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, 1998
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 22
Total Pages: 23
<PAGE>
TABLE OF CONTENTS
-----------------
Pages
-----
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of March 31, 1998 and December 31, 1997 3
Statements of Operations
For the three months ended March 31, 1998 and 1997 4
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 5
Notes To Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-21
PART II
1. Legal Proceedings 22
2. Changes in Securities 22
3. Defaults upon Senior Securities 22
4. Submission of Matters to a Vote of Security Holders 22
5. Other Information 22
6. Exhibits and Reports on Form 8-K 22
Signatures 23
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES IV
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
March 31, 1998 December 31,1997*
-------------- ----------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 204,937 $ 276,145
Cash and equivalents - restricted 193,338 108,724
Investment securities 526,329 422,336
Accounts receivable 319,871 243,134
Land, buildings and amenities, net 12,856,800 13,023,781
Asset held for sale 297,251 297,251
Other assets 420,293 440,937
----------- -----------
$14,818,819 $14,812,308
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $10,550,281 $10,706,802
Accounts payable - operations 157,381 113,724
Accounts payable - construction 72,429 8,694
Security deposits 80,585 83,390
Other liabilities 160,329 65,473
----------- -----------
11,021,005 10,978,083
Commitments and Contingencies
Partners' equity 3,797,814 3,834,225
----------- -----------
$14,818,819 $14,812,308
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
PARTNERS' EQUITY
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 25,834,899 $ -- $ 25,834,899
Net income - prior years 288,540 2,916 291,456
Net loss - current year (10,358) (105) (10,463)
Cash distributions declared to
date (21,586,280) (218,253) (21,804,533)
Repurchase of limited
partnership Units (513,545) -- (513,545)
------------ ------------ ------------
Balances at March 31, 1998 $ 4,013,256 $ (215,442) $ 3,797,814
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 30, 1998.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Rental income $ 916,249 $ 848,554
Interest and other income 10,012 6,110
--------- ---------
926,261 854,664
Expenses:
Operating expenses 206,101 181,327
Operating expenses - affiliated 118,151 99,942
Amortization of capitalized leasing costs 3,729 5,227
Interest expense 213,601 216,355
Management fees 51,268 48,236
Real estate taxes 57,027 55,013
Professional and administrative expenses 24,601 25,020
Professional and administrative expenses
- affiliated 42,054 38,781
Depreciation and amortization 220,192 227,731
--------- ---------
936,724 897,632
--------- ---------
Net loss $ (10,463) $ (42,968)
========= =========
Net loss allocated to the limited partners $ (10,358) $ (42,538)
========= =========
Net loss per limited partnership unit $ (0.39) $ (1.59)
========= =========
Weighted average number of limited
partnership units 26,618 26,764
========= =========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (10,463) $ (42,968)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Accrued interest on investment securities (3,440) --
Amortization of capitalized leasing costs 3,729 5,227
Depreciation and amortization 220,192 227,731
Changes in assets and liabilities:
Cash and equivalents - restricted (5,564) (48,103)
Accounts receivable (76,737) 1,159
Other assets (1,308) (20,345)
Accounts payable 43,657 24,777
Security deposits (2,805) 1,227
Other liabilities 94,856 58,712
--------- ---------
Net cash provided by operating activities 262,117 207,417
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities 14,335 (12,150)
Purchase of investment securities (419,012) --
Maturity of investment securities 318,459 --
--------- ---------
Net cash used in investing activities (86,218) (12,150)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (156,521) (135,436)
Decrease in loan costs 14,414 --
Repurchase of limited partnership Units (25,950) (33,900)
Increase in cash and equivalents - restricted (79,050) (250)
--------- ---------
Net cash used in financing activities (247,107) (169,586)
--------- ---------
Net (decrease) increase in cash and equivalents (71,208) 25,681
CASH AND EQUIVALENTS, beginning of period 276,145 346,479
--------- ---------
CASH AND EQUIVALENTS, end of period $ 204,937 $ 372,160
========= =========
Interest paid on a cash basis $ 196,012 $ 219,906
========= =========
</TABLE>
- 5 -
<PAGE>
NTS-PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein should be read in conjunction with the
Partnership's 1997 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, 1998 and 1997.
1. 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.
2. 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.
3. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve. On January 13, 1998, the Partnership elected to fund an
additional $60,000 to the Interest Repurchase Reserve. With these funds the
Partnership will be able to repurchase up to 400 Units at a price of $150
per Unit. If the number of Units submitted for repurchase exceeds that
which can be repurchased by the Partnership with the current funding, those
additional Units may be repurchased in subsequent quarters. The offering
price per Unit was established by the General Partner and does not purport
to represent the fair market value or liquidation value of the Unit. As of
March 31, 1998, the Partnership has repurchased a total of 3,229 Units for
$484,350. Repurchased Units are retired by the Partnership, thus increasing
the share of ownership of each remaining investor. The balance in the
Interest Repurchase Reserve as of March 31, 1998 is $79,800.
