<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission File Number 0-11655
NTS-PROPERTIES IV
(Exact name of registrant as specified in its charter)
Kentucky 61-1026356
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10172 Linn Station Road
Louisville, Kentucky 40223
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) 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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Exhibit Index: See page 21
Total Pages: 22
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of March 31, 1996 and December 31, 1995 3
Statements of Operations
For the three months ended March 31, 1996 and 1995 4
Statements of Cash Flows
For the three months ended March 31, 1996 and 1995 5
Notes To Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-20
PART II
1. Legal Proceedings 21
2. Changes in Securities 21
3. Defaults upon Senior Securities 21
4. Submission of Matters to a Vote of Security Holders 21
5. Other Information 21
6. Exhibits and Reports on Form 8-K 21
Signatures 22
- 2 -
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES IV
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
March 31, 1996 December 31, 1995*
-------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 366,550 $ 276,610
Cash and equivalents - restricted 146,401 61,308
Investment securities -- 404,587
Accounts receivable, net of allowance
for doubtful accounts of $14,095 (1996)
and $15,854 (1995) 424,808 431,772
Land, buildings and amenities, net 14,403,158 14,617,818
Land held for development 297,251 297,251
Other assets 585,725 556,442
----------- -----------
$16,223,893 $16,645,788
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $11,481,298 $11,592,641
Accounts payable - operations 191,245 212,597
Accounts payable - construction -- 36,167
Distributions payable 86,342 90,136
Security deposits 83,680 83,995
Other liabilities 71,413 17,303
----------- -----------
11,913,978 12,032,839
Partners' equity 4,309,915 4,612,949
----------- -----------
$16,223,893 $16,645,788
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
<S> <C> <C> <C>
PARTNERS' EQUITY
Capital contributions, net of
offering costs $ 25,834,899 $ -- $ 25,834,899
Net income - prior years 382,819 3,868 386,687
Net loss - current year (28,605) (289) (28,894)
Cash distributions declared to
date (21,448,917) (216,865) (21,665,782)
Repurchase of limited
partnership units (216,995) -- (216,995)
------------ ---------- ------------
Balances at March 31, 1996 $ 4,523,201 $ (213,286) $ 4,309,915
============ ========== ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 29, 1996.
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<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Rental income, net of provision for
doubtful accounts of $-0- (1996) and
$1,776 (1995) $ 864,216 $ 763,677
Interest and other income 9,726 14,929
--------- ---------
873,942 778,606
Expenses:
Operating expenses 156,054 133,296
Operating expenses - affiliated 97,130 108,219
Amortization of capitalized leasing costs 5,071 6,278
Interest expense 244,326 225,538
Management fees 49,173 43,400
Real estate taxes 54,943 50,963
Professional and administrative expenses 22,434 37,247
Professional and administrative expenses
- affiliated 42,983 34,958
Depreciation and amortization 230,722 231,207
--------- ---------
902,836 871,106
--------- ---------
Net loss $ (28,894) $ (92,500)
========= =========
Net loss allocated to the limited partners $ (28,605) $ (91,575)
========= =========
Net loss per limited partnership unit $ (.97) $ (3.08)
========= =========
Weighted average number of limited
partnership units 29,558 29,745
========= =========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (28,894) $ (92,500)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Accrued interest on investment securities 3,642 --
Provision for doubtful accounts -- 1,776
Amortization of capitalized leasing costs 5,071 6,278
Depreciation and amortization 230,722 231,207
Changes in assets and liabilities:
Cash and equivalents - restricted (50,343) (37,796)
Accounts receivable 6,964 196,708
Other assets (32,048) (15,474)
Accounts payable - operations (21,352) 18,954
Security deposits (315) (4,241)
Other liabilities 54.114 (33,811)
----------- -----------
Net cash provided by operating activities 167,561 271,101
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (46,664) (166,963)
Increase in cash and equivalents - restricted -- (20,157)
Decrease in cash and equivalents - restricted 2,450 --
Maturity of investment securities 400,945 --
----------- -----------
Net cash provided by (used in) investing
activities 356,731 (187,120)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and notes payable (111,343) (78,623)
Capital contribution to a joint venture -- (616,125)
Cash distributions (90,136) (841,273)
Additions to loan costs (7,873) (24,836)
Repurchase of limited partnership units (187,800) --
Increase in cash and equivalents - restricted (37,200) --
----------- -----------
Net cash used in financing activities (434,352) (1,560,857)
----------- -----------
Net increase (decrease) in cash and equivalents 89,940 (1,476,876)
CASH AND EQUIVALENTS, beginning of period 276,610 2,405,974
----------- -----------
CASH AND EQUIVALENTS, end of period $ 366,550 $ 929,098
=========== ===========
Interest paid on a cash basis $ 247,075 $ 194,190
=========== ===========
</TABLE>
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<PAGE>
NTS-PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein should be read in conjunction with the
Partnership's 1995 Annual Report. In the opinion of the general partner, all
adjustments (only consisting of normal recurring accruals) necessary for a fair
presentation have been made to the accompanying financial statements for the
three months ended March 31, 1996 and 1995.
1. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represent 1) funds received for
residential security deposits, 2) funds which have been escrowed with
mortgage companies for property taxes and insurance in accordance with the
loan agreements and 3) funds which the Partnership has reserved for the
repurchase of limited partnership units pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited Partnership.
Cash and equivalents - restricted at December 31, 1995 also included escrow
funds which were to be released as capital expenditures, leasing
commissions and tenant improvements were incurred at the properties owned
by the Lakeshore/University II Joint Venture. In 1996, these escrow funds
were released.
2. Interest Repurchase Reserve
---------------------------
On February 1, 1996, the Partnership established an Interest Repurchase
Reserve in the amount of $297,450 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. As of March 31,
1996, 1,252 Units have been repurchased. Repurchased Units are being
retired by the Partnership, thus increasing the share of ownership of each
remaining investor. The Interest Repurchase Reserve was funded from cash
reserves.
- 6 -
<PAGE>
3. Mortgages and Notes Payable
---------------------------
Mortgages and notes payable consist of the following:
March 31, December 31,
1996 1995
---- ----
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.8%, due October 1, 2004,
secured by land and building $ 2,626,661 $ 2,677,397
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7%, due December 5, 2003,
secured by land, buildings and amenities 2,036,040 2,043,653
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7%, due December 5, 2003,
secured by land, buildings and amenities 1,939,086 1,946,336
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building 1,331,662 1,353,672
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 335,042 337,832
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 200,025 201,691
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land and building 1,636,488 1,642,914
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land and building 1,018,164 1,024,590
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land 213,843 220,269
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land 83,597 83,597
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land 60,690 60,690
---------- ----------
$11,481,298 $11,592,641
========== ==========
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<PAGE>
3. Mortgages and Notes Payable - Continued
---------------------------------------
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 $13,700,000.
4. Related Party Transactions
--------------------------
Property management fees of $49,173 and $43,400 for the three months ended
March 31, 1996 and 1995, respectively, were paid to NTS Development
Company, an affiliate of the general partner of the Partnership. The fee is
equal to 5% of the gross revenues from residential properties and 6% of the
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
$701 and $667 as a repair and maintenance fee during the three months ended
March 31, 1996 and 1995, respectively, and has capitalized this cost as a
part of land, buildings and amenities. As permitted by the Partnership
agreement, the Partnership was also charged the following amounts from NTS
Development Company for the three months ended March 31, 1996 and 1995.
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:
1996 1995
-------- --------
Administrative $ 58,922 $ 45,282
Leasing agents 33,479 32,326
Property management 56,574 64,334
Other 548 2,318
------- -------
$149,523 $144,260
======= =======
5. Reclassification of 1995 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the March 31, 1995 financial
statements to conform with March 31, 1996 classifications. These
reclassifications have no effect on previously reported operations.
6. New Accounting Pronouncement
----------------------------
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 adopted the Statement as of January 1, 1996 as required. No
adjustments were required.
- 8 -
<PAGE>
Item 2. 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 March 31 were as
follows:
1996 1995
---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 89% 81%
Plainview Point Office Center Phases I and II 86% 74%
The Willows of Plainview Phase I 86% 80%
Properties Owned in Joint Venture with NTS-
Properties V (Ownership % at March 31, 1996)
- --------------------------------------------
The Willows of Plainview Phase II (10%) 97% 90%
Lakeshore Business Center Phase I See below See below
(See L/U II Joint Venture below) (1) (1)
Properties Owned in Joint Venture with NTS-
Properties VI (Ownership % at March 31, 1996)
- ---------------------------------------------
Golf Brook Apartments (4%) 92% 94%
Plainview Point III Office Center (5%) 98% 48%
Property Owned in Joint Venture with NTS-
Properties VII, Ltd. and NTS-Properties Plus
Ltd. (Ownership % at March 31, 1996)
- ------------------------------------
Blankenbaker Business Center 1A (30%) 100% 100%
Properties Owned Through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at March 31, 1996)
- -------------------------------
Lakeshore Business Center Phase I (18%) 97% 79% (1)
Lakeshore Business Center Phase II (18%) 72% 77% (2)
University Business Center Phase II (18%) 100% 100% (2)
(1) During the first quarter of 1995, the Partnership's ownership interest in
Lakeshore Business Center Phase I changed. See below for a discussion
regarding this change.
