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 June 30, 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 June 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and six months ended
June 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and six months ended
June 30, 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
Item 3. Defaults Upon Senior Securities 22
Item 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
June 30, 1998 December 31, 1997*
------------- ------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 376,504 $ 276,145
Cash and equivalents - restricted 241,619 108,724
Investment securities 305,762 422,336
Accounts receivable 225,773 243,134
Land, buildings and amenities, net 12,731,977 13,023,781
Asset held for sale 297,251 297,251
Other assets 393,085 440,937
----------- -----------
$14,571,971 $14,812,308
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $10,378,291 $10,706,802
Accounts payable - operations 134,396 113,724
Accounts payable - construction 43,700 8,694
Security deposits 87,410 83,390
Other liabilities 177,376 65,473
----------- -----------
10,821,173 10,978,083
Commitments and Contingencies
Partners' equity 3,750,798 3,834,225
----------- -----------
$14,571,971 $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 income - current year 25,047 253 25,300
Cash distributions declared to
date (21,586,280) (218,253) (21,804,533)
Repurchase of limited
partnership Units (596,324) -- (596,324)
------------ ------------ ------------
Balances at June 30, 1998 $ 3,965,882 $ (215,084) $ 3,750,798
============ ============ ============
</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
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
----- ------ ------ -----
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 923,392 $ 890,669 $ 1,839,642 $ 1,739,222
Interest and other income 15,944 8,375 26,004 14,486
----------- ----------- ----------- -----------
939,336 899,044 1,865,646 1,753,708
EXPENSES:
Operating expenses 201,696 197,207 407,845 378,533
Operating expenses - affiliated 112,495 92,949 230,646 192,890
Amortization of capitalized
leasing costs 3,729 5,227 7,459 10,452
Interest expense 205,325 217,048 418,927 433,404
Management fees 53,955 50,243 105,222 98,480
Real estate taxes 50,774 53,737 107,803 108,750
Professional and administrative
expenses 27,940 26,564 52,542 51,583
Professional and administrative
expenses - affiliated 39,820 39,206 81,874 77,988
Depreciation and amortization 207,842 226,009 428,028 453,742
----------- ----------- ----------- -----------
903,576 908,190 1,840,346 1,805,822
----------- ----------- ----------- -----------
Net income (loss) $ 35,760 $ (9,146) $ 25,300 $ (52,114)
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners $ 35,402 $ (9,055) $ 25,047 $ (51,593)
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit $ 1.36 $ (.34) $ .95 $ (1.93)
=========== =========== =========== ===========
Weighted average number of
limited partnership units 26,017 26,689 26,316 26,726
=========== =========== =========== ===========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 35,760 $ (9,146) $ 25,300 $ (52,114)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Accrued interest on investment
securities (513) -- (3,953) --
Amortization of capitalized leasing
costs 3,729 5,227 7,459 10,452
Depreciation and amortization 207,842 226,009 428,028 453,742
Changes in assets and liabilities:
Cash and equivalents - restricted (50,996) (51,886) (56,560) (99,989)
Accounts receivable 94,098 31,236 17,361 32,395
Other assets 19,675 24,607 18,363 4,259
Accounts payable (22,991) (21,515) 20,672 3,262
Security deposits 6,825 2,330 4,020 3,557
Other liabilities 17,047 63,584 111,903 122,299
--------- --------- --------- ---------
Net cash provided by operating
activities 310,476 270,446 572,593 477,863
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (107,935) (21,200) (93,595) (33,350)
Purchase of investment securities (201,538) (116,928) (620,550) (116,928)
Maturity of investment securities 422,618 -- 741,077 --
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities 113,145 (138,128) 26,932 (150,278)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (171,990) (140,362) (328,511) (275,798)
Decrease in loan costs -- -- 14,409 --
Repurchase of limited partnership Units (82,779) -- (108,729) (33,900)
Decrease (increase) in cash and
equivalents - restricted 2,715 -- (76,335) (250)
--------- --------- --------- ---------
Net cash used in financing activities (252,054) (140,362) (499,166) (309,948)
--------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents 171,567 (8,044) 100,359 17,637
CASH AND EQUIVALENTS, beginning of period 204,937 372,160 276,145 346,479
--------- --------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 376,504 $ 364,116 $ 376,504 $ 364,116
========= ========= ========= =========
Interest paid on a cash basis $ 205,095 $ 217,052 $ 402,357 $ 436,959
========= ========= ========= =========
</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 (consisting only of normal recurring accruals) necessary for a fair
presentation have been made to the accompanying financial statements for the
three months and six months ended June 30, 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
$60,000 to the Interest Repurchase Reserve. With these funds the
Partnership was able to repurchase 400 Units at a price of $150 per Unit.
