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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
- -------- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______ to ______
Commission file number 0-14695
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NTS-PROPERTIES VI, A MARYLAND LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 61-1066060
- ------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive offices) (Zip Code)
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
- --------------------------------------------------------------------------------
(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 43
Total Pages: 47
TABLE OF CONTENTS
PAGES
PART I
Items 1 and 2 Business and Properties 3-12
Item 3 Legal Proceedings 12
Item 4 Submission of Matters to a Vote
of Security Holders 12
PART II
Item 5 Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-23
Item 8 Financial Statements and Supplementary
Data 24-39
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 40
PART III
Item 10 Directors and Executive Officers of
the Registrant 41
Item 11 Management Remuneration and Transactions 42
Item 12 Security Ownership of Certain Beneficial
Owners and Management 42
Item 13 Certain Relationships and Related
Transactions 42
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 43-46
Signatures 47
- 2 -
PART I
Items 1. and 2. BUSINESS AND PROPERTIES
DEVELOPMENT OF BUSINESS
The registrant, NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership"), is a limited partnership formed in December 1984 under the laws
of the State of Maryland. The General Partner is NTS-Properties Associates VI, a
Kentucky limited partnership. As of December 31, 1998, the Partnership owned the
following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex located on
a 13 acre tract in Orlando, Florida, constructed by the Partnership.
- Park Place Apartments Phase I, a 180-unit luxury apartment complex
located on an 18 acre tract in Lexington, Kentucky, constructed by
the Partnership.
- Willow Lake Apartments, a 207-unit luxury apartment complex located
on an 18 acre tract in Indianapolis, Indiana, constructed by the
Partnership.
- A joint venture interest in Golf Brook Apartments, a 195-unit luxury
apartment complex located on a 16 acre tract in Orlando, Florida,
constructed by the joint venture between the Partnership and NTS-
Properties IV., Ltd. ("NTS-Properties IV"), an affiliate of the
General Partner of the Partnership. The Partnership's percentage
interest in the joint venture was 96% at December 31, 1998.
- A joint venture interest in Plainview Point III Office Center, an
office center with approximately 62,000 net rentable square feet,
located in Louisville, Kentucky, constructed by the joint venture
between the Partnership and NTS-Properties IV. The Partnership's
percentage interest in the joint venture was 95% at December 31,
1998.
The Partnership also owns approximately 15 acres of land, adjacent to the Park
Place Apartments development in Lexington, Kentucky on which it is constructing
152 apartment units (Park Place Apartments Phase III). The first units are
expected to be available for occupancy during the second quarter of 1999.
The Partnership or Joint Venture in which the Partnership is a partner has a fee
title interest in the above listed properties. In the opinion of the
Partnership's management, the properties are adequately covered by insurance.
- 3 -
As of December 31, 1998, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance at
Property Rate Date 12/31/98
-------- -------- -------- -----------
Golf Brook Apartments 7.43% 05/14/09 (1)(2) $ 8,220,270
Willow Lake Apartments 7.32% 10/15/12 (3)(2) 8,120,331
Park Place Apartments 7.74% 10/15/12 (5) 6,151,658 (4)
Phase I and III
Sabal Park Apartments 7.38% 12/05/12 (3)(2) 2,713,152
Sabal Park Apartments 7.38% 12/05/12 (3)(2) 1,808,769
Golf Brook and Prime +1% 06/14/01 (6)(2) 105,000
Sabal Park Apartments
(1) Monthly principal payments are based upon a 12-year amortization schedule.
(2) At maturity, the mortgage will have been repaid based on the current rate of
amortization.
(3) Monthly principal payments are based upon a 15-year amortization schedule.
(4) The mortgage payable has additional availability of $6,048,342 which will be
used to fund the remaining construction of Park Place Apartments Phase III.
(5) Until the construction of Park Place Apartments Phase III is complete, the
mortgage will require only monthly interest payments. Upon the completion of
Park Place Apartments Phase III, the monthly principal payments will be based
upon a 19-year amortization schedule. Due to the fact that it is not known when
principal payments will begin, the outstanding balance at maturity can not be
determined at this time.
(6) Monthly principal payments are based upon a 24-month amortization schedule.
Plainview Point III Office Center is not encumbered by an outstanding mortgage
at December 31, 1998.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements at the Partnership's commercial
property as required by lease negotiations. Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to accommodate a tenant's needs,
new carpeting and paint and/or wallcovering. The extent and cost of the
improvements are determined by the size of the space being leased and whether
the improvements are for a new tenant or incurred because of a lease renewal.
The tenant finish improvements will be funded by cash flow from operations
and/or cash reserves. The
- 4 -
Partnership is currently building Park Place Apartments Phase III (152 units) on
the 15 acres of land it owns which is adjacent to the existing Park Place
Apartments in Lexington, Kentucky. It is currently estimated that the cost of
the project will be $9,000,000. Through December 31, 1998, approximately
$2,600,000 has been incurred. The remaining construction costs will be funded by
loan proceeds, as discussed above, and cash reserves. The Partnership had no
material commitments for renovations or capital improvements at December 31,
1998.
The Partnership also plans to renovate the community clubhouse at Park Place,
Golf Brook and Sabal Park Apartments during 1999. It is currently estimated the
aggregate cost for all three renovations will be approximately $400,000. The
Partnership plans to fund the renovations with short-term financing in the
amount of $2,000,000 which will be secured by Plainview Point Office Center
Phase III which is currently free and clear of any debt. The remaining proceeds
will be used to fund a portion of the Partnership's 1999 operating costs and
other possible renovations at the Partnership's properties. It is expected that
any such borrowing will be readily facilitated. However, there is no assurance
that financing will be obtained when needed, or that any financing will be on
favorable terms.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership is presently engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate. See Note 11 in Item 8 for information regarding the Partnership's
operating segments.
NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to purchase and develop parcels of unimproved or
partially improved land, directly or by joint venture, in order to construct and
otherwise develop thereon apartment complexes, business parks and/or retail,
industrial and office buildings and to own and operate the completed properties.
The Partnership's properties are in a condition suitable for their intended use.
The Partnership intends to hold the Properties until such time as sale or other
disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a Property, the Partnership will consider
factors such as potential capital appreciation, cash flow and federal income tax
considerations, including possible adverse federal income tax consequences to
the Limited Partners.
DESCRIPTION OF REAL PROPERTY
SABAL PARK APARTMENTS
Units at Sabal Park Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, ovens, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, swimming pool and tennis courts.
Monthly rental rates at Sabal Park Apartments start at $919 for two-bedroom
apartments and $1,249 for three-bedroom apartments, with additional monthly
rental amounts for special features and locations. Tenants pay all costs of
heating, air conditioning and electricity. Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional charge. The occupancy levels at the apartment complex as of December
31 were 94% (1998), 97% (1997), 90% (1996), 98% (1995) and 91% (1994).
- 5 -
PARK PLACE APARTMENTS PHASE I
Units at Park Place Apartments Phase I include one and two-bedroom apartments
and two-bedroom town homes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices. The amenities are
shared with Phase II of the Park Place development and will be shared with Phase
III which is currently being constructed, see discussion above. Park Place
Apartments Phase II is owned by NTS-Properties VII, Ltd., an affiliate of the
General Partner of the Partnership. The cost to construct and operate the common
amenities is shared proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase I start at $739 for
one-bedroom apartments, $939 for two-bedroom apartments and $1,119 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 80% (1998), 89%
(1997), 90% (1996), 92% (1995) and 93% (1994).
WILLOW LAKE APARTMENTS
Units at Willow Lake Apartments include one and two-bedroom apartments and
two-bedroom town homes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices.
Monthly rental rates at Willow Lake Apartments start at $810 for one-bedroom
apartments, $1,025 for two-bedroom apartments and $1,236 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 81% (1998), 88% (1997), 91%
(1996), 93% (1995) and 92% (1994).
GOLF BROOK APARTMENTS
Units at Golf Brook Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, pool and tennis courts.
Monthly rental rates at Golf Brook Apartments start at $1,170 for two-bedroom
apartments and $1,400 for three-bedroom apartments, with additional monthly
rental amounts for special features and locations. Tenants pay all costs of
heating, air conditioning and electricity. Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional charge. The occupancy levels at the apartment complex as of December
31 were 96% (1998), 96% (1997),97% (1996), 91% (1995), 93% (1994).
- 6 -
PLAINVIEW POINT III OFFICE CENTER
Base annual rents, which include the cost of utilities, range from $13.90 to
$16.00 per square foot for first and second floor office space and $13.00 per
square foot for lower level office space. The average base annual rental for all
types of space leased as of December 31, 1998 was $14.39 per square foot. Office
space is ordinarily leased for between three and six years with the majority of
current square footage being leased for a term of five years. Current leases
terminate between 1999 and 2004. Some leases provide for renewal options of
between three and five years at rates which are based upon increases in the
consumer price index and/or are negotiated between lessor and lessee. All leases
provide for tenants to contribute toward the payment of increases in common area
maintenance expenses, insurance, utilities and real estate taxes. As of December
31, 1998, there were seven tenants leasing space aggregating approximately
50,827 square feet of rentable area. The tenants who occupy Plainview Point III
Office Center are professional service oriented organizations. The principal
occupation/profession practiced is insurance. Four tenants individually lease
more than 10% of the office center's rentable area. The occupancy levels at the
office center as of December 31 were 81% (1998), 96% (1997), 91% (1996), 91%
(1995)and 91% (1994).
The following table contains approximate data concerning the leases in effect on
December 31, 1998.
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
No. Of Tenants Expiration Area Rental Options
- -------------- ---------- ------------ --------------- -------
Major Tenants (1):
1 1999 6,474 (10.3%) $103,584 (14.2%) None
1 2000 16,727 (26.7%) $232,505 (31.8%) 1 Five-Year
1 2001 11,535 (18.4%) $149,955 (20.5%) None
1 (2) 2004 8,308 (13.3%) $124,620 (17.0%) None
Other Tenants:
None 1999 -- -- --
2 2000 5,244 (8.4%) $ 80,852 (11.1%) 1 Three-Year
1 2001 2,539 (4.1%) $ 39,989 ( 5.5%) None
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
(2) Tenant will occupy an additional 5,439 square feet during 1999 in accordance
with the lease agreement. The office center's occupancy should increase to 93%
when the tenant occupies this additional space.
