UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11655
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NTS-PROPERTIES IV
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(Exact name of registrant as specified in its charter)
Kentucky 61-1026356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (502) 426-4800
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Exhibit Index: See page 56
Total Pages: 61
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TABLE OF CONTENTS
Pages
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PART I
Items 1 and 2. Business and Properties 3-18
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote
of Security Holders 18
PART II
Item 5. Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 19
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 21-30
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 30
Item 8. Financial Statements and Supplementary
Data 31-51
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 52
PART III
Item 10. Directors and Executive Officers of
the Registrant 53-54
Item 11. Management Remuneration and Transactions 54
Item 12. Security Ownership of Certain Beneficial
Owners and Management 54
Item 13. Certain Relationships and Related
Transactions 55
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 56-60
Signatures 61
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PART I
Items 1. and 2. Business and Properties
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Development of Business
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NTS-Properties IV., Ltd., a Kentucky Limited Partnership, (the "Partnership" or
"NTS-Properties IV") is a limited partnership organized under the laws of the
Commonwealth of Kentucky on May 13, 1983. The General Partner is NTS-Properties
Associates IV, a Kentucky limited partnership. As of December 31, 1999, the
Partnership owned the following properties:
- Commonwealth Business Center Phase I, a business center with
approximately 81,000 net rentable square feet in Louisville,
Kentucky, constructed by the Partnership.
- Plainview Point Office Center Phases I and II, an office center
with approximately 56,000 net rentable square feet in Louisville,
Kentucky, acquired complete by the Partnership.
- The Willows of Plainview Phase I, a 118-unit luxury apartment
complex in Louisville, Kentucky, constructed by the Partnership.
- A joint venture interest in The Willows of Plainview Phase II, a
144-unit luxury apartment complex in Louisville, Kentucky,
constructed by the joint venture between the Partnership and NTS-
Properties V, a Maryland Limited Partnership, an affiliate of the
General Partner of the Partnership, ("NTS-Properties V"). The
Partnership's percentage interest in the joint venture was 10% at
December 31, 1999.
- A joint venture interest in Golf Brook Apartments, a 195-unit
luxury apartment complex in Orlando, Florida, constructed by the
joint venture between the Partnership and NTS-Properties VI, a
Maryland Limited Partnership, an affiliate of the General Partner
of the Partnership, ("NTS-Properties VI"). The Partnership's
percentage interest in the joint venture was 4% at December 31,
1999.
- A joint venture interest in Plainview Point III Office Center, an
office center with approximately 63,000 net rentable square feet
in Louisville, Kentucky, constructed by the joint venture between
the Partnership and NTS-Properties VI. The Partnership's
percentage interest in the joint venture was 5% at December 31,
1999.
- A joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground
floor square feet and approximately 50,000 net rentable mezzanine
square feet located in Louisville, Kentucky, acquired complete by
a joint venture between NTS-Properties Plus Ltd. and
NTS-Properties VII, Ltd., affiliates of the General Partner of
the Partnership. The Partnership's percentage interest in the
joint venture was 30% at December 31, 1999.
- A joint venture interest in the Lakeshore/University II Joint
Venture ("L/U II Joint Venture"). The L/U II Joint Venture was
formed on January 23, 1995 among the Partnership and
NTS-Properties V, NTS-Properties Plus Ltd. and NTS/Fort
Lauderdale, Ltd., affiliates of the General Partner of the
Partnership. The Partnership's percentage interest in the joint
venture was 12% at December 31, 1999.
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<PAGE>
Development of Business - Continued
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A description of the properties owned by the L/U II Joint Venture as of December
31, 1999 appears below:
- Lakeshore Business Center Phase I - a business center with
------------------------------------
approximately 103,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- Lakeshore Business Center Phase II - a business center with
------------------------------------
approximately 97,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- Outparcel Building Site - approximately 3.8 acres of land
-------------------------
adjacent to the Lakeshore Business Center development upon
which construction of Lakeshore Business Center Phase III has
commenced.
