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, 1999
---------------------------
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 24
Total Pages: 25
<PAGE>
TABLE OF CONTENTS
-----------------
Pages
-----
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of June 30, 1999 and December 31, 1998 3
Statements of Operations
For the three months and six months ended
June 30, 1999 and 1998 4
Statements of Cash Flows
For the six months ended June 30, 1999 and 1998 5
Notes To Financial Statements 6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II
1. Legal Proceedings 24
2. Changes in Securities 24
3. Defaults upon Senior Securities 24
4. Submission of Matters to a Vote of Security Holders 24
5. Other Information 24
6. Exhibits and Reports on Form 8-K 24
Signatures 25
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, 1999 December 31,1998*
----------------------------------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 679,954 $ 640,969
Cash and equivalents - restricted 80,929 183,050
Investment securities -- 142,569
Accounts receivable, net of allowance
for doubtful accounts of $3,649
(1999)and $1,972 (1998) 205,400 183,170
Land, buildings and amenities, net 11,378,138 11,566,911
Other assets 398,947 339,040
---------- ----------
$12,743,368 $13,055,709
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 8,780,112 $ 9,121,979
Accounts payable 134,713 115,103
Security deposits 84,762 75,108
Other liabilities 172,556 53,518
---------- ----------
9,172,143 9,365,708
Commitments and Contingencies
Partners' equity 3,571,225 3,690,001
---------- ----------
$12,743,368 $13,055,709
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
------------- ------------ ------------
PARTNERS' EQUITY
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 25,852,759 $ -- $ 25,852,759
Net income - prior years 385,853 3,899 389,752
Net loss - current year (13,502) (136) (13,638)
Cash distributions declared to
date (21,586,280) (218,253) (21,804,533)
Repurchase of limited
partnership Units (853,115) -- (853,115)
----------- ----------- -----------
Balances at June 30, 1999 $ 3,785,715 $ (214,490) $ 3,571,225
=========== =========== ===========
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on April 15, 1999.
3
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-----------------------------------------------------------------
REVENUES:
<S> <C> <C> <C> <C>
Rental income $ 847,663 $ 923,392 $ 1,666,130 $ 1,839,642
Interest and other income 6,411 15,944 12,070 26,004
---------- ---------- ---------- ----------
854,074 939,336 1,678,200 1,865,646
EXPENSES:
Operating expenses 206,904 201,696 377,680 407,845
Operating expenses - affiliated 113,568 112,495 255,203 230,646
Amortization of capitalized leasing
costs 35 3,729 928 7,459
Interest expense 173,890 205,325 346,136 418,927
Management fees 48,726 53,955 95,603 105,222
Real estate taxes 50,866 50,774 101,723 107,803
Professional and administrative
expenses 41,875 27,940 78,511 52,542
Professional and administrative
expenses - affiliated 37,281 39,820 78,929 81,874
Depreciation and amortization 178,909 207,842 357,125 428,028
---------- ---------- ---------- ----------
852,054 903,576 1,691,838 1,840,346
---------- ---------- ---------- ----------
Net income (loss) $ 2,020 $ 35,760 $ (13,638) $ 25,300
========== ========== ========== ==========
Net income (loss) allocated to the
limited partners $ 2,000 $ 35,402 $ (13,502) $ 25,047
========== ========== ========== ==========
Net income (loss) per limited
partnership unit $ 0.08 $ 1.36 $ (.54) $ .95
========== ========== ========== ==========
Weighted average number of
limited partnership units 24,709 26,017 24,895 26,316
========== ========== ========== ==========
</TABLE>
4
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (13,638) $ 25,300
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Accrued interest on investment securities -- (3,953)
Amortization of capitalized leasing costs 928 7,459
Depreciation and amortization 357,125 428,028
Changes in assets and liabilities:
Cash and equivalents - restricted (20,879) (56,560)
Accounts receivable (22,230) 17,361
Other assets (67,699) 18,363
Accounts payable - operating 17,165 20,672
Security deposits 9,654 4,020
Other liabilities 119,040 111,903
-------- --------
Net cash provided by operating activities 379,466 572,593
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (161,488) (93,595)
Purchase of investment securities -- (620,550)
Maturity of investment securities 142,568 741,077
Accounts payable - construction 2,446 --
-------- --------
Net cash provided by (used in) investing
activities (16,474) 26,932
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (341,867) (328,511)
Decrease (increase) in loan costs -- 14,409
Capital contributions 17,860 --
Repurchase of limited partnership Units (123,000) (108,729)
Decrease (increase) in cash and equivalents -
restricted 123,000 (76,335)
-------- --------
Net cash used in financing activities (324,007) (499,166)
-------- --------
Net increase in cash and equivalents 38,985 100,359
CASH AND EQUIVALENTS, beginning of period 640,969 276,145
-------- --------
CASH AND EQUIVALENTS, end of period $ 679,954 $ 376,504
======== ========
Interest paid on a cash basis $ 351,053 $ 402,357
======== ========
</TABLE>
5
<PAGE>
NTS-PROPERTIES IV
-----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The financial statements included herein should be read in conjunction with the
Partnership's 1998 Form 10-K as filed with the Commission on April 15, 1999. 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 and six months ended June
30, 1999 and 1998.