- 7 -
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
WHOLLY-OWNED PROPERTIES
Sabal Park Apartments 11,359,053 $ .018437 $167,687
Park Place Apartments
Phase I 11,190,091 .009955 111,727
Willow Lake Apartments 15,581,872 .091906 233,928
PROPERTIES OWNED IN
JOINT VENTURE WITH
NTS-PROPERTIES IV
Golf Brook Apartments 16,179,398 .018437 280,109
Plainview Point III
Office Center 4,318,750 .011110 34,818
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
Depreciation for book purposes is computed using the straight-line method over
the estimated useful lives of the assets which are 5-30 years for land
improvements, 30 years for buildings, 5-30 years for building improvements and
3-30 years for amenities. The estimated realty taxes on the completed Park Place
Apartments Phase III will be approximately $90,000. The estimated realty taxes
on all other planned renovations, primarily tenant improvements, would not be
material. See Management's Discussion and Analysis of Financial Condition and
Results of Operations (Item 7) for explanations regarding the fluctuations of
income and occupancy at the Partnership's properties.
INVESTMENT IN JOINT VENTURES
NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV, an affiliate of
the General Partner of the Partnership, to develop, construct, own and operate a
158-unit luxury apartment complex on a 13.15-acre site in Orlando, Florida known
as Golf Brook Apartments Phase I. On January 1, 1987, the joint venture
agreement was amended to include Golf Brook Apartments Phase II, a 37-unit
luxury apartment complex located on a 3.069-acre site adjacent to Golf Brook
Apartments Phase I. The term of the Joint Venture shall continue until
dissolved. Dissolution shall occur upon, but not before, the first to occur of
the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
- 8 -
The Partnership contributed approximately $15,800,000, the cost of constructing
and leasing the apartments. NTS-Properties IV contributed land valued at
$1,900,000 with a related note payable to a bank of $1,200,000. The Partnership
also contributed funds to retire the $1,200,000 note payable to a bank. No
future contributions are anticipated as of December 31, 1998.
Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. The Partnership had originally obtained financing, secured by Golf
Brook Apartments, to fund a portion of its contribution to the Joint Venture.
The contribution loan has subsequently been refinanced. The current mortgage
payable of $8,220,270 is recorded as a liability by the Partnership in
accordance with the Joint Venture Agreement. The mortgage payable bears interest
at a fixed rate of 7.43%, is due May 14, 2009 and is secured by the assets of
Golf Brook Apartments. Monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the mortgage will have been repaid based on
the current rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 96%
at December 31, 1998.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties IV, an affiliate of the
General Partner, to develop, construct, own and operate an office building in
Louisville, Kentucky known as Plainview Point III Office Center. The terms of
the Joint Venture shall continue until dissolved. Dissolution shall occur upon,
but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property, unless such
disposition is, in whole or in part, represented by a promissory
note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
- 9 -
The Partnership contributed approximately $4,100,000, the cost to construct and
lease the building. NTS-Properties IV contributed land valued at $790,000 with
an outstanding note of $550,000 which was secured by the land. The Partnership
also contributed the funds to retire the $550,000 note payable to the bank. No
future contributions are anticipated as of December 31, 1998.
As of December 31, 1998, Plainview Point III Office Center is not encumbered by
any mortgage indebtedness.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 95%
at December 31, 1998.
COMPETITION
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents, amenities and service provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1998, there are no properties under construction
in the respective vicinities in which the properties are located except for the
following: In close proximity to Sabal Park Apartments and Golf Brook
Apartments, there are 1,000 apartment units currently under construction which
are scheduled to be completed during the fourth quarter of 1999. In the vicinity
near Park Place Apartments, there are currently 300 apartment units currently
under construction which are scheduled to be completed during the second quarter
of 1999 and 280 units which are scheduled to be completed during the fourth
quarter of 1999. Also, at the Park Place Apartments development, the
construction of Phase III is currently under way with the first units expected
to be available the second quarter of 1999. In the vicinity of Willow Lake
Apartments, there are currently 400 apartment units under construction which are
scheduled to be completed during the first quarter of 1999. At this time it is
unknown the effect these new units will have on occupancy at the Partnership's
properties. The Partnership has not commissioned a formal market analysis of
competitive conditions in any market in which it owns properties, but relies
upon the market condition knowledge of the employees of NTS Development Company
who manage and supervise leasing for each property.
- 10 -
MANAGEMENT OF PROPERTIES
NTS Development Company, an affiliate of NTS-Properties Associates VI, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a
wholly-owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties
Associates VI. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received a total of $494,494
for the year ended December 31, 1998. $46,413 was received from the commercial
property and $448,081 was received from residential properties. The fee is equal
to 6% of gross revenues from the commercial property and 5% of gross revenues
from residential properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods, unless canceled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1998, 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 arms-length
negotiations but through the exercise of the General Partner's good judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. With respect to these potential conflicts of interest, the General
Partner and its affiliates retain a free right to compete with the Partnership's
properties including the right to develop competing properties now and in the
future, in addition to those existing properties which may compete directly or
indirectly.
- 11 -
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
EMPLOYEES
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. See Note 9 in Item 8 for information regarding the Partnership's
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.
- 12 -
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 3,634 limited partners as of
March 1, 1999. Cash distributions and allocations of net income (loss) are made
as described in Note 1C to the Partnership's 1998 financial statements.
Annual distributions totaling $12.50, $20.00 and $20.00 per limited partnership
unit were paid during the years ended December 31, 1998, 1997 and 1996,
respectively. Quarterly distributions are determined based on current cash
balances, cash flow being generated by operations and cash reserves needed for
future leasing costs, tenant finish costs and capital improvements.
Distributions were paid quarterly as follows:
1998 1997 1996
-------- -------- --------
First quarter $ 5.00 $ 5.00 $ 5.00
Second quarter 2.50 5.00 5.00
Third quarter 2.50 5.00 5.00
Fourth quarter 2.50 5.00 5.00
------ ------- ------
$12.50 $ 20.00 $20.00
------ ------- ------
------ ------- ------
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1998, 1997 and 1996.
Cash
Net Income Distributions Return of
Allocated Declared Capital
----------- ----------- ----------
Limited Partners:
1998 $ 453,154 $ 515,339 $ 62,185
1997 106,042 853,625 747,583
1996 224,783 886,000 661,217
General Partners:
1998 $ 4,577 $ 5,206 $ 629
1997 1,071 8,622 7,551
1996 2,271 8,950 6,679
- 13 -
Item 6. SELECTED FINANCIAL DATA
Years ended December 31, 1998, 1997, 1996, 1995 and 1994.
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Total revenues $ 9,835,496 $ 9,608,273 $ 9,670,261 $ 8,939,055 $ 8,796,072
Total expenses (9,377,765) (9,402,616) (9,443,207) (9,266,749) (9,607,971)
------------ ------------ ------------ ------------ ------------
Income(loss) before
extraordinary item 457,731 205,657 227,054 (327,694) (811,899)
Extraordinary item(1) -- (98,544) -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 457,731 $ 107,113 $ 227,054 $ (327,694) $ (811,899)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income (loss) allocated to:
General Partner $ 4,577 $ 1,071 $ 2,271 $ (3,277) $ (8,119)
Limited partners $ 453,154 $ 106,042 $ 224,783 $ (324,417) $ (803,780)
Net income (loss) per
limited partnership
unit $ 10.96 $ 2.48 $ 4.97 $ (6.84) $ (16.94)
Weighted average
number of limited
partnership units 41,334 42,817 45,243 47,435 47,435
Cumulative net income (loss) allocated to:
General Partner $ (70,288) $ (74,865) $ (75,936) $ (78,207) $ (74,930)
Limited partners $(11,749,145) $(12,202,299) $(12,308,341) $(12,533,124) $(12,208,707)
Cumulative net
taxable income (loss)
allocated to:
General Partner $ 104,550 $ 102,664 $ 1,192,830 $ 78,617 $ 64,858
Limited partners $(14,759,062) $(15,174,826) $(16,357,888) $(15,401,294) $(14,859,402)
Distributions
declared:
General Partner $ 5,206 $ 8,622 $ 8,950 $ 9,583 $ 8,984
Limited partners $ 515,339 $ 853,625 $ 886,000 $ 948,700 $ 889,380
Cumulative
distributions
declared:
General Partner $ 117,272 $ 112,066 $ 103,444 $ 94,494 $ 84,911
Limited partners $ 11,609,870 $ 11,094,531 $ 10,240,906 $ 9,354,906 $ 8,406,206
At year end:
Cash and equivalents $ 362,822 $ 276,891 $ 640,541 $ 393,552 $ 1,617,604
Investment
securities $ -- $ 1,562,813 $ 1,085,267 $ 1,151,355 $ --
Land, buildings and
amenities, net $ 37,388,637 $ 38,660,912 $ 40,436,784 $ 42,196,272 $ 43,872,072
Total assets $ 43,179,405 $ 43,289,608 $ 44,771,802 $ 46,813,791 $ 48,267,884
Mortgages payable $ 27,119,180 $ 26,872,563 $ 27,403,056 $ 27,653,044 $ 27,883,025
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 Note 7 in Item 8 for information regarding the extraordinary item.
- 14 -
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:
Percentage
Ownership
At 12/31/98 1998 (3) 1997 1996
----------- ----------- --------- -------
WHOLLY-OWNED PROPERTIES
Sabal Park Apartments 100% 94% 97% 90%
Park Place Apartments
Phase I (1) 100% 80% 89% 90%
Willow Lake Apartments (1) 100% 81% 88% 91%
PROPERTIES OWNED IN JOINT
VENTURE WITH NTS-
PROPERTIES IV
Golf Brook Apartments 96% 96% 96% 97%
Plainview Point III Office
Center (2) 95% 81% 96% 91%
(1) 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.