On May 15, 1998, the Partnership elected to fund an additional $64,000 to
the Interest Repurchase Reserve. With the May 15, 1998 funding, the
Partnership repurchased 43 Units at a price of $160 per Unit. On June 30,
1998, the Partnership elected to fund $16,065 to its Interest Repurchase
Reserve enabling the Partnership, along with funds remaining in the reserve
from previous fundings, to repurchase up to 357 Units at a price of $205
per Unit. If the number of Units submitted for repurchase exceeds that
which can be repurchased by the Partnership with the current fundings,
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. From February 1, 1996 (date Interest Repurchase Reserve established)
to June 30, 1998, the Partnership has repurchased a total of 3,778 Units
for $567,130. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited partner
investor. The balance in the Interest Repurchase Reserve as of June 30,
1998 is $76,335.
4. Investment Securities
---------------------
Investment Securities represent investments in Certificates of Deposit or
securities issued by the U.S. Government with initial maturities of greater
than three months. The investments are carried at cost which approximates
market value. The Partnership intends to hold the securities until
maturity. During the six months ended June 30, 1998 and 1997, the
Partnership sold no investment securities.
- 6 -
<PAGE>
4. Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at June 30,
1998:
Amortized Maturity Value at
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $ 101,784 07/02/98 $ 101,798
Certificate of Deposit 103,143 07/31/98 103,578
Certificate of Deposit 100,835 09/01/98 101,744
--------- --------
$ 305,762 $ 307,120
========= ========
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:
June 30, 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 $ 2,116,330 $ 2,238,591
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.15%, due January 5, 2013,
secured by land, buildings and amenities 1,966,518 1,998,000
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.15%, due January 5, 2013,
secured by land, building and amenities 1,872,031 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 1,111,125 1,163,828
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008
secured by land and building 970,670 1,000,809
(Continued next page)
- 7 -
<PAGE>
5. Mortgages Payable - Continued
-----------------------------
June 30, 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 $ 930,393 $ 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 902,199 930,213
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 318,690 321,854
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 190,335 192,225
----------- -----------
$10,378,291 $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 $105,222 and $98,480 were paid to NTS
Development Company, an affiliate of the general partner of the
Partnership, for the six months ended June 30, 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 $7,330 and $2,303 as a repair and maintenance fee during the six
months ended June 30, 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 six months ended June 30, 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. The charges were as follows:
1998 1997
--------- ---------
Administrative $ 102,852 $ 101,434
Leasing 63,703 53,045
Property management 146,303 124,941
Other 11,128 1,832
--------- ---------
$ 323,986 $ 281,252
========= =========
- 8 -
<PAGE>
7. Commitments and Contingencies
-----------------------------
As of June 30, 1998, the Lakeshore/University II ("L/U II") Joint Venture
has a commitment for a $450,000 special tenant finish allowance as a result
of lease negotiations with Full Sail Recorders, Inc. ("Full Sail"). Full
Sail currently occupies 83% of University Business Center Phase II's net
rentable area. 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 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.
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, and (ii)
exercised its right of first refusal under its lease with NTS University
Boulevard Joint Venture to purchase University Business Center II
("University II")office building, for an aggregate purchase price for all
three of $18,700,000. 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 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.
As of June 30, 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.
As of June 30, 1998, Lakeshore Business Center Phase I had a commitment for
approximately $111,000 of tenant finish improvements resulting from a 3,049
square foot expansion by a current tenant. The Partnership's proportionate
share of the commitment is approximately $20,000 or 18%. The project is
expected to be completed during the third quarter of 1998.