4. Investment Securities
---------------------
Investment Securities represent investments in Certificates of Deposit or
securities issued by the U.S. Government with initial maturities of greater
that three months. The investments are carried at cost which approximates
market value. The Partnership intends to hold the securities until
maturity. During the three months ended March 31, 1997 and 1998, the
Partnership sold no investment securities.
- 6 -
<PAGE>
4. Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at March 31,
1998:
Amortized Maturity Value at
Type Cost Date Maturity
---- ---- ---- --------
Certificate of deposit $101,507 04/03/98 $101,537
Certificate of deposit 100,869 05/04/98 101,339
Certificate of deposit 121,655 06/04/98 122,770
Certificate of deposit 100,475 07/02/98 101,798
Certificate of deposit 101,823 07/31/98 103,578
------- -------
$526,329 $531,022
======= =======
The following provides details regarding the investments held at December
31, 1997:
Amortized Maturity Value at
Type Cost Date Maturity
---- ---- ---- --------
Certificate of deposit $101,627 01/30/98 $102,052
Certificate of deposit 120,091 02/27/98 121,081
Certificate of deposit 100,467 03/31/98 101,808
Certificate of deposit 100,151 04/03/98 101,537
------- -------
$422,336 $426,478
======= =======
5. Mortgages Payable
-----------------
Mortgages payable consist of the following:
March 31, December 31,
1998 1997
--------- -----------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.8%, due October 1, 2004,
secured by land and building $ 2,178,276 $ 2,238,591
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities 1,985,519 1,998,000
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities 1,890,119 1,902,000
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building 1,137,755 1,163,828
(Continued next page)
- 7 -
<PAGE>
5. Mortgages Payable - Continued
-----------------------------
March 31, December 31,
1998 1997
-------- ------------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008
secured by land and building $ 985,892 $ 1,000,809
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 944,982 959,282
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 916,348 930,213
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities 320,170 321,854
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities 191,220 192,225
---------- ----------
$10,550,281 $10,706,802
========== ==========
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms and average maturities, the fair value of
long-term debt approximates carrying value.
6. Related Party Transactions
--------------------------
Property management fees of $51,268 and $48,236 were paid to NTS
Development Company, an affiliate of the General Partner of the
Partnership, for the three months ended March 31, 1998 and 1997,
respectively. 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. As permitted by
an agreement, NTS Development Company will receive a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital
improvements. The Partnership has incurred $4,755 and $1,355 as a repair
and maintenance fee during the three months ended March 31, 1998 and 1997,
respectively, and has capitalized this cost as a part of land, buildings
and amenities. As permitted by an agreement, the Partnership was also
charged the following amounts from NTS Development Company for the three
months ended March 31, 1998 and 1997. These charges include items which
have been expensed as operating expenses - affiliated or professional and
administrative expenses - affiliated and items which have been capitalized
as other assets or as land, buildings and amenities.
- 8 -
<PAGE>
6. Related Party Transactions - Continued
--------------------------------------
The charges were as follows:
1998 1997
-------- --------
Administrative $ 52,527 $ 50,505
Leasing 27,852 30,631
Property management 77,672 63,276
Other 3,369 1,168
-------- --------
$161,420 $145,580
======== ========
7. Commitments and Contingencies
-----------------------------
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of
University Business Center Phase II, which is owned by the
Lakeshore/University II ("L/U II") Joint Venture. The original lease term
was for seven years, and the tenant took occupancy in April 1991. During
1994, 1995 and 1996, Crosby sub-leased, through the end of their lease
term, approximately 85,000 square feet (including approximately 10,000
square feet of mezzanine space) of University Business Center Phase II's
approximately 88,000 square feet of net rentable area (or 96%). Of the
total being sub-leased, approximately 73,000 square feet (or 86%) was
leased by Full Sail Recorders, Inc. ("Full Sail"), a major tenant at
University Business Center Phase I, a neighboring property owned by an
affiliate of the General Partner of the Partnership. During this period
and through December 1996, Crosby continued to make rent payments pursuant
to the original lease terms. During 1996, the Joint Venture received
notice that Crosby did not intend to pay full rental due under the
original lease agreement, including and subsequent to January 1997. The
Partnership's proportionate share of the rental income from this property
accounted for approximately 6% of the partnership's total revenues during
1996. Although the Joint Venture did not have formal lease agreements with
the sub-lessees noted above during this period, beginning February 1997
and through March 31, 1998 rent payments from these sub-lessees have been
made directly to the Joint Venture.
