<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
--------------------------------------------------
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, LTD.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kentucky 61-1026356
--------------------------------------------- ---------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
--------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
(502) 426-4800
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
[X] Yes [ ] No
<PAGE>
TABLE OF CONTENTS
-----------------
PART I
------
Pages
-----
Item 1. Financial Statements
Balance Sheets as of September 30, 2000 and December 31, 1999 3
Statement of Partners' Equity as of September 30, 2000 3
Statements of Operations for the three months and nine months ended
September 30, 2000 and 1999 4
Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 5
Notes to Financial Statements 6-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
PART II
-------
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
2
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
<TABLE>
NTS-PROPERTIES IV, LTD.
-----------------------
BALANCE SHEETS
--------------
<CAPTION>
As of As of
September 30, 2000 December 31, 1999*
--------------------------- --------------------------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
Cash and equivalents $ 424,265 $ 607,512
Cash and equivalents - restricted 188,591 60,809
Accounts receivable 186,601 192,079
Land, buildings and amenities, net 10,232,250 10,480,193
Other assets 356,405 325,084
-------------------------- -------------------------
TOTAL ASSETS $ 11,388,112 $ 11,665,677
========================== =========================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Mortgages payable $ 7,331,391 $ 7,861,645
Accounts payable 169,790 224,227
Security deposits 59,331 69,991
Other liabilities 200,355 48,004
-------------------------- -------------------------
TOTAL LIABILITIES 7,760,867 8,203,867
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' EQUITY 3,627,245 3,461,810
-------------------------- -------------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 11,388,112 $ 11,665,677
=========================== =========================
</TABLE>
<TABLE>
STATEMENT OF PARTNERS' EQUITY
-----------------------------
<CAPTION>
Limited General
Partners Partner Total
-------------------- ------------------- -------------------
PARTNERS' EQUITY/(DEFICIT)
-------------------------
<S> <C> <C> <C>
Capital contributions, net of offering costs $ 25,834,899 $ - $ 25,834,899
Net income - prior years 383,189 3,872 387,061
Net income - current year 163,779 1,654 165,433
Cash distributions declared to date (21,586,280) (218,253) (21,804,533)
Repurchase of Limited Partnership Units (955,615) - (955,615)
--------------- ------------------ ---------------
BALANCES AT September 30, 2000 $ 3,839,972 $ (212,727) $ 3,627,245
=============== ================== ===============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Securities and Exchange Commission on March 30, 2000.
The accompanying notes to financial statements are an integral part of these
statements.
3
<PAGE>
<TABLE>
NTS PROPERTIES IV, LTD.
-----------------------
STATEMENTS OF OPERATIONS
------------------------
(UNAUDITED)
-----------
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- ------------------------------------
2000 1999 2000 1999
--------------- ---------------- ---------------- ----------------
REVENUES
--------
<S> <C> <C> <C> <C>
Rental income $ 847,498 $ 789,528 $ 2,504,276 $ 2,464,778
Gain on sale of assets - 11,256 - 11,256
Interest and other income 15,597 13,512 32,123 32,331
---------- ---------- ----------- -----------
TOTAL REVENUES 863,095 814,296 2,536,399 2,508,365
---------- ---------- ----------- -----------
EXPENSES
--------
Operating expenses 159,283 164,604 533,965 534,625
Operating expense - affiliated 120,787 129,499 340,240 384,702
Loss on disposal of assets 9,103 31,715 68,495 55,262
Interest expense 136,849 156,710 431,355 502,830
Management fees 48,510 45,684 142,075 141,287
Real estate taxes 50,745 45,311 147,430 147,034
Professional and administrative expenses 29,790 45,893 87,483 124,404
Professional and administrative expenses
- affiliated 28,986 38,470 91,606 117,399
Depreciation and amortization 178,421 166,207 528,317 524,259
---------- ---------- ----------- -----------
TOTAL EXPENSES 762,474 824,093 2,370,966 2,531,802
---------- ---------- ----------- -----------
Net income (loss) $ 100,621 $ (9,797) $ 165,433 $ (23,437)
========== ========== =========== ===========
Net income (loss) allocated to the Limited
Partners $ 99,615 $ (9,699) $ 163,779 $ (23,203)
========== ========== =========== ===========
Net income (loss ) per Limited Partnership
Unit $ 4.11 $ (0.39) $ 6.77 $ (0.93)
========== =========== =========== ===========
Weighted average number of Limited
Partnership Units 24,209 24,709 24,209 24,832
========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE>
<TABLE>
NTS-PROPERTIES IV, LTD.
-----------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
---------
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------------------
2000 1999
------------------------ -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
<S> <C> <C>
Net income (loss) $ 165,433 $ (23,437)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain on sale of assets - (11,256)
Loss on disposal of assets 68,495 55,262
Depreciation and amortization 528,317 524,259
Changes in assets and liabilities:
Cash and equivalents - restricted (107,282) (119,664)
Accounts receivable 5,478 16,680
Other assets (31,522) (16,043)
Accounts payable (54,437) 3,835
Security deposits (10,660) (6,292)
Other liabilities 152,351 161,818
----------------------- ----------------------
Net cash provided by operating activities 716,173 585,162
----------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Additions to land, buildings, and amenities (484,097) (342,888)
Sale of land, buildings and amenities - 57,065
Maturity of investment securities - 140,000
Change of ownership in Joint Venture (Note 8) 56,807 218,415
----------------------- ----------------------
Net cash (used in) provided by investing activities (427,290) 72,592
----------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Principal payments on mortgages payable (528,342) (509,722)
Increase in mortgages payable 86,823 -
(Increase) decrease in loan cost (10,111) 11,583
Repurchase of Limited Partnership Units - (123,000)
(Increase) decrease in cash and equivalents - restricted (20,500) 20,500
----------------------- ----------------------
Net cash used in financing activities (472,130) (600,639)
----------------------- ----------------------
Net (decrease) increase in cash and equivalents (183,247) 57,115
CASH AND EQUIVALENTS, beginning of period 607,512 640,969
----------------------- ----------------------
CASH AND EQUIVALENTS, end of period $ 424,265 $ 698,084
======================= ======================
Interest paid on a cash basis $ 442,414 $ 509,822
======================= ======================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
5
<PAGE>
NTS-PROPERTIES IV, LTD.