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. Concentration of Credit Risk
----------------------------
NTS-Properties IV owns and operates commercial properties in Louisville,
Kentucky and Ft. Lauderdale, Florida. Substantially all of the
Partnership's tenants are local businesses or are businesses which have
operations in the location in which they lease space. In Louisville,
Kentucky, one tenant occupies 100% of the Blankenbaker Business Center 1A
property. The Partnership also owns and operates, either wholly or through
a joint venture, residential properties in Louisville, Kentucky and
Orlando, Florida. The apartment unit is generally the principal residence
of the tenant.
During the first quarter of 1999, SHPS, Inc., formerly known as Sykes
Health Plan Services, Inc., announced its intentions to consolidate its
operations and to build its corporate headquarters in Jefferson County,
Kentucky. One of SHPS, Inc's operations, Sykes, is already based in
Louisville, Kentucky. Sykes occupies 100% of Blankenbaker Business Center
1A. Due to the expansion of SHPS, Inc's headquarters, it is the
Partnerships understanding that SHPS, Inc. does not intend to continue to
occupy the space at Blankenbaker Business Center 1A through the duration of
its lease term, which expires in July 2005. The Partnership's proportionate
share of the rental income from this property accounted for approximately
8.1% of the Partnership's rent revenues during the six months ended June
30, 1999. The Partnership has not yet determined the effect, if any, on the
Partnership's operations, given the fact Sykes is under lease until
July 2005 and no official notice of termination has been received.
3. 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 (December 31, 1998 balance only).
4. 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 in June 1996. During the years ended December 31, 1998,
1997 and 1996, the Partnership funded $201,565, $45,000, and $575,070,
respectively, to the reserve. Through November 20, 1998 (the commencement
date of the first Tender Offer), the Partnership has repurchased 4,436
Units for $700,920 at a price ranging from $150 to $205 per Unit. The
offering price per Unit was
6
<PAGE>
4. Interest Repurchase Reserve - continued
---------------------------------------
established by the General Partner in its sole discretion and does not
purport to represent the fair market value or liquidation value of the
Units at that time. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining investor. The
Interest Repurchase Reserve was funded from cash reserves. The balance in
the Reserve at June 30, 1999 was $0.
5. Tender Offers
-------------
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, commenced a Tender Offer to purchase up to 1,200 of the
Partnership's limited partnership Units at a price of $205 per Unit.
Although the Partnership and ORIG, LLC believe that this price is
appropriate, the price of $205 per Unit may not equate to the fair market
value or the liquidation value of the Unit as of the offering date. The
Offer stated that the Partnership would purchase the first 600 Units
tendered and would fund its purchases and its portion of the expenses from
cash reserves. Units that were acquired by the Partnership were retired.
Units that were acquired by ORIG, LLC are held by it. The General Partner,
NTS-Properties Associates IV, did not participate in the Tender Offer. The
Tender Offer expired February 19, 1999, at which time, 1,259 Units were
tendered pursuant to the Offer. The Partnership repurchased 600 Units at a
cost of $123,000 and ORIG, LLC purchased 659 Units at a cost of $135,095.
See Note 12, Subsequent Events, for information regarding a Tender offer
which commenced July 28, 1999.
6. 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, 1999 and the twelve months
ended December 31, 1998, the Partnership sold no investment securities.
The Partnership held no investment securities at June 30, 1999.
The following provides details regarding the investments held at December
31, 1998:
Amortized Maturity Value at
Type Cost Date Maturity
---------------------- --------------- ------------- -----------------
Certificate of deposit $ 40,797 01/04/99 $ 40,815
Certificate of deposit 50,886 01/04/99 50,907
Certificate of deposit 50,886 02/01/99 51,111
-------- -------
$ 142,569 $142,833
======== =======
7
<PAGE>
7. Mortgages Payable
-----------------
Mortgages payable consist of the following:
June 30, December 31,
1999 1998
----------------- ----------------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.8%, due October 1, 2004,
secured by land and building $ 1,855,124 $ 1,988,590
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 1,887,034 1,927,484
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 1,796,366 1,834,872
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building 999,446 1,058,249
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008
secured by land and building 907,111 939,811
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 843,124 873,517
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 307,972 312,698
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 183,935 186,758
--------- ---------
$ 8,780,112 $ 9,121,979
========= =========
Based on the borrowing rates currently available to the Partnership for loans
with similar terms and average maturities,the fair value of long term debt is
approximately $9,025,000.