The source of funds for the commitments at Plainview Point Office Center
Phases I and II and Lakeshore Business Center Phase I is expected to be
cash flow from operations and/or cash reserves.
The Partnership also anticipates a demand on future liquidity as a result
of a planned renovation of the community's clubhouse at The Willows of
Plainview. At this time, the cost and extent of the renovation has not been
determined. The cost of the common clubhouse renovation will be shared
proportionately by Phase I and II of The Willows of Plainview. The source
of funds for this project will be cash flow from operations and/or cash
reserves.
- 9 -
<PAGE>
8. Subsequent Event
----------------
Subsequent to June 30, 1998, the L/U II Joint Venture entered into a
contract for the sale of approximately 2.4 acres of land adjacent to the
Lakeshore Business Center development for a purchase price of $528,405.
Concurrent with the signing of the contract, the purchaser deposited into
an escrow account $10,000. This deposit will be applied to the purchase
price at closing. The purchaser has until November 17, 1998 to determine if
the land is satisfactory for their use. If the purchaser determines that it
is satisfactory, the contract requires that they proceed, at their cost, to
have the property re-zoned to allow for a self-storage facility. If the
purchaser is unable to obtain the re-zoning, they may cancel the contract.
The General Partner of the Partnership has met with city officials who seem
interested in the project and have voiced a willingness to consider the
re-zoning request. If the re-zoning is granted, the purchaser is to close
on the property by February 1, 1999 or deposit an additional $10,000 with
the escrow agent for a 30-day delay. The contract also allows for an
additional deposit of $10,000 for one more delay in closing to April 3,
1999. The Partnership has an 18% interest in the Joint Venture. The
Partnership has not yet determined what the use of net proceeds would be
from the sale of the land.
- 10 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the Partnership's 1997 Annual
Report.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
1998 1997
---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 92% 82%
Plainview Point Office Center Phases I and II 76% 82%
The Willows of Plainview Phase I 87% 95%
Property Owned in Joint Venture with NTS-
Properties V (Ownership % at June 30, 1998)
- -------------------------------------------
The Willows of Plainview Phase II (10%) 83% 94%
Properties Owned in Joint Venture with NTS-
Properties VI (Ownership % at June 30, 1998)
- --------------------------------------------
Golf Brook Apartments (4%) 96% 91%
Plainview Point III Office Center (5%) 96% 88%
Property Owned in Joint Venture with NTS-
Properties VII, Ltd. and NTS-Properties Plus
Ltd. (Ownership % at June 30, 1998)
- --------------------------------------------
Blankenbaker Business Center 1A (30%) 100% 100%
Properties Owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at June 30, 1998)
- ---------------------------------------------
Lakeshore Business Center Phase I (18%) 94% 97%
Lakeshore Business Center Phase II (18%) 92% 94%
University Business Center Phase II (18%) 90% 99%
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1998 and 1997 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
-------- -------- -------- ------
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I $167,932 $174,447 $343,890 $335,161
Plainview Point Office Center Phases I
and II $132,566 $134,200 $269,077 $273,396
The Willows of Plainview Phase I $277,809 $290,530 $548,356 $564,245
Property Owned in Joint Venture with
NTS-Properties V (Ownership % at June
30, 1998)
- -------------------------------------
The Willows of Plainview Phase II
(10%) $ 31,076 $ 33,175 $ 62,741 $ 64,170
Properties Owned in Joint Venture with
NTS-Properties VI (Ownership % at June
30, 1998)
- --------------------------------------
Golf Brook Apartments (4%) $ 30,324 $ 26,951 $ 60,104 $ 54,791
Plainview Point III Office Center (5%) $ 9,505 $ 10,148 $ 21,917 $ 19,545
Property Owned in Joint Venture with
NTS-Properties VII, Ltd. And NTS-
Properties Plus Ltd. (Ownership % at
June 30, 1998)
- ------------------------------------
Blankenbaker Business Center 1A (30%) $ 65,279 $ 69,448 $135,606 $138,870
Properties Owned through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at June
30, 1998)
- -----------------------------------
Lakeshore Business Center Phase I
(18%) $ 65,845 $ 62,298 $148,817 $125,444
Lakeshore Business Center Phase II
(18%) $ 97,431 $ 63,789 $170,862 $123,055
University Business Center Phase II
(18%) $ 50,729 $ 28,698 $ 86,935 $ 45,508
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 10% increase in occupancy at Commonwealth Business Center Phase I from June
30, 1997 to June 30, 1998 is attributed to three new leases totaling
approximately 6,700 square feet. Included in the total are two expansions
totaling 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
800 square feet. Average occupancy decreased from 89% (1997) to 87% (1998) for
the three months ended June 30, and from 88% (1997) to 87% (1998) for the six
month period. The increase in rental and other income at Commonwealth Business
Center Phase I for the six months ended June 30, 1998 as compared to the same
period in 1997 is primarily due to 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
decrease in rental and other income at Commonwealth Business Center Phase I for
the three months ended June 30, 1998 as compared to the same period in 1997 is a
result of the decrease in average occupancy.