(2) The Partnership obtained an interest in this property during the first
quarter of 1995. See below for a discussion regarding this change.
- 9 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1996 and 1995 was as follows:
1996 1995
--------- ---------
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I $ 169,234 $ 162,136
Plainview Point Office Center Phases I
and II $ 126,801 $ 118,283
The Willows of Plainview Phase I $ 272,206 $ 236,885
Properties Owned in Joint Venture with
NTS-Properties V (Ownership % at March
31, 1996)
- --------------------------------------
The Willows of Plainview Phase II (10%) $ 30,255 $ 27,478
Lakeshore Business Center Phase I
(See L/U II Joint Venture below) N/A $ 14,282 (1)
Properties Owned in Joint Venture with
NTS-Properties VI (Ownership % at March
31, 1996)
- ---------------------------------------
Golf Brook Apartments (4%) $ 27,790 $ 27,155
Plainview Point III Office Center (5%) $ 10,276 $ 5,734
Property Owned in Joint Venture with NTS-
Properties VII, Ltd. And NTS-Properties
Plus Ltd. (Ownership % at March 31, 1996)
- -----------------------------------------
Blankenbaker Business Center 1A (30%) $ 69,383 $ 67,044
Properties Owned through Lakeshore/
University II Joint Venture (L/U II Joint
Venture) (Ownership % at March 31, 1996)
- ----------------------------------------
Lakeshore Business Center Phase I (18%) $ 61,142 $ 33,692
Lakeshore Business Center Phase II (18%) $ 46,847 $ 36,003 (2)
University Business Center Phase II (18%) $ 52,870 $ 38,400 (2)
Revenues shown in the table above 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
March 31, 1995 is reflected below (See L/U II Joint Venture).
(2) The Partnership obtained an interest in this property during the first
quarter of 1995. See below for a discussion regarding the change.
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 8% increase in occupancy at Commonwealth Business Center Phase I from March
31, 1995 to March 31, 1996 is attributed to three new leases totalling
approximately 6,400 square feet and an expansion by a current tenant of its
existing space of approximately 1,600 square feet.. Partially offsetting the new
leases is one tenant move-out at the end of the lease term totalling 1,600
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 for
the three months ended March 31 from 81% in 1995 to 88% in 1996. Rental and
other income at Commonwealth Business Center Phase I increased for the three
months ended March 31, 1996 as compared to the same period in 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.
The 12% increase in occupancy at Plainview Point Office Center Phases I and II
from March 31, 1995 to March 31, 1996 is attributed to four new leases totalling
approximately 6,800 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 the period. Average occupancy increased for the three months
ended March 31 from 74% in 1995 to 86% in 1996. Rental and other income at
Plainview Point Office Center Phases I and II increased for the three months
ended March 31, 1996 as compared to the same period in 1995 as a result of the
increase in average occupancy.
The Willows of Plainview Phase I's occupancy increased 6% from March 31, 1995 to
March 31, 1996. Average occupancy increased from 80% (1995) to 88% (1996) for
the three month period. Occupancy at residential properties fluctuate on a
continuous basis. Period-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 period's results. The
increase in rental and other income at The Willows of Plainview Phase I for the
three months ended March 31, 1996 as compared to the same period in 1995 is a
result of the increase in average occupancy, an increase in rental rates and an
increase in income from fully furnished units. Fully furnished units are
apartments which rent at an additional premium above base rent.
The Willows of Plainview Phase II's occupancy increased from 90% as of March 31,
1995 to 97% as of March 31, 1996. Average occupancy increased from 89% for the
three months ended March 31, 1995 to 96% for the same period in 1996. The change
in rental and other income at The Willows of Plainview Phase II for the three
months ended March 31, 1996 as compared to the same period in 1995 is not
significant.