During 1997, Crosby abandoned its business, sold all or most of its
operating assets and informed the Joint Venture that Crosby may be
insolvent. During the third quarter of 1997, a conditional settlement was
reached at a mediation conference with Crosby and its corporate parent,
whereby, subject to the Joint Venture's acceptance of the settlement
terms, the corporate parent agreed to pay a portion of Crosby's liability
to the Joint Venture in full satisfaction of all claims against Crosby and
any of its affiliates. During the fourth quarter of 1997, the L/U II Joint
Venture informed Crosby and its corporate parent that it accepted the
terms of the conditional settlement, whereby Crosby's parent paid to the
L/U II Joint Venture the sum of $300,000 in full satisfaction of all
claims. These funds were received by the L/U II Joint Venture on October
23, 1997. The Partnership's proportionate share of the settlement was
$54,000 or 18%. The amount of the settlement was substantially less than
the aggregate liability of Crosby to the Joint Venture resulting from
Crosby's default under its lease. This deficit is partially offset by the
rent payments received from the sub-lessees, as discussed above.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet it sub-leased from Crosby. In
November 1996, Full Sail signed a lease amendment which increased the
square footage from 41,000 square feet to 48,000 square feet and extended
the lease term from 33 months to 76 months. In addition, in November 1996,
Full Sail also signed a 52 month lease for an additional approximately
21,000 square feet of space it sub-leased from Crosby. Both leases
aggregate 69,000 square feet or 78% of the business center's net rentable
area and commence April 1998 when the
- 9 -
<PAGE>
7. Commitments and Contingencies - Continued
-----------------------------------------
Crosby original lease term ends. As part of the lease negotiations, Full
Sail will receive a total of $450,000 in special tenant allowances
($200,000 resulting from the original lease signed December 1995 and
$250,000 resulting from the lease amendment signed November 1996).
Approximately $92,000 of the total allowance is to be reimbursed by Full
Sail to the L/U II Joint Venture pursuant to the lease terms. The
Partnership's proportionate share of the net commitment ($450,000 less
$92,000) is approximately $64,000 or 18%. The tenant allowance will be due
and payable to Full Sail pursuant to the previously mentioned lease
agreements, as appropriate invoices for tenant finish costs incurred by
Full Sail are submitted to the L/U II Joint Venture. The source of funds
for this commitment is expected to be cash flow from operations and/or
cash reserves .
As of March 31, 1998, the Joint Venture was currently negotiating directly
with the other sub-lessees discussed above to enter into leases for the
remaining space available. The future leasing and tenant finish costs
which will be required to release this space are unknown at this time but
are not expected to be substantial.
On December 30, 1997, Full Sail delivered written notice to the
Partnership that Full Sail had (i) exercised its right of first refusal
under its lease with NTS-Properties V, an affiliate of the General Partner
of the Partnership, to purchase University Business Center Phase I
("University I") office building and the Phase III vacant land adjacent to
the University Business Center development, and (ii) exercised its right
of first refusal under its lease with NTS University Boulevard Joint
Venture to purchase University Business Center Phase II ("University II")
office building, for an aggregate purchase price for all three of
$18,700,000. Full Sail exercised its right of first refusal under the
leases in response to a letter of intent to purchase University I,
University II and the Phase III vacant land which was previously received
by the Partnership from an unaffiliated buyer. Under its right of first
refusal, Full Sail must purchase the properties on the same terms and
conditions as contemplated by the letter of intent. Full Sail agreed in
its notice to the Partnership to proceed to negotiate in good faith a
definitive purchase agreement for these properties. Because no binding
agreement exists for the purchase of the properties at this time, there
can be no assurance that a mutual agreement of purchase and sale will be
reached among the parties, nor that the sale of the properties will be
consummated. As such, the Partnership has not determined the use of net
proceeds after repayment of outstanding debt from any such sale nor has it
determined the impact on its future results of operations or financial
position. The University II office building is owned by the L/U II Joint
Venture, the successor to the NTS University Boulevard Joint Venture, in
which the Partnership owns an 18% joint venture interest. Under the terms
of the right of first refusal, the closings of the sale of University I,
University II and the Phase III vacant land are to occur simultaneously.
8. Subsequent Event
----------------
Subsequent to March 31, 1998, the L/U II Joint Venture had a commitment
for approximately $37,000 of roof repairs at Lakeshore Business Center
Phase II. The Partnership's proportionate share of the commitment is
approximately $6,700 or 18%. The source of funds for this project is
expected to be cash flow from operations and/or cash reserves.