The 6% decrease in occupancy at Plainview Point Office Center Phases I and II
from June 30, 1997 to June 30, 1998 is attributed to one tenant move-out at the
end of the lease term totaling approximately 6,400 square feet. Partially
offsetting the move-out 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 decreased from 83% (1997) to 76% (1998) for the
three months ended June 30 and from 85% (1997) to 75% (1998) for the six month
period. 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 six months ended June 30, 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. Rental and other income at Plainview Point
Office Center Phases I and II for the three months ended June 30, 1998 as
compared to the same period in 1997 remained fairly constant.
The Willows of Plainview Phase I's occupancy decreased from 95% at June 30, 1997
to 87% at June 30, 1998. Average occupancy decreased from 92% (1997) to 86%
(1998) for the three months ended June 30 and from 91% (1997) to 89% (1998) for
the six month period. Occupancy at residential properties fluctuates on a
continuous basis. Period-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 period's results.
The decrease in rental and other income at The Willows of Plainview Phase I for
the three months and six months ended June 30, 1998 as compared to the same
periods in 1997 is due primarily to the decrease in average occupancy and is
partially offset by an increase in income from fully-furnished units. Fully-
furnished units are apartments which rent at an additional premium above base
rent. Therefore, it is possible for occupancy to decrease and revenues to
increase when the number of fully furnished units has increased.
The Willows of Plainview Phase II's occupancy decreased from 94% at June 30,
1997 to 83% at June 30, 1998. Average occupancy decreased from 94% (1997) to 83%
(1998) for the three months ended June 30 and from 91% (1997) to 84% (1998) for
the six month period. Rental and other income at The Willows of Plainview Phase
II for the three months and six months ended June 30, 1998 as compared to the
same periods in 1997 remained fairly constant.
Golf Brook Apartments occupancy increased from 91% at June 30, 1997 to 96% at
June 30, 1998. Average occupancy increased from 89% (1997) to 95% (1998) for the
three months ended June 30 and from 91% (1997) to 96% (1998) for the six month
period. Rental and other income at Golf Brook Apartments increased for the three
months and six months ended June 30, 1998 as compared to the same periods in
1997 primarily as a result of the increase in average occupancy.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 8% increase in occupancy at Plainview Point III Office Center from June 30,
1997 to June 30, 1998 is the result of one new lease for approximately 4,800
square feet. Average occupancy increased from 89% (1997) to 96% (1998) for the
three months ended June 30 and from 91% (1997) to 96% (1998) for the six month
period. Rental and other income at Plainview Point III Office Center for the
three months and six months ended June 30, 1998 as compared to the same periods
in 1997 remained fairly constant.
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. Rental and other income at Blankenbaker
Business Center 1A remained fairly constant for the three months and six months
ended June 30, 1998 as compared to the same periods in 1997.
