<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission file number 0-11655
NTS-PROPERTIES IV
(Exact name of registrant as specified in its charter)
Kentucky 61-1026356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive 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
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 60
Total Pages: 65
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TABLE OF CONTENTS
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Pages
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PART I
Items 1 and 2 Business and Properties 3-22
Item 3 Legal Proceedings 23
Item 4 Submission of Matters to a Vote of
Security Holders 23
PART II
Item 5 Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 24
Item 6 Selected Financial Data 25
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 26-40
Item 8 Financial Statements and Supplementary Data 41-55
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 56
PART III
Item 10 Directors and Executive Officers of the
Registrant 56-57
Item 11 Management Remuneration and Transactions 57
Item 12 Security Ownership of Certain Beneficial
Owners and Management 58
Item 13 Certain Relationships and Related Transactions 58-59
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 60-64
Signatures 65
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PART I
Items 1. and 2. Business and Properties
General
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NTS-Properties IV., Ltd., a Kentucky Limited Partnership, (the "Partnership" or
"NTS-Properties IV") is a limited partnership organized under the laws of the
Commonwealth of Kentucky on May 13, 1983. The general partner is NTS-Properties
Associates IV, a Kentucky limited partnership. As of December 31, 1995, the
Partnership owned the following properties:
- Commonwealth Business Center Phase I, a business center with
approximately 57,000 net rentable ground floor square feet and
approximately 24,000 net rentable mezzanine square feet in Louisville,
Kentucky, constructed by the Partnership.
- Plainview Point Office Center Phases I and II, an office center with
approximately 56,000 net rentable square feet in Louisville, Kentucky,
acquired complete by the Partnership.
- The Willows of Plainview Phase I, a 118-unit luxury apartment complex
in Louisville, Kentucky, constructed by the Partnership.
- A joint venture interest in The Willows of Plainview Phase II, a
144-unit luxury apartment complex in Louisville, Kentucky, constructed
by the joint venture between the Partnership and NTS- Properties V, a
Maryland Limited Partnership, an affiliate of the general partner of
the Partnership, ("NTS-Properties V"). The Partnership's percentage
interest in the joint venture was 10% at December 31, 1995.
- A joint venture interest in Golf Brook Apartments, a 195-unit luxury
apartment complex in Orlando, Florida, constructed by the joint
venture between the Partnership and NTS-Properties VI, a Maryland
Limited Partnership, an affiliate of the general partner of the
Partnership, ("NTS-Properties VI"). The Partnership's percentage
interest in the joint venture was 4% at December 31, 1995.
- A joint venture interest in Plainview Point III Office Center, an
office center with approximately 62,000 net rentable square feet in
Louisville, Kentucky, constructed by the joint venture between the
Partnership and NTS-Properties VI. The Partnership's percentage
interest in the joint venture was 5% at December 31, 1995.
- A joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground floor
square feet and approximately 50,000 net rentable mezzanine square
feet located in Louisville, Kentucky, acquired complete by a joint
venture between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
affiliates of the general partner of the Partnership. The Joint
Venture Agreement was amended to admit the Partnership during 1994.
The Partnership's percentage interest in the joint venture was 30% at
December 31, 1995.
- A joint venture interest in the Lakeshore/University II Joint Venture
("L/U II Joint Venture"). The L/U II Joint Venture was formed on
January 23, 1995 among the Partnership and NTS-Properties V,
NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of
the general partner of the Partnership. The Partnership's percentage
interest in the joint venture was 18% at December 31, 1995.
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Items 1. and 2. Business and Properties - Continued
General - Continued
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A description of the properties owned by the L/U II Joint Venture
appears below:
- Lakeshore Business Center Phase I - a business center with
approximately 103,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- Lakeshore Business Center Phase II - a business center with
approximately 97,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- University Business Center Phase II - a business center with
approximately 78,000 net rentable first floor (office and
service) and second floor office square feet and approximately
10,000 net rentable mezzanine square feet located in Orlando,
Florida, acquired complete by the joint venture.
- Outparcel Building Sites - approximately 6.2 acres of undeveloped
land adjacent to the Lakeshore Business Center development, which
is zoned for commercial development.
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. In the opinion of the Partnership's
management, the properties are adequately covered by insurance.
Commonwealth Business Center Phase I is encumbered by a mortgage payable to an
insurance company. The outstanding balance at December 31, 1995 was $2,677,397.
The mortgage bears a fixed interest rate of 8.8% and is due October 1, 2004.
Monthly principal payments are based upon a 10-year amortization schedule. At
maturity, the mortgage will have been repaid based on the current rate of
amortization.
Plainview Point Office Center Phases I and II is not encumbered by any
outstanding mortgages at December 31, 1995.
The Willows of Plainview Phase I is encumbered by permanent mortgages with two
insurance companies. Both loans are secured by a first mortgage on the property.
The outstanding balance of the mortgages at December 31, 1995 was $3,989,989
($2,043,653 and $1,946,336). Both mortgages currently bear a fixed interest rate
of 7% and are due December 5, 2003. Current monthly principal payments on both
notes are based upon a 27-year amortization schedule. The outstanding balance at
maturity based on the current rate of amortization would be $3,367,108
($1,724,617 and $1,642,491).
The Willows of Plainview Phase II, an apartment joint venture between the
Partnership and NTS-Properties V, is encumbered by permanent mortgages with two
insurance companies. The outstanding balances of the mortgages at December 31,
1995 was $5,217,824 ($3,267,236 and $1,950,588). The mortgages are recorded as a
liability of the Joint Venture. The Partnership's proportionate interest in the
mortgages at December 31, 1995 is $539,523 ($337,832 and $201,691). Both
mortgages currently bear a fixed interest rate of 7.5% and are due December 5,
2003. Current monthly principal payments on both mortgages are based upon a
27-year amortization schedule. The outstanding balance at maturity based on the
current rate of amortization would be $4,449,434 ($2,786,095 and $1,663,339) of
which the Partnership's proportionate share would be $458,292 ($286,968 and
$171,324).
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Items 1. and 2. Business and Properties - Continued
General - Continued
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Golf Brook Apartments, a joint venture between the Partnership and NTS-
Properties VI, is encumbered by a mortgage payable to an insurance company. This
mortgage payable replaces the loan which NTS-Properties VI had obtained to fund
a portion of its capital contribution to the Joint Venture. The $9,200,000
mortgage payable is recorded as a liability by NTS-Properties VI in accordance
with the Joint Venture Agreement. The mortgage bears a fixed interest rate of
8.625%. The unpaid balance of the loan ($9,200,000) is due August 1, 1997.
Plainview Point III Office Center is not encumbered by any outstanding mortgages
as of December 31, 1995.
Blankenbaker Business Center 1A, a joint venture between the Partnership,
NTS-Properties VII, Ltd. and NTS-Properties Plus Ltd., is encumbered by a
mortgage payable to an insurance company. The outstanding balance at December
31, 1995 was $4,500,239. The mortgage is recorded as a liability of the Joint
Venture. The Partnership's proportionate interest in the mortgage at December
31, 1995 is $1,353,672. The mortgage bears interest at a fixed rate of 8.5% and
is due November 15, 2005. Currently monthly principal payments are based upon an
11-year amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
The properties owned by the Lakeshore/University II Joint Venture, a joint
venture between the Partnership, NTS-Properties V, NTS-Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd. are encumbered by notes payable to banks as follows:
Note Balance
at 12/31/95 Encumbered Property
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$9,204,000 Lakeshore Business Center Phase II
$5,740,000 University Business Center Phase II
$1,234,000 Outparcel building sites (3.8 acres)
$ 468,333 Outparcel building sites (3.8 acres)
$ 340,000 Outparcel building sites (2.4 acres)
The notes are a liability of the joint venture in accordance with the Joint
Venture Agreement. The Partnership's proportionate interest in the notes at
December 31, 1995 was $1,642,914, $1,024,590, $220,269, $83,597 and $60,690,
respectively. The notes bear interest at a fixed rate of 10.6%, are due January
31, 1998 and are secured by the assets of the joint venture. Principal payments
required on the $9,204,000, $5,740,000 and $1,234,000 notes are as follows:
a) 12 monthly payments of $3,000 each, the first of which was due at
closing. The second through 12th payments are due on the first
day of February through December 1995.
b) 12 monthly payments of $12,000 each, commencing on January 1, 1996
through December 1, 1996.
c) 13 monthly payments of $15,000 each, commencing on January 1, 1997
through January 1, 1998.
d) Balloon payment due at maturity on January 31, 1998.
A mortgage has been recorded on Lakeshore Business Center Phase I in the amount
of $5,500,000 in favor of the banks which held the indebtedness on University
Business Center Phase II, Lakeshore Business Center Phase II and the undeveloped
tracts of land prior to the formation of the L/U II Joint Venture. Lakeshore
Business Center Phase I was contributed to the joint
venture free and clear of any mortgage liens.
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Items 1. and 2. Business and Properties - Continued
General - Continued
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For a further discussion regarding the terms of the debt financings see
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7).
Subsequent to December 31, 1995, the L/U II Joint Venture submitted an
application with an insurance company for $17.4 million of debt financing. The
proceeds from the loan will be used to pay off the Joint Venture's current debt
financings of approximately $16.9 million. The remaining proceeds will be used
to fund Joint Venture tenant finish improvements, leasing costs and loan closing
costs. The Joint Venture anticipates that the financing will be completed during
mid-1996.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's properties. Changes to current tenant
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 and whether the
improvements are for a new tenant or incurred because of a lease renewal. As of
December 31, 1995, the L/U II Joint Venture had commitments for approximately
$200,000 of tenant finish improvements and leasing costs. The commitments are
the result of an 8,200 square foot new lease and a 7,100 square foot lease
renewal. Both leases are for a period of five years. The Partnership's
proportionate share of these commitments is approximately $36,000 or 18%. As of
December 31, 1995, approximately $130,000 had been incurred toward these
commitments, of which the Partnership's proportionate share is approximately
$23,000 or 18%.
As of December 31, 1995, the L/U II Joint Venture also had a commitment for a
$200,000 special tenant finish allowance, of which approximately $92,000 will be
reimbursed by the tenant over a 27-month period beginning in January 1996. This
commitment is the result of lease negotiations with Full Sail Recorders, Inc.
("Full Sail") which currently sub-leases approximately 41,000 square feet from
Philip Crosby Associates, Inc. ("PCA") at University Business Center Phase II.
Full Sail is also a major tenant at University Business Center Phase I, a
neighboring property owned by an affiliate of the general partner of the
Partnership. PCA currently leases 100% of the business center through April
1998. Full Sail's lease term with the Joint Venture is for 33 months (April 1998
to December 2000).
Subsequent to December 31, 1995, a new six-year lease was signed at Lakeshore
Business Center Phase II for approximately 7,000 square feet. As a result of the
new lease, the L/U II Joint Venture has a commitment for approximately $105,000
of tenant finish improvements, of which the Partnership's proportionate share is
approximately $19,000 or 18%.
The Partnership had no other material commitments for tenant improvements as of
December 31, 1995.
The Partnership is engaged solely in the business of developing, constructing,
owning and operating residential apartments and commercial real estate. A
presentation about industry segments is not applicable.
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to invest in real property, which was either under
development or proposed for development, on which it would develop, construct,
own and operate apartment complexes, business parks, and retail, industrial and
office buildings. The Partnership properties are in a condition suitable for
their intended use.
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Items 1. and 2. Business and Properties - Continued
General - Continued
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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. Based on current market conditions, the Partnership
presently does not expect to sell any of the Partnership's properties in the
next 12 months. The General Partner of the Partnership is currently exploring
the marketability of certain of its properties, and has not yet determined if
any of the properties might be sold in the next 12 months. Additionally the
outparcel building sites owned by the L/U II Joint Venture are being marketed
for sale. The Joint Venture currently has a contract for the sale of .7 acres of
this land for $175,000.
Commonwealth Business Center Phase I
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Base annual rents, which exclude the cost of utilities, currently range from
$7.97 to $11.83 per square foot for ground floor office space, $3.97 to $5.59
per square foot for ground floor warehouse space and $7.32 to $10.72 per square
foot for mezzanine office space. The average base annual rental for all space
leased as of December 31, 1995 was $8.16. Space is ordinarily leased for between
three and five years with the majority of current square footage being leased
for a term of five years (1). Current leases terminate between 1996 and 2004.
Several of the leases provide for renewal options ranging from two to 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 common area expenses, insurance and real estate
taxes. As of December 31, 1995, there were 11 tenants leasing office and
warehouse space aggregating approximately 48,613 square feet of rentable area
(2). The tenants who occupy Commonwealth Business Center Phase I are
professional service oriented organizations. The principal
occupations/professions practiced include a stockbrokerage house, food service
specialists, insurance and environmental engineering. One tenant leases more
than 10% of Commonwealth Business Center Phase I's rentable area: Mid-America
Data Processing, Inc. (33.8%). The occupancy levels at the business center as of
December 31 were 86% (1995), 82% (1994), 75% (1993), 77% (1992) and 84% (1991).
The following table contains approximate data concerning the leases in effect on
December 31, 1995.
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(2) Rental Options
---- ---------- ------- ------ -------
Mid-America Data
Processing, Inc. 2004 19,101 (33.8%) $304,116 (51.5%) None
(1) Excluding the Mid-America Data Processing, Inc. current lease which is for
10 years.
(2) Rentable area includes only ground square feet (office and warehouse space).
- 7 -
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Items 1. and 2. Business and Properties - Continued
Commonwealth Business Center Phase I - Continued
- ------------------------------------------------
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area(1) Rental Options
------- ---------- ------- ------ -------
3 1996 8,652 (15.2%) $ 71,139 (12.0%) 1 Three-Year
4 1997 12,009 (21.3%) $ 99,585 (16.8%) 2 Two-Year
None 1998 -- -- --
1 1999 5,224 ( 9.2%) $ 79,692 (13.5%) 2 Three-Year
2 2000 3,627 ( 6.4%) $ 35,964 ( 6.1%) (2)
(1) Rentable area includes only ground square feet (office and warehouse
space).
(2) 2 Three-Year and 1 Five-Year.
Plainview Point Office Center Phases I and II
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Except as indicated in the table below and on page 9, base annual rents, which
include the cost of utilities, currently range from $11.50 to $13.40 per square
foot. The average base annual rental as of December 31, 1995 was approximately
$11.91 per square foot. Office space is ordinarily leased for between two to
five years with the majority of current square footage being leased for a term
of three years (3). Current leases terminate between 1996 and 2006. One lease
provides for a renewal option of five years at a rate which is negotiated
between lessor and lessee. All leases provide for tenants to contribute toward
the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. As of December 31, 1995, there were 10 tenants
leasing office space aggregating approximately 47,581 square feet of rentable
area. The tenants who occupy Plainview Point Office Center Phases I and II are
professional service oriented organizations. The principal
occupations/professions practiced include a business school, state lottery
management, telemarketing services and respiratory therapy services. Three
tenants lease more than 10% of Plainview Point Office Center's rentable area:
ICT Group, Inc. (10.8%), Kentucky Lottery Corporation (11.4%) and ITT
Educational Services, Inc. (36.2%). The occupancy levels at the office center as
of December 31 were 85% (1995), 74% (1994), 43% (1993), 40% (1992) and 56%
(1991).