(2) At Plainview Point III Office Center, a current tenant has leased an
additional 5,439 square feet. Occupancy of this additional space is planned for
the first half of 1999. The office center's occupancy level should increase to
93% at that time.
(3) Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties.
- 15 -
The average occupancy levels at the Partnership's properties as of December 31
were as follows:
Percentage
Ownership
At 12/31/98 1998 1997 1996
----------- --------- --------- -------
WHOLLY-OWNED PROPERTIES
Sabal Park Apartments 100% 95% 92% 94%
Park Place Apartments
Phase I (1) 100% 85% 91% 93%
Willow Lake Apartments 100% 93% 90% 94%
PROPERTIES OWNED IN JOINT
VENTURE WITH NTS-
PROPERTIES IV
Golf Brook Apartments 96% 96% 93% 94%
Plainview Point III Office
Center 95% 92% 90% 93%
(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.
RENTAL AND OTHER INCOME
Rental and other income generated by the Partnership's properties for the years
ended December 31, 1998, 1997 and 1996 were as follows:
Percentage
Ownership
AT 12/31/98 1998 1997 1996
----------- ---------- ---------- -------
WHOLLY-OWNED PROPERTIES
Sabal Park Apartments 100% $1,823,218 $1,725,980 $1,765,302
Park Place Apartments
Phase I 100% $1,787,227 $1,896,871 $1,843,808
Willow Lake Apartments 100% $2,409,227 $2,412,609 $2,434,696
PROPERTIES OWNED IN JOINT
VENTURE WITH NTS-
PROPERTIES IV
Golf Brook Apartments 96% $2,926,168 $2,747,335 $2,801,744
Plainview Point III
Office Center 95% $ 781,388 $ 737,948 $ 729,647
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 16 -
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1998, 1997 and 1996. Items that did not have a
material impact on operations for the periods listed above have been eliminated
from this discussion.
RENTAL INCOME increased approximately $200,000 or 2% in 1998. The increase in
rental income was a result of increased rental rates and increased average
occupancy at Sabal Park Apartments and Golf Brook Apartments and increased cost
recovery income at Plainview Point III Office Center. All leases at the office
center provide for tenants to contribute toward the payment of increases in
common area maintenance expenses, insurance, utilities and real estate taxes.
These increases are partially offset by a decrease in rental income at Park
Place Apartments Phase I as a result of decreased average occupancy.
Year ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
representative of the entire year's results.
INTEREST AND OTHER INCOME includes interest income from investments made by the
Partnership with cash reserves. Interest income increased approximately $25,000
or 22% in 1998 as a result of old outstanding checks being taken back into
income.
OPERATING EXPENSES increased approximately $85,000 or 3% in 1998 due primarily
to the following: 1) increased apartment renovation costs at Sabal Park
Apartments and Golf Brook Apartments (replacing wallpaper with texturized walls
which will require less maintenance in the future), 2) increased repair and
maintenance costs at Sabal Park Apartments, 3) the parking lot was re-sealed and
striped at Plainview Point III Office Center during 1998 and 4) increased
advertising costs at all the Partnership's residential properties. These
increases are partially offset by decreased repair and maintenance costs at Park
Place Apartments Phase I and decreased utility, repair and maintenance costs and
carpet replacement costs at Willow Lake Apartments.
OPERATING EXPENSES - AFFILIATED increased approximately $128,000 or 12% in 1998
primarily as a result of increased property management costs and the fact that
in years past, apartment managers and maintenance supervisors received free rent
as part of their compensation. Beginning in 1998, free rent for these
individuals was discontinued and their base salary was increased. Operating
expenses - affiliated are expenses incurred for services by employees of NTS
Development Company, an affiliated of the General Partner of the Partnership.
OPERATING EXPENSES - AFFILIATED increased approximately $47,000 or 4% in 1997 as
a result of increased salary costs at the Partnership's residential properties.
The 1998 WRITE-OFF OF UNAMORTIZED LAND IMPROVEMENTS AND AMENITIES can be
attributed to Park Place Apartments Phase I, Sabal Park Apartments and Golf
Brook Apartments. The write-offs are the result of property renovations. The
write-off represents the cost of unamortized assets which were replaced as a
result of the renovations.
The 1997 WRITE-OFF OF UNAMORTIZED LOAN COSTS (treated as an extraordinary item)
relates to loan costs associated with the Golf Brook, Park Place Phase I, Willow
Lake and Sabal Park Apartments mortgages payable. The unamortized loan costs
were expensed due to the fact that the mortgages were retired in 1997 prior to
their scheduled maturities - August 1, 1997, October 5, 2002, November 1, 1997
and January 5, 2003, respectively - as a result of new financing being obtained
during 1997.
INTEREST EXPENSE decreased approximately $230,000 or 11% in 1998 as a result of
the new debt financings at lower interest rates which were obtained May 15,
September 12, and October 8, 1997. The $9,200,000 mortgage, which was paid off
May 15, 1997, had an interest rate of 8.625% compared to 7.43% on
- 17 -
the new $9,000,000 loan. The approximately $8,500,000 which was paid off
September 12, 1997, had an interest rate of 9.20% compared to 7.32% on the new
$8,500,000 loan. The approximately $3,900,000 and $950,000 mortgages, which were
paid off October 8, 1997, had an interest rate of 8.375% compared to 7.74% on
the new $5,000,000 loan. Interest expense also decreased in 1998 due to the
Partnership's decreasing debt level as a result of principal payments made.
INTEREST EXPENSE decreased approximately $150,000 or 6% in 1997 as a result of
lower interest rates on new debt financings obtained during 1997, as discussed
above. Interest expense decreased in 1997 also as a result of the Partnership's
decreasing debt level due to principal payments made.
MANAGEMENT FEES are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations of
management fee expense.
REAL ESTATE TAXES increased approximately $36,000 or 5% in 1998 as a result of
increased assessments for Sabal Park Apartments and Golf Brook Apartments.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES increased approximately $35,000 or 24%
in 1998 primarily as a result of costs incurred in connection with the Tender
Offer. See below for information regarding the Tender Offer.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES increased approximately $5,000 or 4% in
1997 as the result of increased legal costs.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES - AFFILIATED decreased approximately
$48,000 or 16% in 1998 primarily as a result of decreased salary costs.
Professional and administrative expenses - affiliated are expenses incurred for
services performed by employees of NTS Development Company, an affiliate of the
General Partner of the Partnership.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES - AFFILIATED increased approximately
$96,000 or 47% in 1997 primarily as a result of increased charges by NTS
Development Company for accounting personnel. Over the past several years the
charges for the annual partnership audit have stayed at a relatively consistent
level despite the increase in disclosure and audit requirements. This has been
accomplished by the increased utilization of NTS Development Company personnel's
preparation of the necessary audit documentation, work papers, Securities and
Exchange Commission filings and EDGAR (Electronic Data Gathering, Analysis and
Retrieval) filings. In addition, administrative overhead costs have increased as
a result of the additional personnel costs related to investor relations and
asset management.
DEPRECIATION AND AMORTIZATION EXPENSE decreased approximately $108,000 or 6% in
1998 as a result of original land improvements at Park Place Apartments Phase I,
Willow Lake Apartments and Golf Brook Apartments becoming fully depreciated and
as a result of decreased loan cost amortization. Depreciation is computed using
the straight-line method over the useful lives of the assets which are 5-30
years for land improvements, 30 years for buildings, 5 - 30 years for building
improvements and 5-30 years for amenities. The aggregate cost for the
Partnership's properties for Federal tax purpose is approximately $62,225,000.
CONSOLIDATED CASH FLOWS AND FINANCIAL CONDITIONS
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements, other capital improvements at the Partnership's properties and for
the construction of Park Place Apartments Phase III. Changes to current tenant
improvements at commercial properties 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 and
- 18 -
other capital additions have been funded by cash flow from operations. Park
Place Apartments Phase III construction costs have been funded by debt financing
and cash reserves. Cash flows used in investing activities are also for the
purchase of investment securities. As part of its cash management activities,
the Partnership has purchased Certificates of Deposit or securities issued by
the U.S. Government with initial maturities of greater than three months to
improve the return on its cash reserves. The Partnership intends to hold the
securities until maturity. Cash flows provided by investing activities are
derived from the maturity of investment securities. Cash flows used in financing
activities are for cash distributions, principal payments on mortgages payable,
repurchase of limited partnership Units and payment of loan costs. Cash flows
used in financing activities also include cash which has been reserved by the
Partnership for the repurchase of limited partnership Units through the Interest
Repurchase Program or the Tender Offer (1998 only). Cash flows provided by
financing activities represent the utilization of cash which has been reserved
by the Partnership for the repurchase of limited partnership Units and proceeds
from mortgage loans.
Cash flows provided by (used in):
1998 1997 1996
---- ---- ----
Operating activities $ 2,336,661 $ 2,131,543 $ 2,257,823
Investing activities (1,147,264) (588,096) (44,917)
Financing activities (1,103,466) (1,907,097) (1,965,917)
----------- ----------- -----------
Net increase (decrease) in $ 85,931 $ (363,650) $ 246,989
cash and equivalents
----------- ----------- -----------
----------- ----------- -----------
Net cash provided by operating activities increased approximately $205,000 or
10% to $2,336,661 in 1998. This increase was driven by an increase in net
income.
Net cash provided by operating activities decreased approximately $126,000 or 6%
to $2,131,543 in 1997. This decrease was driven by a decrease in net income
before extraordinary item recorded in 1997 and an overall decrease in net
working capital assets and liabilities (excluding cash) primarily due to
decreased accounts payable.