Golf Brook Apartments' occupancy decreased 2% from March 31, 1995 to March 31,
1996 while average occupancy remained constant at 94% for both three month
periods. Rental and other income at Golf Brook Apartments remained fairly
constant for the three months ended March 31, 1996 as compared to the same
period in 1995.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 50% increase in occupancy at Plainview Point III Office Center from March
31, 1995 to March 31, 1996 is primarily the result of two new leases for a total
of 27,070 square feet. The new leases 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 increase in occupancy can also be
attributed to an expansion by a current tenant of its existing space by
approximately 4,400 square feet. Average occupancy increased from 54% for the
three months ended March 31, 1995 to 96% for the same period in 1996. Rental and
other income increased at Plainview Point III Office Center for the three months
ended March 31, 1996 as compared to the same period in 1995 as a result of the
increase in average occupancy.
A wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential Service Bureau, Inc.) has leased 100% of Blankenbaker Business
Center 1A through July 2005. 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 change in rental and other income at
Blankenbaker Business Center 1A for the three months ended March 31, 1996 as
compared to the same period in 1995 was not significant.
The 18% increase in occupancy at Lakeshore Business Center Phase I from March
31, 1995 to March 31, 1996 can be attributed to 10 new leases totalling
approximately 23,500 square feet, which includes approximately 7,600 square feet
in expansions by three current tenants. The new leases and expansions are
partially offset by three tenant move-outs, who vacated at the end of the lease
terms, totalling approximately 4,300 square feet. Average occupancy for the
three months ended March 31 increased from 79% (1995) to 98% (1996). Rental and
other income at Lakeshore Business Center Phase I increased for the three months
ended March 31, 1996 as compared to the same period in 1995 primarily as a
result of the increase in average occupancy and a decrease in the provision for
doubtful accounts. The increase in rental and other income can also be
attributed to the Partnership's increased ownership in Lakeshore Business Center
Phase I. (See below for a discussion regarding the change.)
The 5% decrease in occupancy at Lakeshore Business Center Phase II from March
31, 1995 to March 31, 1996 can be attributed to four tenant move-outs totalling
approximately 11,000 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 5,100 square feet, represent tenants who vacated the
premises prior to the end of the lease term but are continuing to pay rent
through the end of the lease term. The third tenant, who occupied approximately
4,500 square feet, vacated the premises at the end of the lease term. The fourth
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.
Partially offsetting the tenant move-outs are four new leases totalling
approximately 8,800 square feet and a 3,600 square foot expansion by a current
tenant of its
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
existing space. Average occupancy at Lakeshore Business Center Phase II
decreased for the three months ended March 31 from 78% in 1995 to 72% in 1996.
In the opinion of the General Partner of the Partnership, the decrease in
occupancy at Lakeshore Business Center Phase II is only a temporary fluctuation
and does not represent a downward occupancy trend. The Partnership's
proportionate share of the rental and other income at Lakeshore Business Center
Phase II increased during the first quarter of 1996 as compared to the first
quarter of 1995. This is due to the fact that the Partnership acquired an
interest in Lakeshore Business Center Phase II as a result of the formation of
the Lakeshore/University II Joint Venture (L/U II Joint Venture) in January
1995. (See below for a discussion of the Joint Venture). Overall, rental and
other income decreased at Lakeshore Business Center Phase II during the period
primarily due to the decrease in average occupancy.
During the first quarter of 1996, a new six-year lease was signed at Lakeshore
Business Center Phase II for approximately 7,000 square feet. The tenant took
occupancy in April 1996 improving the building's occupancy to 80%.
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
52,000 square feet (or 67%) of University Business Center Phase II to three
tenants. Of the total being sub-leased, approximately 41,000 square feet (or
79%) 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). In December 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. The Joint Venture has received notice that PCA
will not renew its lease when it expires in 1998. At this time, it is not known
whether the other sublessees will sign renewal leases with the Joint Venture.
The Partnership's proportionate share of the rental and other income at
University Business Center Phase II increased for the three months ended March
31, 1996 as compared to the same period in 1995. This is due to the fact that
the Partnership acquired an interest in University Business Center Phase II as a
result of the formation of the L/U II Joint Venture in January 1995. (See below
for a discussion of the Joint Venture.) Overall, rental and other income at
University Business Center Phase II decreased for the three months ended March
31, 1996 as compared to the same period in 1995 as a result of a decrease in
common area expense reimbursements. The decrease in rental and other income is
partially offset by a rent escalation based upon an increase in the consumer
price index.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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.
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.
Interest and other income includes income from investments made by the
Partnership with cash reserves. Interest and other income decreased for the
three months ended March 31, 1996 as compared to the same period in 1995 as a
result of a decrease in cash reserves available for investment.