The following table contains approximate data concerning the leases in effect on
December 31, 1995.
Major Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
ICT Group, Inc. 1998 6,031 (10.8%) $ 70,524 (13.3%) None
Kentucky Lottery
Corporation 1997 6,374 (11.4%) $ 73,296 (13.8%) None
ITT Educational
Services, Inc. 2004 20,232 (36.2%) $204,950 (38.7%)(4) 1 Five-Year
(3) Excluding the ITT Educational Services, Inc. current lease which is for 10
years and the Independent Life and Accident Insurance lease which is for
10 1/2 years.
(4) The lease provides that the tenant will pay its own electricity and thus
the base rent is below $11.91.
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Items 1. and 2. Business and Properties - Continued
Plainview Point Office Center Phases I and II - Continued
- ---------------------------------------------------------
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
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2 1996 5,187 ( 9.3%) $ 60,084 (11.3%) None
2 1997 2,324 ( 4.2%) $ 29,637 ( 5.6%) None
1 1998 936 ( 1.7%) $ 11,700 ( 2.2%) None
1 1999 2,338 ( 4.2%) $ 29,225 ( 5.5%) None
None 2000-2005 -- -- None
1 2006 4,159 ( 7.5%) $ 49,908 ( 9.4%) None
The Willows of Plainview Phase I
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Units at The Willows of Plainview Phase I include one and two-bedroom loft and
deluxe apartments and two-bedroom townhomes. All units have wall-to-wall
carpeting, individually controlled heating and air conditioning, dishwashers,
ranges, refrigerators and garbage disposals. All units, except one-bedroom
lofts, have washer/dryer hook-ups. The one-bedroom lofts have stackable washers
and dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, pool, whirlpool and tennis courts.
Monthly rental rates at The Willows of Plainview Phase I start at $599 for
one-bedroom apartments, $849 for two-bedroom apartments and $939 for two-bedroom
townhomes, with additional monthly rental amounts for special features and
locations. Tenants pay all costs of heating, air conditioning and electricity.
Most leases are for a period of one year. Units will be rented in some cases,
however, on a shorter term basis at an additional charge. The occupancy levels
at the apartment complex as of December 31 were 91% (1995), 87% (1994), 87%
(1993),85% (1992) and 86% (1991).
The Willows of Plainview Phase II
- ---------------------------------
See the discussion under The Willows of Plainview Phase I. Monthly rental rates
at The Willows of Plainview Phase II start at $599 for one-bedroom apartments,
$849 for two-bedroom apartments and $949 for two-bedroom townhomes, with
additional monthly rental amounts for special features and locations. The
occupancy levels at the apartment complex as of December 31 were 94% (1995), 93%
(1994), 91% (1993), 90% (1992) and 85% (1991).
Golf Brook Apartments
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Units at Golf Brook Apartments include two and three bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, pool and tennis courts.
Monthly rental rates at Golf Brook Apartments start at $1,100 for two-bedroom
apartments and $1,320 for three-bedroom apartments, with additional monthly
rental amounts for special features and locations. Tenants pay all costs of
heating, air conditioning and electricity. Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional charge. The occupancy levels at the apartment complex as of December
31 were 91% (1995), 93% (1994), 91% (1993), 94% (1992) and 87% (1991).
- 9 -
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Items 1. and 2. Business and Properties - Continued
Plainview Point III Office Center
- ---------------------------------
Base annual rents, which include the cost of utilities, range from $14.25 to
$15.00 per square foot for first and second floor office space and $13.00 per
square foot for lower level office space. The average base annual rental for all
types of space leased as of December 31, 1995 was $14.23 per square foot. Office
space is ordinarily leased for between two and six years with the majority of
current square footage being leased for a term of five and one-half years.
Current leases terminate between 1996 and 2001. Some leases provide for renewal
options of between two and five years at rates which are based upon increases in
the consumer price index and/or are negotiated between lessor and lessee. All
leases provide for tenants to contribute toward the payment of increases in
common area maintenance expenses, insurance, utilities and real estate taxes. As
of December 31, 1995, there were six tenants leasing space aggregating
approximately 40,180 square feet of rentable area. The tenants who occupy
Plainview Point III Office Center are professional service oriented
organizations. The principal occupations/professions practiced include real
estate and insurance. Three tenants lease more than 10% of the office center's
rentable area: The Prudential Company of America (10.4%), Underwriters Safety &
Claims, Inc. (16.6%) and RE/MAX Properties East, Inc. (22.5%). The occupancy
levels at the office center as of December 31 were 91% (1995), 91% (1994), 87%
(1993), 95% (1992) and 96% (1991).
The following table contains approximate data concerning the leases in effect on
December 31, 1995.
Major Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
The Prudential Company
of America 1997 6,474 (10.4%) $ 95,964 (16.8%) 1 Five-Year
Underwriters Safety &
Claims, Inc. 2001 10,343 (16.6%) $134,460 (23.5%) None
RE/MAX Properties East,
Inc. 1999 14,001 (22.5%) $204,000 (35.7%) 1 Two-Year
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- ---- ------ -------
2 1996 7,223 (11.6%) $106,452 (18.6%) None
1 1997 2,139 ( 3.4%) $ 31,008 ( 5.4%) 1 Three-Year
Blankenbaker Business Center 1A
- -------------------------------
Prudential Service Bureau, Inc. has leased 100% of Blankenbaker Business Center
1A. The annual base rent, which does not include the cost of utilities, is $7.89
per square foot for ground floor office space and $7.10 per square foot for
second floor office space. The average base annual rental for all types of space
leased as of December 31, 1995 was $7.48. The lease term is for 11 years and
expires in July 2005. Prudential Service Bureau, Inc. is a professional service
oriented organization which deals in insurance claim processing. The lease
provides for the tenant to contribute toward the payment of common area
expenses, insurance and real estate taxes. The occupancy level at the business
center as of December 31, 1995, 1994, 1993, 1992 and 1991 was 100%.
- 10 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Blankenbaker Business Center 1A - Continued
- -------------------------------------------
The following table contains approximate data concerning the lease in effect as
of December 31, 1995:
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(1) Rental Options
---- ---------- ------- ------ -------
Prudential Service
Bureau, Inc. 2005 48,463 (100%) $752,787 (100%) None
(1) Rentable area includes only ground floor square feet.
Lakeshore Business Center Phase I
- ---------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$7.71 to $12.01 per square foot for first floor office space, $5.69 to $7.50 per
square foot for first floor service space and $8.75 to $11.93 per square foot
for second floor office space. The average base rental for all space leased as
of December 31, 1995 was $9.96. Space is ordinarily leased for between one and
eight years with the majority of current square footage being leased for a term
of five years. Current leases expire between 1996 and 2000. All leases provide
for tenants to contribute toward the payment of common area expenses, insurance
and real estate taxes. As of December 31, 1995, there were 35 tenants leasing
office space (first and second floor) and service space aggregating
approximately 95,069 square feet of rentable area. The tenants who occupy
Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include
healthcare services, financial services, engineering and management offices for
both a cellular communication chain and a soft drink company. One tenant leases
more than 10% of Lakeshore Business Center Phase I's rentable area: U.S.
Homecare Infusion Therapy Products of Florida (11.7%). The occupancy levels at
the business center as of December 31 were 92% (1995), 80% (1994), 58% (1993),
55% (1992) and 52% (1991).
The following table contains approximate data concerning the leases in effect on
December 31, 1995.
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
U.S. Homecare Infusion
Therapy Products of
Florida 1998 12,081 (11.7%) $135,912 (14.3%) (2)
(2) Tenant has option to renew its lease for an unspecified period of time.
- 11 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Lakeshore Business Center Phase I - Continued
- ---------------------------------------------
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- ---- ------ -------
8 1996 13,153 (12.7%) $129,384 (13.7%) (1)
8 1997 16,249 (15.7%) $153,120 (16.1%) 2 Two-Year
7 1998 12,960 (12.7%) $125,736 (13.4%) None
7 1999 32,400 (31.4%) $330,240 (34.8%) 4 Three-Year
4 2000 8,226 ( 7.9%) $ 72,756 ( 7.7%) 2 Three-Year
(1) 1 Two-Year, 1 Three-Year
Lakeshore Business Center Phase II
- ----------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$8.84 to $14.00 per square foot for first floor office space, $6.52 per square
foot for first floor service space and $9.50 to $14.95 per square foot for
second floor office space. The average base rental for all space leased as of
December 31, 1995 was $11.19. Space is ordinarily leased for between one and ten
years with the majority of current square footage being leased for a term of
five years. Current leases expire between 1996 and 2000. Three leases provide
for renewal options 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 common area expenses, insurance
and real estate taxes. As of December 31, 1995, there were 18 tenants leasing
office space (first and second floor) and service space aggregating
approximately 68,425 square feet of rentable area (2). The tenants who occupy
Lakeshore Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include
healthcare services, insurance, business machine sales and management offices
for the Florida state lottery. One tenant leases more than 10% of Lakeshore
Business Center Phase II's rentable area: Kimberly Home Health Care, Inc.
(10.4%). The occupancy levels at the business center as of December 31 was 72%
(1995), 78% (1994), 75% (1993), 84% (1992) and 71% (1991).
The following table contains approximate data concerning the leases in effect on
December 31, 1995:
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
Kimberly Home
Health Care,
Inc. 1997 10,132 (10.4%) $120,636 (15.8%) None
(2) Excludes approximately 1,218 square feet which is occupied by the business
center's property management and leasing staff.
- 12 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Lakeshore Business Center Phase II - Continued
- ----------------------------------------------
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- -------------- ---------------- ----------
2 1996 6,930 ( 7.1%) $ 85,500 (11.2%) None
4 1997 18,121 (18.7%) $198,366 (25.9%) None
4 1998 16,007 (16.4%) $164,464 (21.5%) (1)
2 1999 3,962 ( 4.1%) $ 39,292 ( 5.2%) None
5 2000 13,273 (13.7%) $157,630 (20.6%) None
(1) 1 Two-Year and 2 Three-Year.
University Business Center Phase II
- -----------------------------------
Philip Crosby Associates, Inc. has leased 100% of University Business Center
Phase II. The annual base rent, which does not include the cost of utilities, is
$13.00 per square foot for first floor office space, $8.50 per square foot for
first floor service space, $14.00 per square foot for second floor office space
and $13.00 per square foot for mezzanine office space. The average base annual
rental for all types of space leased as of December 31, 1995 was $12.43. The
lease term is for seven years and expires in 1998. Philip Crosby Associates,
Inc. is a professional service oriented organization which specializes in
quality control seminars. The lease provides for the tenant to contribute toward
the payment of common area expenses, insurance and real estate taxes. The
occupancy level at the business center as of December 31, 1995, 1994, 1993, 1992
and 1991 was 100%.
The following table contains approximate data concerning the lease in effect as
of December 31, 1995.
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(2) Rental Options
---- ---------- ------- ------ -------
Philip Crosby
Associates, Inc. 1998 75,975 (100%) $1,072,920 (100%) 1 Five-Year
(2) Rentable area includes only first floor (office and service) square feet
and second floor office square feet.
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
- -----------------------
Commonwealth Business
Center Phase I $3,982,857 $.011410 $ 36,555
Plainview Point Office
Center Phases I and II 3,392,744 .011410 18,449
(continued next page)
- 13 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
The Willows of
Plainview Phase I $ 7,317,902 $.011410 $ 53,320
Property Owned in Joint
Venture with NTS-
Properties V
- ------------
The Willows of
Plainview Phase II 7,858,570 .011410 59,528
Properties Owned in
Joint Venture with NTS-
Properties VI
- -------------
Golf Brook Apartments 16,100,810 .018950 224,493
Plainview Point III
Office Center 4,246,199 .011410 35,667
Property Owned in Joint
Venture with NTS-
Properties VII and NTS-
Properties Plus Ltd.
- --------------------
Blankenbaker Business
Center 1A 7,356,545 .011410 66,685
Properties Owned
Through Lakeshore/
University II Joint
Venture (L/U II Joint
Venture
- -------
Lakeshore Business
Center Phase I 10,021,413 .027197 138,990
Lakeshore Business
Center Phase II 11,999,046 .027197 128,497
University Business
Center Phase II 7,104,723 .023212 106,191
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
5 - 30 for amenities. The estimated realty taxes on planned renovations,
primarily tenant improvements, is not 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.
- 14 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures
- ----------------------------
NTS Willows Phase II Joint Venture - On September 1, 1984, the Partnership
entered into a joint venture agreement with NTS-Properties V to develop,
construct, own and operate a 144 - unit luxury apartment complex on an 8.29 acre
site in Louisville, Kentucky known as The Willows of Plainview Phase II. The
term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2028.
The Partnership contributed land valued at $800,000 and NTS-Properties V
contributed approximately $7,455,000, the construction and carrying costs of the
apartment complex. No future contributions are anticipated as of December 31,
1995.
The apartment complex is encumbered by permanent mortgages with two insurance
companies. Both loans are secured by a first mortgage on the property. The
outstanding balance of the mortgages at December 31, 1995 is $5,217,824
($3,267,236 and $1,950,588). The mortgages are recorded as a liability of the
Joint Venture. The Partnership's proportionate interest in the mortgages at
December 31, 1995 is $539,523 ($337,832 and $201,691). Both mortgages currently
bear a fixed interest rate of 7.5% and are due December 5, 2003. The outstanding
balance at maturity based on the current rate of amortization would be
$4,449,434 ($2,786,095 and $1,663,339) of which the Partnership's proportionate
share would be $458,292 ($286,968 and $171,324). See Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item 7) for a further
discussion regarding the terms of the debt financing.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (A) the gross receipts from the operations of the
Joint Venture Property (including investment income) for such period plus any
funds released from previously established reserves (referred to in clause (iv)
below), over (B) the sum of (i) all cash operating expenses paid by the Joint
Venture Property during such period in the course of business, (ii) capital
expenditures during such period not funded by capital contributions, loans or
paid out of previously established reserves, (iii) payments during such period
on account of amortization of the principal of any debts or liabilities of the
Joint Venture property and (iv) reserves for contingent liabilities and future
expenses of the Joint Venture Property. Percentage Interest means that
percentage which the capital contributions of a Partner bears to the aggregate
capital contributions of all 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 10%
at December 31, 1995.
- 15 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
NTS Ft. Lauderdale Office Joint Venture - On April 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties V to develop,
construct, own and operate an office warehouse building in Ft. Lauderdale,
Florida known as Lakeshore Business Center Phase I.
The Partnership contributed land valued at $1,752,982 and NTS-Properties V
contributed approximately $9,170,000, the cost of constructing and leasing the
building. On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the newly formed
Lakeshore/University II (L/U II) Joint Venture. For a further discussion of the
Lakeshore/University II Joint Venture, see pages 19 through 21.
NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties VI to develop,
construct, own and operate a 158-unit luxury apartment complex on a 13.15 acre
site in Orlando, Florida known as Golf Brook Apartments Phase I. On January 1,
1987, the joint venture agreement was amended to include Golf Brook Apartments
Phase II, a 37-unit luxury apartment complex located on a 3.069 acre site
adjacent to Golf Brook Apartments Phase I. The term of the Joint Venture shall
continue until dissolved. Dissolution shall occur upon, but not before, the
first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
The Partnership contributed land valued at $1,900,000 with a related note
payable to a bank of $1,200,000. NTS-Properties VI contributed approximately
$15.8 million, the cost of constructing and leasing the apartments.
NTS-Properties VI also contributed funds to retire the $1,200,000 note payable
to a bank. No future contributions are anticipated as of December 31, 1995.
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
- 16 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
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 4%
at December 31, 1995.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties VI to develop, construct, own
and operate an office building in Louisville, Kentucky known as Plainview Point
III Office Center. The terms of the Joint Venture shall continue until
dissolved. Dissolution shall occur upon, but not before, the first to occur of
the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property, unless such
disposition is, in whole or in part, represented by a promissory
note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
The Partnership contributed land valued at $790,000 with an outstanding note
payable to a bank of $550,000 which was secured by the land. NTS-Properties VI
contributed approximately $4.1 million, the cost to construct and lease the
building. NTS-Properties VI also contributed funds to retire the $550,000 note
payable to the bank. No future contributions are anticipated as of December 31,
1995.
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 5%
at December 31, 1995.
- 17 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
Blankenbaker Business Center Joint Venture - On August 16, 1994, the
Blankenbaker Business Center Joint Venture agreement was amended to admit
NTS-Properties IV to the Joint Venture. The Joint Venture was originally formed
on December 28, 1990 between NTS-Properties Plus Ltd. and NTS- Properties VII,
Ltd., affiliates of the general partner, to own and operate Blankenbaker
Business Center 1A and to acquire an approximately 2.49 acre parking lot that
was being leased by the business center from an affiliate of the general
partner. The use of the parking lot is a provision of the tenant's lease
agreement with the business 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 and Parking
Lot and the sale and/or collection of any evidences of
indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
In 1990 when the Joint Venture was originally formed, NTS-Properties VII, Ltd.
contributed $450,000 which was used for additional tenant improvements to the
business center, and contributed $325,000 to purchase the 2.49 acre parking lot.
The additional tenant improvements were made to the business center and the
parking lot was purchased in 1991. NTS-Properties Plus Ltd. contributed
Blankenbaker Business Center 1A together with improvements and personal property
subject to mortgage indebtedness of $4,715,000. During November 1994, this note
payable was replaced with permanent financing in the amount of $4,800,000. For a
further discussion regarding the permanent financing, see Management's
Discussion and Analysis of Financial Condition and Results of Operations (Item
7).
On April 28, 1994, the Joint Venture obtained $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which are associated with
the Prudential Service Bureau, Inc. lease renewal and expansion. For a further
discussion of the lease renewal and expansion, see Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item 7). The
$1,100,000 note bore interest at the Prime Rate + 1 1/2%. In order for the Joint
Venture to obtain the $4,800,000 of permanent financing discussed above, it was
necessary for the Joint Venture to seek an additional Joint Venture partner to
provide the funds necessary for the tenant finish and leasing costs instead of
debt financing. The $1,100,000 note was retired in August 1994. This resulted in
the Joint Venture's debt being at a level where permanent financing could be
obtained and serviced.
On August 16, 1994, NTS-Properties IV contributed $1,100,000 and NTS- Properties
VII, Ltd. contributed $500,000 in accordance with the agreement to amend the
Joint Venture. The need for additional capital by the Joint Venture was a result
of the lease renewal and expansion which was signed April 28, 1994 between the
Joint Venture and Prudential. NTS-Properties
- 18 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
Plus Ltd. was not in a position to contribute additional capital, nor was
NTS-Properties VII, Ltd. in a position to contribute all of the capital required
for this project. NTS-Properties IV was willing to participate in the Joint
Venture and to contribute, together with NTS-Properties VII, Ltd., the capital
necessary with respect to the project. NTS-Properties Plus Ltd. agreed to the
admission of NTS-Properties IV to the Joint Venture, and to the capital
contributions by NTS-Properties IV and NTS-Properties VII, Ltd. with the
knowledge that its joint venture interest would, as a result, decrease. With
this expansion, Prudential now occupies 100% of the business center. No future
contributions are anticipated as of December 31, 1995.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with the respective Percentage Interests. The term Net Cash Flow for
any period shall mean 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 released by the Partners from previously
established reserves (referred to in clause (B) (iv) below), over (B) the sum of
(i) all cash operating expenses paid by the Joint Venture Property during such
period in the course of the business, (ii) capital expenditures paid in cash
during such period, (iii) payments during such period on account of amortization
of the principal of any debts or liabilities of the Joint Venture 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 (B)(i), (ii) and (iii) above shall only be taken into
account to the extent not funded by capital contributions or paid out of
previously established reserves. Percentage Interest means that percentage which
the capital contributions of a Partner bears to the aggregate capital
contributions of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 30%
at December 31, 1995.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
Lakeshore/University II Joint Venture - On January 23, 1995, a new joint venture
known as Lakeshore/University II Joint Venture (L/U II Joint Venture) was formed
among the Partnership and NTS-Properties V, NTS- Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd., affiliates of the general partner of the Partnership,
for purposes of owning Lakeshore Business Center Phases I and II, University
Business Center Phase II and certain undeveloped tracts of land adjacent to the
Lakeshore Business Center development. The table below identifies which
properties were contributed to the L/U II Joint Venture and the respective
owners of such properties prior to the formation of the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
- 19 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
Property Contributing Owner
-------- ------------------
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center Phase II NTS-Properties V and NTS-
Properties Plus Ltd.
The term of the Joint Venture shall continued until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the Real Property and the sale and/or
collection of any evidences of indebtedness received in connection
therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
Each of the properties were contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages have been recorded
on Lakeshore Business Center Phase I in the amount of $5,500,000, and on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture. In addition to the above, the Partnership
also contributed $750,000 to the L/U II Joint Venture. As a result of the
valuation of the properties contributed to the L/U II Joint Venture, the
Partnership obtained an 18% partnership interest in the joint venture.
The properties of the L/U II Joint Venture are encumbered by notes payable to
banks as follows:
Note Balance
at 12/31/95 Encumbered Property
------------ -------------------
$9,204,000 Lakeshore Business Center Phase II
$5,740,000 University Business Center Phase II
$1,234,000 Outparcel building sites (3.8 acres)
$ 468,333 Outparcel building sites (3.8 acres)
$ 340,000 Outparcel building sites (2.4 acres)
The notes are recorded as liabilities of the Joint Venture. The Partnership's
proportionate interest in the notes at December 31, 1995 is $3,032,060
($1,642,914, $1,024,590, $220,269, $83,597 and $60,690). The notes bear a fixed
interest rate of 10.6% and are due January 31, 1998. See Management's Discussion
and Analysis of Financial Condition and Results of Operations (Item 7) for a
further discussion regarding the terms of the debt financing.
- 20 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Ventures - Continued
- ----------------------------------------
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B)(iv) below), over (B) the sum of (i) all cash
operating expenses paid by the Joint Venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the Joint Venture and (iv) reserves for contingent
liabilities and future expenses of the Joint Venture, as established by the
Partners; provided, however, that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 18%
at December 31, 1995.
The Partnership had no liability for funding losses of the joint venture as of
December 31, 1995.
Competition
- -----------
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents, amenities and service provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1995, there are no properties under construction
in the respective vicinities in which the properties are located except for the
following: In the vicinity of Golf Brook Apartments, there are 240 apartment
units currently under construction which are scheduled to be completed during
the second quarter of 1996. At this time it is unknown the effect these new
units will have on occupancy at Golf Brook Apartments. The Partnership has not
commissioned a formal market analysis of competitive conditions in any market in
which it owns properties, but relies upon the market condition knowledge of the
employees of NTS Development Company who manage and supervise leasing for each
property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates IV, 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 IV. 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 $186,176
for the year ended December 31, 1995. $122,736 was received from commercial
properties and $63,440 was received from residential properties. The fee is
equal to 6% of gross revenues from commercial properties and 5% of gross
revenues from residential properties.
- 21 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Management of Properties - Continued
- ------------------------------------
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was initially for five years, and thereafter for succeeding one-year
periods, unless cancelled. The Agreement is subject to cancellation by either
party upon sixty days written notice. As of December 31, 1995, the Management
Agreement is still in effect.
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 by the Partnership of the
General Partner for liability resulting from errors in judgement or certain acts
or omissions. The General Partner and its affiliates retain a free right to
compete with the Partnership's properties including the right to develop
competing properties now and in the future in addition to those existing
properties which may compete directly or indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than that 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.
- 22 -
<PAGE>
Item 3. Legal Proceedings
The litigation originally instituted by an investor in the Partnership against
her investment advisor and involving claims between the investment advisor and
the Partnership, its general partner, and NTS-Properties V, an affiliate of the
general partner of the Partnership, and its general partner has been settled. At
a settlement conference before the Court (U.S.D.C., S.D. NY), the parties agreed
on a confidential basis to settle the litigation, and any and all other claims
of Third-Party Plaintiffs in exchange for the payment by the Partnership and
NTS-Properties V of the sum of $45,000 each.
Item 4. Submission of Matters to a Vote of Security Holders
None.
- 23 -
<PAGE>
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.
The Partnership had 2,847 limited partners as of February 29, 1996. Cash
distributions and allocations of income and loss are made as described in Note
1C to the Partnership's 1995 financial statements.
Annual distributions totalling $37.00 (1995), $11.58 (1994) and $11.44 (1993)
were paid per limited partnership unit. 1995 distributions include a $25 per
unit special distribution from the Partnership's cash reserves. Quarterly
distributions are determined based on current cash balances, cash flow being
generated by operations and cash reserves needed, as determined by the general
partner, for future leasing costs, tenant finish costs and capital improvements.
Distributions were paid quarterly as follows:
1995 1994 1993
---------- ---------- ---------
First quarter $28.00 $ 2.86 $ 2.86
Second quarter 3.00 2.86 2.86
Third quarter 3.00 2.86 2.86
Fourth quarter 3.00 3.00 2.86
------ ------ ------
$37.00 $11.58 $11.44
====== ====== ======
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1995, 1994 and 1993.
Cash
Net Loss Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $(422,220) $1,100,565 $1,100,565
1994 (303,153) 344,447 344,447
1993 (261,903) 340,282 340,282
General Partner:
1995 $ (4,265) $ 11,117 $ 11,117
1994 (3,062) 3,479 3,479
1993 (2,645) 3,438 3,438
- 24 -
<PAGE>
<TABLE>
Item 6. Selected Financial Data
Years ended December 31, 1995, 1994, 1993, 1992 and 1991.
<CAPTION>
1995 1994 1993 1992 1991
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other income $ 3,285,430 $ 2,595,299 $ 2,184,317 $ 2,302,901 $ 2,223,278
Total expenses (3,711,915) (2,901,514) (2,448,865) (2,274,943) (2,515,278)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (426,485) $ (306,215) $ (264,548) $ 27,958 $ (292,000)
============ ============ ============ ============ ============
Net income (loss) allocated to:
General partner $ (4,265) $ (3,062) $ (2,645) $ 280 $ (2,920)
Limited partners $ (422,220) $ (303,153) $ (261,903) $ 27,678 $ (289,080)
Net income (loss) per
limited partnership unit $ (14.19) $ (10.19) $ (8.80) $ .93 $ (9.72)
Weighted average number
of limited partnership
units 29,745 29,745 29,745 29,745 29,745
Cumulative net income
(loss) allocated to:
General partner $ 3,868 $ 8,133 $ 11,195 $ 13,840 $ 13,560
Limited partners $ 382,819 $ 805,039 $ 1,108,192 $ 1,370,095 $ 1,342,417
Cumulative taxable income
(loss) allocated to:
General partner $ (24,486) $ (20,830) $ (14,278) $ (9,650) $ (8,381)
Limited partners $ (2,424,353) $ (2,062,388) $ (1,413,707) $ (955,538) $ (829,859)
Distributions declared:
General partner $ 11,117 $ 3,479 $ 3,438 $ 5,163 $ 10,053
Limited partners $ 1,100,565 $ 344,447 $ 340,282 $ 511,175 $ 995,268
Cumulative distributions
declared to:
General partner $ 216,002 $ 204,885 $ 201,406 $ 197,968 $ 192,805
Limited partners $ 21,384,794 $ 20,284,229 $ 19,939,782 $ 19,599,500 $ 19,088,325
At year end:
Land, buildings and
amenities, net $ 14,617,818 $ 11,974,200 $ 9,808,367 $ 10,251,046 $ 10,757,838
Total assets $ 16,645,788 $ 15,483,541 $ 15,242,567 $ 11,537,027 $ 12,112,817
Mortgages and notes
payable $ 11,592,641 $ 8,895,313 $ 8,132,325 $ 3,883,000 $ 3,883,000
</TABLE>
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.
- 25 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
Percentage
Ownership at
12/31/95 1995 1994 1993
------------ ---- ---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center 100% 86% 82% 75%
Phase I
Plainview Point Office Center 100% 85% 74% 43%
Phases I and II
The Willows of Plainview Phase I 100% 91% 87% 87%
Properties Owned in Joint Venture
with NTS-Properties V
- ---------------------
The Willows of Plainview Phase II 10% 94% 93% 91%
Lakeshore Business Center Phase I N/A See 80% 58%
below
(2)
Properties Owned in Joint Venture
with NTS-Properties VI
- ----------------------
Golf Brook Apartments 4% 91% 93% 91%
Plainview Point III Office Center 5% 91% 91% 87%
Property Owned in Joint Venture
with NTS-Properties VII, Ltd. and
NTS-Properties Plus Ltd.
- ------------------------
Blankenbaker Business Center 1A 30% 100% 100% N/A
(1) (1)
Properties Owned Through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
- ------------------------------
Lakeshore Business Center Phase I 18% 92% See See
above above
(2) (2)
Lakeshore Business Center Phase II 18% 72% 78% 75%
(3) (3)
University Business Center 18% 100% 100% 100%
Phase II (3) (3)
(1) The Partnership acquired an interest in this property during the third
quarter of 1994. See page 32 for a discussion regarding this capital
contribution.
(2) During the first quarter of 1995, the Partnership's ownership interest in
Lakeshore Business Center Phase I changed. See pages 32 and 33 for a
discussion regarding this change.
(3) As of December 31, 1994 and 1993, the Partnership did not have an
interest in this property. See pages 32 and 33 for a discussion regarding
the change which occurred during the first quarter of 1995.