Net cash used in investing activities totaled $1,147,264, $588,096 and $44,917
in 1998, 1997 and 1996, respectively. The increase in net cash used in investing
activities in 1998 was primarily due to increased capital expenditures (began
construction of Park Place Apartments Phase III in 1998) partially offset by the
maturity of investment securities exceeding the purchase of investment
securities. The increase in net cash used in investing activities in 1997 was
primarily due to the purchase of investment securities exceeding maturities.
Net cash used in financing activities totaled $1,103,466, $1,907,097 and
$1,965,917 in 1998, 1997 and 1996, respectively. The decrease in net cash used
in financing activities in 1998 was primarily due to decreased net payments on
mortgages and decreased loan costs paid in 1998 (Partnership's mortgages were
refinanced during 1997) and decreased cash distributions (rate of distribution
was reduced second quarter of 1998). These decreases are partially offset by
restricted cash being returned to unrestricted cash as a result of the Tender
Offer. The decrease in net cash used in investing activities in 1997 was
primarily due to fewer repurchases of limited partnership Units in 1997 as
compared to 1996 partially offset by increased net payments on mortgages and
increased loan costs in 1997.
During the year ended December 31, 1998, the Partnership used cash flow from
operations and cash on hand to make a 1.25% (annualized) distribution of
$520,545 (1998). During the years ended December 31, 1997 and 1996, the
Partnership used cash flow from operations and cash on hand to make a 2%
(annualized) distribution of $862,000 and $895,000, respectively. Cash
distributions were reduced from 2% to 1% per quarter, effective June 30, 1998,
as a result of capital improvements at the Partnership's properties
- 19 -
including the construction of Park Place Apartments Phase III. The annualized
distribution rate is calculated as a percent of the original capital
contribution. The limited partners received 99% and the General Partner received
1% of these distributions. The primary source of future liquidity and
distributions is expected to be derived from cash generated by the Partnership's
properties after the construction of Park Place Apartments Phase III and other
capital improvements are funded and adequate cash reserves are established for
future leasing and tenant finish costs. It is anticipated that the cash flow
from operations, cash reserves and the remaining funds available on the
$12,200,000 mortgage payable (balance is $6,151,658 at December 31, 1998) will
be sufficient to meet the needs of the Partnership. Cash reserves (which are
unrestricted cash and equivalents and investment securities as shown on the
Partnership's balance sheet as of December 31) were $362,822, $1,839,704 and
$1,725,808 at December 31, 1998, 1997 and 1996, respectively.
The Partnership does not expect any material changes in the mix and relative
cost of capital resources from those in 1998 except for the construction of Park
Place Apartments Phase III, as discussed below.
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, 1998, 1997 and 1996.
Cash
Net Income Distributions Return Of
Allocated Declared Capital
------------ ------------- -----------
Limited Partners:
1998 $ 453,154 $ 515,339 $ 62,185
1997 106,042 853,625 747,583
1996 224,783 886,000 661,217
General Partner:
1998 $ 4,577 $ 5,206 $ 629
1997 1,071 8,622 7,551
1996 2,271 8,950 6,679
The demand on future liquidity has increased as a result of construction
beginning at Park Place Apartments Phase III (152 units) during 1998 on the 15
acres of land the Partnership owns which is adjacent to the existing Park Place
Apartments in Lexington, Kentucky. It is currently estimated that the cost of
the project will be $9,000,000. Construction costs will be funded by $7,200,000
of loan proceeds and cash reserves. As of December 31, 1998, $6,048,342 is
available on the mortgage payable for construction costs. Through December 31,
1998, approximately $2,600,000 of cost had been incurred.
Construction in progress on the December 31, 1998 Balance Sheet relates to Park
Place Apartments Phase III. Included in the cost of approximately $4,400,000 is
approximately $2,600,000 related directly to Phase III construction and
approximately $1,700,000 of land cost, capitalized interest, common area costs
and amenity costs which were allocated at the time Phases I and II were
originally constructed. These allocated costs had previously been shown on the
Partnership's Balance Sheet as Asset Held for Development.
In the next 12 months, the demand on future liquidity is also anticipated to
increase as the Partnership continues its efforts in the leasing of Plainview
Point III Office Center. At this time, the future leasing and tenant finish
costs which will be required to renew current leases that expire during 1999 or
obtain new tenants are unknown.
The Partnership also plans to renovate the community clubhouse at Park Place,
Golf Brook and Sabal Park Apartments during 1999. It is currently estimated the
aggregate cost for all three renovations will be approximately $400,000. The
Partnership plans to fund the renovations with short-term financing in the
amount of $2,000,000 which will be secured by Plainview Point Office Center
Phase III which is currently free and clear of any debt.
- 20 -
The remaining proceeds will be used to fund a portion of the Partnership's 1999
operating costs and other possible renovations at the Partnership's properties.
It is expected that any such borrowing will be readily facilitated. However,
there is no assurance that financing will be obtained when needed, or that any
financing will be on favorable terms.
The Partnership had no other material commitments for renovations or capital
expenditures at December 31, 1998.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in December 1995. During the years ended December 31, 1998, 1997 and 1996, the
Partnership has funded $400,000, $300,000 and $705,380, respectively, to the
reserve. Through December 31, 1998, the Partnership has repurchased a total of
6,846 Units for $1,861,200 at a price ranging from $250 to $350 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. Repurchased Units have been 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 funds remaining in the Interest Repurchase Reserve at the
commencement of the Tender Offer (discussed below) were returned to unrestricted
cash for utilization in the Partnership's operations.
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "Offerors") commenced a Tender Offer to purchase up to 1,250
of the Partnership's limited Partnership Units at a price of $350 per Unit.
Although the Partnership and ORIG, LLC believe that this price is appropriate,
the price of $350 per Unit may not equate to the fair market value or the
liquidation value of the Unit, and is less than the book value per Unit as of
the date of the Offering. Approximately $499,500 ($437,500 to purchase 1,250
Units plus approximately $62,000 for expenses associated with the Offer) is
required to purchase all 1,250 Units. The Offer stated that the Partnership will
purchase the first 750 Units tendered and will fund its purchases and its
portion of the expenses from cash reserves. If more than 750 Units are tendered,
ORIG, LLC will purchase up to an additional 500 Units. If more than 1,250 Units
are tendered, the Partnership and ORIG, LLC may choose to acquire the additional
Units on the same terms. Otherwise, tendered Units will be purchased on a pro
rata basis up to 1,250. Units that are acquired by the Partnership will be
retired. Units that are acquired by ORIG, LLC will be held by it. The General
Partner, NTS- Properties Associates VI, does not intend to participate in the
Tender Offer.
Under the terms of the Offer, the Offer expired on January 18, 1999. As of that
date, a total of 2,103 Units were tendered pursuant to the Offer. The Offerors
exercised their right under the terms of the Offer to purchase more than 1,250
Units and all 2,103 Units tendered were accepted by the Offerors, without
proration. The Partnership repurchased 750 Units and ORIG, LLC purchased 1,353
Units.
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, who are employees of
NTS Development Company, at each of the apartment communities. The staff handles
all on-site visits from potential tenants, coordinates local advertising with
NTS Development Company's marketing staff, makes visits to local companies to
promote fully furnished units and negotiates lease renewals with current
residents.
The leasing and renewal negotiations for the Partnership's commercial property
are handled by leasing agents, employees of NTS Development Company, located in
Louisville, Kentucky. The leasing agent's are located in the same city as the
commercial property. All advertising for the commercial property is coordinated
by NTS Development Company's marketing staff located in Louisville, Kentucky.
- 21 -
Leases at Plainview Point III Office Center provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. Leases at the office center also provide for
rent increases which are based upon increases in the consumer price index. These
lease provisions, along with the fact that residential leases are generally for
a period of one year, should protect the Partnership's operations from the
impact of inflation and changing prices.
YEAR 2000
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare our information systems (IT) and non- information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separate for the Year 2000 since the
Partnership saw the need to move to more advanced management and accounting
systems made available by new technology and software developments during the
decade of the 1990's.
The PILOT software system, purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California has been selected to supercede
PILOT. The Yardi system has been tested and is compatible with Year 2000 and
beyond. This system is being implemented with the help of third party
consultants and should be fully operational by the third quarter of 1999. Our
system for multi-family apartment locations was converted to GEAC's Power Site
System earlier in 1998 and is Year 2000 compliant.
The few remaining systems not addressed by these conversions are being modified
by our in-house staff of programmers. The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network. It will be retained as long as necessary to assure smooth operations
and has been upgraded to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
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 costs involved will be
approximately $19,000 and $81,000 over 1998 and 1999 respectively. These costs
include hardware and software.
NTS property management staff has been surveying our vendors to evaluate
embedded technology in our alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of 1999.
We are also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant vendors and tenants have indicated that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.
Management has determined that at our current state of readiness, the need does
not presently exist for a contingency plan. We will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, inability of
our tenants to pay rent when due, more general public infrastructure failures or
failure to successfully conclude our remediation efforts as planned could have a
material adverse impact on our results of operations, financial conditions
and/or cash flows in 1999 and beyond.
- 22 -
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate with the exception of a $105,000 note payable that bears interest at
the Prime Rate + 1%. At December 31, 1998, a hypothetical 100 basis point
increase in interest rates would result in an approximately $1,450,000 decrease
in the fair value of debt.
CAUTIONARY STATEMENTS
Some of the statements included in Items 1 and 2, Business and Properties, and
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, may be considered to be "forward-looking statements" since such
statements relate to matters which have not yet occurred. For example, phrases
such as "the Partnership anticipates", "believes" or "expects" indicate that it
is possible that the event anticipated, believed or expected may not occur.
Should such event not occur, then the result which the Partnership expected also
may not occur or occur in a different manner, which may be more or less
favorable to the Partnership. The Partnership does not undertake any obligations
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of a
commercial office building and apartment complexes. If a major commercial tenant
or a large number of apartment lessees default on their lease, 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.