8. Basis of Property
-----------------
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, specifies circumstances in which certain long-lived assets
must be reviewed for impairment. If such review indicates that the
carrying amount of an asset exceeds the sum of its expected future cash
flows, the asset's carrying value must be written down to fair market
value. Application of this standard during the periods ended June 30, 1999
and 1998 did not result in an impairment loss.
8
<PAGE>
9. Related Party Transactions
--------------------------
Property management fees of $48,727 and $95,603 were paid to NTS
Development Company, an affiliate of the General Partner of the
Partnership, for the three months and six months ended June 30, 1999, and
$53,955 and $105,222 were paid for the same periods in 1998, 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 $6,230 and $7,330 as a repair and maintenance fee
during the six months ended June 30, 1999 and 1998, 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,
1999 and 1998. 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:
1999 1998
------------------ -------------------
Administrative $104,216 $ 102,852
Leasing 77,484 63,703
Property management 142,170 146,303
Other 22,916 11,128
------- -------
$346,786 $323,986
======= =======
10. Segment Reporting
-----------------
The Partnership's reportable operating segments include Residential and
Commercial real estate operations. The Residential operations represent
the Partnership's ownership and operating results relative to apartment
complexes known as Golf Brook and the Willows of Plainview Phases I and
II. The Commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known as
Commonwealth Business Center Phase I, Plainview Point Office Center Phases
I, II and III, Blankenbaker Business Center 1A and Lakeshore Business
Center Phases I and II. Commercial operations for the periods ending June
30, 1998 include University Business Center Phase II which was sold
October 6, 1998.
The financial information of the operating segments has been prepared
using a management approach, which is consistent with the basis and manner
in which the Partnership's management internally disaggregates financial
information for the purposes of assisting in making internal operating
decisions. The Partnership evaluates performance based on stand-alone
operating segment net income.
9
<PAGE>
10. Segment Reporting - continued
-----------------------------
Six Months ended June 30, 1999
Residential Commercial Total
------------------- ------------------ --------------
Rental Income $ 712,257 $ 953,871 $ 1,666,128
Other Income 1,666 1,666
---------- --------- -----------
Total Net Revenues 712,257 955,537 1,667,794
========== ========= ===========
Operating Expenses 240,619 392,262 632,881
Amortization of Capitalized
Leasing Costs -- 927 927
Interest Expense 16,927 115,800 132,727
Management Fees 38,225 57,378 95,603
Real Estate Taxes 33,607 68,116 101,723
Depreciation Expense 115,873 234,122 349,995
---------- --------- ----------
Net Income (Loss) $ 267,006 $ 86,932 $ 353,938
========== ========= ==========
Six Months ended June 30, 1998
Residential Commercial Total
------------------- ---------------- ----------------
Rental Income $ 668,570 $ 1,171,072 $ 1,839,642
Other Income 2,632 6,043 8,675
--------- ----------- ----------
Total Net Revenues 671,202 1,177,115 1,848,317
========= =========== ==========
Operating Expenses 263,674 374,817 638,491
Amortization of Capitalized
Leasing Costs -- 7,459 7,459
Interest Expense 18,165 162,736 180,901
Management Fees 33,449 71,773 105,222
Real Estate Taxes 33,344 74,459 107,803
Depreciation Expense 112,096 308,923 421,019
--------- ----------- ----------
Net Income (Loss) $ 210,474 $ 176,948 $ 387,422
========= =========== ==========
Three Months ended June 30, 1999
RESIDENTIAL COMMERCIAL TOTAL
-------------------- ----------------- ----------------
Rental Income $ 368,102 $ 479,561 $ 847,663
Other Income -- (3,700) (3,700)
--------- ----------- ----------
Total Net Revenues 368,102 475,861 843,963
========= =========== ==========
Operating Expenses 133,428 187,046 320,474
Amortization of Capitalized
Leasing Costs -- 35 35
Interest Expense 8,487 57,282 65,769
Management Fees 19,568 29,159 48,727
Real Estate Taxes 16,803 34,063 50,866
Depreciation Expense 58,103 117,241 175,344
--------- ----------- ----------
Net Income (Loss) $ 131,713 $ 51,035 $ 182,748
========= =========== ==========
10
<PAGE>
10. Segment Reporting - continued
-----------------------------
Three Months ended June 30, 1998
Residential Commercial Total
------------------- --------------------- -------------
Rental Income $ 337,913 $ 585,479 $ 923,392
Other Income 1,296 3,868 5,164
--------- ---------- ---------
Total Net Revenues 339,209 589,347 928,556
========= ========== =========
Operating Expenses 141,069 173,122 314,191
Amortization of Capitalized
Leasing Costs -- 3,729 3,729
Interest Expense 8,793 80,153 88,946
Management Fees 15,191 38,764 53,955
Real Estate Taxes 16,687 34,087 50,774
Depreciation Expense 56,204 148,130 204,334
--------- ---------- ---------
Net Income (Loss) $ 101,265 $ 111,362 $ 212,627
========= ========== =========
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements for the three