- 26 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1995, 1994 and 1993 were as follows:
Percentage
Ownership
at 12/31/95 1995 1994 1993
----------- ---------- ---------- ----------
Wholly-Owned Properties
- -----------------------
Commonwealth Business
Center Phase I 100% $ 618,041 $ 565,572 $ 517,022
Plainview Point Office
Center Phases I and II 100% $ 462,855 $ 324,433 $ 267,383
The Willows of Plainview
Phase I 100% $1,043,360 $1,060,995 $ 976,437
Properties Owned in Joint
Venture with NTS-
Properties V
- ------------
The Willows of Plainview
Phase II 90% $ 115,380 $ 118,399 $ 110,332
Lakeshore Business Center
Phase I N/A $ 14,282 $ 163,127 $ 135,145
(1)
Properties Owned in Joint
Venture with NTS-
Properties VI
- -------------
Golf Brook Apartments 4% $ 112,549 $ 108,795 $ 105,868
Plainview Point III
Office Center 5% $ 22,351 $ 35,080 $ 35,940
Property Owned in Joint
Venture with NTS-
Properties VII, Ltd. And
NTS-Properties Plus Ltd.
- ------------------------
Blankenbaker Business
Center 1A 30% $ 275,378 $ 87,253 N/A (2)
(2)
(continued on next page)
Revenues shown in the table above and on page 28 for properties owned through a
joint venture represent only the Partnership's percentage interest in those
revenues.
(1) During the first quarter of 1995, the Partnership's ownership interest in
Lakeshore Business Center Phase I changed. The Partnership's
proportionate share of rental and other income from January 23, 1995 to
December 31, 1995 is reflected on page 28. See pages 32 and 33 for a
discussion regarding this change.
(2) The Partnership acquired an interest in this property during the third
quarter of 1994. See page 32 for a discussion regarding this capital
contribution.
- 27 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Percentage
Ownership
at 12/31/95 1995 1994 1993
----------- ---------- -------- --------
Properties Owned through
Lakeshore/University II
Joint Venture (L/U II
Joint Venture)
- --------------
Lakeshore Business Center
Phase I 18% $ 191,785 N/A (1) N/A (1)
Lakeshore Business Center
Phase II 18% $ 192,167 N/A (2) N/A (2)
University Business
Center Phase I 18% $ 198,064 N/A (2) N/A (2)
(1) During the first quarter of 1995, the Partnership's ownership interest in
Lakeshore Business Center Phase I changed. Rental and other income from
January 1, 1995 to January 22, 1995 and for 1994 and 1993 is reflected on
page 27. See pages 32 and 33 for a discussion regarding this change.
(2) During 1994 and 1993, the Partnership did not have an interest in this
property. See pages 32 and 33 for a discussion regarding the change which
occurred during the first quarter of 1995.
The 4% increase in year-ending occupancy at Commonwealth Business Center Phase I
from 1994 to 1995 is attributed to three new leases totalling approximately
6,000 square feet. Partially offsetting the new leases are two tenant move-outs
at the end of the lease terms totalling approximately 2,300 square feet and one
tenant, who had occupied 1,600 square feet, vacating the premises prior to the
end of the lease term due to bankruptcy. There was no accrued income connected
with this lease. Average occupancy has increased from 75% in 1994 to 81% in
1995. Rental and other income at Commonwealth Business Center Phase I increased
from 1994 to 1995 as a result of the increase in average occupancy and an
increase in common area expense reimbursements. Tenants at Commonwealth Business
Center Phase I reimburse the Partnership for common area expenses as part of the
lease agreements. Partially offsetting the increase in rental and other income
is an increase in the provision for doubtful accounts.
The 7% increase in year-ending occupancy at Commonwealth Business Center Phase I
from 1993 to 1994 is attributed to six new leases totalling approximately 17,000
square feet which includes an expansion of approximately 4,500 square feet by a
major tenant in the business center. Partially offsetting the new leases are
seven tenant move-outs totalling approximately 12,800 square feet. Of the total
move-outs, approximately 7,200 square feet represents four tenants who vacated
at the end of the lease terms. Approximately 4,000 square feet of the total
move-outs represents two tenants who vacated prior to the end of the lease terms
but continue to make monthly rental payments in accordance with the terms of the
lease. The remaining 1,600 square feet represents a tenant who vacated and
ceased making rental payments in breach of the lease terms due to bankruptcy.
There was no accrued income connected with this lease. Average occupancy for the
year decreased from 77% in 1993 to 75% in 1994.
- 28 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Rental and other income at Commonwealth Business Center Phase I increased from
1993 to 1994 as a result of an increase in common area expense reimbursements
and a decrease in the provision for doubtful accounts. The increase in rental
and other income from 1993 to 1994 at Commonwealth Business Center Phase I is
not consistent with the decrease in average occupancy as a result of two tenants
(who had occupied 4,000 square feet) who vacated prior to the end of the lease
terms but continue to make monthly rental payments.
The 11% increase in year-ending occupancy at Plainview Point Office Center
Phases I and II from 1994 to 1995 is attributed to three new leases totalling
approximately 6,100 square feet. Included in this total is an expansion of
approximately 1,000 square feet by an existing tenant. There were no tenant
move-outs during 1995. Average occupancy increased from 57% in 1994 to 77% in
1995. Rental and other income at Plainview Point Office Center Phases I and II
increased in 1995 as compared to 1994 as a result of the increase in average
occupancy and as a result of increased rental rates on lease renewals.
The 31% increase in year-ending occupancy at Plainview Point Office Center
Phases I and II from 1993 to 1994 can be attributed to four new leases totalling
approximately 18,000 square feet. Included in this total is an expansion of
approximately 14,000 square feet by ITT Educational Services, Inc. ("ITT"), a
major tenant in the office center. In accordance with ITT's lease, the lease
term was automatically extended for a period of 10 additional years from the
date of expansion (July 1994). Partially offsetting the new leases is one
tenant, who previously occupied approximately 1,000 square feet, vacating at the
end of the lease term. Average occupancy at Plainview Point Office Center Phases
I and II has increased from 46% in 1993 to 57% in 1994. Rental and other income
at Plainview Point Office Center Phases I and II increased from 1993 to 1994 as
a result of the increase in average occupancy and as a result of the increased
rental rate which ITT is paying in accordance with the terms of the ten-year
lease.
Year-ending occupancy at The Willows of Plainview Phase I increased 4% from 1994
to 1995. However, average occupancy from 1994 to 1995 decreased from 92% to 87%,
respectively. Occupancy at residential properties fluctuate on a continuous
basis. Year-ending occupancy percentages represent occupancy only a specific
date; therefore, it is more meaningful to consider average occupancy percentages
which are representative of the entire year's results. In the opinion of the
General Partner of the Partnership, the decrease in average occupancy from 1994
to 1995 is only a temporary fluctuation and does not represent a downward
occupancy trend. The decrease in rental and other income at The Willows of
Plainview Phase I from 1994 to 1995 is a result of the decrease in average
occupancy.
Year-ending occupancy at The Willows of Plainview Phase I remained constant
(87%) from 1993 to 1994. Average occupancy increased from 85% (1993) to 92%
(1994). Rental and other income at The Willows of Plainview Phase I increased
from 1993 to 1994 as a result of the 7% increase in average occupancy, increased
fees collected upon early lease terminations and an increase in rental rates.
The Willows of Plainview Phase II's year-ending occupancy increased from 93%
(1994) to 94% (1995); however, average occupancy from 1994 to 1995 decreased
from 94% to 92%, respectively. In the opinion of the General Partner of the
Partnership, the decrease in average occupancy from 1994 to 1995 is only a
temporary fluctuation and does not represent a downward occupancy trend. This
decrease in average occupancy at The Willows of Plainview Phase II resulted in a
decrease in rental and other income.
- 29 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The Willows of Plainview Phase II's year-ending occupancy increased from 91%
(1993) to 93% (1994). Average occupancy increased from 89% in 1993 to 94% in
1994. Rental and other income at The Willows of Plainview Phase II increased
from 1993 to 1994 as a result of the increase in average occupancy and an
increase in rental rates. The increase in rental and other income from 1993 to
1994 is partially offset by a decrease in income from fully furnished units.
Fully furnished units are apartments which rent at an additional premium above
base rent. It is possible for occupancy to increase and revenues to decrease
when the number of fully furnished units has decreased.
The 12% increase in year-ending occupancy at Lakeshore Business Center Phase I
from 1994 to 1995 can be attributed to 11 new leases totalling approximately
19,000 square feet, which includes approximately 6,400 square feet in expansions
by two current tenants. The new leases and expansions are partially offset by
four tenant move-outs, who vacated at the end of the lease terms, totalling
approximately 6,100 square. Average occupancy increased from 70% (1994) to 84%
(1995). Rental and other income at Lakeshore Business Center Phase I increased
from 1994 to 1995 primarily as a result of the increase in average occupancy and
an increase in common area expense reimbursements. The increase in rental and
other income can also be attributed to the Partnership's increased ownership in
Lakeshore Business Center Phase I. (See pages 32 and 33 for a discussion
regarding the change.) Partially offsetting the increase in rental and other
income at Lakeshore Business Center I is an increase in the provision for
doubtful accounts.
During January 1996, Lakeshore Business Center Phase I's occupancy increased to
98% as a result of approximately 6,400 square feet of expansions by two current
tenants.
The 22% increase in year-ending occupancy at Lakeshore Business Center Phase I
from 1993 to 1994 can be attributed to twelve new leases totalling approximately
32,700 square feet which includes approximately 3,100 square feet in expansions
by three current tenants. Included in the new leases is a five year
approximately 9,400 square foot lease which commenced during the second quarter
of 1994 and a five year approximately 6,400 square foot lease which commenced
during the third quarter of 1994. The new leases and expansions are partially
offset by an approximately 1,200 square foot downsizing by an existing tenant
and four tenants, who occupied approximately 7,300 square feet, vacating at the
end of the lease terms. In addition to the downsizing and move-outs, the
business center's leasing office of approximately 1,500 square feet was
relocated to Lakeshore Business Center Phase II (during 1994 the property was
owned by NTS- Properties Plus Ltd., an affiliate of the general partner of the
Partnership). The leasing office was relocated in order to accommodate a new
lease, approximately 9,400 square feet (as discussed above). Average occupancy
at Lakeshore Business Center Phase I increased from 56% in 1993 to 70% in 1994.
Rental and other income at Lakeshore Business Center Phase I increased from 1993
to 1994 primarily due to the increase in average occupancy. Another factor
contributing to the increase in rental and other income from 1993 to 1994 is the
fact that in 1993 accrued income was written off which related to two tenants
who had vacated and ceased making rental payments in breach of the lease terms
due to bankruptcies. There were no similar write-offs in 1994.
Golf Brook Apartments' year-ending occupancy decreased 2% from 1994 to 1995
while average occupancy remained constant at 94% in 1994 and 1995. Rental and
other income at Golf Brook Apartments increased from 1994 to 1995 as a result of
increased rental rates, decreased rental concessions and increased charges to
applicants for credit checks.
- 30 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Golf Brook Apartments' year-ending occupancy increased 2% from 1993 to 1994.
Average occupancy remained constant at 94% from 1993 to 1994. Rental and other
income at Golf Brook Apartments increased from 1993 to 1994 as a result of
increased rental rates, decreased rent concessions and increased fees collected
upon early lease terminations.
Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and
1994 as a result of the following new leases and tenant move-outs. New leases
during 1995 consist of a 10,343 square foot 63-month lease (took occupancy
September 1, 1995) and a 16,727 square foot five-year lease (took occupancy
December 27, 1995). The leases are offset by two tenant move-outs totalling
approximately 26,000 square feet. Of this total, 16,400 square feet represents a
tenant who vacated the office center at the end of the lease term due to the
company's decision to consolidate its Louisville processing center with one
located in another city. The tenant occupied 27% of the office center's rentable
area. Approximately 9,600 square feet of the total move-outs represents a tenant
who vacated the premises January 31, 1995. The tenant's lease was on a
month-to-month basis at the time of move- out. The tenant's original lease term
was for a period of four years. The tenant occupied approximately 16% of the
office center's rentable area. Average occupancy decreased from 92% (1994) to
55% (1995). Rental and other income decreased at Plainview Point III Office
Center from 1995 to 1994 as a result of the decrease in average occupancy during
1995.
During February 1996, a current tenant of Plainview Point III Office Center
expanded its leased space by approximately 4,400 square feet for a period of
seven months. This expansion improved the office center's occupancy to 98%.
The 4% increase in occupancy at Plainview Point III Office Center from 1993 to
1994 can be attributed to one new lease totalling approximately 2,500 square
feet. There were no tenant move-outs during the year. Average occupancy at
Plainview Point III Office Center increased from 83% in 1993 to 92% in 1994. The
change in rental and other income at Plainview Point III Office Center is not
consistent with the change in average occupancy due to the fact that two tenants
vacated (in 1993) prior to the end of the lease terms but continued to make
monthly rental payments.
A wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential Service Bureau, Inc.) has leased 100% of Blankenbaker Business
Center 1A. During 1994, Prudential Service Bureau, Inc. signed a lease renewal
and expansion. The renewal extended the current lease through July 2005. With
the expansion, the tenant occupied 100% of the business center during the third
quarter of 1994. In addition to monthly rent payments, Prudential Service
Bureau, Inc. is obligated to pay substantially all of the operating expenses
attributable to its space.
The 6% decrease in year-ending occupancy at Lakeshore Business Center Phase II
from 1994 to 1995 can be attributed to four tenant move-outs totalling
approximately 9,600 square feet and a downsizing by a current tenant of its
existing space of approximately 6,000 square feet. Two of the move-outs,
totalling approximately 5,800 square feet, represent tenants who vacated the
premises at the end of the lease term. The third tenant, who occupied
approximately 1,400 square feet, vacated the premises and ceased making rental
payments in breach of the lease terms due to bankruptcy. The write-off of
accrued income connected with this lease was not significant. The fourth tenant,
who occupied approximately 2,400 square feet, vacated the premises prior to the
end of the lease term but is continuing to pay rent through the end of the lease
term. Partially offsetting the tenant move- outs are six new leases for a total
of approximately 9,700 square feet. Average occupancy at Lakeshore Business
Center Phase II decreased from 78% (1994) to 76% (1995).
- 31 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Subsequent to December 31, 1995, a new six-year lease was signed at Lakeshore
Business Center Phase II for approximately 7,000 square feet. The tenant is
expected to take occupancy during the second quarter of 1996. With this new
lease, the building's occupancy will increase to 79%.
Lakeshore Business Center Phase II's year-ending occupancy increased 3% from
1993 to 1994 and average occupancy increased from 75% in 1993 to 78% in 1994.
There were no significant new leases or tenant move-outs during 1994. A detail
discussion of the tenant activity has been omitted due to the fact that the
Partnership had no interest in this property during 1994 or 1993.