- 23 -
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NTS-Properties VI, a Maryland Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1998 and 1997, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 44
through 46 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the 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 12, 1999
- 24 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
1998 1997
------------- ---------
ASSETS
Cash and equivalents $ 362,822 $ 276,891
Cash and equivalents - restricted 446,097 507,568
Investment securities -- 1,562,813
Accounts receivable 125,474 111,152
Land, buildings and amenities, net 37,388,637 38,660,912
Construction in progress 4,363,046 1,774,455
Other assets 493,329 395,817
------------ -----------
$ 43,179,405 $ 43,289,608
------------ -----------
------------ -----------
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $ 27,119,180 $ 26,872,563
Accounts payable-operations 245,279 195,165
Accounts payable-construction 319,757 --
Retainage payable 141,280 --
Distributions payable 102,497 213,687
Security deposits 222,794 237,501
Other liabilities 87,030 67,340
------------ -----------
28,237,817 27,586,256
Commitments and contingencies (Note 10)
Partners' equity 14,941,588 15,703,352
------------ -----------
$ 43,179,405 $ 43,289,608
------------ -----------
------------ -----------
The accompanying notes to financial statements are an integral part of these
statements.
- 25 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
----------- ----------- -----------
Revenues:
Rental income $ 9,695,585 $ 9,493,634 $ 9,541,311
Interest and other income 139,911 114,639 128,950
----------- ----------- -----------
9,835,496 9,608,273 9,670,261
Expenses:
Operating expenses 2,580,618 2,495,455 2,529,274
Operating expenses - affiliated 1,219,445 1,091,454 1,044,781
Write-off of unamortized land
improvements and amenities 65,060 -- --
Interest expense 1,962,133 2,194,368 2,344,531
Management fees 494,494 480,335 485,250
Real estate taxes 815,422 779,214 771,952
Professional and administrative
expenses 186,533 150,846 145,734
Professional and administrative
expenses - affiliated 251,719 300,159 203,818
Depreciation and amortization 1,802,341 1,910,785 1,917,867
----------- ----------- -----------
9,377,765 9,402,616 9,443,207
----------- ----------- -----------
Income before extraordinary item 457,731 205,657 227,054
Extraordinary item:
Write-off unamortized loan costs -- (98,544) --
----------- ----------- -----------
Net income $ 457,731 $ 107,113 $ 227,054
----------- ----------- -----------
----------- ----------- -----------
Net income allocated to the limited partners:
Income before extraordinary item $ 453,154 $ 203,600 $ 224,783
Extraordinary item -- (97,558) --
----------- ----------- -----------
Net income $ 453,154 $ 106,042 $ 224,783
----------- ----------- -----------
----------- ----------- -----------
Net income per limited partnership Unit:
Income before extraordinary item $ 10.96 $ 4.76 $ 4.97
Extraordinary item -- (2.28) --
----------- ----------- -----------
Net income $ 10.96 $ 2.48 $ 4.97
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of limited
partnership units 41,334 42,817 45,243
----------- ----------- -----------
----------- ----------- -----------
The accompanying notes to financial statements are an integral part of these
statements.
- 26 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (1)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Limited General
Partners Partners Total
------------ ----------- ------------
Balances at December 31, 1995 $ 18,461,233 $ (172,601) $ 18,288,632
Net income 224,783 2,271 227,054
Distributions declared (886,000) (8,950) (894,950)
Repurchase of limited partnership
Units (1,120,750) -- (1,120,750)
----------- ---------- ------------
Balances at December 31, 1996 16,679,266 (179,280) 16,499,986
Net income 106,042 1,071 107,113
Distributions declared (853,625) (8,622) (862,247)
Repurchase of limited partnership
Units (41,500) -- (41,500)
----------- ---------- -----------
Balances at December 31, 1997 15,890,183 (186,831) 15,703,352
Net income 453,154 4,577 457,731
Distributions declared (515,339) (5,206) (520,545)
Repurchase of limited partnership
Units (698,950) -- (698,950)
----------- ---------- -----------
Balances at December 31, 1998 $ 15,129,048 $ (187,460) $ 14,941,588
----------- ---------- -----------
----------- ---------- -----------
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.
- 27 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
------------- ------------- -----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 457,731 $ 107,113 $ 227,054
Adjustments to reconcile net income to net cash
provided by operating activities:
Accrued interest on investment securities 11,426 (4,048) 7,498
Amortization of capitalized leasing costs -- 2,244 --
Write-off of unamortized land improvements
and amenities 65,060 -- --
Write-off unamortized loan costs -- 98,544 --
Depreciation and amortization 1,802,341 1,910,785 1,917,867
Changes in assets and liabilities:
Cash and equivalents - restricted 6,491 141,609 (30,047)
Accounts receivable (14,322) 25,242 22,035
Other assets (47,168) 2,121 23,436
Accounts payable 50,114 (154,003) 43,389
Security deposits (14,707) (13,313) 15,627
Other liabilities 19,695 15,249 30,964
----------- ----------- ----------
Net cash provided by operating activities 2,336,661 2,131,543 2,257,823
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (2,698,651) (114,598) (103,508)
Purchase of investment securities (1,004,314) (3,931,387) (3,344,984)
Maturity of investment securities 2,555,701 3,457,889 3,403,575
----------- ----------- ----------
Net cash used in investing activities (1,147,264) (588,096) (44,917)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (1,010,041) (27,730,493) (249,988)
Proceeds from mortgage loans and note payable 1,256,658 27,200,000 --
Cash distributions (631,736) (865,252) (917,829)
Repurchase of limited partnership Units (698,950) (41,500) (1,120,750)
Additions to loan costs (74,377) (211,352) (92,720)
Cash and equivalents - restricted 54,980 (258,500) 415,370
----------- ----------- ----------
Net cash used in financing activities (1,103,466) (1,907,097) (1,965,917)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents 85,931 (363,650) 246,989
CASH AND EQUIVALENTS, beginning of year 276,891 640,541 393,552
----------- ----------- ----------
CASH AND EQUIVALENTS, end of year $ 362,822 $ 276,891 $ 640,541
----------- ----------- ----------
----------- ----------- ----------
Interest paid on a cash basis $ 1,965,603 $ 2,284,228 $ 2,346,643
----------- ----------- ----------
----------- ----------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
- 28 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. SIGNIFICANT ACCOUNTING POLICIES
A) ORGANIZATION
NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership") is a limited partnership organized under the laws of
the State of Maryland on December 27, 1984. The General Partner is
NTS-Properties Associates VI (a Kentucky limited partnership). The
Partnership is in the business of developing, constructing, owning
and operating apartment complexes and commercial real estate.
B) PROPERTIES
The Partnership owns and operates the following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex in
Orlando, Florida
- Park Place Apartments Phase I, a 180-unit luxury apartment
complex in Lexington, Kentucky
- Willow Lake Apartments, a 207-unit luxury apartment complex in
Indianapolis, Indiana
- A 96% joint venture interest in Golf Brook Apartments, a 195-
unit luxury apartment complex in Orlando, Florida
- A 95% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net rentable
square feet located in Louisville, Kentucky
The Partnership also owns approximately 15 acres of land in
Lexington, Kentucky upon which 152 apartment units are currently
being constructed (Park Place Apartments Phase III). See Note 10
Commitments and Contingencies for further information.
C) ALLOCATION OF NET INCOME (LOSS) AND CASH DISTRIBUTIONS
Pre-Termination Date Net Cash Receipts and Interim Net Cash
Receipts, as defined in the partnership agreement and which are
made available for distribution, will be distributed 99% to the
limited partners and 1% to the General Partner. Net Cash Proceeds,
as defined in the partnership agreement, will be distributed 1) 99%
to the limited partners and 1% to the General Partner until the
limited partners have received cash distributions from all sources
(except Pre-Termination Date Net Cash Receipts) equal to their
Original Capital; and 2) the remainder, 80% to the limited partners
and 20% to the General Partner. Net operating income shall be
allocated to the limited partners and the General Partner in
proportion to their respective cash distributions.
- 29 -
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
C) ALLOCATION OF NET INCOME (LOSS) AND CASH DISTRIBUTIONS -
CONTINUED
Net Operating Income in excess of cash distributions and Net Gains
from Sales shall be allocated as follows: (1) pro rata to all
partners with a negative capital account in an amount to restore
the negative capital account to zero; (2) 99% to the limited
partners and 1% to the General Partner until the limited partners
have received an amount equal to their Original Capital less cash
distributions except distributions of Pre-Termination Date Net Cash
Receipts; (3) the balance, 80% to the limited partners and 20% to
the General Partner. Net Operating Losses shall be allocated 99% to
the limited partners and 1% to the General Partner.
D) TAX STATUS
The Partnership has received a ruling from the Internal Revenue
Service stating that the Partnership is classified as a limited
partnership for federal income tax purposes. As such, the
Partnership makes no provision for income taxes. The taxable income
or loss is passed through to the holders of the partnership
interests for inclusion on their individual income tax returns.
A reconciliation of net income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
1998 1997 1996
---------- ---------- -------
Net income $ 457,731 $ 107,113 $ 227,054
Items handled differently for tax purposes:
Depreciation and
amortization (117,115) (86,287) (139,371)
Retirement of fixed
assets 15,420 -- --
Capitalized leasing
costs 51,951 34,898 34,134
Write-off of unamortized
tenant improvements -- -- (11,476)
Rental income 9,664 37,172 47,278
--------- --------- --------
Taxable income $ 417,651 $ 92,896 $ 157,619
--------- --------- --------
--------- --------- --------
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.
- 30 -
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
F) JOINT VENTURE ACCOUNTING - CONTINUED
Proportionate consolidation is utilized by the Partnership due to
the fact that the ownership of 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 the accounts of such partner. It is the belief of the General
Partner of the Partnership that the financial statement disclosures
resulting from the use of proportionate consolidation provides a
meaningful presentation of assets, liabilities, revenues, expenses
and cash flows given the commonality of the Partnership's
operations.