months and six months ended June 30, 1999 and 1998 is necessary given amounts
recorded at the Partnership level and not allocated to the operating properties
for internal reporting purposes:
Six Months Ended
June 30,
1999 1998
-------------- -------------
NET REVENUES
Total revenues for reportable segments $ 1,667,794 $ 1,848,317
Other income for partnership 56,528 95,192
Eliminations (46,122) (77,863)
---------- ----------
Total consolidated net revenues $ 1,678,200 $ 1,865,646
========== ==========
INTEREST EXPENSE
Total interest expense for reportable
segments
$ 132,727 $ 180,901
Interest expense for partnership 213,409 238,026
Eliminations -- --
--------- ----------
Total interest expense $ 346,136 $ 418,927
========= ==========
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization
for reportable $ 349,995 $ 421,019
Depreciation and amortization for
partnership 4,220 4,098
Eliminations 2,910 2,911
--------- ----------
Total depreciation and amortization $ 357,125 $ 428,028
========= ==========
NET INCOME (LOSS)
Total net income (loss) for reportable
segments $ 353,938 $ 387,422
Net income (loss) for partnership (318,539) (281,614)
Eliminations (49,037) (80,508)
--------- ----------
Total net income (loss) $ (13,638) $ 25,300
========= ==========
11
<PAGE>
10. Segment Reporting - continued
-----------------------------
Three Months Ended
June 30,
1999 1998
---- ----
NET REVENUES
Total revenues for reportable segments $ 843,963 $ 928,556
Other income for partnership 38,324 68,421
Eliminations (28,213) (57,641)
-------- --------
Total consolidated net revenues $ 854,074 $ 939,336
======== ========
INTEREST EXPENSE
Total interest expense for reportable
segments $ 65,769 $ 88,946
Interest expense for partnership 108,121 116,379
Eliminations -- --
-------- --------
Total interest expense $ 173,890 $ 205,325
======== ========
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization
for reportable segments $ 175,344 $ 204,334
Depreciation and amortization for
partnership 2,110 2,049
Eliminations 1,455 1,459
-------- --------
Total depreciation and amortization $ 178,909 $ 207,842
======== ========
NET INCOME (LOSS)
Total net income (loss) for reportable
segments $ 182,748 $ 212,627
Net income (loss) for partnership (151,063) (117,989)
Eliminations (29,665) (58,878)
-------- --------
Total net income (loss) $ 2,020 $ 35,760
======== ========
11. Subsequent Events
-----------------
On July 1, 1999 Gregory A. Wells was hired as Executive Vice President by
NTS Capital Corporation, General Partner of NTS-Properties Associates IV
Ltd., the General Partner of NTS-Properties IV. Mr. Wells will serve as the
senior Accounting and Financial Officer of NTS Capital Corporation.
On July 1, 1999, NTS-Properties V contributed $1,737,000 to the L/U II
Joint Venture. The other partners in the Joint Venture, including
NTS-Properties IV, did not make capital contributions at that time.
Accordingly, the ownership percentages of the partners in the Joint Venture
changed at that time. Effective July 1, 1999, NTS-Properties IV's
percentage of ownership in the Joint Venture is 11.93%.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres
of land adjacent to the Lakeshore Business Center for a purchase price of
$528,405, which was received in cash. The Partnership has an 11.93%
interest in the Partnership.
The proceeds from the two transactions discussed above will be used to fund
construction of the Lakeshore Business Center Phase III.
On July 28, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, ("the Offerors") commenced a Tender Offer to purchase up to
1,000 of the Partnership's limited partnership Units at a price of $205 per
Unit. Although the Partnership and ORIG, LLC believe that this price is
appropriate, the price of $205 per Unit may not equate to the fair market
value or the liquidation value of the Unit, and is less than the book value
per Unit as of the offering date. Approximately $225,000 ($205,000 to
purchase 1,000 Units plus approximately $20,000 for expenses associated
with the Offer) is required to purchase all 1,000 Units. The offer stated
that the Partnership will purchase the first 500 Units tendered and fund
its purchases and its portion of the expenses from cash reserves. If more
than
12
<PAGE>
11. Subsequent Events - continued
-----------------------------
500 Units are tendered, ORIG, LLC will purchase up to an additional 500
Units. If more than 1,000 Units are tendered, the Partnership and ORIG, LLC
may choose to acquire the additional Units on the same terms. Otherwise,
tendered Units will be purchased on a pro rata basis. Up to 1,000 Units
that are acquired by the Partnership will be retired. Units that are
acquired by ORIG, LLC will be held by it. The General Partner,
NTS-Properties Associates IV, Ltd., does not intend to participate in the
Tender Offer. The expiration date of the original Offer will be October 29,
1999 unless extended.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations is structured in four major sections. The first section provides
information related to occupancy levels and rental and other income generated by
the Partnership's properties. The second analyzes results of operations on a
consolidated basis. The final sections address consolidated cash flows and
financial condition. Discussion of certain market risks also follow.