Philip Crosby Associates, Inc. ("PCA") has leased 100% of University Business
Center Phase II. The lease term is for seven years, and the tenant took
occupancy in April 1991. The tenant has currently sub-leased approximately
50,000 square feet (or 64%) of University Business Center Phase II to two
tenants. Of the total being sub-leased, approximately 41,000 square feet (or
52%) is being leased by Full Sail Recorders, Inc. (a major tenant at University
Business Center Phase I, a neighboring property owned by an affiliate of the
general partner of the Partnership). Prior to December 31, 1995, Full Sail
Recorders, Inc. ("Full Sail") signed a 33 month lease with the L/U II Joint
Venture for the approximately 41,000 square feet it currently sub-leases from
PCA. The lease term commences April 1998 when PCA's lease ends. As part of the
lease negotiations, Full Sail will receive a $200,000 tenant finish allowance in
1996, of which approximately $92,000 will be reimbursed by Full Sail over a
27-month period beginning January 1996. At this time, it is not known whether
PCA or the other sub-lessee will renew the current lease with the business
center when the original lease expires in 1998.
In cases of tenants who cease making rental payments or abandon the premises in
breach of their lease, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical.
As previously disclosed in the Partnership's Form 10-K for the year ended
December 31, 1994, on August 16, 1994, Blankenbaker Business Center Joint
Venture, a joint venture between NTS-Properties VII, Ltd. and NTS-Properties
Plus Ltd., affiliates of the general partner of the Partnership, amended its
joint venture agreement to admit the Partnership to the Joint Venture. In
accordance with the Joint Venture Agreement, the Partnership contributed
$1,100,000 and NTS-Properties VII, Ltd. contributed $500,000. As a result of its
capital contribution, the Partnership obtained a 30% interest in the Joint
Venture. NTS-Properties Plus Ltd.'s interest in the Joint Venture decreased from
69% to 39% as a result of the capital contributions made by NTS-Properties VII,
Ltd. and the Partnership. NTS-Properties VII, Ltd.'s interest in the Joint
Venture remained at 31%.
On January 23, 1995, a new joint venture known as Lakeshore/University II Joint
Venture (L/U II Joint Venture) was formed among the Partnership, NTS- Properties
V, NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of the
general partner of the Partnership, for purposes of owning Lakeshore Business
Center Phases I and II, University Business Center Phase II and certain
undeveloped tracts of land adjacent to the Lakeshore Business Center
development.
- 32 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center NTS-Properties V and NTS-Properties
Phase II Plus Ltd.
Each of the properties were contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages have been recorded
on Lakeshore Business Center Phase I in the amount of $5,500,000, and on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture. In addition to the above, the Partnership
also contributed $750,000 to the L/U II Joint Venture. As a result of the
valuation of the properties contributed to the L/U II Joint Venture, the
Partnership obtained an 18% partnership interest in the joint venture.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties. In the opinion of the General Partner of the
Partnership, the low level of occupancy at Lakeshore Business Center Phase II is
not indicative of trends in the area in which the property is located. Based on
current leasing activity, the General Partner believes the occupancy level of
the property should improve during the next 12 months; however, there is no
guarantee that this will occur.
The General Partner of the Partnership believes that the results of operations
for 1995 and 1994 are not comparable and, therefore, a discussion comparing the
results of operations is not included due to the fact that the Partnership
acquired an interest in the Blankenbaker Business Center Joint Venture on August
16, 1994 as discussed on page 32. Comparisons of the results of operations
between 1995 and 1994 are also difficult as a result of the Partnership's
investment in the L/U II Joint Venture as discussed above. These changes in the
Partnership's investments are permanent changes and will effect future results
of operations.
Interest and other income increased from 1993 to 1994 as a result of increased
cash being available for investment. Additional cash was available as a result
of the permanent financing obtained on The Willows of Plainview Phase I in
November of 1993.
Operating expenses increased from 1993 to 1994 as a result of increased snow
removal costs at all the Partnership's properties except Lakeshore Business
Center Phase I and Golf Brook Apartments which are located in Florida,
- 33 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
increased repair and maintenance costs at Lakeshore Business Center Phase I and
Plainview Point III Office Center, increased exterior painting costs at the
Partnership's residential properties and increased promotional fees. Partially
offsetting the increases in operating expenses are decreased commercial property
legal fees, decreased landscaping costs at all of the Partnership's properties
and decreased renovation costs. The change in operating expenses is net of the
increase caused by the Partnership's capital contribution to the Blankenbaker
Business Center Joint Venture. (See page 32 for a discussion regarding the
capital contribution.)
The increase in operating expenses - affiliated from 1993 to 1994 is due to the
fact that 1994 includes expenses related to Blankenbaker Business Center 1A as a
result of the Partnership's capital contribution to the joint venture. (See page
32 for a discussion regarding the capital contribution.) Another factor
contributing to the increase is an increase in property management salaries at
Lakeshore Business Center I and Plainview Point III Office Center. Partially
offsetting the increase in operating expenses affiliated is a decrease in
leasing salaries at all of the commercial properties except Blankenbaker
Business Center 1A. There were no significant fluctuations at the Partnership's
residential properties. Operating expenses - affiliated are expenses incurred
for services performed by employees of NTS Development Company, an affiliate of
the General Partner of the Partnership.
The write-off of unamortized tenant and building improvements in 1994 relates
mainly to Blankenbaker Business Center 1A (as a result of the expansion and
lease renewal, Prudential occupies 100% of the business center) and Plainview
Point Office Center Phases I and II (as a result of the expansion of ITT, the
office center's major tenant). In both instances, the Partnership agreed to
renovate the area into which the tenants expanded as part of the lease
negotiation. Changes to current tenant 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. In order to complete the renovations, it is sometimes necessary to
replace improvements which had not been fully depreciated. This resulted in a
write-off of unamortized tenant improvements.
The write-off of unamortized tenant and building improvements in 1993 was the
result of a stair replacement at Plainview Office Center Phases I and II. This
expense represents the cost of the original stairs which were not fully
depreciated.
Amortization of capitalized leasing costs decreased from 1993 to 1994 as a
result of a portion of special tenant allowance costs and the costs capitalized
during start-up having become fully amortized.
Interest expense increased from 1993 to 1994 as a result of the increase in the
Partnership's level of debt during the fourth quarter of 1993. See the Liquidity
and Capital Resources section of Item 7 for a discussion regarding the new
financings obtained in November 1993. Another factor contributing to the
increase in interest expense from 1993 to 1994 is the fact that the Partnership
acquired an interest in the Blankenbaker Business Center Joint Venture during
the third quarter of 1994. The interest expense for 1994 includes the
Partnership's proportionate share of the joint venture's interest expense. (See
page 32 for a discussion regarding the Partnership's capital contribution.) See
the Liquidity and Capital Resources section of this item for details regarding
the Partnership's debt.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between years will differ from the fluctuations of
management fee expense.
- 34 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Real estate taxes increased from 1993 to 1994 primarily due to the fact that
1994 includes the Partnership's proportionate share of Blankenbaker Business
Center 1A's real estate taxes. The increase in real estate taxes is also due to
the fact that 1993 includes a real estate tax refund at Lakeshore Business
Center Phase I which was not duplicated in 1994. (NTS-Properties IV's
proportionate share of the refund was approximately $2,400.) The refund was the
result of the business center's assessment being lowered subsequent to the
payment of the 1992 real estate taxes. The increase in real estate taxes from
1993 to 1994 is partially offset by a decrease in real estate taxes at Plainview
Point Office Center Phases I and II as a result of a decrease in the property
tax assessment.
The increase in professional and administrative expenses from 1993 to 1994 is
primarily due to the fact that 1994 includes a write-off of unamortized loan
costs which were associated with the Blankenbaker Business Center Joint
Venture's notes payable. The loan fees were expensed due to the fact that the
notes were retired during 1994. The increase in professional and administrative
expenses is also a result of an increase in outside legal fees. These increases
in professional and administrative expenses are partially offset by decreased
taxes expense. 1993 includes $16,800 for additional taxes incurred in connection
with the amendment of certain joint venture tax returns.
Professional and administrative expenses - affiliated decreased from 1993 to
1994 as a result of decreased legal fees and decreased accounting salaries.
Professional and administrative expenses - affiliated are expenses incurred for
services performed by employees of NTS Development Company, an affiliate of the
General Partner.
The increase in depreciation and amortization from 1993 to 1994 is due to the
fact that 1994 includes the Partnership's proportionate share of Blankenbaker
Business Center 1A's depreciation and amortization. (See page 32 for a
discussion regarding the Partnership's capital contribution to the Blankenbaker
Business Center Joint Venture.) Another factor contributing to the increase in
depreciation and amortization is the fact that there has been approximately
$985,000 of assets placed in service since January 1993 (primarily tenant
improvements) at the Partnership's remaining properties. Partially offsetting
the increase in depreciation and amortization is the fact that a portion of the
Partnership's assets have become fully depreciated. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets
which are 5 - 30 years for land improvements, 30 years for buildings, 5 - 30
year for building improvements and 5 - 30 years for amenities. The aggregate
cost of the Partnership's properties for Federal tax purposes is approximately
$25,000,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by (used in) operations was $815,327 (1995), $(27,511) (1994) and
$325,181 (1993). These funds, in conjunction with cash on hand, were used to
make a 4.8% (annualized) distribution of $1,111,682 (1995), a 1.5% (annualized)
distribution of $347,926 (1994) and 1.5% (annualized) distribution of $343,720
(1993). The distribution made during the three months ended March 31, 1995
included a special $751,136 distribution made from the Partnership's cash
reserves. The Partnership does not anticipate making another special
distribution in the near term. The annualized distribution rate is calculated as
a percent of the original capital contribution less a return of capital of
$235.64 per limited partnership unit made from the proceeds of the sale of Sabal
Club Apartments in 1988. The limited partners received 99% and the general
partners received 1% of these distributions. The primary source of future
liquidity and distributions is expected to be derived from cash generated by the
Partnership's properties after adequate cash reserves are established for future
leasing costs, tenant finish costs and capital improvements. Cash
- 35 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
reserves (which are unrestricted cash and equivalents and investment securities
as shown on the Partnership's balance sheet as of December 31) were $681,197,
$2,405,974 and $4,782,578 at December 31, 1995, 1994 and 1993, respectively.
As of December 31, 1995, the Partnership has a mortgage payable with an
insurance company in the amount of $2,677,397. The mortgage payable is due
October 1, 2004, bears interest at a fixed rate of 8.8% and is secured by
Commonwealth Business Center Phase I. Monthly principal payments are based upon
a 10-year amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
As of December 31, 1995, the Partnership had two mortgage loans each with an
insurance company in the amount of $2,043,653 and $1,946,336. Both mortgages
payable are due December 5, 2003, bear interest at a fixed rate of 7% for the
first 60 months and are secured by the land, buildings and amenities of The
Willows of Plainview Phase I. At the end of the 56th month from the date of the
notes (notes dated November 23, 1993), the insurance companies will notify the
Partnership of the interest rate which is their then prevailing interest rate
for loans with a term of five years on properties comparable to the apartments
(the "Modified Rate"). The Partnership will have 30 days to accept or reject the
Modified Rate. If the Modified Rate is rejected by the Partnership, the entire
unpaid principal balance is due with the 60th installment of interest. If the
Partnership accepts the Modified Rate, it becomes effective the 61st month from
the date of the note. Current monthly principal payments on both notes are based
upon a 27-year amortization schedule. If the Partnership accepts the Modified
Rate, the remaining principal balance of both mortgages will be amortized using
a 22-year amortization schedule beginning the 61st month. The outstanding
balance at maturity based on the current rate of amortization would be
$3,367,108 ($1,724,617 and $1,642,491).
As of December 31, 1995, The Willows of Plainview Phase II, an apartment joint
venture between the Partnership and NTS-Properties V, had two mortgage loans
each with an insurance company in the amount of $3,267,236 and $1,950,588. The
mortgages are recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the mortgages as of December 31, 1995 is $539,523
($337,832 and $201,691). Both mortgages are due December 5, 2003, bear interest
at a fixed rate of 7.5% for the first 60 months and are secured by the land,
buildings and amenities of the Joint Venture. At the end of the 56th month from
the date of the notes (notes dated November 23, 1993), the insurance companies
will notify the Joint Venture of the interest rate which is their then
prevailing interest rate for loans with a term of five years on properties
comparable to the apartments (the "Modified Rate"). The Joint Venture will have
30 days to accept or reject the Modified Rate. If the Modified Rate is rejected
by the Joint Venture, the entire unpaid principal balance is due with the 60th
installment of interest. If the Joint Venture accepts the Modified Rate, it
becomes effective the 61st month from the date of the note. Current monthly
principal payments on both notes are based upon a 27-year amortization schedule.
If the Partnership accepts the Modified Rate, the remaining principal balance of
both mortgages will be amortized using a 22-year amortization schedule beginning
the 61st month. The outstanding balance at maturity based on the current rate of
amortization would be $4,449,434 ($2,786,095 and $1,663,339).
As of December 31, 1995, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company (obtained November 1994) in the
amount of $4,500,239. The mortgage is recorded as a liability of the Joint
Venture and is secured by the assets of the Joint Venture. The Partnership's
proportionate interest in the mortgage at December 31, 1995 is $1,353,672. The
mortgage bears interest at a fixed rate of 8.5% and is due November 15, 2005.
Currently monthly principal payments are based upon an 11-year amortization
schedule. At maturity, the mortgage will have been repaid based on the current
rate of amortization.
- 36 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of December 31, 1995, the L/U II Joint Venture had notes payable to banks in
the following amounts: $9,204,000, $5,740,000, $1,234,000, $468,333 and
$340,000. The notes are a liability of the joint venture in accordance with the
Joint Venture Agreement. The Partnership's proportionate interest in the notes
at December 31, 1995 was $1,642,914, $1,024,590, $220,269, $83,597 and $60,690,
respectively. As part of the loan agreements with the banks, the Joint Venture
is required to place in escrow funds for capital expenditures, leasing
commissions and tenant improvements at the properties owned by the Joint
Venture. During the term of the loans, the Joint Venture is required to fund a
total of $200,000 to the escrow account. As of December 31, 1995, the Joint
Venture had met this funding requirement. The notes bear interest at a fixed
rate of 10.6%, are due January 31, 1998 and are secured by the assets of the
joint venture. Principal payments required on the $9,204,000, $5,740,000 and
$1,234,000 notes are as follows:
a) 12 monthly payments of $3,000 each, the first of which was due at
closing. The second through 12th payments are due on the first
day of February through December 1995.
b) 12 monthly payments of $12,000 each, commencing on January 1,
1996 through December 1, 1996.
c) 13 monthly payments of $15,000 each, commencing on January 1,
1997 through January 1, 1998.
d) Balloon payment due at maturity on January 31, 1998.
Subsequent to December 31, 1995, the L/U II Joint Venture submitted an
application with an insurance company for $17.4 million of debt financing. The
proceeds from the loan will be used to pay off the Joint Venture's current debt
financings of approximately $16.9 million. The remaining proceeds will be used
to fund Joint Venture tenant finish improvements, leasing costs and loan closing
costs. The Joint Venture anticipates that the financing will be completed during
mid-1996.