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The unaudited financial statements and schedules included herein should be read
in conjunction with the Partnership's 1999 Form 10-K as filed with the
Securities and Exchange Commission on March 30, 2000. 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 nine months ended September 30, 2000 and
1999.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles ("GAAP") 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, Ltd. owns and operates, either wholly or through a joint
venture, commercial rental properties in Kentucky (Louisville) and Florida
(Ft. Lauderdale). In Kentucky, a single tenant occupies one of the
commercial rental properties. The Partnership also owns and operates,
either wholly or through a joint venture, residential rental properties in
Kentucky (Louisville) and Florida (Orlando).
It is the Partnership's understanding that SHPS, Inc. does not intend to
continue to occupy the space at Blankenbaker Business Center 1A through the
duration of its lease, ending in July 2005. The Partnership's proportionate
share of the rental income from this property accounted for approximately
8% of the Partnership's total revenues for the nine months ended September
30, 2000. The Partnership has not yet determined the effect, if any, on the
Partnership's operations, given the fact SHPS, Inc. is under lease until
July 2005 and no official notice of termination has been received.
3. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for residential
security deposits, funds escrowed with mortgage companies for property
taxes in accordance with the loan agreements and funds reserved by the
Partnership for the purchase of Limited Partnership Units through the
tender offer (See Notes to Financial Statements - Note 6).
6
<PAGE>
4. Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost less
accumulated depreciation to the Partnership. Costs directly associated with
the acquisition, development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5-30 years for land improvements, 3-30
years for buildings and improvements, 3-30 years for amenities and the
applicable lease term for tenant improvements. The aggregate cost of the
Partnership's properties for federal tax purposes is approximately
$21,447,190.
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 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 value. Application of this standard by management
during the periods ended September 30, 2000 and 1999 did not result in any
impairment loss.
On July 23, 1999, the Lakeshore/University II Joint Venture closed on the
sale of 2.4 acres of land adjacent to the Lakeshore Business Center for a
sale price of $528,405.
5. Mortgages Payable
-----------------
Mortgages payable consist of the following:
<TABLE>
September 30, 2000 December 31, 1999
------------------------------ ---------------------------
<S> <C> <C>
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.8%, due
October 1, 2004, secured by land and a building. $ 1,494,705 $ 1,715,679
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 7.15%, due
January 5, 2013, secured by land, building and
amenities. 1,779,370 1,845,116
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 7.15%, due
January 5, 2013, secured by land, buildings
and amenities. 1,693,875 1,756,462
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.5%, due
November 15, 2005, secured by land and a building. 844,286 940,500
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%, due
August 1, 2008, secured by land and a building. 500,955 583,180
(Continued on next page)
7
<PAGE>
5. Mortgages Payable - Continued
-----------------------------
September 30, 2000 December 31, 1999
------------------------------ ---------------------------
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%, due
August 1, 2008, secured by land and buildings. $ 465,618 $ 542,043
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 7.2%,
due January 5, 2013, secured by land, buildings and
amenities. 291,602 299,682
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 7.2%, due
January 5, 2013, secured by land, buildings and
amenities. 174,157 178,983
Mortgage payable to a bank, bearing interest
at a variable rate based on LIBOR daily rate plus 2.3%,
currently 8.92%, due on September 8, 2003, secured by
land and a building. 86,823 -
--------------------------- ----------------------
$ 7,331,391 $ 7,861,645
=========================== ======================
</TABLE>
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 $7,157,000.
6. Tender Offer
------------
On September 22, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership, filed a tender offer (the "Tender Offer") with the Securities
and Exchange Commission, commencing on September 22, 2000, to purchase up
to 200 of the Partnership's Limited Partnership Units at a price of $205
per Unit. Under the Tender Offer, the Partnership will purchase the first
100 Units tendered and will fund its purchase and its portion of the
expenses from cash reserves. If more than 100 Units are tendered, ORIG, LLC
will purchase up to an additional 100 Units. If more than 200 Units are
tendered, the bidders may choose to acquire the additional Units on a pro
rata basis. The total costs of the Tender Offer are expected to be $51,000,
consisting of $41,000 to purchase 200 Units and $10,000 of expenses. The
Partnership expects that its share of these costs will be approximately
$26,000. 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, does not intend to participate in the Tender
Offer. The Tender Offer will expire on December 22, 2000 unless extended.