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. In the opinion of the Partnership's
management, the properties are adequately covered by insurance.
As of December 31, 1999, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/99
- -------- ------ ------ -----------
Commonwealth Business Center
Phase I 8.8% 10/01/04 (1) $1,715,679
Plainview Point Office Center
Phases I and II -- None
Willows of Plainview Phase I 7.15% 01/05/13 (2) $1,845,116
Willows of Plainview Phase I 7.15% 01/05/13 (2) $1,756,462
Willows of Plainview Phase II 7.2% 01/05/13 (2) $ 299,682 (3)
Willows of Plainview Phase II 7.2% 01/05/13 (2) $ 178,983 (3)
Golf Brook Apartments -- See Below (4)
Plainview Point Office Center
Phase III -- See Below (5)
Blankenbaker Business Center
1A 8.5% 11/15/05 (6) $ 940,500 (7)
Lakeshore Business Center
Phase I 8.125% 08/01/08 (8) $ 542,043 (9)
Lakeshore Business Center
Phase II 8.125% 08/01/08 (8) $ 583,180 (9)
(Footnotes continued on next page)
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Development of Business - Continued
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(1) Current monthly principal payments are based upon a 10-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(2) Current monthly principal payments are based upon a 15-year
amortization schedule. At maturity, the loan will have been repaid
based on the current rate of amortization.
(3) This amount represents the Partnership's proportionate interest in the
mortgages payable at December 31, 1999. The outstanding balances of the
mortgages at December 31, 1999 were $2,949,626 and $1,761,647,
respectively.
(4) Golf Brook Apartments, a joint venture between the Partnership and NTS-
Properties VI, is encumbered by a mortgage payable to an insurance
company. The $7,677,179 mortgage payable is recorded as a liability by
NTS-Properties VI in accordance with the Joint Venture Agreement. The
mortgage bears interest at a fixed rate of 7.43% and matures May 15,
2009.
(5) Plainview Point Office Center Phase III, a joint venture between the
Partnership and NTS-Properties VI, is encumbered by a mortgage payable
to a bank. The $2,298,000 mortgage payable is recorded as a liability
by NTS-Properties VI in accordance with the Joint Venture Agreement.
The mortgage bears interest at Euro Rate plus 225 basis points and
matures June 23, 2002.
(6) Current monthly principal payments are based upon an 11-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(7) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1999. The outstanding balance of the
mortgage at December 31, 1999 was $3,121,473.
(8) Current monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(9) This amount represents the Partnerships's proportionate interest in the
mortgage payable at December 31, 1999. The outstanding balance of the
mortgage at December 31, 1999 was $4,543,531 for Phase I and $4,888,353
for Phase II.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's properties. Changes to current tenant
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 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, cash
reserves or additional financing where necessary.
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.
The Partnership reflects a gain of approximately $11,300 associated with this
sale in the third quarter of 1999 and expects to use the net proceeds from the
land sale to help fund the construction of Lakeshore Business Center Phase III
as described below.
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<PAGE>
Development of Business - Continued
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As of December 31, 1999, the L/U II Joint Venture has a commitment, pursuant to
a contract signed December 6, 1999, to construct a building to be known as
Lakeshore Business Center Phase III on the 3.8 acres of land it owns at the
Lakeshore Business Center Development. Site work began in December 1999 and
shell construction began the first quarter of 2000. The construction costs are
currently estimated to be $4,000,000 and will be funded by a $1,737,000 capital
contribution from NTS-Properties V in July 1999 and approximately $2,680,000
debt financing obtained subsequent to December 31, 1999. The Partnership and
NTS- Properties Plus, which prior to July 1, 1999 had an 18% and 12% interest
respectively, in the L/U II Joint Venture, 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 the capital contribution to the L/U II Joint Venture
with the knowledge that their Joint Venture interest would, as a result,
decrease to 8% and 12% respectively. See Item 8 Note 14 for information of debt
financing obtained for the construction of Lakeshore Business Center Phase III
subsequent to December 31, 1999.