- 10 -
<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:
1998 1997
---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 87% 80%
Plainview Point Office Center Phases I and II 77% 84%
The Willows of Plainview Phase I 92% 92%
Property Owned in Joint Venture with NTS-
Properties V (Ownership % at March 31, 1998)
- --------------------------------------------
The Willows of Plainview Phase II (10%) 85% 86%
Properties Owned in Joint Venture with NTS-
Properties VI (Ownership % at March 31, 1998)
- ---------------------------------------------
Golf Brook Apartments (4%) 98% 90%
Plainview Point III Office Center (5%) 96% 91%
Property Owned in Joint Venture with NTS-
Properties VII, Ltd. and NTS-Properties Plus
Ltd. (Ownership % at March 31, 1998)
- --------------------------------------------
Blankenbaker Business Center 1A (30%) 100% 100%
Properties Owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at March 31, 1998)
- ---------------------------------------------
Lakeshore Business Center Phase I (18%) 94% 95%
Lakeshore Business Center Phase II (18%) 100% 94%
University Business Center Phase II (18%) 99% 99%
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1998 and 1997 was as follows:
1998 1997
--------- --------
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I $ 175,958 $ 160,713
Plainview Point Office Center Phases I $ 136,510 $ 139,196
and II
The Willows of Plainview Phase I $ 270,548 $ 273,715
Property Owned in Joint Venture with NTS-
Properties V (Ownership % at March
31, 1998)
- -----------------------------------------
The Willows of Plainview Phase II (10%) $ 31,666 $ 30,996
Properties Owned in Joint Venture with
NTS-Properties VI (Ownership % at March
31, 1998)
- ---------------------------------------
Golf Brook Apartments (4%) $ 29,780 $ 27,840
Plainview Point III Office Center (5%) $ 12,411 $ 9,397
Property Owned in Joint Venture with NTS-
Properties VII, Ltd. And NTS-Properties
Plus Ltd. (Ownership % at March 31, 1998)
- -----------------------------------------
Blankenbaker Business Center 1A (30%) $ 70,327 $ 69,422
Properties Owned through Lakeshore/
University II Joint Venture (L/U II Joint
Venture) (Ownership % at March 31, 1998)
- ----------------------------------------
Lakeshore Business Center Phase I (18%) $ 82,972 $ 63,146
Lakeshore Business Center Phase II (18%) $ 73,431 $ 59,266
University Business Center Phase II (18%) $ 36,206 $ 16,810
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The 7% increase in occupancy at Commonwealth Business Center Phase I from March
31, 1997 to March 31, 1998 is attributed to four new leases totaling
approximately 7,500 square feet. Included in the total are two expansions of
approximately 5,000 square feet by existing tenants. Partially offsetting the
new leases is one tenant move-out at the end of the lease term of 4,000 square
feet. Average occupancy increased for the three months ended March 31 from 82%
in 1997 to 87% in 1998. Rental and other income at Commonwealth Business Center
Phase I increased for the three months ended March 31, 1998 as compared to the
same period in 1997 primarily 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.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 7% decrease in occupancy at Plainview Point Office Center Phases I and II
from March 31, 1997 to March 31, 1998 is attributed to two tenant move- outs at
the end of the lease terms totaling approximately 7,500 square feet. Partially
offsetting the move-outs are two new leases totaling 3,200 square feet. Included
in this total is an expansion by an existing tenant of approximately 2,000
square feet. Average occupancy at Plainview Point Office Center Phases I and II
decreased for the three months ended March 31 from 86% in 1997 to 74% in 1998.
In the opinion of the General Partner of the Partnership, the decrease in
occupancy is only a temporary fluctuation and does not represent a downward
occupancy trend. The decrease in rental and other income at Plainview Point
Office Center Phases I and II for the three months ended March 31, 1998 as
compared to the same period in 1997 is a result of the decrease in average
occupancy and is partially offset by an increase in common area expense
reimbursements. Leases at Plainview Point Office Center Phases I and II provide
for tenants to contribute toward the payment of increases in common area
expenses, insurance, utilities and real estate taxes.
As of March 31, 1998 Plainview Point Office Center Phases I and II has
approximately 6,400 square feet of additional space leased to an existing tenant
which currently occupies approximately 22,300 square feet (or 39%) of the
building's total rentable area. The expansion is scheduled to occur during the
fourth quarter of 1999. See the Liquidity and Capital Resources section of this
item for the tenant finish commitment related to this lease.
The Willows of Plainview Phase I's occupancy was 92% at March 31, 1998 and 1997.
Average occupancy increased from 90% for the three months ended March 31, 1997
to 92% for the same period in 1998. Occupancy at residential properties
fluctuates on a continual basis. Year-ending occupancy percentages represent
occupancy only on a specific date; therefore, it is more meaningful to consider
average occupancy percentages which are representative of the entire year's
results. The change in rental and other income at The Willows of Plainview Phase
I for the three months ended March 31, 1998 as compared to the same period in
1997 was not significant.