Management's analysis should be read in conjunction with the financial
statements in Item 1 and the cautionary statements below.
Cautionary Statements
- ---------------------
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 event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
office buildings, business centers and an apartment complex. 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 lessee's ability to make payments are subject to risks
generally associated with real estate, many of which are beyond the control of
the Partnership, including general or local economic conditions, competition,
interest rates, real estate tax rates, other operating expenses and acts of God.
14
<PAGE>
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
1999(1) 1998
------- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 100% 92%
Plainview Point Office Center Phases I and II(2) 53% 76%
The Willows of Plainview Phase I 95% 87%
Property Owned in Joint Venture with
- -------------------------------------
NTS-Properties V (Ownership % at June 30, 1999)
- -----------------------------------------------
The Willows of Plainview Phase II (10%) 95% 83%
Properties Owned in Joint Venture with
- -----------------------------------------
NTS-Properties VI (Ownership % at June
- ---------------------------------------
30, 1999)
- ---------
Golf Brook Apartments (4%)(2) 89% 96%
Plainview Point III Office Center (5%)(2) 91% 96%
Property Owned in Joint Venture with
- -------------------------------------
NTS-Properties VII, Ltd. and NTS-Properties
- --------------------------------------------
Plus Ltd. (Ownership % at June 30, 1999)
- ----------------------------------------
Blankenbaker Business Center 1A (30%) 100% 100%
Properties Owned through Lakeshore/University
- ------------------------------------------------
II Joint Venture (L/U II Joint Venture)
- ----------------------------------------
(Ownership % at June 30, 1999)
- ------------------------------
Lakeshore Business Center Phase I (18%)(2) 71% 94%
Lakeshore Business Center Phase II (18%)(2) 86% 92%
University Business Center Phase II (18%)(3) N/A 90%
(1) Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties.
(2) In the opinion of the General Partner of the Partnership, the decrease in
period ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) Represents ownership percentage as of June 30, 1998. On October 6, 1998,
University Business Center Phase II was sold.
15
<PAGE>
Results of Operations - continued
- ---------------------------------
Average occupancy levels at the Partnership's properties during the three months
and six months ended June 30, 1999 and 1998, were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- --------- ---------
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 95% 87% 94% 87%
Plainview Pt. Office Center Phases I and II
(1) 53% 76% 55% 75%
The Willows of Plainview Phase I 95% 86% 95% 89%
Property owned in Joint Venture with NTS-
- -----------------------------------------
Properties V (Ownership % at June 30, 1999)
- -------------------------------------------
The Willows of Plainview Phase II (10%) 96% 83% 95% 84%
Properties Owned in Joint Venture with NTS-
- -------------------------------------------
Properties VI (Ownership % at June 30, 1999)
- --------------------------------------------
Golf Brook Apartments (4%) (1) 93% 95% 94% 96%
Plainview Point III Office Center (5%) (1) 89% 96% 90% 96%
Property Owned in Joint Venture with NTS-
- -----------------------------------------
Properties VII, Ltd. and NTS-Properties Plus
- --------------------------------------------
Ltd. (Ownership % at June 30, 1999)
- -----------------------------------
Blankenbaker Business Center 1A (30%) 100% 100% 100% 100%
Properties Owned through Lakeshore/
- -----------------------------------
University II Joint Venture (L/U
- --------------------------------
II Joint Venture)
- ------------------
(Ownership % at June 30, 1999)
- ------------------------------
Lakeshore Business Center Phase I (18%) (1) 72% 93% 76% 94%
Lakeshore Business Center Phase II (18%) (1) 86% 95% 85% 97%
University Business Center Phase II (18%) (2)N/A 90% N/A 95%
(1) In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent
a permanent downward occupancy trend.
(2) Represents ownership percentage as of June 30, 1998. On October 6, 1998,
University Business Center Phase II was sold.
16
<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, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -------------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ---------------
Wholly-Owned Properties
- -----------------------
<S> <C> <C> <C> <C>
Commonwealth Business Center Phase I $193,194 $ 167,932 $379,464 $ 343,890
Plainview Point Office Center Phases I and II $ 79,763 $ 132,566 $166,975 $ 269,077
The Willows of Plainview Phase I $303,325 $ 277,809 $585,574 $ 548,356
Property Owned in Joint Venture with NTS-Properties V
- -----------------------------------------------------
(Ownership % at June 30, 1999)
- ------------------------------
The Willows of Plainview Phase II (10%) $ 32,783 $ 31,076 $ 66,595 $ 62,741
Properties Owned in Joint Venture with NTS-Properties VI
- --------------------------------------------------------
(Ownership % at June 30, 1999)
- ------------------------------
Golf Brook Apartments (4%) $ 30,375 $ 30,324 $ 60,088 $ 60,104
Plainview Point III Office Center (5%) $ 9,736 $ 9,505 $ 19,134 $ 21,917
Property Owned in Joint Venture with NTS-Properties VII,
- --------------------------------------------------------
Ltd. And NTS-Properties Plus Ltd. (Ownership % at June 30,
- ----------------------------------------------------------
1999)
- -----
Blankenbaker Business Center 1A (30%) $ 70,454 $ 65,279 $140,902 $135,606
Properties Owned through Lakeshore/ University II Joint
- -------------------------------------------------------
Venture (L/U II Joint Venture) (Ownership % at June 30,
- -------------------------------------------------------
1999)
- -----
Lakeshore Business Center Phase I (18%) $ 57,535 $ 65,845 $119,729 $148,817
Lakeshore Business Center Phase II (18%) $ 69,699 $ 97,431 $129,284 $170,682
University Business Center Phase II (18%)(1) N/A (2) $ 50,729 N/A (2) $ 86,935
</TABLE>
(1) Ownership percentage at June 30, 1998.