As of December 31, 1999, the Partnership has also started renovation of the
community clubhouse at Golf Brook Apartments. The estimated cost of the
renovation is $200,000. The renovation is being funded partly from cash flow
from operations and partly from financing obtained by NTS-Properties VI on
September 23, 1999 in the amount of $2,500,000 which is secured by Plainview
Point III Office Center.
The Partnership had no other material commitments for renovations or capital
improvements as of December 31, 1999.
Financial Information About Industry Segments
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The Partnership is engaged solely in the business of developing, constructing,
owning and operating residential apartments and commercial real estate. See Item
8, Note 13 for information regarding the Partnership's operating segments.
Narrative Description of Business
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General
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The current business of the Partnership is consistent with the original purpose
of the Partnership which was to invest in real property, which was either under
development or proposed for development, on which it would develop, construct,
own and operate apartment complexes, business parks, and retail, industrial and
office buildings. The Partnership properties are in a condition suitable for
their intended use.
The Partnership intends to hold the properties until such time as sale or other
disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a property, the Partnership will consider
factors such as potential capital appreciation, cash flow and Federal income tax
considerations, including possible adverse Federal income tax consequences to
the Limited Partners.
The following is information regarding properties that represent either 10% or
more of total consolidated assets or revenues as of and for the year ending
December 31, 1999.
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<PAGE>
Commonwealth Business Center Phase I
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As of December 31, 1999, there were 12 tenants leasing space aggregating
approximately 75,766 square feet of rentable area at Commonwealth Business
Center Phase I. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance and real estate taxes. The tenants who occupy
Commonwealth Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include a
stockbrokerage house, insurance and machinery sales/service. One tenant
individually leases more than 10% of Commonwealth Business Center Phase I's
rentable area. The occupancy levels at the business center as of December 31
were 93% (1999), 89% (1998), 87% (1997) and 86% (1996 and 1995). See Item 7 for
average occupancy levels for the periods ending December 31, 1999, 1998 and
1997.
The following table contains approximate data concerning the major lease in
effect on December 31, 1999:
Sq. Ft. and Current Annual
% of Net Rental
Year of Expiration Rentable Area per Square Foot
------------------ ------------- ---------------
Major Tenant (1):
1 2004 40,079 (49.3%) $7.59
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
Plainview Point Office Center Phases I and II
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As of December 31, 1999, there were 6 tenants leasing space aggregating
approximately 44,461 square feet of rentable area at Plainview Point Office
Center Phases I and II. All leases provide for tenants to contribute toward the
payment of common area expenses, insurance and real estate taxes. The tenants
who occupy Plainview Point Office Center Phases I and II are professional
service oriented organizations. The principal occupations/professions practiced
include a business school, telemarketing services and insurance. Two tenants
individually lease more than 10% of Plainview Point Office Center's rentable
area. The occupancy levels at the office center as of December 31 were 79%
(1999), 65% (1998), 73% (1997), 88% (1996) and 85% (1995). See Item 7 for
average occupancy levels for the periods ending December 31, 1999, 1998 and
1997.
The following table contains approximate data concerning the major leases in
effect on December 31, 1999:
Current Annual
Sq. Ft. and % of Net Rental
Year of Expiration Rentable Area per Square Foot
------------------ ------------- ---------------
Major Tenant (1):
1 2004 28,675 (50.7%) $13.42
2 2004 7,428 (13.1%) $13.60
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
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<PAGE>
The Willows of Plainview Phase I
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Units at The Willows of Plainview Phase I include one and two-bedroom lofts and
deluxe apartments and two-bedroom town homes. All units have wall-to-wall
carpeting, individually controlled heating and air conditioning, dishwashers,
ranges, refrigerators and garbage disposals. All units, except one-bedroom
lofts, have washer/dryer hook-ups. The one-bedroom lofts have stackable washers
and dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, pool, whirlpool and tennis courts.