8
<PAGE>
7. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, NTS Development Company, an
affiliate of the General Partner of the Partnership, receives property
management fees on a monthly basis. The fees are paid in an amount equal to
5% of the gross revenues from the residential properties and 6% of the
gross revenues from the commercial properties. Also pursuant to an
agreement, NTS Development Company receives a repair and maintenance fee
equal to 5.9% of costs incurred which relate to capital improvements. These
repair and maintenance fees are capitalized as part of land, buildings and
amenities.
The Partnership was charged the following amounts from NTS Development
Company for the nine months ended September 30, 2000 and 1999. 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.
<TABLE>
Nine Months Ended
September 30,
-------------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
Property management fees $ 142,075 $ 141,287
-------------- --------------
Total property management fees 142,075 141,287
-------------- --------------
Property management 217,869 251,495
Leasing 59,474 86,365
Administrative - operating 56,168 36,640
Other 6,729 10,202
-------------- --------------
Total operating expenses -affiliated 340,240 384,702
-------------- --------------
Administrative - professional 91,606 117,399
-------------- --------------
Total professional and administrative expenses - affiliated 91,606 117,399
-------------- --------------
Repairs and maintenance fee 32,441 13,242
Leasing commissions 17,512 21,837
Construction management 4 -
-------------- --------------
Total related party transactions capitalized 49,957 35,079
-------------- --------------
Total related party transactions $ 623,878 $ 678,467
============== ==============
</TABLE>
On February 7, 2000, ORIG, LLC (the "Affiliate") purchased Interests in the
Partnership pursuant to an Agreement, Bill of Sale and Assignment, by and
among the Affiliate and four investors in the Partnership (the "Purchase
Agreement"). The Affiliate purchased 565 Interests in the Partnership for
total consideration of $136,629, or an average price of $241.82 per
Interest. The Affiliate paid these investors a premium above the purchase
price previously offered for Interests pursuant to prior tender offers
because this purchase allowed the Affiliate to purchase a substantial
number of Interests without incurring the significant expenses involved
with a tender offer and multiple transfers.
9
<PAGE>
8. Transactions Affecting the Investment in Lakeshore/University II Joint
----------------------------------------------------------------------
Venture
-------
On July 1, 2000 and July 1, 1999, NTS-Properties V contributed $500,000 and
$1,737,000, respectively, to the Lakeshore/University II Joint Venture
("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 other Partners in the
Joint Venture decreased. Effective July 1, 2000, NTS-Properties IV's
percentage of ownership in the Joint Venture is 10.92% as compared to
11.93% prior to July 1, 2000, and 17.86% prior to July 1, 1999.
9. Commitments and Contingencies
-----------------------------
The Partnership, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the
Partnership with existing laws has not had a material adverse effect on the
Partnership's financial condition and results of operations. However, the
Partnership cannot predict the impact of new or changed laws or regulations
on its current properties or on properties that it may acquire in the
future.
The Partnership does not believe there is any litigation threatened against
the Partnership other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material adverse effect on the
consolidated financial statements of the Partnership.
Pursuant to a contract signed on December 6, 1999, the L/U II Joint Venture
has a commitment to construct a building to be known as Lakeshore Business
Center Phase III on 3.8 acres of land it owns at the Lakeshore Business
Center Development. The construction cost is currently estimated to be
$4,000,000 and will be funded by working capital and approximately
$2,680,000 in debt financing. As of September 30, 2000, the L/U II Joint
Venture has incurred approximately $2,820,000 in expenses for the
construction of Lakeshore Business Center Phase III.
On July, 19, 2000, there was a fire at Golf Brook Apartments. Eight
apartment units sustained fire and/or smoke damage. The Partnership filed a
claim with its insurance company, and after meeting the $5,000 deductible,
received an advance of $100,000 subsequent to September 30, 2000. It is
unknown at this time, if the costs of the repairs to the eight apartments
will be completely covered by the insurance claim.
On September 8, 2000, the L/U II Joint Venture obtained a loan from a bank
for an amount not exceeding $2,680,000 to fund the construction of
Lakeshore Business Center Phase III. This commitment is guaranteed by the
L/U II Joint Venture, NTS-Properties V, NTS-Properties IV, Ltd. and NTS-Ft.
Lauderdale, Ltd. The funds will be used by the L/U II Joint Venture to
construct Lakeshore Business Center Phase III. The loan bears a variable
interest rate equal to a daily floating LIBOR rate as quoted for 30-day
investments, plus 230 basis points and is secured by 3.8 acres of land
located at the Lakeshore Business Center Development and the improvements
now and hereafter located on the land.
10
<PAGE>
9. Commitments and Contingencies - Continued
-----------------------------------------
As of September 30, 2000, the L/U II Joint Venture has a commitment for
approximately $122,000 for tenant improvements on 6,190 square feet at
Lakeshore Business Center Phase III. The Partnership's share of this
commitment is approximately $13,000 and will be funded from debt financing.
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore
Business Center Phase I for a cost of approximately $200,000. The
Partnership's share of this project will be approximately $22,000 and will
be funded from cash flows from operations.
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
communities 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, II and III.
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 reports financial information
for the purposes of assisting in making internal operating decisions. The
Partnership's management evaluated performance based on stand-alone
operating segment net income.