G) CASH AND EQUIVALENTS - RESTRICTED
Cash and equivalents - restricted represents funds received for
residential security deposits, funds which have been escrowed with
mortgage companies for property taxes and insurance in accordance
with the loan agreements, funds reserved by the Partnership for the
repurchase of limited partnership Units (December 31, 1997) and
funds reserved by the Partnership for the purchase of limited
partnership Units under the Tender Offer (December 31, 1998 - see
Note 6).
H) INVESTMENT SECURITIES
Investment securities represent investments in Certificates of
Deposit or securities issued by the U.S. Government with initial
maturities of greater than three months. The investments are
carried at cost which approximates market value. The Partnership
intends to hold the securities until maturity. During 1998, 1997
and 1996, the Partnership sold no investment securities.
As of December 31, 1998, the Partnership held no investment
securities with initial maturities greater than three months.
The following provides details regarding the investments held at
December 31, 1997:
Amortized Maturity Value At
Type Costs Date Maturity
- ---- ---------- -------- ----------
Certificate of Deposit $ 222,741 02/03/98 $ 223,805
Certificate of Deposit 205,392 02/12/98 206,654
Certificate of Deposit 101,154 03/02/98 102,042
Certificate of Deposit 101,246 03/12/98 102,272
Certificate of Deposit 205,082 03/27/98 207,639
Certificate of Deposit 125,678 03/30/98 127,336
Certificate of Deposit 150,226 03/30/98 152,215
Certificate of Deposit 150,226 04/06/98 152,373
Certificate of Deposit 100,151 04/15/98 101,718
Certificate of Deposit 100,151 04/30/98 101,944
Certificate of Deposit 100,766 05/08/98 102,569
------------ -----------
Deposit
$1,562,813 $1,580,567
------------ -----------
------------ -----------
- 31 -
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
I) BASIS OF PROPERTY AND DEPRECIATION
Land, buildings and amenities are stated at cost to the
Partnership. Costs directly associated with the acquisition,
development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for building and improvements, 5-30 years
for amenities and the applicable lease term for tenant
improvements.
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of, specifies circumstances in which
certain long-lived assets must be reviewed for impairment. If such
review indicates that the carrying amount of an asset exceeds the
sum of its expected future cash flows, the asset's carrying value
must be written down to fair value. Application of this standard
during the years ended December 31, 1998, 1997 and 1996 did not
result in an impairment loss.
J) RENTAL INCOME AND DEFERRED LEASING COMMISSIONS
Certain of the Partnership's lease agreements at Plainview Point
III Office Center are structured to include scheduled and specified
rent increases over the lease term. For financial reporting
purposes, the income from these leases is being recognized on a
straight-line basis over the lease term. Accrued income connected
with these leases is included in accounts receivable and totaled
$42,584 and $75,984 at December 31, 1998 and 1997, respectively.
All commissions paid to commercial leasing agents are deferred and
amortized over the term of the lease to which they apply.
K) ADVERTISING
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during the
years ended December 31, 1998, 1997 and 1996.
L) STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and equivalents include
cash on hand and short-term, highly liquid investments with initial
maturities of three months or less.
2. CONCENTRATION OF CREDIT RISK
The Partnership owns and operates, either wholly or through a joint
venture, residential properties in Kentucky (Louisville and Lexington),
Indiana (Indianapolis) and Florida (Orlando). The apartment unit is
generally the principal residence of the tenant. The Partnership also owns
and operates, through a joint venture, a commercial property in
Louisville, Kentucky. Substantially all of the tenants are local
businesses or are businesses which have operations in the Louisville area.
3. INVESTMENT IN JOINT VENTURES
A) NTS SABAL GOLF VILLAS JOINT VENTURE
In 1985, the Partnership entered into a joint venture agreement
with NTS-Properties IV to develop and construct a 158-unit luxury
apartment complex on a 13.15-acre site located in Orlando, Florida,
known as Golf Brook Apartments Phase I. NTS-Properties IV
contributed land valued at $1,900,000 with an outstanding note
payable to a bank of $1,200,000 which was secured by the land. The
Partnership contributed the construction and carrying costs of the
apartment complex.
- 32 -
3. INVESTMENT IN JOINT VENTURES - CONTINUED
A) NTS SABAL GOLF VILLAS JOINT VENTURE - CONTINUED
In 1987, the joint venture agreement was amended to include Golf
Brook Apartments Phase II, a 37-unit luxury apartment complex
located on a 3.069 acre site adjacent to Golf Brook Apartments
Phase I. The Partnership contributed land, construction costs, and
the cost of the initial leasing of this second phase.
The Partnership made contributions of approximately $15,800,000 for
construction and carrying costs and retired the $1,200,000 note
payable in 1987, which increased the Partnership's percentage
interest in the joint venture.
The net income and net loss is allocated based on the respective
partnership's contribution as of the end of each calendar quarter.
The Partnership's ownership share was 96% at December 31, 1998. The
Partnership's share of the joint venture's revenues was $2,926,168
(1998), $2,747,335 (1997) and $2,801,744 (1996). The Partnership's
share of the joint venture's expenses was $1,899,120 (1998),
$1,781,475 (1997) and $1,777,844 (1996).
B) PLAINVIEW POINT III JOINT VENTURE
In 1987, the Partnership entered into a joint venture agreement
with NTS-Properties IV to develop and construct an approximately
62,000 square foot office building located in Louisville, Kentucky
known as Plainview Point III Office Center.
NTS-Properties IV contributed land valued at $790,000 with an
outstanding note payable to a bank of $550,000 which was secured by
the land. The Partnership contributed the construction and carrying
costs of the complex. The Partnership made contributions of
approximately $4,100,000 million for construction and carrying
costs and retired the $550,000 note payable in 1987, which
increased the Partnership's percentage interest in the joint
venture. The net income and net loss is allocated based on the
respective partnership's contribution as of the end of each
calendar quarter. The Partnership's ownership share was 95% at
December 31, 1998. The Partnership's share of the joint venture's
revenues was $781,388 (1998), $737,948 (1997) and $729,647 (1996).
The Partnership's share of the joint venture's expenses was
$848,332 (1998), $805,215 (1997) and $761,600 (1996).
4. LAND, BUILDINGS AND AMENITIES
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1998 1997
------ -----
Land and improvements $14,899,011 $14,863,568
Buildings, improvements and
amenities 46,859,125 46,659,837
---------- ----------
61,758,136 61,523,405
Less accumulated depreciation 24,369,499 22,862,493
---------- ----------
$37,388,637 $38,660,912
---------- ----------
---------- ----------
5. INTEREST REPURCHASE RESERVE
Pursuant to Section 61.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve in December 1995. During the years ended December 31,
1998, 1997 and 1996, the Partnership has funded $400,000, $300,000 and
$705,380, respectively, to the reserve. Through December 31, 1998, the
Partnership has repurchased a total of 6,846 Units for $1,861,200 at a
price ranging from $250 to $350 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. Repurchased Units have been retired by
- 33 -
the Partnership, thus increasing the percentage of ownership of each
remaining limited partner investor. The Interest Repurchase Reserve was
funded from cash reserves. The funds remaining in the Interest Repurchase
Reserve at the commencement of the Tender Offer (discussed below) were
returned to unrestricted cash for utilization in the Partnership's
operations.
6. TENDER OFFER
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "Offerors") commenced a Tender Offer to purchase up to
1,250 of the Partnership's limited Partnership Units at a price of $350
per Unit as of the date of the Offering. Although the Partnership and
ORIG, LLC believes that this price is appropriate, the price of $350 per
Unit may not equate to the fair market value or the liquidation value of
the Unit, and is less than the book value per Unit. Approximately $499,500
($437,500 to purchase 1,250 Units plus approximately $62,000 for expenses
associated with the Offer) is required to purchase all 1,250 Units. The
Offer stated that the Partnership will purchase the first 750 Units
tendered and will fund its purchases and its portion of the expenses from
cash reserves. If more than 750 Units are tendered, ORIG, LLC will
purchase up to an additional 500 Units. If more than 1,250 Units are
tendered, the Partnership and ORIG, LLC may choose to acquire the
additional Units on the same terms. Otherwise, tendered Units will be
purchased on a pro rata basis up to 1,250. Units that are acquired by the
Partnership will be retired. Units that are acquired by ORIG, LLC will be
held by it. The General Partner, NTS-Properties Associates VI, does not
intend to participate in the Tender Offer.
Under the terms of the Offer, the Offer expired on January 18, 1999. As of
that date, a total of 2,103 Units were tendered pursuant to the Offer. The
Offerors exercised their right under the terms of the Offer to purchase
more than 1,250 Units and all 2,103 Units tendered were accepted by the
Offerors, without proration. The Partnership repurchased 750 Units and
ORIG, LLC purchased 1,353 Units.
7. MORTGAGES PAYABLE
Mortgages payable as of December 31 consist of the following:
1998 1997
------ -----
Mortgage payable with an insurance
company bearing interest at 7.43%, due May
14, 2009 secured by certain land, buildings and
amenities $ 8,220,270 $ 8,724,588
Mortgage payable with an insurance
company bearing interest at 7.32%, due October
15, 2012 secured by certain land, buildings and
amenities 8,120,331 8,447,975
Mortgage payable with an insurance company
bearing interest at 7.74%, due
October 15, 2012 secured by certain land,
buildings and amenities 6,151,658 5,000,000
Mortgage payable with an insurance
company bearing interest at 7.38%,
due December 5, 2012 secured by
certain land, buildings and
amenities 2,713,152 2,820,000
(Continued on next page)
- 34 -
7. MORTGAGES PAYABLE - CONTINUED
1998 1997
------ -----
Mortgage payable with an insurance company
bearing interest at 7.38%, due
December 5, 2012 secured by certain land,
buildings and amenities. $ 1,808,769 $ 1,880,000
Note payable to a bank, bearing interest
at the Prime Rate + 1%, due June 14,
2001 secured by certain
land, buildings and amenities 105,000 --
---------- ----------
$27,119,180 $26,872,563
---------- ----------
---------- ----------
The mortgages and note are payable in aggregate monthly installments of
$275,987 which includes principal, interest, property taxes and insurance.