The Partnership's primary plans for its cash reserves are outlined in the
following discussion. The General Partner believes that the Partnership needs to
reserve funds for tenant finish improvements at the Partnership's commercial
properties which will result from future lease negotiations. The General Partner
considers it necessary for the Partnership to retain a cash reserve for future
renovations at the Partnership's properties. A few examples of such renovations
are roof repairs or roof replacement, exterior painting and replacement of
asphalt paving in parking lots. These renovations will be necessary as the
Partnership's properties continue to age.
The majority of the Partnership's cash flow is derived from operating activities
in 1995, cash reserves in 1994 and increased debt level and operating activities
in 1993. Cash flows used in investing activities are for tenant finish
improvements and other capital additions and were funded by operating activities
or cash reserves. Changes to current tenant finish improvements are a typical
part of any lease negotiation. Improvements generally include a revision to the
current floor plan to accommodate a tenant's needs, new carpeting and paint
and/or wallcovering. The extent and cost of these improvements are determined by
the size of the space and whether the improvements are for a new tenant or
incurred because of a lease renewal. Cash flows used in investing activities
also include cash which is being escrowed for capital expenditures, leasing
commissions and tenant improvements at the properties owned by the L/U II Joint
Venture. 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 excess cash. The Partnership intends to hold the securities
until maturity. Cash flows used in financing activities are for
- 37 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
cash distributions, payment of loan costs and principal payments on mortgages
and notes payable. Cash flows provided by financing activities represent an
increase in mortgages payable. The 1995 capital contribution to a joint venture
represents the Partnership's capital contribution to the L/U II Joint Venture
net the Partnership's proportionate interest in the joint venture's capital
contributions. The 1994 capital contribution to a joint venture represents the
Partnership's capital contribution to the Blankenbaker Business Center Joint
Venture net the Partnership's proportionate interest in the joint venture's 1994
third quarter capital contributions. The Partnership utilizes the proportionate
consolidation method of accounting for joint venture properties. The
Partnership's interest in the joint venture's assets, liabilities, revenues,
expenses and cash flows are combined on a line-by-line basis with the
Partnership's own assets, liabilities, revenues, expenses and cash flows. The
Partnership does not expect any material changes in the mix and relative cost of
capital resources except for the following: 1) Interest and principal payments
required by the permanent financing of The Willows of Plainview Phases I and II,
Commonwealth Business Center Phase I and Blankenbaker Business Center 1A as
previously discussed; 2) Interest and principal payments required by the notes
payable of the L/U II Joint Venture; and 3) Renovations and other major capital
expenditures, including tenant finish, which may be required to be funded from
cash reserves if they exceed cash flow from operating activities and the escrow
funds (as discussed on page 37).
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1995, 1994 and 1993.
Cash Return
Net Loss Distributions of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $ (422,220) $1,100,565 $1,100,565
1994 (303,153) 344,447 344,447
1993 (261,903) 340,282 340,282
General Partner:
1995 $ (4,265) $ 11,117 $ 11,117
1994 (3,062) 3,479 3,479
1993 (2,645) 3,438 3,438
As of December 31, 1995, the L/U II Joint Venture had commitments for
approximately $200,000 of tenant finish improvements and leasing costs. The
commitments are the result of an 8,200 square foot new lease and a 7,100 square
foot lease renewal. Both leases are for a period of five years. The
Partnership's proportionate share of these commitments is approximately $36,000
or 18%. As of December 31, 1995, approximately $130,000 had been incurred toward
these commitments, of which the Partnership's proportionate share is
approximately $23,000 or 18%.
As of December 31, 1995, the L/U II Joint Venture also had a commitment for a
$200,000 special tenant finish allowance, of which approximately $92,000 will be
reimbursed by the tenant over a 27-month period beginning in January 1996. This
commitment is the result of lease negotiations with Full Sail Recorders, Inc.
("Full Sail") which currently sub-leases approximately 41,000 square feet from
Philip Crosby Associates, Inc. ("PCA") at University Business Center Phase II.
Full Sail is also a major tenant at University Business Center Phase I, a
neighboring property owned by an affiliate of the general partner of the
Partnership. PCA currently leases 100% of the business center through April
1998. Full Sail's lease term with the Joint Venture is for 33 months (April 1998
to December 2000).
- 38 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Subsequent to December 31, 1995, a new six-year lease was signed at Lakeshore
Business Center Phase II for approximately 7,000 square feet. As a result of the
new lease, the L/U II Joint Venture has a commitment for approximately $105,000
of tenant finish improvements, of which the Partnership's proportionate share is
approximately $19,000 or 18%.
The Partnership had no other material commitments for tenant improvements as of
December 31, 1995.
The primary source of future liquidity and distributions is expected to be
derived from cash generated by the Partnership's operating properties after
adequate cash reserves are established for future leasing and tenant finish
costs. It is anticipated that the cash flow from operations and cash reserves
will be sufficient to meet the needs of the Partnership.
In the next 12 months, the demand on future liquidity is anticipated to increase
as the Partnership continues its efforts in the leasing of the Partnership's
commercial properties. At this time, the future leasing and tenant finish costs
which will be required to renew current leases that expire during 1996 or obtain
new tenants are unknown. However, with certain properties below stabilized
occupancy (see page 26), the Partnership is anticipating that a significant
portion of the cash reserves will be required to improve the occupancy levels.
Cash in the amount of $297,450 will be required to fund the Interest Repurchase
Reserve which the Partnership established on February 1, 1996 pursuant to
Section 16.4 of the Partnership's Amended and Restated Agreement of Limited
Partnership. Under Section 16.4, limited partners may request the Partnership to
repurchase their respective interests (Units) in the Partnership. With this
Interest Repurchase Reserve, the Partnership will be able to repurchase up to
1,983 Units at a price of $150 per Unit. The Partnership notified the limited
partners by letter dated February 1, 1996 of the establishment of the Interest
Repurchase Reserve and the opportunity to request that the Partnership
repurchase Units at the established price. Repurchased Units will be retired by
the Partnership, thereby reducing the total number of Units outstanding. The
Interest Repurchase Reserve will be funded from cash reserves.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's commercial properties. Historically,
extremely weak economic conditions in Ft. Lauderdale, Florida have caused the
low occupancy level at the Lakeshore Business Center development. In the opinion
of the general partner, leasing activity is improving in this part of Florida.
In an effort to continue to improve the occupancy at the Lakeshore Business
Center development, the Partnership has an on-site leasing agent, an employee of
NTS Development Company (an affiliate of the general partner of the
Partnership), who makes calls to potential tenants, negotiates lease renewals
with current tenants and manages local advertising with the assistance of NTS
Development Company's marketing staff. The leasing and renewal negotiations at
University Business Center Phase II are handled by a leasing agent, an employee
of NTS Development Company, located at the University Business Center
development. The leasing and renewal negotiations for the Partnership's
remaining commercial properties are handled by leasing agents, employees of NTS
Development Company, located in Louisville, Kentucky. The leasing agents are
located in the same city as the commercial properties. All advertising for these
properties is coordinated by NTS Development Company's marketing staff located
in Louisville, Kentucky.
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, employees of NTS
Development Company, at each of the apartment communities.
- 39 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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.
Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A,
University Business Center Phase II and Lakeshore Business Center Phases I and
II provide for tenants to contribute toward the payment of common area expenses,
insurance and real estate taxes. Leases at Lakeshore Business Center Phases I
and II and University Business Center Phase II also provide for rent increases
which are based upon increases in the consumer price index. Leases at Plainview
Point Office Center Phases I and II and 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. These lease
provisions, along with the fact that residential leases are generally for a
period of one year, should protect the Partnership's operations from the impact
of inflation and changing prices.
The L/U II Joint Venture owns approximately 6 acres of land adjacent to the
Lakeshore Business Center development in Ft. Lauderdale, Florida. The
Partnership's proportionate interest at December 31, 1995 in the land held for
development is approximately $300,000. The Joint Venture currently has a
contract for the sale of .7 acres of this land at a price of $175,000.
- 40 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties IV,
We have audited the accompanying balance sheets of NTS-Properties IV, (a
Kentucky limited partnership), as of December 31, 1995 and 1994, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties IV as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 61
through 64 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 14, 1996
- 41 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
----------- -----------
ASSETS
<S> <C> <C>
Cash and equivalents $ 276,610 $ 2,405,974
Cash and equivalents - restricted 61,308 35,865
Investment securities 404,587 --
Accounts receivable, net of allowance
for doubtful accounts of $15,854 (1995)
and $1,788 (1994) 431,772 533,971
Land, buildings and amenities, net 14,617,818 11,974,200
Land held for development 297,251 --
Other assets 556,442 533,531
----------- -----------
$16,645,788 $15,483,541
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $11,592,641 $ 8,895,313
Accounts payable - operations 212,597 98,263
Accounts payable - construction 36,167 168,473
Distributions payable 90,136 90,136
Security deposits 83,995 75,299
Other Liabilities 17,303 4,941
----------- -----------
12,032,839 9,332,425
Partners' equity 4,612,949 6,151,116
----------- -----------
$16,645,788 $15,483,541
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 42 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental income, net of provision for
doubtful accounts of $12,018 (1995),
$2,546 (1994) and $2,318 (1993) $ 3,231,420 $ 2,451,192 $ 2,139,420
Interest and other income 54,010 144,107 44,897
----------- ----------- -----------
3,285,430 2,595,299 2,184,317
Expenses:
Operating expenses 604,846 513,760 499,726
Operating expenses - affiliated 395,570 400,350 390,494
Write-off of unamortized tenant
and buildings improvements 31,636 47,633 6,549
Amortization of capitalized leasing
costs 26,645 20,150 22,922
Interest expense 979,241 674,348 404,888
Management fees 186,176 136,786 120,541
Real estate taxes 215,165 154,462 144,595
Professional and administrative
expenses 203,990 161,804 139,211
Professional and administrative
expenses - affiliated 138,737 133,988 143,760
Depreciation and amortization 929,909 658,233 576,179
----------- ----------- -----------
3,711,915 2,901,514 2,448,865
----------- ----------- -----------
Net loss $ (426,485) $ (306,215) $ (264,548)
=========== =========== ===========
Net loss allocated to the limited
partners $ (422,220) $ (303,153) $ (261,903)
=========== =========== ===========
Net loss per limited partnership
unit $ (14.19) $ (10.19) $ (8.80)
=========== =========== ===========
Weighted average number of limited 29,745 29,745 29,745
=========== =========== ===========
partnership units
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 43 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balances at December 31, 1992 $ 7,597,654 $ (184,129) $ 7,413,525
Net loss (261,903) (2,645) (264,548)
Distributions declared (340,282) (3,438) (343,720)
----------- ----------- -----------
Balances at December 31, 1993 6,995,469 (190,212) 6,805,257
Net loss (303,153) (3,062) (306,215)
Distributions declared (344,447) (3,479) (347,926)
----------- ----------- -----------
Balances at December 31, 1994 6,347,869 (196,753) 6,151,116
Net loss (422,220) (4,265) (426,485)
Distributions declared (1,100,565) (11,117) (1,111,682)
----------- ----------- -----------
Balances at December 31, 1995 $ 4,825,084 $ (212,135) $ 4,612,949
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 44 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (426,485) $ (306,215) $ (264,548)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Accrued interest on investment securities (3,642) -- --
Provision for doubtful accounts 12,018 2,546 2,318
Write-off of unamortized tenant and building
improvements 31,636 47,633 6,549
Amortization of capitalized leasing costs 26,645 20,150 22,922
Depreciation and amortization 929,909 658,233 576,179
Changes in assets and liabilities:
Cash and equivalents - restricted (22,993) (17,601) (10,367)
Accounts receivable 260,173 (154,962) (25,401)
Other assets 5,821 (123,496) (11,312)
Accounts payable - operations 80,942 (138,902) 30,051
Security deposits 2,644 2,615 (3,681)
Other liabilities (81,341) (17,512) 2,471
----------- ----------- -----------
Net cash provided by (used in) operating
activities 815,327 (27,511) 325,181
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (301,349) (733,210) (123,058)
Increase in cash and equivalents - restricted (36,170) -- --
Decrease in cash and equivalents - restricted 33,720 -- --
Purchase of investment securities (698,227) -- --
Maturity of investment securities 297,282 -- --
Increase (decrease) in accounts payable -
construction (132,306) 111,425 35,642
----------- ----------- -----------
Net cash used in investing activities (837,050) (621,785) (87,416)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable -- 4,373,993 4,632,325
Principal payments on mortgages and note (354,010) (5,065,734) (383,000)
payable
Capital contribution to a joint venture (616,125) (597,357) --
Additions to loan costs (25,823) (94,490) (87,546)
Cash distributions (1,111,683) (343,720) (343,720)
----------- ----------- -----------
Net cash provided by (used in) financing
activities (2,107,641) (1,727,308) 3,818,059
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (2,129,364) (2,376,604) 4,055,824
CASH AND EQUIVALENTS, beginning of year 2,405,974 4,782,578 726,754
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 276,610 $ 2,405,974 $ 4,782,578
=========== =========== ===========
Interest paid on a cash basis $ 978,622 $ 697,905 $ 367,941
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 45 -
<PAGE>
NTS-PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties IV (the "Partnership") is a limited partnership
organized under the laws of the Commonwealth of Kentucky on May 13,
1983. The general partner is NTS-Properties Associates IV, a
Kentucky limited partnership. The Partnership is in the business of
developing, constructing, owning and operating residential
apartments and commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Commonwealth Business Center Phase I, a business center with
approximately 57,000 net rentable ground floor square feet and
approximately 24,000 net rentable mezzanine square feet in
Louisville, Kentucky
- Plainview Point Office Center Phases I and II, an office center
with approximately 56,000 net rentable square feet in
Louisville, Kentucky
- The Willows of Plainview Phase I, a 118-unit luxury apartment
complex in Louisville, Kentucky
- A 10% joint venture interest in The Willows of Plainview Phase
II, a 144-unit luxury apartment complex in Louisville, Kentucky
- A 4% joint venture interest in Golf Brook Apartments, a 195-unit
luxury apartment complex in Orlando, Florida
- A 5% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net rentable
square feet in Louisville, Kentucky
- A 30% joint venture interest in Blankenbaker Business Center 1A,
a business center with approximately 50,000 net rentable ground
floor square feet and approximately 50,000 net rentable
mezzanine square feet in Louisville, Kentucky.
- An 18% joint venture interest in the Lakeshore/University II
Joint Venture. A description of the properties owned by the
Joint Venture appears below:
- Lakeshore Business Center Phase I - a business center with
approximately 103,000 rentable square feet located in Fort
Lauderdale, Florida.
- Lakeshore Business Center Phase II - a business center with
approximately 97,000 net rentable square feet located in
Fort Lauderdale, Florida.
- University Business Center Phase II - a business center with
approximately 78,000 net rentable first floor (office and
service) and second floor office square feet and
approximately 10,000 net rentable mezzanine square feet
located in Orlando, Florida.