The increase in operating expenses for the three months ended March 31, 1996 as
compared to the same period in 1995 is due mainly to increased utility costs,
landscaping costs and general building maintenance costs at the Partnership's
commercial properties and increased costs connected with fully-furnished units
at The Willows of Plainview Phases I and II. The increase in operating expenses
is also due to the Partnership acquiring an interest in the L/U II Joint Venture
in January 1995 (see discussion below). Operating expenses at Golf Brook
Apartments remained fairly constant for the three months ended March 31, 1996 as
compared to the same period in 1995.
The decrease in operating expenses - affiliated for the three months ended March
31, 1996 as compared to the same period in 1995 is due primarily to decreased
leasing salaries at Plainview Point Office Center Phases I and II, Commonwealth
Business Center Phase I and Blankenbaker Business Center 1A combined with
decreased property management salaries at Commonwealth Business Center Phase I
and Blankenbaker Business Center 1A. Partially offsetting the decrease in
operating expenses - affiliated for the period is the Partnership's interest in
the L/U II Joint Venture which was acquired in January 1995 (see discussion
below). There were no significant fluctuations in operating expenses -
affiliated at the Partnership's residential properties. Operating expenses -
affiliated are expenses for services performed by employees of NTS Development
Company, an affiliate of the General Partner of the Partnership.
The decrease in amortization of capitalized leasing costs for the three months
ended March 31, 1996 as compared to the same period in 1995 is due primarily to
costs capitalized during initial lease-up at University Business Center Phase II
becoming fully amortized in 1995.
Interest expense has increased for the three months ended March 31, 1996 as
compared to the same period in 1995 due primarily to the Partnership acquiring
an interest in the L/U II Joint Venture in January 1995 (discussed
- 14 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
below). The increase in interest expense is partially offset by continued
principal payments on the mortgages and notes payable of the Partnership and its
joint venture properties. 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 recorded on the accrual basis. As a result,
the fluctuations of revenues between periods will differ from the fluctuations
of management fee expense. The increase in management fee expense for the three
months ended March 31, 1996 as compared to the same period in 1995 is also
attributed to the Partnership acquiring an interest in the L/U II Joint Venture
in January 1995 (discussed below).
The increase in real estate taxes for the three months ended March 31, 1996 as
compared to the same period in 1995 is due primarily to the Partnership
acquiring an interest in the L/U II Joint Venture in January 1995 (discussed
below). Real estate taxes did not fluctuate significantly at the Partnership's
other properties.
Professional and administrative expenses decreased for the three months ended
March 31, 1996 as compared to the same period in 1995 primarily as a result of
decreased outside legal fees.
The increase in professional and administrative expense - affiliated for the
three months ended March 31, 1996 as compared to the same period in 1995 is
primarily due to the Partnership acquiring an interest in the L/U II Joint
Venture in January 1995 (discussed below). Professional and administrative
expenses - affiliated are expenses for services performed by employees of NTS
Development Company, an affiliate of the General Partner.
The change in depreciation and amortization expense for the three months ended
March 31, 1996 as compared to the same period in 1995 was not significant.
Depreciation is computed using the straight-line method of depreciation 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 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 operations for the three months ended March 31 was $167,561
(1996) and $271,101 (1995). These funds, in conjunction with cash on hand, were
used to make a 1.57% (annualized) distribution of $86,342 (1996) and a 14.8%
(annualized) distribution of $841,273 (1995) for the three months ended March
31. 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
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 reserves (which are unrestricted cash and equivalents as
shown on the Partnership's balance sheet as of March 31) were $366,550 and
$929,098 at March 31, 1996 and 1995, respectively.
As previously disclosed in the Partnership's Form 10-K for the year ended
December 31, 1995, a new joint venture known as Lakeshore/University II Joint
Venture (L/U II Joint Venture) was formed on January 23, 1995 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.
As of March 31, 1996, the Partnership has a mortgage payable with an insurance
company in the amount of $2,626,661. 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 March 31, 1996, the Partnership had two mortgage loans each with an
insurance company in the amount of $2,036,040 and $1,939,086. Both mortgages
payable are due December 5, 2003, currently bear interest at a fixed rate of 7%
and are secured by the land, buildings and amenities of The Willows of Plainview
Phase I. 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).
As of March 31, 1996, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $4,427,069. 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 $1,331,662. The mortgage bears interest at a
fixed rate of 8.5% and is due November 15, 2005. 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.