11
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Three Months Ended September 30, 2000
---------------------------------------------------------------
Residential Commercial Total
------------------- -------------------- ----------------
<S> <C> <C> <C>
Rental income $ 365,175 $ 482,323 $ 847,498
Interest and other income 9,002 1,640 10,642
--------------- ----------------- ------------
Total net revenues $ 374,177 $ 483,963 $ 858,140
--------------- ----------------- ------------
Operating expenses and operating expenses -
affiliated $ 124,379 $ 155,691 $ 280,070
Loss on disposal of assets - 9,103 9,103
Interest expense 70,346 66,503 136,849
Management fees 19,070 29,440 48,510
Real estate taxes 20,094 30,651 50,745
Depreciation and amortization 61,545 117,191 178,736
--------------- ----------------- ------------
Total expenses $ 295,434 $ 408,579 $ 704,013
--------------- ----------------- ------------
Net income $ 78,743 $ 75,384 $ 154,127
=============== ================= ============
</TABLE>
<TABLE>
Three Months Ended September 30, 1999
---------------------------------------------------------------
Residential Commercial Total
------------------- -------------------- ----------------
<S> <C> <C> <C>
Rental income $ 357,248 $ 432,280 $ 789,528
Interest and other income 1,196 (1,108) 88
--------------- ----------------- ------------
Total net revenues $ 358,444 $ 431,172 $ 789,616
--------------- ----------------- ------------
Operating expenses and operating expenses -
affiliated $ 116,003 $ 178,164 $ 294,167
Loss on disposal of assets 3,713 28,002 31,715
Interest expense 8,382 20,687 29,069
Management fees 19,644 26,040 45,684
Real estate taxes 16,803 27,055 43,858
Depreciation and amortization 58,457 102,154 160,611
--------------- ----------------- ------------
Total expenses $ 223,002 $ 382,102 $ 605,104
--------------- ----------------- ------------
Net income $ 135,442 $ 49,070 $ 184,512
=============== ================= ============
</TABLE>
12
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Nine Months Ended September 30, 2000
----------------------------------------------------------------
Residential Commercial Total
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Rental income $ 1,078,826 $ 1,425,450 $ 2,504,276
Interest and other income 11,938 5,601 17,539
---------------- ---------------- -------------
Total net revenues $ 1,090,764 $ 1,431,051 $ 2,521,815
---------------- ---------------- -------------
Operating expenses and operating expenses -
affiliated $ 391,967 $ 482,112 $ 874,079
Loss on disposal of assets 43,464 25,031 68,495
Interest expense 213,637 217,718 431,355
Management fees 55,872 86,203 142,075
Real estate taxes 60,278 87,152 147,430
Depreciation and amortization 180,708 336,862 517,570
---------------- ---------------- -------------
Total expenses $ 945,926 $ 1,235,078 $ 2,181,004
---------------- ---------------- -------------
Net income $ 144,838 $ 195,973 $ 340,811
================ ================ =============
</TABLE>
<TABLE>
Nine Months Ended September 30, 1999
----------------------------------------------------------------
Residential Commercial Total
-------------------- -------------------- ----------------
<S> <C> <C> <C>
Rental income $ 1,084,497 $ 1,380,281 $ 2,464,778
Interest and other income 2,073 6,380 8,453
---------------- ---------------- -------------
Total net revenues $ 1,086,570 $ 1,386,661 $ 2,473,231
---------------- ---------------- -------------
Operating expenses and operating expenses -
affiliated $ 348,960 $ 569,098 $ 918,058
Loss on disposal of assets 27,260 28,002 55,262
Interest expense 25,294 63,880 89,174
Management fees 57,869 83,418 141,287
Real estate taxes 50,410 90,149 140,559
Depreciation expense 174,329 335,149 509,478
---------------- ---------------- -------------
Total expenses $ 684,122 $ 1,169,696 $ 1,853,818
---------------- ---------------- -------------
Net income $ 402,448 $ 216,965 $ 619,413
================ ================ =============
</TABLE>
13
<PAGE>
10. Segment Reporting - Continued
-----------------------------
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 nine months ended September 30, 2000 and 1999 is necessary
given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes.
<TABLE>
Three Months Ended September 30,
------------------------------------------------
2000 1999
--------------------- ---------------------
NET REVENUES
------------
<S> <C> <C>
Total revenues for reportable segments $ 858,140 $ 789,616
Other income for Partnership 37,261 39,464
Gain on sale of assets - 11,256
Eliminations (32,306) (26,040)
------------------ -------------------
Total consolidated net revenues $ 863,095 $ 814,296
================== ===================
OPERATING EXPENSES AND OPERATING EXPENSES
-----------------------------------------
- AFFILIATED
--------------
Total operating expenses and operating expenses - affiliated
for reportable segments $ 280,070 $ 294,167
Operating expenses and operating expenses - affiliated
for Partnership - (64)
------------------ -------------------
Total operating expenses and operating expenses - affiliated $ 280,070 $ 294,103
================== ===================
INTEREST EXPENSE
----------------
Total interest expense for reportable segments $ 136,849 $ 29,069
Interest expense for Partnership - 127,641
------------------ -------------------
Total interest expense $ 136,849 $ 156,710
================== ===================
REAL ESTATE TAXES
-----------------
Total real estate taxes for reportable segments $ 50,745 $ 43,858
Real estate taxes for Partnership - 1,453
------------------ -------------------
Total real estate taxes $ 50,745 $ 45,311
================== ===================
DEPRECIATION AND AMORTIZATION
-----------------------------
Total depreciation and amortization for reportable segments $ 178,736 $ 160,611
Depreciation and amortization for Partnership (1,770) 4,141
Eliminations 1,455 1,455
------------------ -------------------
Total depreciation and amortization $ 178,421 $ 166,207
================== ===================
NET INCOME (LOSS)
----------------
Total net income for reportable segments $ 154,127 $ 184,512
Net loss for Partnership (19,745) (166,815)
Eliminations (33,761) (27,494)
------------------ -------------------
Total net income (loss) $ 100,621 $ (9,797)
================== ===================
</TABLE>
14
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Nine Months Ended September 30,
------------------------------------------------
2000 1999
--------------------- ---------------------
NET REVENUES
------------