The Willows of Plainview Phase II's occupancy decreased from 86% as of March 31,
1997 to 85% as of March 31, 1998. Average occupancy decreased from 89% for the
three months ended March 31, 1997 to 86% for the same period in 1998. The change
in rental and other income at The Willows of Plainview Phase II for the three
months ended March 31, 1998 as compared to the same period in 1997 was not
significant.
Golf Brook Apartments' occupancy increased from 90% as of March 31, 1997 to 98%
as of March 31, 1998. Average occupancy increased from 93% for the three months
ended March 31, 1997 to 97% for the same period in 1998. The change in rental
and other income at Golf Brook Apartments for the three months ended March 31,
1998 as compared to the same period in 1997 was not significant.
The 5% increase in occupancy at Plainview Point III Office Center from March 31,
1997 to March 31, 1998 is the result of one new lease for approximately 4,800
square feet. Partially offsetting the new lease is the downsizing of an existing
tenant by approximately 1,600 square feet. Average occupancy increased for the
three months ended March 31 from 91% in 1997 to 93% in 1998. Rental and other
income increased at Plainview Point III Office Center for the three months ended
March 31, 1998 as compared to the same period in 1997 as a result of an increase
in average occupancy and an increase in common area expense reimbursements.
Leases at Plainview Point III Office Center provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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, 1998 as
compared to the same period in 1997 was not significant.
The 1% decrease in occupancy at Lakeshore Business Center Phase I from March 31,
1997 to March 31, 1998, can be attributed to six tenant move-outs, vacating a
total of 7,000 square feet. One of the six tenants vacated its space prior to
the end of the lease term. The write-off of accrued income connected with this
lease was not significant. The move-outs are partially offset by three new
leases totaling approximately 5,600 square feet including an expansion by a
current tenant of 2,100 square feet. Average occupancy at Lakeshore Business
Center Phase I remained constant at 94% for the three months ended March 31,
1997 and 1998. The increase in rental and other income at Lakeshore Business
Center Phase I for the three months ended March 31, 1998 as compared to the
three months ended March 31, 1997 is due primarily to a $61,000 lease buy-out
received in February 1998 (the Partnership's proportionate share is
approximately $10,900 or 18%). The lease buy-out income was received from a
tenant whose lease expires during July 1999; however, the tenant has notified
the Partnership that it will vacate the space during the summer of 1998 due to
the fact that it will be consolidating several of its regional offices. The
increase in rental and other income is also due to an increase in common area
expense reimbursements. Tenants at the business center reimburse the Partnership
for common area expenses as part of the lease agreements.
The 6% increase in occupancy at Lakeshore Business Center Phase II from March
31, 1997 to March 31, 1998, can be attributed to three new leases totaling
approximately 7,200 square feet which includes approximately 3,000 square feet
in expansions by two current tenants. Partially offsetting the new leases is one
tenant move-out at the end of the lease term of approximately 1,200 square feet.
Average occupancy at Lakeshore Business Center Phase II increased for the three
months ended March 31 from 91% (1997) to 100% (1998). The increase in rental and
other income at Lakeshore Business Center Phase II for the three months ended
March 31, 1998 as compared to the three months ended March 31, 1997 is primarily
a result of the increase in average occupancy and an increase in common area
expense reimbursements. Tenants at the business center reimburse the Partnership
for common area expenses as part of the lease agreements.
Occupancy at University Business Center Phase II was 99% at March 31, 1998 and
1997. The increase in rental and other income at University Business Center
Phase II for the three months ended March 31, 1998 as compared to the same
period in 1997 is primarily due to the fact that approximately $70,000 of
accrued income connected with the Philip Crosby Associates, Inc. ("Crosby")
lease was written-off during the first quarter of 1997, of which the
Partnership's proportionate share was approximately $13,000 or 18%. See below
for a discussion of the Crosby lease.
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 and other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it has thought there could be a possible collection. There
have been no funds recovered as a result of these actions during the three
months ended March 31, 1998 or 1997.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
this item for a discussion regarding the Partnership's debt financing.
- 14 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Interest and other income includes income from short-term investments made by
the Partnership with cash reserves. Interest and other income increased for the
three months ended March 31, 1998 as compared to the same period in 1997 as a
result of an increase in cash reserves available for investment.
The increase in operating expenses for the three months ended March 31, 1998 as
compared to the same period in 1997 is due primarily to increased advertising,
landscaping and building maintenance costs at the Partnership's commercial
properties. There were no significant fluctuations in operating expenses at the
Partnership's residential properties for the three months ended March 31, 1998
as compared to the same period in 1997.