Scheduled maturities of debt are as follows:
For The Years Ended December 31, Amount
-------------------------------- ------
1999 $ 1,113,466
2000 1,316,104
2001 1,441,594
2002 1,524,079
2003 1,641,171
Thereafter 20,082,766
-----------
$27,119,180
-----------
-----------
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 approximates fair market value.
The mortgage payable with an outstanding balance of $6,151,658 as of
December 31, 1998 has an additional availability of $6,048,342. The
proceeds will be used to fund the construction of Park Place Apartments
Phase III. See Note 10 Commitments and Contingencies for further
information.
The 1997 write-off of unamortized loan costs (treated as an extraordinary
item) relates to loan costs associated with the Golf Brook, Park Place
Phase I, Willow Lake and Sabal Park Apartments mortgages payable. The
unamortized loan costs were expensed due to the fact that the mortgages
were retired in 1997 prior to their scheduled maturities - August 1, 1997,
October 5, 2002, November 1, 1997 and January 5, 2003, respectively - as a
result of new financing obtained during 1997.
8. RENTAL INCOME UNDER OPERATING LEASES
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1998:
For The Years Ended December 31, Amount
1999 $ 666,634
2000 613,500
2001 349,816
2002 203,902
2003 203,902
Thereafter 16,992
-----------
$ 2,054,746
-----------
-----------
- 35 -
9. RELATED PARTY TRANSACTIONS
Pursuant to an agreement with the Partnership, property management fees of
$494,494 (1998), $480,335 (1997) and $485,250 (1996)were paid to NTS
Development Company, an affiliate of the General Partner. The fee is equal
to 5% and 6% of gross revenues from the residential properties and
commercial properties, respectively. Also pursuant to an agreement, NTS
Development Company will receive a repair and maintenance fee equal to
5.9% of costs incurred which relate to capital improvements and major
repair and renovation projects. The Partnership has incurred $10,902
(1998), $252 (1997) and $862 (1996) as a repair and maintenance fee and
has capitalized these costs as part of land, buildings and amenities. The
Partnership was also charged the following amounts from NTS Development
Company for the years ended December 31, 1998, 1997 and 1996. 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.
1998 1997 1996
---------- ---------- -------
Administrative $ 304,187 $ 359,864 $ 258,101
Property manager 943,598 838,536 792,366
Leasing 215,328 191,370 212,358
Construction manager 225,759 -- --
Other 67,885 66,876 4,471
--------- --------- ---------
$1,756,757 $1,456,646 $1,267,296
--------- --------- ---------
--------- --------- ---------
10. COMMITMENTS AND CONTINGENCIES
The Partnership began construction of Park Place Apartments Phase III (152
units) during 1998 on the 15 acres of land it owns which is adjacent to
the existing Park Place Apartments in Lexington, Kentucky. It is currently
estimated that the cost of the project will be $9,000,000. Construction
costs will be funded by loan proceeds of $7,200,000 from a mortgage loan
obtained during 1997 and cash reserves. Through December 31, 1998,
approximately $2,600,000 of the cost had been incurred.
Construction in progress on the December 31, 1998 Balance Sheet relates to
Park Place Apartments Phase III. Included in the cost of approximately
$4,400,000 is approximately $1,700,000 of land cost, capitalized interest,
common area costs and amenity costs which were allocated at the time Phase
I and II were originally constructed. These allocated costs had previously
been shown on the Partnership's Balance Sheet as Asset Held for
Development.
The Partnership also plans to renovate the community clubhouse at Park
Place, Golf Brook and Sabal Park Apartments during 1999. It is currently
estimated the aggregate cost for all three renovations will be
approximately $400,000. The Partnership plans to fund the renovations with
short-term financing in the amount of $2,000,000 which will be secured by
Plainview Point Office Center Phase III which is currently free and clear
of any debt. The remaining proceeds will be used to fund a portion of the
Partnership's 1999 operating costs and other possible renovations at the
Partnership's properties. It is expected that any such borrowing will be
readily facilitated. However, there is no assurance that financing will be
obtained when needed, or that any financing will be on favorable terms.
- 36 -
11. SEGMENT REPORTING
The Partnership adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998.
SFAS No. 131 established standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued
to limited partners. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision
making group, in deciding how to allocate resources and in assessing
performance. The standard also allows entities to aggregate operating
segments into a single segment if the segments are similar in each of the
six criteria set forth in SFAS No. 131. The Partnership's chief operating
decision maker is the General Partner.
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 apartment
complexes known as Willow Lake, Park Place Phase I, Sabal Park and Golf
Brook. The Commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known as
Plainview Point III Office Center.
The financial information of the operating segments have been prepared
using a management approach, which is consistent with the basis and manner
in which the Partnership's management internally 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.
1998
Residential Commercial Total
----------- ----------- -----------
Rental income $ 8,915,533 $ 780,052 $ 9,695,585
Other income 30,307 1,336 31,643
---------- ---------- ----------
Total net revenues $ 8,945,840 $ 781,388 $ 9,727,228
---------- ---------- ----------
---------- ---------- ----------
Operating expenses $ 3,471,402 $ 328,661 $ 3,800,063
Write-off of
unamortized building
improvements 64,617 443 65,060
Management fees 448,081 46,413 494,494
Real estate taxes 782,331 33,091 815,422
Professional and
administrative -- 285,120 285,120
Depreciation expense 1,525,398 154,604 1,680,002
---------- ---------- ----------
Net income (loss) $ 2,654,011 $ (66,944) $ 2,587,067
---------- ---------- ----------
---------- ---------- ----------
Land, buildings and
amenities, net $34,655,676 $ 2,713,900 $37,369,576
---------- ---------- ----------
---------- ---------- ----------
Expenditures for
land, buildings and
amenities $ 508,775 $ 141,520 $ 650,295
---------- ---------- ----------
---------- ---------- ----------
Segment liabilities $ 345,753 $ 514,576 $ 860,329
---------- ---------- ----------
---------- ---------- ----------
- 37 -
11. SEGMENT REPORTING - CONTINUED
1997
Residential Commercial Total
----------- ----------- -----------
Rental income $ 8,756,996 $ 736,638 $ 9,493,634
Other income 25,800 1,310 27,110
---------- ---------- ----------
Total net revenues $ 8,782,796 $ 737,948 $ 9,520,744
---------- ---------- ----------
---------- ---------- ----------
Operating expenses $ 3,316,160 $ 270,749 $ 3,586,909
Management fees 434,236 46,099 480,335
Real estate taxes 746,094 33,120 779,214
Professional and
administrative -- 299,376 299,376
Depreciation expense 1,576,344 155,872 1,732,216
---------- ---------- ----------
Net income (loss) $ 2,709,962 $ (67,268) $ 2,642,694
---------- ---------- ----------
---------- ---------- ----------
Land, buildings and
amenities, net $35,809,570 $ 2,851,342 $38,660,912
---------- ---------- ----------
---------- ---------- ----------
Expenditures for
land, buildings and
amenities $ 13,296 $ 4,519 $ 17,815
---------- ---------- ----------
---------- ---------- ----------
Segment liabilities $ 310,291 $ 373,574 $ 683,865
---------- ---------- ----------
---------- ---------- ----------
1996
Residential Commercial Total
----------- ---------- ---------
Rental income $ 8,814,581 $ 726,730 $ 9,541,311
Other income 30,968 2,917 33,885
---------- ---------- ---------
Total net revenues $ 8,845,549 $ 729,647 $ 9,575,196
---------- ---------- ----------
---------- ---------- ----------
Operating expenses $ 3,328,336 $ 245,719 $ 3,574,055
Management fees 439,807 45,443 485,250
Real estate taxes 738,684 33,268 771,952
Professional and
administrative -- 280,368 280,368
Depreciation expense 1,574,270 156,800 1,731,070
---------- ---------- ----------
Net income (loss) $ 2,764,452 $ (31,951) $ 2,732,501
---------- ---------- ----------
---------- ---------- ----------
Land, buildings and
amenities, net $37,428,632 $ 3,008,152 $40,436,784
---------- ---------- ----------
---------- ---------- ----------
Expenditures for
land, buildings and
amenities $ 22,178 $ 81,330 $ 103,508
---------- ---------- ----------
---------- ---------- ----------
Segment liabilities $ 359,196 $ 335,244 $ 694,440
---------- ---------- ----------
---------- ---------- ----------
- 38 -
11. 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:
1998 1997 1996
---- ---- ----
NET REVENUES
Total revenues for reportable segments $ 9,727,228 $ 9,520,744 $ 9,575,196
Other income at Partnership level 108,268 87,529 95,065
----------- ----------- ----------
Total consolidated net revenues $ 9,835,496 $ 9,608,273 $ 9,670,261
----------- ----------- ----------
----------- ----------- ----------
PROFESSIONAL AND ADMINISTRATIVE
Total professional and administrative
for reportable segments $ 285,120 $ 299,376 $ 280,368
Professional and administrative for
Partnership level 153,132 151,629 69,184
----------- ----------- ----------
Total professional and administrative $ 438,252 $ 451,005 $ 349,552
----------- ----------- ----------
----------- ----------- ----------
DEPRECIATION AND AMORTIZATION
Total depreciations and amortization
for reportable segments $ 1,680,002 $ 1,732,216 $ 1,731,070
Depreciation and amortization for
Partnership level 122,339 178,569 186,797
----------- ----------- ----------
Total depreciation and amortization $ 1,802,341 $ 1,910,785 $ 1,917,867
----------- ----------- ----------
----------- ----------- ----------
NET INCOME (LOSS)
Total net income (loss) for reportable
segments $ 2,587,067 $ 2,642,694 $ 2,732,501
Net income (loss) for Partnership (2,129,336) (2,535,581) (2,505,447)
----------- ----------- -----------
Total net income (loss) $ 457,731 $ 107,113 $ 227,054
----------- ----------- ----------
----------- ----------- ----------
LAND, BUILDINGS AND AMENITIES
Total land, buildings and amenities $37,369,576 $38,660,912 $40,436,784
for reportable segments
Partnership level 19,061 -- --
---------- ----------- ------
Total land, buildings and amenities $37,388,637 $38,660,912 $40,436,784
----------- ----------- ----------
----------- ----------- ----------
EXPENDITURES
Total expenditures for land, buildings
and amenities for reportable $ 650,295 $ 17,815 $ 103,508
segments
Expenditures for land, buildings and 19,061 -- --
amenities for Partnership level
Construction in progress at
Partnership level 2,029,295 96,783 --
----------- ----------- ----------
Total expenditures $ 2,698,651 $ 114,598 $ 103,508
----------- ----------- ----------
----------- ----------- ----------
LIABILITIES
Total liabilities for reportable
segments $ 860,329 $ 683,865 $ 694,440
Liabilities for Partnership (1) 27,377,488 26,902,391 27,577,376
----------- ----------- ----------
Total liabilities $28,237,817 $27,586,256 $28,271,816
----------- ----------- ----------
----------- ----------- ----------
(1) These amounts primarily represent the mortgages held by the partnership
secured by the assets of the operating segments.