<S> <C> <C>
Total revenues for reportable segments $ 2,521,815 $ 2,473,231
Other income for Partnership 80,277 96,042
Gain on sale of assets - 11,256
Eliminations (65,693) (72,164)
----------------- ------------------
Total consolidated net revenues $ 2,536,399 $ 2,508,365
================= ==================
OPERATING EXPENSES AND OPERATING EXPENSES
- AFFILIATED
Total operating expenses and operating expenses - affiliated
for reportable segments $ 874,079 $ 918,058
Operating expenses and operating expenses - affiliated
for Partnership 126 1,269
----------------- ------------------
Total operating expenses and operating expenses - affiliated $ 874,205 $ 919,327
================= ==================
INTEREST EXPENSE
Total interest expense for reportable segments $ 431,355 $ 89,174
Interest expense for Partnership - 413,656
----------------- ------------------
Total interest expense $ 431,355 $ 502,830
================= ==================
REAL ESTATE TAXES
Total real estate taxes for reportable segments $ 147,430 $ 140,559
Real estate taxes for Partnership - 6,475
----------------- ------------------
Total real estate taxes $ 147,430 $ 147,034
================= ==================
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable segments $ 517,570 $ 509,478
Depreciation and amortization for Partnership 6,383 10,417
Eliminations 4,364 4,364
----------------- ------------------
Total depreciation and amortization $ 528,317 $ 524,259
================= ==================
NET INCOME (LOSS)
Total net income for reportable segments $ 340,811 $ 619,413
Net loss for Partnership (105,321) (566,322)
Eliminations (70,057) (76,528)
----------------- ------------------
Total net income (loss) $ 165,433 $ (23,437)
================= ==================
</TABLE>
15
<PAGE>
11. Recent Accounting Pronouncement
-------------------------------
The Emerging Issues Task Force ("EITF") of the Financial Accounting
Standards Board ("FASB") has reached a consensus on Issue No. 00-1,
"Applicability of the Pro Rata Method of Consolidation to Investments in
Certain Partnerships and Other Unincorporated Joint Ventures." The EITF
reached a consensus that a proportionate gross financial statement
presentation (referred to as "proportionate consolidation" in the
Partnership's 1999 Form 10-K Notes to Financial Statements) is not
appropriate for an investment in an unincorporated legal entity accounted
for by the equity method of accounting, unless the investee is in either
the construction industry or an extractive industry where there is a
longstanding practice of its use.
The consensus is applicable to financial statements for annual periods
ending after June 15, 2000. Upon application of the consensus, all
comparative financial statements shall be restated to conform with the
consensus. The application of this consensus will not result in a
restatement of previously reported partners' equity or results of
operations, but will result in a recharacterization or reclassification of
certain financial statements' captions and amounts. The Partnership plans
to restate its financial statements using the equity method to account for
its joint venture investments for the year ending December 31, 2000.
16
<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 ("MD&A") 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. A discussion of certain market risks also
follows. MD&A 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 this Item 2 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 MD&A, 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 liquidity, capital resources and results of operations are
subject to a number of risks and uncertainties including, but not limited to the
following: the ability of the Partnership to achieve planned revenues; the
ability of the Partnership to make payments due under its debt agreements; the
ability of the Partnership to negotiate and maintain terms with vendors and
service providers for operating expenses; competitive pressures from other real
estate companies, including large commercial and residential real estate
companies, which may affect the nature and viability of the Partnership's
business strategy; trends in the economy as a whole which may affect consumer
confidence and demand for the types of rental property held by the Partnership;
the ability of the Partnership to predict the demand for specific rental
properties; the ability of the Partnership to attract and retain tenants;
availability and costs of management and labor employed; real estate occupancy
and development costs, including substantial fixed investment costs associated
with renovations necessary to obtain new tenants and retain existing tenants;
and the risk of a major commercial tenant defaulting on its lease due 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.
17
<PAGE>
Results of Operations
---------------------
The occupancy levels at the Partnership's properties as of September 30 were as
follows:
<TABLE>
Nine Months Ended September 30,
---------------------------------------------
2000 (1) 1999
-------------------- -------------------
Wholly-owned Properties
-----------------------
<S> <C> <C>
Commonwealth Business Center Phase I (2) 89% 100%
Plainview Point Office Center Phases I & II 77% 54%
The Willows of Plainview Phase I 94% 92%
Property Owned in Joint Venture with NTS-Properties V
-----------------------------------------------------
(Ownership % at September 30, 2000)
----------------------------------
The Willows of Plainview Phase II (9.7%) (2) 91% 93%
Properties Owned in Joint Venture with NTS-Properties VI
--------------------------------------------------------
(Ownership % at September 30, 2000)
----------------------------------
Golf Brook Apartments (3.97%) 95% 93%
Plainview Point III Office Center (4.96%) 91% 91%
Property Owned in Joint Venture with NTS-Properties VII, Ltd. and
-----------------------------------------------------------------
NTS-Properties Plus Ltd. (Ownership % at September 30, 2000)
-----------------------------------------------------------
Blankenbaker Business Center 1A (29.61%) 100% 100%
Properties Owned through Lakeshore/University II Joint Venture
--------------------------------------------------------------
(L/U II Joint Venture)
---------------------
Lakeshore Business Center Phase I (3) 74% 74%
Lakeshore Business Center Phase II (3) 86% 86%
Lakeshore Business Center Phase III (4) N/A N/A
</TABLE>
(1) Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties without additional financing. Lakeshore
Business Center Phase III is currently under construction.