The increase in operating expenses - affiliated for the three months ended March
31, 1998 as compared to the same period in 1997 is due primarily to increased
property management costs at the Partnership's commercial properties. There were
no significant fluctuations in operating expenses affiliated at the
Partnership's residential properties for the three months ended March 31, 1998
as compared to the same period in 1997. Operating expenses - affiliated are
expenses for services performed by employees of NTS Development Company, an
affiliate of the General Partner of the Partnership.
The change in amortization of capitalized leasing costs for the three months
ended March 31, 1998 as compared to the same period in 1997 is not significant.
Interest expense decreased for the three months ended March 31, 1998 as compared
to the same period in 1997 primarily due to continued principal payments on the
mortgages payable of the Partnership and its Joint Venture properties. The
decrease in interest expense is partially offset by a higher interest rate on
the financing obtained by the Partnership in December 1997 (7.15% compared to a
rate of 7% on the previous debt). 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 changes in real estate taxes, professional and administrative expenses and
professional and administrative expenses - affiliated for the three months ended
March 31, 1998 as compared to the same period in 1997 were not significant.
Professional and administrative 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 depreciation and amortization expense for the three months ended
March 31, 1998 as compared to the same period in 1997 is due to a portion of the
assets at the Partnership's joint venture properties (primarily tenant finish
improvements) becoming fully depreciated. 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
$24,600,000.
- 15 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations for the three months ended March 31 was $262,117
(1998) and $207,417 (1997). No distribution has been made since the quarter
ended September 30, 1996 due to uncertainties involving the Crosby lease as
discussed below. Distributions will be resumed once the Partnership has
established adequate cash reserves and is generating cash from operations which,
in management's opinion, is sufficient to warrant future 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 and
investment securities as shown on the Partnership's balance sheet as of March
31) were $731,266 and$372,160 at March 31, 1998 and 1997, respectively.
As of March 31, 1998, the Partnership has a mortgage payable with an insurance
company in the amount of $2,178,276. 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, 1998, the Partnership obtained two mortgage loans from an
insurance company totaling $3,900,000 ($1,998,000 and $1,902,000). The
outstanding balances of the loans at March 31, 1998 were $1,985,519 and
$1,890,119, respectively, for a total of $3,875,638. The mortgages bear interest
at a fixed rate of 7.2%, are due January 5, 2013 and are secured by The Willows
of Plainview Phase I. Monthly principal payments are based upon a 15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of amortization.
As of March 31, 1998, the Blankenbaker Business Center Joint Venture, in which
the Partnership has a joint venture interest, had a mortgage payable with an
insurance company in the amount of $3,782,431. 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 March 31,
1998 is $1,137,755. 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, 1998, the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at March 31, 1998 were
$5,523,204, $5,294,025 and $5,133,600 for a total of $15,950,829. The loans are
recorded as a liability of the Joint Venture. The Partnership's proportionate
share in the loans at March 31, 1998 was $985,892, $944,982 and $916,348,
respectively, for a total of $2,847,222. The mortgages bear interest at a fixed
rate of 8.125%, are due August 1, 2008, and are secured by the assets of the
Joint Venture. Monthly principal payments are based upon a 12-year amortization
schedule. At maturity, the loans will have been repaid based on the current rate
of amortization.
As of March 31, 1998,, The Willows of Plainview Phase II, an apartment joint
venture between the Partnership and NTS-Properties V, obtained two mortgage
loans from an insurance company totaling $5,100,000 ($3,193,000 and $1,907,000).
The outstanding balances of the loans at March 31, 1998 were $3,173,141 and
$1,895,139, respectively, for a total of $5,068,280. The Partnership's
proportionate interest in the loans at March 31, 1998 was $320,170 and $191,220,
respectively, for a total of $511,390. The mortgages bear interest at a fixed
rate of 7.2%, are due January 5, 2013 and are secured by the assets of the Joint
Venture. Monthly principal payments are based upon a 15-year amortization
schedule. At maturity, the loans will have been repaid based on the current rate
of amortization.
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 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 are
also for the purchase of investments securities. As part of its cash management
activities, the Partnership has purchased Certificates of Deposit or securities
issued by the U.S. Government with initial maturities of greater than three
months to improve the return on its cash reserves. The Partnership intends to
hold the securities until maturity. Cash flows provided by investing activities
are from reimbursements from tenants for tenant finish improvements and the
maturity of investment securities. Cash flows used in financing activities are
for principal payments on mortgages payable, repurchases of limited partnership
Units and cash which has been reserved by the Partnership for the repurchase of
limited partnership Units. Cash flows provided by financing activities are from
a decrease in loan costs. The Partnership does not expect any material changes
in the mix and relative cost of capital resources except for 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.