(2) University Business Center Phase II was sold October 6, 1998,therefore there
were no revenues generated for this property for the three months or six
months ended June 30, 1999.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The following is an analysis of material changes in results of operations for
the periods ending June 30, 1999 and 1998. Items that did not have a material
impact on operations for the periods listed above have been omitted from this
discussion.
Rental and other income decreased $173,500 or 9% and $75,700 or 8% for the three
months and six months ended June 30, 1999 and 1998, respectively. The decreases
are primarily a result of a decrease in lease buy-out income at Lakeshore
Business Center Phase II and decreases in occupancy at Plainview Point Office
Center Phases I and II and Lakeshore Business Center Phase I. Also contributing
to the decrease is the sale of University Business Center Phase II in October of
1998. The decrease is partially offset by increases in average occupancy at
Commonwealth Business Center Phase I and The Willows of Plainview Phase I.
Operating expenses decreased $30,000 or 7% for the six months ended June 30,
1999 as compared to the period ended June 30, 1998 primarily as a result of
decreased landscape replacements and parking lot repairs at Commonwealth
Business Center
17
<PAGE>
Results of Operations - continued
- ---------------------------------
Phase I and decreased exterior repairs and maintenance at Blankenbaker Business
Center 1A. Also contributing to the decrease is the sale of University Business
Center Phase II in October 1998.
Operating expenses - affiliated increased $1,100 or 1% and $24,600 or 11% for
the three and six months ended June 30, 1999, respectively, as compared to the
same periods in 1998. The increase for the six months ended June 30, 1999 was
primarily due to painting and HVAC replacements at Plainview Point Office Center
Phases I and II and exterior wood replacement at Golfbrook Apartments, partially
offset by a decrease due to the sale of University Business Center Phases I and
II and decreased lawn maintenance costs at several properties. Operating
expenses - affiliated are expenses incurred for services performed by NTS
Development Company, an affiliate of the General Partner.
Interest expense decreased approximately $73,000 or 17% and $31,000 or 15% for
the three months and six months ended June 30, 1999 as compared to the same
periods in 1998 primarily due to required principal payments on the mortgages
payable of the Partnership and its Joint Venture properties. Interest expense
also decreased in 1999 as a result of the reduction in debt from the sale of
University Business Center Phase II, which was sold in October 1998.
Professional and administrative expenses increased approximately $26,000 or 49%
and $14,000 or 50% for the three months and six months ended June 30, 1999,
respectively, as compared to the same periods in 1998 primarily as a result of
costs incurred in connection with the Tender Offer.
Depreciation and amortization decreased approximately $71,000 or 17% and $29,000
or 14% for the three months and six months ended June 30, 1999 as compared to
the same periods in 1998 primarily as a result of assets becoming fully
depreciated and the result of the sale of University Business Center Phase II in
October 1998. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land improvements,
30 years for buildings, 5-30 years for building improvements and 5-30 years for
amenities. The aggregate cost of the Partnership's properties for Federal tax
purposes is approximately $23,592,217.
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
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 flows from operating activities.
Cash flows provided by (used in):
1999 1998
--------------------- ----------------------
Operating activities $ 379,466 $ 572,593
Investing activities (16,474) 26,932
Financing activities (324,007) (499,166)
-------- --------
Net increase (decrease) in
cash and equivalents $ 38,985 $ 100,359
======== ========
Net cash provided by operating activities decreased approximately $193,000 or
33% for the six months ended June 30, 1999 as compared to the same period in
1998. The decrease was primarily driven by a decrease in net income from
operations as a result of the sale of University Business Center Phases I and II
in October, 1998 and an increase in leasing commissions which caused an increase
in the other assets category.
18
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
Net cash used in investing activities in 1999 is the result of fixed asset
additions, partially offset by the maturity of investment securities. Net cash
provided by investing activities in 1998 is primarily the result of the maturity
of investment securities, partially offset by purchases of investment securities
and by fixed asset additions.