(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) Ownership percentage was 10.92% as of September 30, 2000 and 11.93% as of
September 30, 1999. (See Notes to Financial Statements - Note 8).
(4) Ownership percentage was 10.92% as of September 30, 2000. Construction of
the property commenced December 1999. As of September 30, 2000, one lease
for 4,689 square feet has been signed and the tenant is expected to take
occupancy during the fourth quarter of 2000. Another lease for 6,190 square
feet has been signed and the tenant is expected to take occupancy during
the first quarter of 2001.
18
<PAGE>
Results of Operations - Continued
---------------------------------
The average occupancy levels at the Partnership's properties during the three
months and nine months ended September 30 were as follows:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
2000 1999 2000 1999
------------ ----------- ----------- -----------
Wholly-owned Properties
-----------------------
<S> <C> <C> <C> <C>
Commonwealth Business Center Phase I (1) 89% 100% 92% 96%
Plainview Point Office Center Phases I & II 78% 54% 75% 54%
The Willows of Plainview Phase I 95% 94% 95% 95%
Property Owned in Joint Venture with NTS-Properties V
-----------------------------------------------------
(Ownership % at September 30, 2000)
----------------------------------
The Willows of Plainview Phase II (9.7%) (1) 95% 93% 93% 95%
Properties Owned in Joint Venture with NTS-Properties VI
--------------------------------------------------------
(Ownership % at September 30, 2000)
----------------------------------
Golf Brook Apartments (3.97%) 95% 92% 93% 93%
Plainview Point III Office Center (4.96%) (1) 91% 91% 89% 91%
Properties Owned in Joint Venture with NTS-Properties VII,
----------------------------------------------------------
Ltd. and NTS-Properties Plus Ltd. (Ownership % at
--------------------------------------------------
September 30, 2000)
------------------
Blankenbaker Business Center 1A (29.61%) 100% 100% 100% 100%
Properties Owned Through Lakeshore/University II
------------------------------------------------
University (L/U II Joint Venture)
--------------------------------
Lakeshore Business Center Phase I (2) 74% 73% 75% 75%
Lakeshore Business Center Phase II (1) (2) 86% 86% 83% 86%
Lakeshore Business Center Phase III (3) N/A N/A N/A N/A
</TABLE>
(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) Ownership percentage was 10.92% for the three months ended September 30,
2000, and 11.93% for the six months ended June 30, 2000 and the three
months ended September 30, 1999. Ownership percentage was 17.86% for the
six months ended June 30, 1999. (See Notes to Financial Statements - Note
8).
(3) Ownership percentage was 10.92% as of September 30, 2000. Construction of
the property commenced December 1999. As of September 30, 2000, one lease
for 4,689 square feet has been signed and the tenant is expected to take
occupancy during the fourth quarter of 2000. Another lease for 6,190 square
feet has been signed and the tenant is expected to take occupancy during
the first quarter of 2001.
19
<PAGE>
Results of Operations - Continued
---------------------------------
Rental and other income generated by the Partnership's properties for the three
months and nine months ended September 30, 2000 and 1999 were as follows:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
-------------- --------------- -------------- ---------------
Wholly-owned Properties
-----------------------
<S> <C> <C> <C> <C>
Commonwealth Business Center Phase I $ 196,063 $ 204,324 $ 575,821 $ 583,788
Plainview Point Office Center Phases I & II $ 132,559 $ 73,891 $ 381,574 $ 240,865
The Willows of Plainview Phase I $ 302,086 $ 296,375 $ 895,666 $ 897,818
Property Owned in Joint Venture with NTS-
-----------------------------------------
Properties V (Ownership % at September 30,
------------------------------------------
2000)
----
The Willows of Plainview II (9.7%) $ 32,576 $ 33,099 $ 96,265 $ 99,694
Properties Owned in Joint Venture with NTS-
-------------------------------------------
Properties VI (Ownership % at September 30,
-------------------------------------------
2000)
----
Golf Brook Apartments (3.97%) $ 39,515 $ 28,970 $ 98,834 $ 89,058
Plainview Point III Office Center (4.96%) $ 10,613 $ 10,022 $ 30,789 $ 29,157
Property Owned in Joint Venture with NTS-
-----------------------------------------
Properties VII, Ltd. and NTS-Properties Plus Ltd.
-------------------------------------------------
(Ownership % at September 30, 2000)
----------------------------------
Blankenbaker Business Center 1A (29.61%) $ 67,968 $ 67,696 $ 200,915 $ 208,598
Property Owned Through Lakeshore/University
-------------------------------------------
II Joint Venture (L/U II Joint Venture)
--------------------------------------
Lakeshore Business Center Phase I (1) $ 37,232 $ 35,525 $ 119,656 $ 155,253
Lakeshore Business Center Phase II (1) $ 39,527 $ 39,715 $ 122,296 $ 168,999
Lakeshore Business Center Phase III (2) N/A N/A N/A N/A
</TABLE>
(1) Represents ownership percentage of 10.92% for the three months ended
September 30, 2000, 11.93% for the six months ended June 30, 2000 and three
months ended September 30, 1999, and 17.86% for the six months ended June
30, 1999. (See Notes to Financial Statements - Note 8).