As of March 31, 1996, 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 $3,255,993 and $1,943,876. The
mortgages are recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the mortgages as of March 31, 1996
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
is $535,067 ($335,042 and $200,025). Both mortgages are due December 5, 2003,
currently bear interest at a fixed rate of 7.5% and are secured by the land,
buildings and amenities of the Joint Venture. 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
$4,449,434 ($2,786,095 and $1,663,339).
As of March 31, 1996, the L/U II Joint Venture had notes payable to banks in the
following amounts: $9,168,000, $5,704,000, $1,198,000, $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
March 31, 1996 was $1,636,488, $1,018,164, $213,843, $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. The Joint Venture met this funding
requirement in 1995. As of March 31, 1996, all funds in the escrow account had
been released. 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 $9,168,000, $5,704,000 and $1,198,000 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.
As of March 31, 1996, the L/U II Joint Venture has obtained a commitment from an
insurance company for $17.4 million of debt financing. The mortgage will mature
144 months from the closing date and will bear interest at a fixed rate of
8.125%. The repayment of principal will be amortized over 144 months, with
monthly payments of principal and interest in the amount of $189,541. 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 closing date of the permanent financing is expected to take place
before June 30, 1996.
The majority of the Partnership's cash flow is derived from operating
activities. 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
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 provided by investing
activities were the result of a release of these escrow funds. Cash flows
provided by investing activities are also from the maturity of investment
securities. As part of its cash management activities, the Partnership has
purchased Certificates of Deposit or securities issued by the U.S. Government
with initial maturities of greater than three months to improve the return on
its cash reserves. The Partnership held the securities until maturity. Cash
flows used in financing activities are for cash distributions, payment of loan
costs, principal payments on mortgages and notes payable, repurchases of limited
partnership units and funds reserved by the Partnership for the repurchase of
limited partnership units. The 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 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 interest
and principal payments required by the debt financings of the L/U II Joint
Venture and 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.
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
three months ended March 31, 1996 and 1995.
Cash Return
Net Loss Distributions of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1996 $ (28,605) $ 85,479 $ 85,479
1995 (91,575) 832,860 832,860
General Partner:
1996 $ (289) $ 855 $ 855
1995 (925) 8,413 8,413
As of March 31, 1996, the L/U II Joint Venture had a commitment for an
approximately $105,000 special tenant finish allowance. The commitment is the
result of a new six-year lease for approximately 7,000 square feet at
- 18 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Lakeshore Business Center Phase II. The Partnership's proportionate share of
this commitment is approximately $19,000 or 18%. As of March 31, 1996,
approximately $70,000 had been incurred toward this commitment, of which the
Partnership's proportionate share is approximately $12,500 or 18%.
As of March 31, 1996, 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). The Partnership's proportionate share of the net commitment
($200,000 less $92,000) is approximately $19,000 or 18%.
The Partnership had no other material commitments for renovations or capital
improvements as of March 31, 1996.
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 above), the Partnership is anticipating that a significant
portion of the cash reserves will be required to improve the occupancy levels.
On February 1, 1996, the Partnership established an Interest Repurchase Reserve
in the amount of $297,450 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. As of
March 31, 1996, 1,252 Units have been repurchased. Repurchased Units are being
retired by the Partnership, thus increasing the share of ownership of each
remaining investor. The Interest Repurchase Reserve was funded from cash
reserves. The Partnership is currently contemplating an additional funding to
its Interest Repurchase Reserve in the near term.
- 19 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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. 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 March 31, 1996 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.
- 20 -
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated February 1, 1996, was filed to report in Item 5
the fact that the Partnership has established an Interest
Repurchase Reserve pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited
Partnership.
- 21 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTS-PROPERTIES IV
(Registrant)
By: NTS-Properties Associates IV
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
John W. Hampton
Senior Vice President
Date: May 14, 1996
- 22 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF MARCH 31, 1996 AND FROM THE STATEMENT OF OPERATIONS
FOR THE THREE MONHTS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 512,951
<SECURITIES> 0
<RECEIVABLES> 424,808
<ALLOWANCES> 14,095
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,403,158
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 16,223,893
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,481,298
0
0
<COMMON> 0
<OTHER-SE> 4,309,915
<TOTAL-LIABILITY-AND-EQUITY> 16,223,893
<SALES> 864,216
<TOTAL-REVENUES> 873,942
<CGS> 0
<TOTAL-COSTS> 593,093
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244,326
<INCOME-PRETAX> (28,894)
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,894)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,894)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE
IS $0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