Net cash used in financing activities totaled $324,007 and $499,166 in 1999 and
1998, respectively. The approximate $175,000 increase in net cash used in
financing activities in 1999 as compared to 1998 is primarily a result of
decreased funds reserved for the repurchase of limited partnership Units through
the Interest Repurchase Reserve.
No distributions were made during the year ended December 31, 1998 or the six
months ended June 30, 1999. 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 other
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 $679,954 and $682,266 at June 30, 1999 and 1998, respectively.
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 1999 or obtain
new tenants are unknown.
Due to the fact that no distributions were made during the six months ended June
30, 1999 or 1998, 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.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations. Changes to current tenant finish improvements
are a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of the improvements
are determined by the size of the space being leased and whether the
improvements are for a new tenant or incurred because of a lease renewal. The
tenant finish improvements will be funded by cash flow from operations and cash
reserves.
As of June 30, 1999, the Partnership plans to renovate the community clubhouse
at Golf Brook Apartments. The estimated cost of this renovation is $200,000. The
Partnership plans to fund the renovations out of the $2,000,000 loan obtained
June 23, 1999 secured by the Plainview Point III Office Center.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in June 1996. During the years ended December 31, 1998, 1997 and 1996, the
Partnership funded $201,565, $45,000, and $575,070, respectively, to the
reserve. Through November 20, 1998 (the commencement date of the first Tender
Offer), the Partnership has repurchased 4,436 Units for $700,920 at a price
ranging from $150 to $205 per Unit. The offering price per Unit was established
by the General Partner in its sole discretion and does not purport to represent
the fair market value or liquidation value of the Units at that date.
Repurchased Units are retired by the Partnership, thus increasing the percentage
of ownership of each remaining limited partner investor. The Interest Repurchase
Reserve was funded from cash reserves. The balance in the Reserve at June 30,
1999 was $0.
19
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, commenced a Tender Offer to purchase up to 1,200 of the
Partnership's limited partnership Units at a price of $205 per Unit. Although
the Partnership and ORIG, LLC believe that this price is appropriate, the price
of $205 per Unit may not equate to the fair market value or the liquidation
value of the Unit as of the offering date. The Offer stated that the Partnership
would purchase the first 600 Units tendered and would fund its purchases and its
portion of the expenses from cash reserves. Units that were acquired by the
Partnership were retired. Units that were acquired by ORIG, LLC are held by it.
The General Partner, NTS-Properties Associates IV, did not participate in the
Tender Offer. The Tender Offer expired February 19, 1999, at which time, 1,259
Units were tendered pursuant to the Offer. The Partnership repurchased 600 Units
at a cost of $123,000 and ORIG, LLC purchased 659 Units at a cost of $135,095.
On July 28, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, ("the Offerors") commenced a Tender Offer to purchase up to 1,000
of the Partnership's limited partnership Units at a price of $205 per Unit.
Although the Partnership and ORIG, LLC believe that this price is appropriate,
the price of $205 per Unit may not equate to the fair market value or the
liquidation value of the Unit, and is less than the book value per Unit as of
the offering date. Approximately $225,000 ($205,000 to purchase 1,000 Units plus
approximately $20,000 for expenses associated with the Offer) is required to
purchase all 1,000 Units. The offer stated that the Partnership will purchase
the first 500 Units tendered and fund its purchases and its portion of the
expenses from cash reserves. If more than 500 Units are tendered, ORIG, LLC will
purchase up to an additional 500 Units. If more than 1,000 Units are tendered,
the Partnership and ORIG, LLC may choose to acquire the additional Units on the
same terms. Otherwise, tendered Units will be purchased on a pro rata basis. Up
to 1,000 Units that are acquired by the Partnership will be retired. Units that
are acquired by ORIG, LLC will be held by it. The General Partner,
NTS-Properties Associates IV, Ltd., does not intend to participate in the Tender
Offer. The expiration date of the original Offer will be October 29, 1999 unless
extended.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of
land adjacent to the Lakeshore Business Center for a purchase price of $528,405,
which was received in cash. The Partnership has an 11.93% interest in the Joint
Venture. The Partnership expects to use the net proceeds from the sale of the
land to help fund the construction of Lakeshore Business Center III as described
below.
As of June 30, 1999 the L/U II Joint Venture intends to use the remaining 3.8
acres of the land it owns at the Lakeshore Business Center development to
construct Lakeshore Business Center Phase III. Construction is expected to begin
during 1999. The construction cost is currently estimated to be $4,000,000 and
will be funded by a capital contribution from NTS-Properties V and debt
financing. Construction will not begin until, in the opinion of the General
partners, financing on favorable terms has been obtained. On July 1, 1999,
NTS-Properties V contributed capital of $1,737,000 to the L/U II Joint Venture
for the construction of Lakeshore Business Center Phase III. At that time, the
Partnership and NTS-Properties Plus were not in a position to contribute
additional capital required for the construction of Lakeshore Business Center
Phase III. The Partnership, together with NTS-Properties Plus, agreed that
NTS-Properties V would make a capital contribution to the L/U II Joint Venture
with the knowledge that their Joint Venture interest would, as a result,
decrease.