The 3% decrease in occupancy at Lakeshore Business Center Phase I from June 30,
1997 to June 30, 1998 can be attributed to six tenant move-outs totaling
approximately 6,100 square feet. One of the six tenants vacated 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 two new leases totaling
approximately 2,600 square feet. Average occupancy at Lakeshore Business Center
Phase I decreased from 96% (1997) to 93% (1998) for the three months ended June
30 and from 95% (1997) to 94% (1998) for the six month period. The increase in
rental and other income at Lakeshore Business Center Phase I for the six months
ended June 30, 1998 as compared to the same period in 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%). This 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 at the end of 1998 due to
the fact that it will be consolidating several of its regional offices. The
increase in rental and other income for the six month period 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 change in rental and other income for the three months ended
June 30, 1998 as compared to the same period in 1997 was not significant.
As of June 30, 1998 Lakeshore Business Center Phase I has 3,049 square feet of
additional space leased to an existing tenant. The tenant is expected to take
occupancy of the expansion space during the third quarter of 1998. With this
expansion the Business Center's occupancy should improve to 96%. See the
Liquidity and Capital Resources Section of this item for the tenant finish
commitment related to this lease.
The 2% decrease in occupancy at Lakeshore Business Center Phase II from June 30,
1997 to June 30, 1998 can be attributed to two tenant move-outs totaling
approximately 11,000 square feet. The move-outs consist of one tenant vacating
at the end of the lease term (1,200 square feet) and one tenant negotiating a
lease termination (10,000 square feet - tenant paid the L/U II Joint Venture a
lease termination fee {recorded as rental income} of $185,000 of which the
Partnership's proportionate share is approximately $33,000 or 18%). Partially
offsetting the move-outs are four new leases totaling approximately 9,000 square
feet which includes three expansions of approximately 5,000 square feet by
existing tenants. 4,000 square feet of the expansions represents an increase in
the square footage leased by Lambda Physik. Lambda Physik currently leases
nearly 15,000 square feet and is the largest tenant in the building occupying
approximately 15% of the building's total rentable square feet. Average
occupancy at Lakeshore Business Center Phase II increased from 94% (1997) to 95%
(1998) for the three months ended June 30 and from 92% (1997) to 97% (1998) for
the six month period. The increase in rental and other income at Lakeshore
Business Center Phase II for the three months and six months ended June 30, 1998
as compared to the same periods in 1997 is due primarily to the $185,000
termination fee paid to the L/U II Joint Venture, as discussed above.
- 14 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Also contributing to the increase in rental and other income is an 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.
The 9% decrease in occupancy at University Business Center Phase II from June
30, 1997 to June 30, 1998 is the result of one of Philip Crosby Associates,
Inc's ("Crosby") sub-tenants (approximately 9,000 square feet) vacating its
space at the end to Crosby's lease term (March 31, 1998). The move-out is
partially offset by an expansion of approximately 1,300 square feet by one of
Crosby's former sub-tenants, Full Sail Recorders, Inc. ("Full Sail"), upon the
commencement (April 1, 1998) of its lease with the L/U II Joint Venture. In 1995
and 1996, Full Sail had signed leases with the Joint Venture for the
approximately 73,000 square feet it was leasing from Crosby. These leases
commenced April 1, 1998. (See below for a further discussion regarding Crosby
and Full Sail). Average occupancy at University Business Center Phase II
decreased from 99% (1997) to 90% (1998) for the three months ended June 30 and
from 99% (1997) to 95% (1998) for the six month period. The increase in rental
and other income at University Business Center Phase II for the six months ended
June 30, 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 Crosby
lease was written-off during the first quarter of 1997, of which the
Partnership's proportionate share was approximately $13,000 or 18%. The increase
in rental and other income at University Business Center Phase II for the three
months ended June 30, 1998 as compared to the same period in 1997 is a result of
an increase in common area expense reimbursements. Sub-tenants at the Business
Center were not required to reimburse the Partnership for common area expenses.
However, as part of Full Sail's lease agreement, which commenced April 1, 1998,
Full Sail is required to reimburse the Partnership for such expenses,
attributing to the increase in rental and other income for the second quarter of
1998.
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
were made directly to the Joint Venture.
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 six months
ended June 30, 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.
- 15 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Interest and other income includes income from investments made by the
Partnership with cash reserves. Interest income increased for the three months
and six months ended June 30, 1998 as compared to the same periods in 1997 as a
result of an increase in cash reserves available for investment.