- Outparcel Building Sites - approximately 6.2 acres of
undeveloped land adjacent to the Lakeshore Business Center
development which is zoned for commercial development.
- 46 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Net Cash Receipts made available for distribution, 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 their 8% Preference Distribution as defined
in the partnership agreement; 2) to the general partner in an
amount equal to approximately 10% of the limited partners' 8%
Preference Distribution; and 3) the remainder, 90% to the limited
partners and 10% to the general partner.
Net Cash Proceeds, as defined in the partnership agreement, which
are available for distribution will be distributed 1) 99% to the
limited partners and 1% to the general partner until the limited
partners have received distributions from all sources equal to
their Original Capital plus the amount of any deficiency in their
8% Cumulative Distribution as defined in the partnership agreement;
and 2) the remainder, 75% to the limited partners and 25% to the
general partner.
Net income (loss) is to be allocated to the limited partners and to
the general partner based on cash distributions made.
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 interests for inclusion
on their individual income tax returns.
A reconciliation of income for financial statement purposes versus
that for income tax reporting is as follows:
1995 1994 1993
----------- ----------- ----------
Net loss $(426,485) $(306,215) $(264,548)
Items handled differently
for tax purposes:
Depreciation and
amortization (18,448) (304,209) (226,542)
Capitalized leasing
costs 6,635 637 2,982
Rental income 73,129 17,451 33,281
Write-off of unamortized
tenant improvements (12,556) (56,757) (871)
Allowance for doubtful
accounts 12,104 (6,140) (7,099)
--------- --------- ---------
Taxable loss $(365,621) $(655,233) $(462,797)
========= ========= =========
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.
- 47 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
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 and
expenses and cash flows. All intercompany accounts and transactions
have been eliminated in consolidation.
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents the following: 1)
Escrow funds which are to be released as capital expenditures,
leasing commissions and tenant improvements are incurred at the
properties owned by the Lakeshore/University II Joint Venture, 2)
Funds received for residential security deposits and 3) Funds which
have been escrowed with mortgage companies for property taxes and
insurance in accordance with the loan agreements.
H) Investment Securities
---------------------
Investment securities represent investments in Certificates of
Deposit or securities issued by the U.S. Government with initial
maturities of greater than three months. The investments are
carried at cost which approximates market value. The Partnership
intends to hold the securities until maturity. During 1995, the
Partnership sold no investment securities. The following provides
details regarding the investments held at December 31, 1995:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $153,537 01/05/96 $153,646
Certificate of Deposit 102,336 02/02/96 102,809
FNMA Discount Note 148,714 02/28/96 150,000
------- -------
$404,587 $406,455
======= =======
The Partnership held no investment securities with initial
maturities greater than three months during 1994 or 1993.
I) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost to the
Partnership. Costs directly associated with the acquisition,
development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5 - 30 years for
land improvements, 5 - 30 years for building and improvements and 5
- 30 years for amenities.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (the "Statement") on accounting for the
impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to assets to be held and used. The Statement
also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The
Partnership is required to adopt the Statement no later than
January 1, 1996, although earlier implementation is permitted. The
- 48 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
I) Basis of Property and Depreciation - Continued
----------------------------------------------
Statement is required to be applied prospectively for assets to be
held and used. The initial application of the Statement to assets
held for disposal is required to be reported as the cumulative
effect of a change in accounting principle.
The Partnership plans to adopt the Statement as of January 1, 1996.
Based on a preliminary review, the Partnership does not anticipate
that any material adjustments will be required.
J) Rental Income and Capitalized Leasing Costs
-------------------------------------------
Certain of the Partnership's lease agreements for the commercial
properties are structured to include scheduled and specified rent
increases over the lease term. For financial reporting purposes,
the income from these leases is being recognized on a straight-line
basis over the lease term. Accrued income connected with these
leases is included in accounts receivable and totalled $333,744 and
$243,057 at December 31, 1995 and 1994, respectively.
All commissions paid to commercial leasing agents and incentives
paid to tenants are deferred and amortized on a straight-line basis
over the applicable lease term. In addition, certain other costs
associated with the initial leasing of the properties are
capitalized and amortized over a five year period.
K) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents include
cash on hand and short-term, highly liquid investments with initial
maturities of three months or less.
L) Reclassification of 1994 and 1993 Financial Statements
------------------------------------------------------
Certain reclassifications have been made to the December 31, 1994
and 1993 financial statements to conform with December 31, 1995
classifications. These reclassifications have no effect on
previously reported operations.
2. Concentration of Credit Risk
----------------------------
NTS-Properties IV owns and operates commercial properties in Louisville,
Kentucky, Orlando, Florida and Ft. Lauderdale, Florida. Substantially all
of the Partnership's tenants are local businesses or are businesses which
have operations in the location in which they lease space. In Louisville,
Kentucky, one tenant occupies 100% of the Blankenbaker Business Center 1A
property. The Partnership also owns and operates residential properties
in Louisville, Kentucky and Orlando, Florida. The apartment unit is
generally the principal residence of the tenant.
3. Investment in Joint Ventures
----------------------------
A) NTS/Willows Phase II Joint Venture
----------------------------------
In 1984, the Partnership entered into a joint venture agreement
with NTS-Properties V, an affiliate of the general partner of the
Partnership, to develop and construct a 144-unit luxury apartment
complex on an 8.29-acre site in Louisville, Kentucky known as The
Willows of Plainview Phase II. The Partnership contributed land
valued at $800,000 and NTS-Properties V contributed approximately
$7,455,000, the construction and carrying costs of the apartment
- 49 -
<PAGE>
3. Investment in Joint Ventures - Continued
----------------------------------------
A) NTS/Willows Phase II Joint Venture - Continued
----------------------------------------------
complex. The project was completed in August 1985. Net income or
net loss is allocated each calendar quarter based on the respective
partnership's contribution. The Partnership's ownership share was
10% at December 31, 1995. The Partnership's share of the joint
venture's net operating income was $4,233 (1995), $8,320 (1994) and
$8,759 (1993).
B) NTS Ft. Lauderdale Office Joint Venture
---------------------------------------
In 1985, the Partnership entered into a joint venture agreement
with NTS-Properties V to develop an approximately 103,000
square-foot commercial business center known as Lakeshore Business
Center Phase I, located in Fort Lauderdale, Florida. The
Partnership contributed land valued at $1,752,982 and NTS-
Properties V contributed approximately $9,170,000, the cost of
constructing and leasing the building. The net income or net loss
was allocated each calendar quarter based on the respective
partnership's contribution. The Partnership's share of the joint
venture's net operating income (loss) was $2,085 (1995), $18,060
(1994) and $(23,713) (1993).
On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the
newly formed Lakeshore/University II (L/U II) Joint Venture. Refer
to Note 3F for a further discussion of the new joint venture.
C) NTS Sabal Golf Villas Joint Venture
-----------------------------------
In 1985, the Partnership entered into a joint venture agreement
with NTS-Properties VI, an affiliate of the general partner of the
Partnership, to develop and construct a 158-unit luxury apartment
complex on a 13.15-acre site in Orlando, Florida to be known as the
Golf Brook Apartments Phase I. The Partnership 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. 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. NTS-
Properties VI contributed approximately $15.8 million, the cost of
constructing and leasing the complexes. NTS-Properties VI also
contributed funds to retire the $1,200,000 note payable to the
bank.
Net income or net loss is allocated based on the respective
contribution of each partnership as of the end of each calendar
quarter. The Partnership's ownership share was 4% at December 31,
1995. The Partnership's share of the joint venture's net operating
income was $43,768 (1995), $33,744 (1994) and, $30,568 (1993).
D) Plainview Point III Joint Venture
---------------------------------
In 1987, the Partnership entered into a joint venture agreement
with NTS-Properties VI to develop and construct an approximately
62,000 square foot office building located in Louisville, Kentucky
to be known as Plainview Point Phase III Office Center. The
Partnership contributed land valued at $790,000 with an outstanding
note payable to a bank of $550,000 which was secured by the land.
- 50 -
<PAGE>
3. Investment in Joint Ventures - Continued
----------------------------------------
D) Plainview Point III Joint Venture - Continued
---------------------------------------------
NTS-Properties VI contributed approximately $4.1 million, the cost
to construct and lease the building. NTS-Properties VI also
contributed funds to retire the $550,000 note payable to the bank.
Net income or 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 5% at December 31, 1995. The
Partnership's share of the joint venture's net operating income
(loss) was $648 (1995), $(3,075) (1994) and $(6,024) (1993).
E) Blankenbaker Business Center Joint Venture
------------------------------------------
On August 16, 1994, the Blankenbaker Business Center Joint Venture
agreement was amended to admit the Partnership to the Joint
Venture. The Joint Venture was originally formed on December 28,
1990 between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
affiliates of the general partner of the Partnership, to own and
operate Blankenbaker Business Center 1A and to acquire an
approximately 2.49 acre parking lot that was being leased by the
business center from an affiliate of the general partner. The use
of the parking lot is a provision of the tenants's lease agreement
with the business center.
In accordance with the Joint Venture Agreement Amendment, the
Partnership contributed $1,100,000 and NTS-Properties VII, Ltd.
contributed $500,000. The general partner of the Partnership
determined the utilization of a portion of the Partnership's cash
reserves to participate in the Joint Venture would be consistent
with the investment objectives set forth in the Partnership's
partnership agreement, and should enhance the future returns of the
Partnership.
The need for additional capital by the Joint Venture was a result
of the lease renewal and expansion which was signed April 28, 1994
between the Joint Venture and Prudential Service Bureau, Inc.
("Prudential"). The lease expands Prudential's leased space by
approximately 15,000 square feet and extends its current lease term
through July 2005. Approximately 12,000 square feet of the
expansion was into new space which had to be constructed on the
second level of the existing business center. With this expansion,
Prudential now occupies 100% of the business center (approximately
101,000 square feet). The tenant finish and leasing costs connected
with the lease renewal and expansion were approximately $1.4
million.
In order to calculate the revised joint venture percentage
interests, the assets of the Joint Venture were revalued in
connection with the admission of the Partnership as a joint venture
partner and the additional capital contributions. The value of the
Joint Venture's assets immediately prior to the additional capital
contributions was $6,764,322 and its outstanding debt was
$4,650,042, with net equity being $2,114,280. The difference
between the value of the Joint Venture's assets and the value at
which they were carried on the books of the Joint Venture has been
allocated to NTS-Properties VII, Ltd. and NTS-Properties Plus Ltd.
in determining each Joint Venture partner's percentage interest.
- 51 -
<PAGE>
3. Investment in Joint Ventures - Continued
----------------------------------------
E) Blankenbaker Business Center Joint Venture - Continued
------------------------------------------------------
As a result of its capital contribution, the Partnership obtained a
30% interest in the Joint Venture. NTS-Properties Plus Ltd.'s
interest in the Joint Venture decreased from 69% to 39% as a result
of the capital contributions made by NTS-Properties VII, Ltd. and
the Partnership. NTS-Properties VII, Ltd.'s interest in the Joint
Venture remained at 31%.
Net income or net loss is allocated based on the respective
contribution of each partnership as of the end of each calendar
quarter. The Partnership's ownership share was 30% at December 31,
1995. The Partnership's share of the joint venture's net operating
loss was $60,080 (1995) and $119,449 (1994).
F) Lakeshore/University II Joint Venture
-------------------------------------
On January 23, 1995, a new joint venture known as
Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties V, NTS-Properties
Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of the general
partner of the Partnership, for purposes of owning Lakeshore
Business Center Phases I and II, University Business Center Phase
II and certain undeveloped tracts adjacent to the Lakeshore
Business Center Development. The table below identifies which
properties were contributed to the L/U II Joint Venture and the
respective owners of such properties prior to the formation of the
joint venture.
Property (Net Asset Contributed) Owner
-------------------------------- -----
Lakeshore Business Center NTS-Properties IV and NTS-
Phase I ($6,249,667) Properties V
Lakeshore Business Center NTS-Properties Plus Ltd.
Phase II (-$1,023,535)
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)(-$670,709)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)($27,104)
University Business Center NTS-Properties V and NTS-
Phase II ($953,236) Properties Plus Ltd.
Each of the properties were contributed to the L/U II Joint Venture
subject to existing indebtedness, except for Lakeshore Business
Center Phase I which was contributed to the joint venture free and
clear of any mortgage liens, and all such indebtedness was assumed
by the L/U II joint venture. Mortgages have been recorded on
Lakeshore Business Center Phase I in the amount of $5,500,000, and
on University Business Center Phase II in the amount of $3,000,000,
in favor of the banks which held the indebtedness on University
Business Center Phase II, Lakeshore Business Center Phase II and
the undeveloped tracts prior to the formation of the joint venture.
In addition to the above, the Partnership also contributed $750,000
to the L/U II Joint Venture. The Partnership's ownership share was
18% at December 31, 1995. The Partnership's share of the joint
ventures net operating loss was $220,756 in 1995.
- 52 -
<PAGE>
4. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1995 1994
----------- -----------
Land and improvements $ 5,521,041 $ 4,334,640
Buildings and improvements 18,567,171 15,248,787
Amenities 223,800 220,025
---------- ----------
24,312,012 19,803,452
Less accumulated depreciation 9,694,194 7,829,252
---------- ----------
$14,617,818 $11,974,200
========== ==========
5. Land Held for Development
-------------------------
The L/U II Joint Venture owns approximately 6.2 acres of land adjacent to
the Lakeshore Business Center development in Ft. Lauderdale, Florida. The
Joint Venture currently has a contract for the sale of .7 acres of this
land at a price of $175,000.
6. Mortgages and Notes Payable
Mortgages and notes payable as of December 31, consist of the following:
1995 1994
----------- -----------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of8.8%, due October 1, 2004,
secured by land and building $ 2,677,397 $ 2,869,577
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7%, due December 5, 2003,
secured by land, buildings and
amenities 2,043,653 2,072,809
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7%, due December 5, 2003,
secured by land, buildings and
amenities 1,946,336 1,974,103
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.5%, due December 5, 2003,
secured by land, buildings and
amenities 337,832 340,947
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.5%, due December 5, 2003,
secured by land, buildings and
amenities 201,691 203,550
(continued next page)
- 53 -
<PAGE>
6. Mortgages and Notes Payable - Continued
---------------------------------------
1995 1994
----------- -----------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building $ 1,353,672 $ 1,434,327
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land
and building 1,024,590 --
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 83,597 --
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land
and building 1,642,914 --
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 220,269 --
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 60,690 --
---------- ----------
$11,592,641 $ 8,895,313
========== ==========
The mortgages are payable in monthly installments of $95,468 which
includes principal, interest and property tax escrow.
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
1996 $ 446,486
1997 498,029
1998 3,295,300
1999 474,932
2000 516,483
Thereafter 6,361,411
----------
$11,592,641
==========
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms and average maturities, the fair value of
long-term debt is approximately $13,900,000.