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
20
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
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.
During the first quarter of 1999, SHPS, Inc., formerly known as Sykes Health
Plan Services, Inc., announced its intentions to consolidate its operations and
to build its corporate headquarters in Jefferson County, Kentucky. One of SHPS,
Inc's operations, Sykes is already based in Louisville, Kentucky. Sykes occupies
100% of Blankenbaker Business Center 1A. Due to the expansion of SHPS, Inc's
headquarters, it is the Partnerships understanding that SHPS, Inc. does not
intend to continue to occupy the space at Blankenbaker Business Center 1A
through the duration of its lease term, which expires in July 2005. The
Partnership's proportionate share of the rental income from this property
accounted for approximately 8.1% of the Partnership's rent revenues during the
six months ended June 30, 1999. The Partnership has not yet determined the
effect, if any, on the Partnership's operations, given the fact Sykes is
under lease until July 2005 and no official notice of termination has been
received.
Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A,
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 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 residential leases are
generally for a period of one year, should protect the Partnership's operations
from the impact of inflation and changing prices.
Year 2000
- ---------
All divisions of NTS Corporation, an affiliate of NTS-Properties Associates IV,
the General Partner of the Partnership, are reviewing the effort necessary to
prepare its information systems (IT) and non-information technology with
embedded technology (ET) for the Year 2000. The information technology solutions
have been addressed separately for the Year 2000 since the Partnership saw the
need to move to more advanced management and accounting to systems made
available by new technology and software developments during the decade of the
1990's.
The PILOT software system, purchased in the early 1990's, is being replaced by a
windows based network system both for NTS' headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California is replacing PILOT. The Yardi
system has been tested and is compatible with Year 2000 and beyond. This system
is being implemented with the help of third party consultants and should be
fully operational by the third quarter of 1999. NTS' system for multi-family
apartment locations was converted to GEAC's Power Site System earlier in 1998
and is Year 2000 compliant.
21
<PAGE>
Year 2000- continued
- --------------------
The few remaining systems not addressed by these conversions are being modified
by the Company's in-house staff of programmers. The Hewlett Packard 3000 system,
used for PILOT and custom applications, was purchased in 1997 and will be part
of the new network. It will be retained as long as necessary to assure smooth
operations and has been upgraded to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
The cost of these advances in NTS' systems technology is not all attributable
the Year 2000 issue since NTS had already identified the need to move to a
network based system regardless of the Year 2000. The Partnership's share of the
costs involved will be approximately $57,000 during 1999. Costs incurred through
December 31, 1998 were approximately $13,000. These costs include primarily
hardware and software.
NTS property management staff has been surveying its vendors to evaluate
embedded technology in its alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of 1999.
NTS is also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on NTS' business.
All significant vendors and tenants have indicated that they will be compliant
by the end of 1999. Such assurances are being evaluated and documented.
Management has determined that at its current state of readiness, the need does
not presently exist for a contingency plan. NTS will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, inability of
our tenants to pay rent when due, more general public infrastructure failures or
failure to successfully conclude NTS' remediation efforts as planned could have
a material adverse impact on NTS' results of operations, financial conditions
and/or cash flows in 1999 and beyond.
22
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate. At June 30, a hypothetical 100 basis point increase in interest
rates would result in an approximately $360,000 decrease in the fair value of
the debt.
23
<PAGE>
PART II. OTHER INFORMATION
3. Defaults upon Senior Securities
-------------------------------
None
5. Other Information
-----------------
In anticipation of retirement, Mr. Richard Good, the Vice Chairman and
former President of NTS Capital Corporation and NTS Development Company,
has begun to decrease his responsibilities with the Partnership and its
affiliates. In conjunction with Mr. Good's decreased responsibilities,
Mr. Brian Lavin was appointed President and Chief Operating Officer of
NTS Development Company and NTS Capital Corporation in February, 1999.
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None.
Items 1,2, and 4 are not applicable and have been omitted.
24
<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/ Gregory A. Wells
--------------------
Gregory A. Wells
Executive Vice President
of NTS Capital
Corporation
Date: August 16, 1999
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30,1999 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 760,883
<SECURITIES> 0
<RECEIVABLES> 205,400
<ALLOWANCES> 2,043
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,378,138
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 12,743,368
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,780,112
0
0
<COMMON> 0
<OTHER-SE> 3,571,225
<TOTAL-LIABILITY-AND-EQUITY> 12,743,368
<SALES> 1,666,130
<TOTAL-REVENUES> 1,678,200
<CGS> 0
<TOTAL-COSTS> 1,345,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 346,136
<INCOME-PRETAX> (13,638)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,638)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,638)
<EPS-BASIC> 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>