The increase in operating expenses for the six months ended June 30, 1998 as
compared to the same period in 1997 is due primarily to increased advertising
costs at Commonwealth Business Center Phase I and Plainview Point Office Center
Phases I and II and increased exterior maintenance costs at Commonwealth
Business Center Phase I. The increase is also due to increased costs resulting
form the leasing of fully-furnished units at The Willows of Plainview Phases I
and II. There were no significant fluctuations in operating expenses at Golf
Brook Apartments for the six months ended June 30, 1998 as compared to the same
period in 1997. Operating expenses for the three months ended June 30, 1998 as
compared to the same period in 1997 remained fairly constant.
The increase in operating expenses - affiliated for the three months and six
months ended June 30, 1998 as compared to the same periods in 1997 is due
primarily to increased property management costs at Commonwealth Business Center
Phase I, Plainview Point Office Center Phases I and II, Plainview Point III
Office Center and Blankenbaker Business Center 1A.
There were no significant fluctuations in operating expenses - affiliated at the
Partnership's residential properties for the three months and six months ended
June 30, 1998 as compared to the same periods 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 and
six months ended June 30, 1998 as compared to the same periods in 1997 is not
significant.
Interest expense decreased for the three months and six months ended June 30,
1998 as compared to the same periods in 1997 due primarily 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% as 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.
Real estate taxes, professional and administrative expenses and professional and
administrative expenses - affiliated for the three months and six months ended
June 30, 1998 as compared to the same periods in 1997 remained fairly constant.
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 and
six months ended June 30, 1998 as compared to the same periods 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.
- 16 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of June 30, 1998, the Partnership has a mortgage payable with an insurance
company in the amount of $2,116,330. 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 June 30, 1998, the Partnership had two mortgage loans with an insurance
company. The outstanding balances of the loans as of June 30, 1998 were
$1,966,518 and $1,872,031, respectively for a total of $3,838,549. The mortgages
bear interest at a fixed rate of 7.15%, 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 June 30, 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 $3,693,900. 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 June 30,
1998 is $1,111,125. 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 June 30, 1998, the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at June 30, 1998 were
$5,437,925, $5,212,284 and $5,054,336 for a total of $15,704,545. The loans are
recorded as a liability of the Joint Venture. The Partnership's proportionate
share in the loans at June 30, 1998 was $970,670, $930,393 and $902,199,
respectively, for a total of $2,803,262. 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 June 30, 1998, The Willows of Plainview Phase II, an apartment joint
venture between the Partnership and NTS-Properties V, had two mortgage loans
with an insurance company. The outstanding balances of the loans at June 30,
1998 were $3,142,903 and $1,877,080 respectively, for a total of $5,019,983. The
Partnership's proportionate interest in the loans at June 30, 1998 was $318,690
and $190,335, respectively, for a total of $509,025. 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 payment are based upon a 15-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of amortization.
Cash provided by operations for the six months ended June 30 was $572,593 (1998)
and $477,863 (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 June 30)
were $682,266 and $481,044 at June 30, 1998 and 1997, respectively.
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.
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 investment securities. As part of its cash management activities, the
Partnership has purchased Certificates of Deposit with initial maturities of
greater than three months to improve the return of its cash reserves. The
partnership intends to hold the securities until maturity. Cash flows provided
by investing activities are from 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 the financing activities are from a decrease in loan
costs (refund of loan application fee). 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 six months ended June
30, 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.
As of June 30, 1998, the Lakeshore/University II ("L/U II") Joint Venture has a
commitment for a $450,000 special tenant finish allowance as a result of lease
negotiations with Full Sail Recorders, Inc. ("Full Sail"). Full Sail currently
occupies 83% of University Business Center Phase II's net rentable area.
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 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 June 30, 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.
As of June 30, 1998, Lakeshore Business Center Phase I had a commitment for
approximately $111,000 of tenant finish improvements resulting from a 3,049
square foot expansion by a current tenant. The Partnership's proportionate share
of the commitment is approximately $20,000 or 18%. The project is expected to be
completed during the third quarter of 1998.