Due to the fact that no distributions were made during the three months ended
March 31, 1998 or 1997, the table which presents that portion of the
distribution that represents a return of capital on a Generally Accepted
Accounting Principle basis has been omitted.
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of University
Business Center Phase II, which is owned by the Lakeshore/University II ("L/U
II") Joint Venture. The original lease term was for seven years, and the tenant
took occupancy in April 1991. During 1994, 1995 and 1996, Crosby sub-leased,
through the end of their lease term, approximately 85,000 square feet (including
approximately 10,000 square feet of mezzanine space) of University Business
Center Phase II's approximately 88,000 square feet of net rentable area (or
96%). Of the total being sub-leased, approximately 73,000 square feet (or 86%)
was leased by Full Sail Recorders, Inc. ("Full Sail"), a major tenant at
University Business Center Phase I, a neighboring property owned by an affiliate
of the General Partner of the Partnership. During this period and through
December 1996, Crosby continued to make rent payments pursuant to the original
lease terms. During 1996, the Joint Venture received notice that Crosby did not
intend to pay full rental due under the original lease agreement, including and
subsequent to January 1997. The Partnership's proportionate share of the rental
income from this property accounted for approximately 6% of the partnership's
total revenues during 1996. Although the Joint Venture did not have formal lease
agreements with the sub-lessees noted above during this period, beginning
February 1997 and through March 31, 1998 rent payments from these sub-lessees
have been made directly to the Joint Venture.
During 1997, Crosby abandoned its business, sold all or most of its operating
assets and informed the Joint Venture that Crosby may be insolvent. During the
third quarter of 1997, a conditional settlement was reached at a mediation
conference with Crosby and its corporate parent, whereby, subject to the Joint
Venture's acceptance of the settlement terms, the corporate parent agreed to pay
a portion of Crosby's liability to the Joint Venture in full satisfaction of all
claims against Crosby and any of its affiliates. During the fourth quarter of
1997, the L/U II Joint Venture informed Crosby and its corporate parent that it
accepted the terms of the conditional settlement, whereby Crosby's parent paid
to the L/U II Joint Venture the sum of $300,000 in full satisfaction of all
claims.
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
These funds were received by the L/U II Joint Venture on October 23, 1997. The
Partnership's proportionate share of the settlement was $54,000 or 18%. The
amount of the settlement was substantially less than the aggregate liability of
Crosby to the Joint Venture resulting from Crosby's default under its lease.
This deficit is partially offset by the rent payments received from the
sub-lessees, as discussed above.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet it sub-leased from Crosby. In
November 1996, Full Sail signed a lease amendment which increased the square
footage from 41,000 square feet to 48,000 square feet and extended the lease
term from 33 months to 76 months. In addition, in November 1996, Full Sail also
signed a 52 month lease for an additional approximately 21,000 square feet of
space it sub-leased from Crosby. Both leases aggregate 69,000 square feet or 78%
of the business center's net rentable area and commence April 1998 when the
Crosby original lease term ends. As part of the lease negotiations, Full Sail
will receive a total of $450,000 in special tenant allowances ($200,000
resulting from the original lease signed December 1995 and $250,000 resulting
from the lease amendment signed November 1996). Approximately $92,000 of the
total allowance is to be reimbursed by Full Sail to the L/U II Joint Venture
pursuant to the lease terms. The Partnership's proportionate share of the net
commitment ($450,000 less $92,000) is approximately $64,000 or 18%. The tenant
allowance will be due and payable to Full Sail pursuant to the previously
mentioned lease agreements, as appropriate invoices for tenant finish costs
incurred by Full Sail are submitted to the L/U II Joint Venture. The source of
funds for this commitment is expected to be cash flow from operations and/or
cash reserves.
As of March 31, 1998, the Joint Venture was currently negotiating directly with
the other sub-lessees discussed above to enter into leases for the remaining
space available. The future leasing and tenant finish costs which will be
required to release this space is unknown at this time but is not expected to be
substantial.
As of March 31, 1998, the Partnership had a commitment for approximately $30,000
of tenant finish improvements at Plainview Point Office Center Phases I and II.
The commitment is the result of an expansion of approximately 6,400 square feet
by a current tenant. The tenant is expected to take occupancy of the expansion
space during the fourth quarter of 1999. The source of funds for this project is
expected to be cash flow from operations and/or cash reserves.
The Partnership had no other material commitments for renovations or capital
improvements as of March 31, 1998.
Subsequent to March 31, 1998, the L/U II Joint Venture had a commitment for
approximately $37,000 of roof repairs at Lakeshore Business Center Phase II. The
Partnership's proportionate share of the commitment is approximately $6,700 or
18%. The source of funds for this project is expected to be cash flow from
operations and/or cash reserves.
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 the next 12
months or obtain new tenants are unknown.
