore Business
Center Phase II and land held by the Lakeshore/University II Joint
Venture as a result of a capital contribution made by the Partnership
to the Lakeshore /University II Joint Venture in July 1999. See Note
5D.
(D) Aggregate cost of real estate for tax purposes is $30,084,265.
(E) 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, 5-30 years for
amenities and the life of the lease for tenant improvements.
(F) Total Gross Cost at December 31,1999 $ 32,103,660
Additions to the Partnership
for Computer software and
hardware in 1998 and 1999 23,922
-----------
Balance at December 31, 1999 32,127,582
Less Accumulated depreciation
- per above (15,116,708)
Less Accumulated depreciation
- computer equipment (2,392)
------------
Land, buildings and amenities,
net at December 31, 1999 $ 17,008,482
===========
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NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
Real Accumulated
Estate Depreciation
------ ------------
Balances at December 31, 1996 $ 46,027,481 $ 17,622,865
Additions during period:
Improvements (a) 98,269 --
Depreciation (b) -- 1,473,905
Deductions during period:
Retirements (71,288) (71,195)
------------ ------------
Balances at December 31, 1997 $ 46,054,462 $ 19,025,575
Additions during period:
Improvements (a) 474,474 --
Depreciation (b) -- 812,939
Deductions during period:
Retirements (c) (16,318,752) (6,430,187)
------------ ------------
Balances at December 31, 1998 $ 30,210,184 $ 13,408,327
Additions during period:
Improvements (a) 803,597 --
Depreciation (b) -- 829,159
Other (d) 2,383,511 1,023,300
Deductions during period:
Retirements (e) (1,269,710) (141,686)
------------ ------------
Balances at December 31, 1999 $ 32,127,582 $ 15,119,100
============ ============
(a) The additions to improvements on this schedule will differ from the
additions to land, buildings, amenities and construction in progress on
the Statements of Cash Flows primarily due to the fact that changes in
accounts payable construction are not included in the real estate
balance above.
(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.
(c) Result of Sale of University Business Center Phases I and II on October
6, 1998.
(d) Represents NTS-Properties V's increased interest in the
Lakeshore/University II Joint Venture as a result of a capital
contribution made by the Partnership to Joint Venture in July 1999. See
Item 8 Note 5D.
(e) Result of the sale of University III Vacant Land by the Partnership and
2.4 acres of land by the Lakeshore/University II Joint Venture.
See Item 8 Note 11.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties V, a Maryland Limited Partnership, has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NTS-PROPERTIES V, a Maryland Limited
------------------------------------
Partnership
-----------
(Registrant)
BY: NTS-Properties Associates V,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/Gregory A. Wells
-------------------------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: March 30,2000
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
--------- -----
/s/ J.D. Nichols General Partner of NTS-Properties
- -----------------------------------
J. D. Nichols Associates V and Chairman of the
Board and Sole Director of
NTS Capital Corporation
/s/ Brian F. Lavin President and Chief Operating Officer
- -----------------------------------
Brian F. Lavin of NTS Capital Corporation
/s/ Gregory A. Wells Senior Vice President and
- -----------------------------------
Gregory A. Wells Chief Financial Officer of
NTS Capital Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
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