- 54 -
<PAGE>
7. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1995:
For the Years Ended December 31, Amount
-------------------------------- ------
1996 $ 1,614,123
1997 1,467,028
1998 1,147,439
1999 966,665
2000 849,795
Thereafter 3,206,858
-----------
$ 9,251,908
===========
8. Related Party Transactions
--------------------------
Property management fees of $186,176 (1995), $136,786 (1994) and $120,541
(1993) were paid to NTS Development Company, an affiliate of the general
partner of the Partnership. The fee is equal to 5% of gross revenues from
residential properties and 6% of gross revenues from commercial
properties pursuant to an agreement with the Partnership. Also permitted
by the Partnership agreement, NTS Development Company will receive a
repair and maintenance fee equal to 5.9% of costs incurred which relate
to capital improvements. The Partnership has incurred repair and
maintenance fees of $17,895 (1995) and $61,961 (1994) and has capitalized
this cost as a part of land, buildings and amenities. The Partnership
agreement also provides for NTS Development Company to receive a fee
equal to 1% of Net Cash Proceeds from the refinancing of any Partnership
property. During 1994, a $41,000 refinancing fee was paid to NTS
Development Company and capitalized as a loan cost (other assets). The
fee will be amortized over the life of the mortgages (permanent
financings on The Willows of Plainview Phase I) to which the fee relates.
As permitted by the Partnership agreement, the Partnership was also
charged the following amounts from NTS Development Company for the years
ended December 31, 1995, 1994 and 1993. These charges include items which
have been expensed as operating expenses - affiliated or professional and
administrative expenses - affiliated and items which have been
capitalized as other assets or as land, buildings and amenities. The
charges were as follows.
1995 1994 1993
-------- -------- --------
Leasing agents $115,557 $155,619 $149,723
Administrative 178,910 167,814 172,496
Property manager 253,574 234,636 224,175
Other 9,291 17,427 43,605
------- ------- -------
$557,332 $575,496 $589,999
======= ======= =======
On January 23, 1995, the Partnership contributed $750,000 to the L/U II
Joint Venture. For details regarding this transaction, refer to Note 3F.
On August 16, 1994, the Partnership contributed $1,100,000 to the
Blankenbaker Business Center Joint Venture. The Joint Venture was
originally formed on December 28, 1990 between NTS-Properties Plus Ltd.
and NTS-Properties VII, Ltd., affiliates of the general partner. For
details regarding this transaction, refer to Note 3E.
- 55 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the general partner, NTS-Properties Associates IV. 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 IV are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 54) is the managing general partner of NTS-Properties
Associates IV and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. At the present time its capital is $1,000 and it
is not anticipated that such capital will be significantly increased. J.
D. Nichols is Chairman of the Board and the sole director of NTS Capital
Corporation.
NTS Subpartnership IV
- ---------------------
NTS Subpartnership IV is a Kentucky limited partnership whose primary business
purpose is to acquire, own and hold an interest in NTS-Properties Associates IV.
The partners of NTS Subpartnership IV include various management personnel of
NTS Corporation and its affiliates.
Alliance Realty Corporation
- ---------------------------
Alliance Realty Corporation was formed in September 1982, and is a wholly-
owned subsidiary of SN Alliance, Inc. SN Alliance, Inc. is also the parent
corporation of Stifel, Nicolaus & Company, Inc. which acted as the Dealer
Manager in connection with the offering for the interests.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols,
Richard L. Good and John W. Hampton.
Richard L. Good
- ---------------
Mr. Good, (age 56) President and Chief Operating Officer of NTS Corporation and
President of NTS Development Company and Chairman of the Board of NTS
Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he
was Executive Vice President of Jacques-Miller, Inc., a real estate syndication,
property management and financial planning firm in Nashville, Tennessee.
- 56 -
<PAGE>
Item 10. Directors and Executive Officers of the Registrant - Continued
John W. Hampton
- ---------------
Mr. Hampton, (age 46) is Senior Vice President of NTS Corporation with
responsibility for all accounting operations. Before joining NTS in March 1991,
Mr. Hampton was Vice President - Finance and Chief Financial Officer of the
Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for nine
years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is
a Certified Public Accountant and a graduate of the University of Louisville
with a Bachelor of Science degree in Commerce. He is a member of the American
Institute of CPA's and the Kentucky Society of CPA's.
Item 11. Management Remuneration and Transactions
The officers and/or directors of the corporate general partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company, an affiliate
of the general partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specific
projects and a refinancing fee on Net Cash Proceeds from the refinancing of any
Partnership property. In addition, the Partnership shares equally with NTS
Development Company the gross revenues from coin-operated washers and dryers
maintained at the apartments. Also, NTS Development Company provides certain
other services to the Partnership. See Note 8 to the financial statements which
sets forth transactions with affiliates of the general partner for the years
ended December 31, 1995, 1994 and 1993.
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 allocations and cash
distributions.
- 57 -
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The general partner is NTS-Properties Associates IV, 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 IV are as follows:
J. D. Nichols 69.69%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Subpartnership IV 30.00%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .30%
10172 Linn Station Road
Louisville, Kentucky 40223
Alliance Realty Corporation .01%
500 North Broadway
St. Louis, Missouri 63102
Item 13. Certain Relationships and Related Transactions
Property management fees of $186,176 (1995), $136,786 (1994) and $120,541 (1993)
were paid to NTS Development Company, an affiliate of the general partner of the
Partnership. The fee is equal to 5% of gross revenues from residential
properties and 6% of gross revenues from commercial properties pursuant to an
agreement with the Partnership. Also permitted by the Partnership agreement, NTS
Development Company will receive a repair and maintenance fee equal to 5.9% of
costs incurred which relate to capital improvements. The Partnership has
incurred repair and maintenance fees of $17,895 (1995) and $61,961 (1994) and
has capitalized this cost as a part of land, buildings and amenities. The
Partnership agreement also provides for NTS Development Company to receive a fee
equal to 1% of Net Cash Proceeds from the refinancing of any Partnership
property. During 1994, a $41,000 refinancing fee was paid to NTS Development and
capitalized as a loan cost (other assets). The fee will be amortized over the
life of the mortgages (permanent financings on The Willows of Plainview Phase I)
to which the fee relates.
As permitted by the Partnership agreement, the Partnership was also charged the
following amounts from NTS Development Company for the years ended December 31,
1995, 1994 and 1993. These charges include items which have been expensed as
operating expenses - affiliated or professional and administrative expenses -
affiliated and items which have been capitalized as other assets or as land,
buildings and amenities.
1995 1994 1993
-------- -------- --------
Leasing agents $115,557 $155,619 $149,723
Administrative 178,910 167,814 172,496
Property manager 253,574 234,636 224,175
Other 9,291 17,427 43,605
------- ------- -------
$557,332 $575,496 $589,999
======= ======= =======
- 58 -
<PAGE>
Item 13. Certain Relationships and Related Transactions - Continued
On January 23, 1995, the Partnership contributed $750,000 to the L/U II Joint
Venture. For details regarding this transaction, refer to Note 3F of the
Partnership's 1995 financial statements and Items 1 and 2 Business and
Properties.
On August 16, 1994, the Partnership contributed $1,100,000 to the Blankenbaker
Business Center Joint Venture. The Joint Venture was originally formed on
December 28, 1990 between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
affiliates of the general partner of the Partnership. For details regarding this
transaction refer to Note 3E of the 1995 financial statements and Items 1 and 2
Business and Properties.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 59 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. Financial statements
The financial statements for the years ended December 31, 1995, 1994 and
1993 together with the report of Arthur Andersen LLP dated February 14,
1996, appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 61-64
All other schedules have been omitted because they are not applicable,
are not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement and Certificate *
of Limited Partnership of NTS-Properties IV
10. Property Management Agreement and Construction *
Management Agreement between NTS Development
Company and NTS-Properties IV
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the
Securities and Exchange Commission in connection with the
filing of the Registration Statements on Form S-11 on May 16,
1983 (effective August 1, 1983) under Commission File No.
2-83771.
4. Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended December 31,
1995.
- 60 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<CAPTION>
Commonwealth Plainview
Business Point Office The Willows The Willows
Center Center Phases of Plainview of Plainview
Phase I I and II Phase I Phase II
------- -------- ------- --------
<S> <C> <C> <C> <C>
Encumbrances (A) None (B) (B)
Initial cost to partnership:
Land $ 928,867 $ 356,048 $1,798,292 $ 170,808
Buildings and improvements 1,419,653 2,214,001 5,447,513 585,917
Cost capitalized subsequent to
acquisition:
Improvements 1,694,087 899,396 127,674 67,212
Other -- -- -- --
Carrying costs -- -- -- --
Gross amount at which carried
December 31, 1995:
Land $ 939,987 $ 454,262 $1,799,392 $ 183,591
Buildings and improvements 3,102,620 3,015,183 5,574,087 640,346
---------- ---------- ---------- ----------
Total $4,042,607 $3,469,445 $7,373,479 $ 823,937
========== ========== ========== ==========
Accumulated depreciation $1,913,729 $1,232,518 $3,154,256 $ 347,489
========== ========== ========== ==========
Date of construction 06/84 N/A 03/85 08/85
Date Acquired N/A 04/84 N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C) (C) (C)
<FN>
(A) First mortgage held by an insurance company.
(B) First mortgage held by two insurance companies.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
</FN>
</TABLE>
- 61 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<CAPTION>
Lakeshore
Plainview Blankenbaker Business
Golfbrook Point III Business Center
Apartments Office Center Center 1A Phase I
---------- ------------- --------- -------
<S> <C> <C> <C> <C>
Encumbrances (A) None (A) (B)
Initial cost to partnership:
Land $ 175,557 $ 65,211 $ 582,561 $ 422,983
Buildings and improvements 474,566 116,284 2,263,506 662,259
Cost capitalized subsequent to
acquisition:
Improvements (289) 53,457 92,355 533,294
Other (C) -- -- -- 184,250
Carrying costs -- -- -- --
Gross amount at which carried
December 31, 1995:
Land $ 175,445 $ 66,509 $ 672,364 $ 479,210
Buildings and improvements 474,389 168,443 2,266,058 1,323,576
---------- ---------- ---------- ----------
Total $ 649,834 $ 234,952 $2,938,422 $1,802,786
========== ========== ========== ==========
Accumulated depreciation $ 194,905 $ 78,758 $ 869,251 $ 789,761
========== ========== ========== ==========
Date of construction 05/88 01/88 N/A 05/86
Date Acquired N/A N/A 08/94 N/A
Life at which depreciation in
latest income statement is
computed (D) (D) (D) (D)
<FN>
(A) First mortgage held by an insurance company.
(B) First mortgage held by a bank.
(C) Represents NTS-Properties IV's increased interest in Lakeshore Business
Center Phase I as a result of the formation of the Lakeshore/University
II Joint Venture in 1995.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
</FN>
</TABLE>
- 62 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<CAPTION>
Lakeshore University
Business Business
Center Center Total
Phase II Phase II Pages 61-63
<S> <C> <C> <C>
Encumbrances (A) (A)
Initial cost to partnership:
Land $ 658,760 $ 388,156 $ 5,547,243
Buildings and improvements 1,508,328 1,567,339 16,259,366
Cost capitalized subsequent to
acquisition:
Improvements 12,698 -- 3,479,884
Other -- -- 184,250
Carrying costs -- -- --
Gross amount at which carried
December 31, 1995 (B):
Land $ 658,760 $ 388,156 $ 5,817,676
Buildings and improvements 1,521,026 1,567,339 19,653,067
----------- ----------- -----------
Total $ 2,179,786 $ 1,955,495 $25,470,743
=========== =========== ===========
Accumulated depreciation $ 704,052 $ 409,475 $ 9,694,194 (D)
=========== =========== ===========
Date of construction N/A N/A
Date Acquired 01/95 01/95
Life at which depreciation in
latest income statement is
computed (C) (C)
<FN>
(A) First mortgage held by a bank.
(B) Aggregate cost of real estate for tax purposes is $25,229,393.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
(D) Total gross cost at December 31, 1995 $25,470,743
Adjust land contribution from fair
market value to cost:
Golfbrook Apartments (662,731)
Plainview Point III Office Center (496,000)
-----------
$24,312,012
===========
</FN>
</TABLE>
- 63 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Real Accumulated
Estate Depreciation
<S> <C> <C>
Balances at December 31, 1992 $ 16,699,171 $ 6,448,125
Additions during period:
Improvements (a) 121,628 --
Depreciation (b) -- 557,760
Deductions during period:
Retirements (118,807) (112,260)
------------ ------------
Balances at December 31, 1993 16,701,992 6,893,625
Additions during period:
Improvements (a) 743,561 --
Depreciation (b) -- 643,256
Other (c) 2,846,067 732,346
Deductions during period:
Retirements (488,168) (439,975)
------------ ------------
Balances at December 31, 1994 19,803,452 7,829,252
Additions during period:
Improvements (a) 298,146 --
Depreciation (b) -- 896,863
Other (d) 4,306,835 1,032,864
Deductions during period:
Retirements (96,421) (64,785)
------------ ------------
Balances at December 31, 1995 $ 24,312,012 $ 9,694,194
============ ============
<FN>
(a) The additions to real estate on this schedule will differ from the
expenditures 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.
(c) Represents the Partnership's share of Blankenbaker Business Center 1A
Joint Venture property and equipment recorded under the proportionate
consolidation method.
(d) Represents the increase in the Partnership's interest in Lakeshore
Business Center Phase I property and equipment and the Partnership's
share of Lakeshore Business Center Phase II's and University Business
Center Phase II's property and equipment recorded under the proportionate
consolidation method. All are the result of the formation of the
Lakeshore/University II Joint Venture in 1995.
</FN>
</TABLE>
- 64 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties IV has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES IV
(Registrant)
BY: NTS-Properties Associates IV,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
-------------------
John W. Hampton
Senior Vice President
Date: March 29 , 1996
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
--------- -----
/s/ J. D. Nichols General Partner of NTS-Properties
J. D. Nichols Associates IV and Chairman of the
Board and Sole Director of
NTS Capital Corporation
/s/ Richard L. Good President of NTS Capital Corporation
Richard L. Good
/s/ John W. Hampton Senior Vice President of NTS Capital
John W. Hampton Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 65 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF DECEMBER 31, 1995 AND FROM THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 337,918
<SECURITIES> 404,587
<RECEIVABLES> 431,772
<ALLOWANCES> 15,854
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,312,012
<DEPRECIATION> 9,694,194
<TOTAL-ASSETS> 16,645,788
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,592,641
0
0
<COMMON> 0
<OTHER-SE> 4,612,949
<TOTAL-LIABILITY-AND-EQUITY> 16,645,788
<SALES> 3,231,420
<TOTAL-REVENUES> 3,285,430
<CGS> 0
<TOTAL-COSTS> 2,389,947
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,018
<INTEREST-EXPENSE> 979,241
<INCOME-PRETAX> (426,485)
<INCOME-TAX> 0
<INCOME-CONTINUING> (426,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (426,485)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE
VALUE IS $0.
</FN>
</TABLE>