The Partnership has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the issue. The Year 2000 Issue, a
worldwide problem, is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the
- 18 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Partnership's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
major systems failures or miscalculations. The Partnership presently believes
that, with modifications to existing software and conversions to new software,
the Year 2000 problem will not pose significant operational problems for the
Partnership's computer systems. The Partnership continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material effect on its financial position or results of
operations. The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1998 was immaterial.
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.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve.
On January 13, 1998, the Partnership elected to fund an additional $60,000 to
its Interest Repurchase Reserve. With this funding the Partnership will be able
to repurchase up to 400 additional Units at a price of $150 per Unit. If the
number of Units submitted for repurchase exceeds that which can be repurchased
by the Partnership with the current funding, those additional Units may be
repurchased in subsequent quarters. The offering price per Unit was established
by the General Partner and does not purport to represent the fair market value
or liquidation value of the Unit. The Interest Repurchase Reserve was funded
from cash reserves. Through March 31, 1998, the Partnership has repurchased a
total of 3,229 Units for $484,350. Repurchased Units are retired by the
Partnership, thus increasing the share of ownership of each remaining investor.
The balance in the Interest Repurchase Reserve as of March 31, 1998 is $79,800.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's commercial properties. The leasing and
renewal negotiations at the Lakeshore Business Center development are handled by
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 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.
- 19 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Leases at Commonwealth Business Centers 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, 1998 in the asset held for
sale is $297,251. The Joint Venture continues to actively market the asset for
sale. In management's opinion, the net book value approximates the fair market
value less cost to sell.
On December 30, 1997, Full Sail delivered written notice to the Partnership that
Full Sail had (i) exercised its right of first refusal under its lease with
NTS-Properties V to purchase University Business Center Phase I ("University
I")office building and the Phase III vacant land adjacent to the University
Business Center development, and (ii) exercised its right of first refusal under
its lease with NTS University Boulevard Joint Venture to purchase the University
Business Center Phase II ("University II") office building, for an aggregate
purchase price for all three of $18,700,000. Full Sail exercised its right of
first refusal under the leases in response to a letter of intent to purchase
University I, University II and the Phase III vacant land which was previously
received by the Partnership from an unaffiliated buyer. Under its right of first
refusal, Full Sail must purchase the properties on the same terms and conditions
as contemplated by the letter of intent. Full Sail agreed in its notice to the
Partnership to proceed to negotiate in good faith a definitive purchase
agreement for the properties. Because no binding agreement exists for the
purchase of these properties at this time, there can be no assurance that a
mutual agreement of purchase and sale will be reached among the parties, nor
that the sale of the properties will be consummated. As such, the Partnership
has not determined the use of net proceeds after repayment of outstanding debt
from any such sale nor has it determined the impact on its future results of
operations or financial position. The University II office building is owned by
the L/U II Joint Venture, the successor to the NTS University Boulevard Joint
Venture, in which the Partnership owns an 18% joint venture interest. Under the
terms of the right of first refusal, the closings of the sale of University I,
University II and the Phase III vacant land are to occur simultaneously.
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as the Partnership "anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such events not occur, then the
result which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
- 20 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
office buildings, business centers and apartment complexes. If a major
commercial tenant or a large number of apartment lessees default on their
leases, the Partnership's ability to make payments due under its debt
agreements, payment of operating costs and other partnership expenses would be
directly impacted. A lessees ability to make payments are subject to risks
generally associated with real estate, many of which are beyond the control of
the Partnership, including general or local economic conditions, competition,
interest rates, real estate tax rates, other operating expenses and acts of God.
- 21 -
<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 was filed on January 21, 1998, to report in Item 5
that Full Sail Recorders, Inc., a tenant at University
Boulevard Office development in Orlando, Florida, had exercised
its right of first refusal under its lease with NTS-Properties
V to purchase University Business Center Phase I office
building and the Phase III vacant land, and exercised its right
of first refusal under its lease with NTS University Boulevard
Joint Venture to purchase University Business Center II office
building, for an aggregate purchase price for all three of
$18,700,000.
Form 8-K was filed on January 21, 1998 to report in Item 5 that
the Partnership has elected to fund an additional amount of
$60,000 to its Interest Repurchase Reserve.
- 22 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
-------------------
John W. Hampton
Senior Vice President
Date: May 14, 1998
------------
- 23 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 398,275
<SECURITIES> 526,329
<RECEIVABLES> 319,871
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,856,800
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 14,818,819
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,797,814
<TOTAL-LIABILITY-AND-EQUITY> 14,818,819
<SALES> 916,249
<TOTAL-REVENUES> 926,261
<CGS> 0
<TOTAL-COSTS> 723,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,601
<INCOME-PRETAX> (10,463)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,463)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,463)
<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>