(2) Ownership percentage was 10.92% as of September 30, 2000. Construction of
the property commenced December 1999. As of September 30, 2000, one lease
for 4,689 square feet has been signed and the tenant is expected to take
occupancy during the fourth quarter of 2000. Another lease for 6,190 square
feet has been signed and the tenant is expected to take occupancy during
the first quarter of 2001.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
20
<PAGE>
Results of Operations - Continued
---------------------------------
It is the Partnership's understanding that SHPS, Inc. does not intend to
continue to occupy the space at Blankenbaker Business Center 1A through the
duration of its lease, ending in July 2005. The Partnership's proportionate
share of the rental income from this property accounted for approximately 8% of
the Partnership's total revenues for the nine months ended September 30, 2000.
The Partnership has not yet determined the effect, if any, on the Partnership's
operations, given the fact SHPS, Inc. is under lease until July 2005 and no
official notice of termination has been received.
The following is an analysis of material changes in results of operations for
the periods ending September 30, 2000 and 1999. Items that did not have a
material impact on operations for the periods listed above have been excluded
from this discussion.
Operating expenses - affiliated decreased approximately $9,000 or 7% and $44,000
or 12% for the three months and nine months ended September 30, 2000,
respectively, as compared to the same periods in 1999. The decrease is primarily
due to decreased salary and overhead costs allocated to the Partnership as a
result of decreased property management and leasing expenses. Operating expenses
- affiliated are expenses incurred for services performed by NTS Development
Company, an affiliate of the General Partner.
Loss on disposal of assets for the three months and nine months ended September
30, 2000, can be attributed to the retirement of building costs at The Willows
of Plainview Phases I and II, Lakeshore Business Center Phases I and II and
Plainview Point Office Center Phases I and II. The losses are the result of
exterior wood and paint replacements at The Willows of Plainview I and II and
common area renovations at Lakeshore Business Centers Phases I and II and
Plainview Point Office Centers Phases I and II. Loss on disposal of assets for
the three months and nine months ended September 30, 1999, can be attributed to
the retirement of building costs at The Willows of Plainview Phases I and II and
Golf Brook Apartments and to the retirement of tenant improvements at Plainview
Point Office Center Phases I and II. The losses are the result of the
replacement of the alarm system at The Willows of Plainview Phases I and II,
exterior wood and paint replacements at Golf Brook Apartments and tenant
improvements at Plainview Point Office Center Phases I and II.
Interest expense decreased approximately $20,000 or 13% and $71,000 or 14% for
the three months and nine months ended September 30, 2000, respectively, as
compared to the same period in 1999. The decreases are primarily due to required
principal payments on the mortgages payable of the Partnership's properties.
Professional and administrative expenses decreased approximately $16,000 or 35%
and $37,000 or 30% for the three months and nine months ended September 30,
2000, respectively, as compared to the same periods in 1999. The decrease is due
primarily to decreased legal and accounting fees related to the Tender Offer.
21
<PAGE>
Results of Operations - Continued
---------------------------------
Professional and administrative expenses - affiliated decreased approximately
$9,000 or 25% and $26,000 or 22% for the three months and nine months ended
September 30, 2000, respectively, as compared to the same periods in 1999,
primarily as a result of decreased overhead costs allocated to the Partnership
as a result of personnel status changes. Professional and administrative
expenses - affiliated are expenses incurred for services performed by employees
of NTS Development Company, an affiliate of the General Partner.
Also contributing to all of the decreases discussed above is a decrease in
ownership of L/U II Joint Venture. (See Notes to Financial Statements - Note 8).
Consolidated Cash Flows and Financial Condition
-----------------------------------------------
In the next 12 months, the demand on future liquidity is anticipated to increase
as the Partnership continues its efforts in the leasing of its commercial
properties. At this time, the future leasing and tenant finish costs which will
be required to renew the current leases or obtain new tenants are unknown. It is
anticipated that the cash flow from operations and cash reserves will be
sufficient to meet the needs of the Partnership.
Cash flows provided by (used in):
<TABLE>
Nine Months Ended September 30,
---------------------------------------------------------------
2000 1999
----------------------------- --------------------------
<S> <C> <C>
Operating activities $ 716,173 $ 585,162
Investing activities (427,290) 72,592
Financing activities (472,130) (600,639)
---------------------------- -------------------------
Net (decrease) increase in cash and equivalents $ (183,247) $ 57,115
============================ =========================
</TABLE>
Net cash provided by operating activities increased approximately $131,000 for
the nine months ended September 30, 2000, as compared to the same period in
1999. The increase was primarily driven by an increase in net income. The
increase is partially offset by increased payments on accounts payable.
Net cash used in investing activities increased approximately $500,000 for the
nine months ended September 30, 2000, as compared to the same period in 1999.
The primary reason for the increase in funds used in investing activities was
increased capital expenditures for the Lakeshore Business Center Phase III
construction, offset by the decrease in the maturity of investment securities.
Net cash used in financing activities decreased approximately $129,000 for the
nine months ended September 30, 2000, as compared to the same period in 1999.
The decrease is primarily due to an increase in mortgages payable and a decrease
in the repurchase of Limited Partnership Units.