The source of funds for the commitments at Plainview Point Office Center Phases
I and II and Lakeshore Business Center Phase I is expected to be cash flow from
operations and/or cash reserves.
The Partnership also anticipates a demand on future liquidity as a result of a
planned renovation of the community's clubhouse at The Willows of Plainview. At
this time, the cost and extent of the renovation has not been determined. The
cost of the common clubhouse renovation will be shared proportionately by Phase
I and II of The Willows of Plainview. The source of funds for this project will
be cash flow from operations and/or cash reserves.
The Partnership had no other material commitments for renovations or capital
improvements as of June 30, 1998.
- 18 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 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 $60,000 to the Interest
Repurchase Reserve. With these funds the Partnership was able to repurchase 400
Units at a price of $150 per Unit. On May 15, 1998, the Partnership elected to
fund an additional $64,000 to the Interest Repurchase Reserve. With the May 15,
1998 funding, the Partnership repurchased 43 Units at a price of $160 per Unit.
On June 30, 1998, the Partnership elected to fund $16,065 to its Interest
Repurchase Reserve enabling the Partnership, along with funds remaining in the
reserve from previous fundings, to repurchase up to 357 Units at a price of $205
per Unit. If the number of Units submitted for repurchase exceeds that which can
be repurchased by the Partnership with the current fundings, 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. From February 1, 1996 (date
Interest Repurchase Reserve established) to June 30, 1998, the Partnership has
repurchased a total of 3,778 Units for $567,130. Repurchased Units are retired
by the Partnership, thus increasing the percentage of ownership of each
remaining limited partner investor. The balance in the Interest Repurchase
Reserve as of June 30, 1998 is $76,335.
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 the commercial properties.
All advertising for these properties is coordinated by NTS Development Company's
marketing staff located in Louisville, Kentucky.
- 19 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 June 30, 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. See below for information regarding a contract for the sale
of a portion of this land.
Subsequent to June 30, 1998, the L/U II Joint Venture entered into a contract
for the sale of approximately 2.4 acres of land adjacent to the Lakeshore
Business Center development for a purchase price of $528,405. Concurrent with
the signing of the contract, the purchaser deposited into an escrow account
$10,000. This deposit will be applied to the purchase price at closing. The
purchaser has until November 17, 1998 to determine if the land is satisfactory
for their use. If the purchaser determines that it is satisfactory, the contract
requires that they proceed, at their cost, to have the property re-zoned to
allow for a self-storage facility. If the purchaser is unable to obtain the
re-zoning, they may cancel the contract. The General Partner of the Partnership
has met with city officials who seem interested in the project and have voiced a
willingness to consider the re-zoning request. If the re-zoning is granted, the
purchaser is to close on the property by February 1, 1999 or deposit an
additional $10,000 with the escrow agent for a 30-day delay. The contract also
allows for an additional deposit of $10,000 for one more delay in closing to
April 3, 1999. The Partnership has an 18% interest in the Joint Venture. The
Partnership has not yet determined what the use of net proceeds would be from
the sale of the land.
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, and (ii) exercised its right
of first refusal under its lease with NTS University Boulevard Joint Venture to
purchase University Business Center II ("University II")office building, for an
aggregate purchase price for all three of $18,700,000. 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 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.
- 20 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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.
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
3. Defaults Upon Senior Securities
-------------------------------
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 May 26, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $64,000
to its Interest Repurchase Reserve.
Form 8-K was filed on July 15, 1998 to report in Item 5 that
the Partnership has elected to fund an additional $16,065 to
its Interest Repurchase Reserve.
Items 1,2,4, and 5 are not applicable and have been omitted.
- 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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: August 12, 1998
---------------
- 23 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 618,123
<SECURITIES> 305,762
<RECEIVABLES> 225,773
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,731,977
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 14,571,971
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10,378,291
0
0
<COMMON> 0
<OTHER-SE> 3,750,798
<TOTAL-LIABILITY-AND-EQUITY> 14,571,971
<SALES> 1,839,642
<TOTAL-REVENUES> 1,865,646
<CGS> 0
<TOTAL-COSTS> 1,421,419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 418,927
<INCOME-PRETAX> 25,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,300
<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>