- 39 -
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
- 40 -
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates VI. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The General Partners of NTS-Properties Associates VI are as follows:
J. D. NICHOLS
Mr. Nichols (age 57) is the managing General Partner of NTS-Properties
Associates VI and Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
RICHARD L. GOOD
Mr. Good, (age 59) Vice Chairman of NTS Corporation and of NTS Development
Company and Chairman of the Board of NTS Securities, Inc., joined the Manager in
January 1985. From 1981 through 1984, he was Executive Vice President of
Jacques-Miller, Inc., a real estate syndication, property management and
financial planning firm in Nashville, Tennessee.
NTS CAPITAL CORPORATION
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Richard
L. Good and Brian F. Lavin.
BRIAN F. LAVIN
Mr. Lavin (age 45) President of NTS Corporation and NTS Development Company,
joined the Manager in June 1997. Prior to joining NTS, Mr. Lavin served as
President of the Residential Division of Paragon Group, Inc., and as a Vice
President of Paragon's Midwest Division. In this capacity, he directed the
development, marketing, leasing and management operations for the firms
expanding portfolios. Mr. Lavin attended the University of Missouri where he
received his Bachelor's Degree in Business Administration. He has served as a
Director of the Louisville Apartment Association. He is a licensed Kentucky Real
Estate Broker and Certified Property Manager. Mr. Lavin is a member of the
Institute of Real Estate Management, and council member of the Urban Land
Institute. He currently serves on the University of Louisville Board of
Overseers and is on the Board of Directors of the National Multi-Housing Council
and the Louisville Science Center.
- 41 -
Item 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company, an affiliate
of the General Partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specific
projects. Also, NTS Development Company provides certain other services to the
Partnership. See Note 9 to the financial statements which sets forth
transactions with NTS Development Company for the years ended December 31, 1997,
1996 and 1995.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocation and cash
distributions.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The General Partner is NTS-Properties Associates VI, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates VI are as follows:
J. D. Nichols 38.60%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 9.95%
10172 Linn Station Road
Louisville, Kentucky 40223
Richard L. Good 10.00%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 41.45% interests are owned by various limited partners of NTS-
Properties Associates VI.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement with the Partnership, property management fees of
$494,494 (1998), $480,335 (1997), and $485,250 (1996)were paid to NTS
Development Company, an affiliate of the General Partner. The fee is equal to 5%
and 6% of gross revenues from the residential properties and commercial
properties, respectively. Also pursuant to an agreement, NTS Development Company
will receive a repair and maintenance fee equal to 5.9% of costs incurred which
relate to capital improvements and major repair and renovation projects. The
Partnership has incurred $10,902 (1998), $252 (1997), and $862 (1996) as a
repair and maintenance fee and has capitalized these costs as part of land,
buildings and amenities. The Partnership was also charged the following amounts
from NTS Development Company for the years ended December 31, 1998, 1997 and
1996. 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.
The charges were as follows:
1998 1997 1996
---------- ---------- -------
Administrative $ 304,187 $ 359,864 $ 258,101
Property manager 943,598 838,536 792,366
Leasing 215,328 191,370 212,358
Construction manager 225,759 -- --
Other 67,885 66,876 4,471
--------- --------- ---------
$1,756,757 $1,456,646 $1,267,296
--------- --------- ---------
--------- --------- ---------
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 42 -
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, 1998, 1997 and
1996 together with the report of Arthur Andersen LLP, dated March 12,
1999, 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 44-46
All other schedules have been omitted because they are not applicable, are not
required, or because the required information is included in the financial
statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement *
Certificate of Limited Partnership
of NTS-Properties VI, a Maryland
limited partnership
3a. First Amendment to Amended and **
Restated Agreement of Limited
Partnership of NTS-Properties VI,
a Maryland limited partnership
10. Property Management and *
Construction Agreement between
NTS Development Company and
NTS-Properties VI, a Maryland
limited partnership
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the Securities
and Exchange Commission in connection with the filing of the
Registration Statements on Form S-11 on March 22, 1985
(effective June 25, 1985) under Commission File No.2-96583.
** Incorporated by reference to Form 10-K filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 (Commission File No. 0-14695).
4. Reports on Form 8-K
None.
- 43 -
NTS-PROPERTIES VI
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
Park Place
Sabal Park Apartments Willow Lake
Apartments Phase I Apartments
---------- ---------- -----------
Encumbrances (A) (B) (B)
Initial cost to partnership:
Land $ 3,063,046 $ 2,320,938 $ 3,770,328
Buildings and improvements 8,417,719 9,630,935 12,616,655
Cost capitalized subsequent to
acquisition
Improvements 169,582 (14,643) 242,580
Gross amount at which carried
December 31, 1998:(C)
Land $ 3,083,693 $ 2,342,601 $ 3,770,328
Buildings and improvements 8,566,654 9,594,629 12,859,235
----------- ----------- -----------
Total $ 11,650,347 $ 11,937,230 $ 16,629,563
----------- ----------- -----------
----------- ----------- -----------
Accumulated depreciation $ 5,024,085 $ 4,686,488 $ 6,332,553
----------- ----------- -----------
----------- ----------- -----------
Date of construction 06/84 04/84 03/85
Date Acquired N/A N/A N/A
Life at which depreciation in
latest income statement is
computed (D) (D) (D)
(A) First mortgages held by two insurance companies.
(B) First mortgage held by
an insurance company.
(C) Aggregate cost of real estate for tax purposes is
$62,224,492.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
- 44 -
NTS-PROPERTIES VI
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
Plainview
Golf Brook Point III Total
Apartments Office Center Pages 44-45
---------- ------------- -----------
Encumbrances (A) (B)
Initial cost to partnership:
Land $ 4,384,363 $ 1,268,339 $ 14,807,014
Buildings and improvements 12,302,319 2,270,729 45,238,357
Cost capitalized subsequent to
acquisition
Improvements 158,199 1,137,986 1,693,704
Gross amount at which carried
December 31, 1998:
Land $ 4,417,429 $ 1,284,960 $ 14,899,011
Buildings and improvements 12,427,452 3,392,094 46,840,064
------------ ------------ ------------
Total $ 16,844,881 $ 4,677,054 $ 61,739,075 (D)
------------ ------------ ------------
------------ ------------ ------------
Accumulated depreciation $ 6,363,219 $ 1,963,154 $ 24,369,499
------------ ------------ -----------
------------ ------------ -----------
Date of construction 05/88 01/88
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C)
(A) First mortgage held by an insurance company. (B) None.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
(D) Reconciliation net of accumulated depreciation to consolidated financial
statements:
Total Gross Costs at December 31, 1998 $ 61,739,075
Additions to Partnership for computer hardware
and software in 1998 19,061
-----------
Balance at December 31, 1998 61,758,136
Less accumulated depreciation (24,369,499)
Land, buildings and amenities, net as of
December 31, 1998 $ 37,388,637
------------
------------
- 45 -
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Real Accumulated
Estate Depreciation
----------- -----------
Balances at December 31, 1995 $61,545,265 $19,348,993
Additions during period:
Improvements (a) 39,297 --
Depreciation (b) -- 1,797,649
Deductions during period:
Retirements (73,036) (71,900)
----------- -----------
Balances at December 31, 1996 61,511,526 21,074,742
Additions during period:
Improvements (a) 18,912 --
Depreciation (b) -- 1,794,784
Deductions during period:
Retirements (7,033) (7,033)
----------- -----------
Balances at December 31, 1997 61,523,405 22,862,493
Additions during period:
Improvements (a) 535,362 --
Depreciation (b) -- 1,742,549
Deductions during period:
Retirements (300,631) (235,543)
----------- -----------
Balances at December 31, 1998 $61,758,136 $24,369,499
----------- -----------
----------- -----------
(a) The additions to real estate on this schedule will differ from the
expenditures for land, buildings and amenities on the Statements of Cash
Flows as a result of minor changes in the Partnership's joint venture
investment ownership percentages. Changes that may occur in the
ownership percentages are less than one percent.
(b) The additions charged to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statements of Cash
Flows due to the amortization of loan costs and depreciation of a
portion of assets held for development.
- 46 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties VI, a Maryland Limited Partnership, has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NTS-PROPERTIES VI, A MARYLAND LIMITED
PARTNERSHIP
(Registrant)
BY: NTS-Properties Associates VI,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ Brian F. Lavin
-----------------------
Brian F. Lavin
President
Date: March 31, 1999
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
- ------------------------------------- Associates VI and Chairman of the
J. D. Nichols Board and Sole Director of NTS
Capital Corporation
/s/Richard L. Good General Partner of NTS-Properties
- ------------------------------------- Associates VI and Vice Chairman of
Richard L. Good NTS Capital Corporation
/s/ Brian F. Lavin President and Chief Operating Officer
- ------------------------------------- of NTS Capital Corporation
Brian F. Lavin (acting Chief Financial Officer)
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 47 -