22
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
-----------------------------------------------------------
No distributions were paid for the nine months ended September 30, 2000, or the
year ended December 31, 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) as shown on the Partnership's balance sheet as of September 30,
2000 were $424,265.
Due to the fact that no distributions were paid during the nine months ended
September 30, 2000 or 1999, the table which presents that portion of the
distribution that represents a return of capital on a GAAP 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 and the construction of Lakeshore Business Center
Phase III as discussed below. 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.
Pursuant to a contract signed on December 6, 1999, the L/U II Joint Venture has
a commitment to construct a building to be known as Lakeshore Business Center
Phase III on 3.8 acres of land it owns at the Lakeshore Business Center
Development. The construction commenced in December 1999 and the construction
cost is currently estimated to be $4,000,000 and will be funded by working
capital and approximately $2,680,000 in debt financing. As of September 30,
2000, the L/U II Joint Venture has incurred approximately $2,820,000 in expenses
for the construction of Lakeshore Business Center Phase III.
On July 14, 2000, a settlement agreement relative to a class action suit was
executed in a claim NTS-Properties VI had against Masonite Corporation for
defective hardboard siding installed at Golf Brook Apartments. Masonite
Corporation settled on 15 of 19 buildings at Golf Brook Apartments and paid a
total of approximately $254,000. An agreement has not been reached, at this time
for the remaining four buildings. NTS-Properties IV's share of the settlement is
approximately $10,000.
On July, 19, 2000, there was a fire at Golf Brook Apartments. Eight apartment
units sustained fire and/or smoke damage. The Partnership filed a claim with its
insurance company, and after meeting the $5,000 deductible, received an advance
of $100,000 subsequent to September 30, 2000. It is unknown at this time, if the
costs of the repairs to the eight apartments will be completely covered by the
insurance claim.
23
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
-----------------------------------------------------------
On September 8, 2000, the L/U II Joint Venture obtained a loan from a bank for
an amount not exceeding $2,680,000 to fund the construction of Lakeshore
Business Center Phase III. This commitment is guaranteed by the L/U II Joint
Venture, NTS-Properties V, NTS-Properties IV, Ltd. and NTS-Ft. Lauderdale, Ltd.
The funds will be used by the L/U II Joint Venture to construct Lakeshore
Business Center Phase III. The loan bears a variable interest rate equal to a
daily floating LIBOR rate as quoted for 30-day investments, plus 230 basis
points and is secured by 3.8 acres of land located at the Lakeshore Business
Center Development and the improvements now and hereafter located on the land.
As of September 30, 2000, the L/U II Joint Venture has a commitment for
approximately $122,000 for tenant improvements on 6,190 square feet at Lakeshore
Business Center Phase III. The Partnership's share of this commitment is
approximately $13,000 and will be funded from debt financing.
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore Business
Center Phase I for a cost of approximately $200,000. The Partnership's share of
this project will be approximately $22,000 and will be funded from cash flows
from operations.
The Partnership has no other material commitments for renovations or capital
improvements as of September 30, 2000.
On September 22, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership, filed a tender offer (the "Tender Offer") with the Securities and
Exchange Commission, commencing on September 22, 2000, to purchase up to 200 of
the Partnership's Limited Partnership Units at a price of $205 per Unit as of
the date of the Tender Offer. Under the Tender Offer, the Partnership will
purchase the first 100 Units tendered and will fund its purchase and its portion
of the expenses from cash reserves. If more than 100 Units are tendered, ORIG,
LLC will purchase up to an additional 100 Units. If more than 200 Units are
tendered, the bidders may choose to acquire the additional Units on a pro rata
basis. The total costs of the Tender Offer are expected to be $51,000,
consisting of $41,000 to purchase 200 Units and $10,000 of expenses. The
Partnership expects that its share of these costs will be approximately $26,000.
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, does not intend to participate in the Tender Offer. The Tender
Offer will expire on December 22, 2000 unless extended.
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 for the Partnership's remaining commercial
properties are handled by leasing agents, who are employees of NTS Development
Company, located in Louisville, Kentucky. The leasing
24
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
-----------------------------------------------------------
agents are located in the same city as the commercial properties. All
advertising for these properties is coordinated by NTS Development Company's
marketing staff located in Louisville, Kentucky.
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, who are 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 apartments and negotiates lease renewals with current
residents.
Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A,
and Lakeshore Business Center Phases I, II and III provide for tenants to
contribute toward the payment of common area expenses, insurance and real estate
taxes. Leases at Plainview Point Office Center Phases I, II and III 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.
25
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Our primary market risk exposure with regard to financial instruments is changes
in interest rates. At September 30, 2000, a hypothetical 100 basis point
increase in interest rates would result in an approximate $270,000 decrease in
the fair value of the debt.
26
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
On July 14, 2000, a settlement agreement relative to a class action
suit was executed in a claim NTS-Properties VI had against Masonite
Corporation for defective hardboard siding installed at Golf Brook
Apartments. Masonite Corporation settled on 15 of 19 buildings at Golf
Brook Apartments and paid a total of approximately $254,000. An
agreement has not been reached, at this time for the remaining four
buildings. NTS-Properties IV's share of the settlement is
approximately $10,000.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
Exhibit 27. Financial Data Schedule
b) Reports on Form 8-K:
Not applicable.
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTS-PROPERTIES IV, LTD.
-------------------------------------------
(Registrant)
BY: NTS-Properties Associates IV, LTD.
General Partner,
BY: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
--------------------------------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: November 13, 2000
28
<PAGE>