Monthly rental rates at The Willows of Plainview Phase I start at $679 for one-
bedroom apartments, $939 for two-bedroom apartments and $1,039 for two-bedroom
town homes, with additional monthly rental amounts for special features and
locations. Tenants pay all costs of heating, air conditioning and electricity.
Most leases are for a period of one year. Units will be rented in some cases,
however, on a shorter term basis at an additional charge. The occupancy levels
at the apartment complex as of December 31 were 96% (1999), 86% (1998), 92%
(1997), 89% (1996) and 91% (1995). See Item 7 for average occupancy levels for
the periods ending December 31, 1999, 1998 and 1997.
Blankenbaker Business Center 1A
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Sykes HealthPlan Services Bureau, Inc. (SHPS, Inc.) has leased 100% of
Blankenbaker Business Center 1A. The annual base rent, which excludes the cost
of utilities, is $7.48 per square foot. The lease term is for 11 years and
expires in July 2005. The lease provides for the tenant to contribute toward the
payment of common area expenses, insurance and real estate taxes. Sykes
HealthPlan Services Bureau, Inc. is a professional service-orientated
organization which deals in insurance claim processing. The occupancy level at
the business center as of December 31, 1999, 1998, 1997, 1996 and 1995 was 100%.
See Item 7 for average occupancy levels for the periods ending December 31,
1999, 1998, and 1997.
The following table contains approximate data concerning the lease in effect on
December 31, 1999:
Current Annual
Sq. Ft. and % of Net Rental
Name Year of Expiration Rentable Area (1) per Square Foot
---- ------------------ ----------------- ---------------
Sykes HealthPlan
Services Bureau, Inc. 2005 100,640 (100%) $ 7.48
(1) Rentable area includes ground floor and mezzanine square feet.
It has previously been reported that SHPS, Inc. intended to consolidate its
operations and build its corporate headquarters in Jefferson County, Kentucky.
SHPS, Inc. occupies 100% of Blankenbaker Business Center 1A. The Partnership
believes that SHPS, Inc. no longer intends to build a Corporate Headquarters. As
of December 31, 1999, it is the Partnership's understanding that SHPS, Inc.,
intends to occupy the space at Blankenbaker Business Center 1A through the
duration of the lease term, which expires in July 2005.
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<PAGE>
Lakeshore Business Center Phase I
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As of December 31, 1999, there were 29 tenants leasing space aggregating
approximately 76,069 square feet of rentable area at Lakeshore Business Center
Phase I. All leases provide for tenants to contribute toward the payment of
common area expenses, insurance, utilities and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include
telemarketing services, financial services and computer integration services.
There are no tenants that lease 10% or more of Lakeshore Business Center Phase
I's rentable area. The occupancy levels at the business center as of December 31
were 73% (1999), 85% (1998), 96% (1997) and 92% (1996 and 1995). See Item 7 for
average occupancy levels for the periods ending December 31, 1999, 1998 and
1997.
Lakeshore Business Center Phase II
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As of December 31, 1999, there were 20 tenants leasing space aggregating
approximately 70,417 square feet of the rentable area at Lakeshore Business
Center Phase II. All leases provide for tenants to contribute toward the payment
of common area expenses, insurance, utilities and real estate taxes. The tenants
who occupy Lakeshore Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include medical
equipment leasing, insurance services and management offices for the Florida
state lottery. One tenant individually leases more than 10% of Lakeshore
Business Center Phase II's rentable area. The occupancy levels at the business
center as of December 31 were 72% (1999), 79% (1998), 100% (1997), 89% (1996)
and 72% (1995). See Item 7 for average occupancy levels for the periods ending
December 31, 1999, 1998 and 1997.
The following table contains approximate data concerning the major lease in
effect on December 31, 1999:
Current Annual
Sq. Ft. and % of Rental
Year of Expiration Net Rentable Area per Square Foot
------------------ ----------------- ---------------
Major Tenant (1):
1 2002 14,665 (15.1%) $15.30
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
Additional Operating Data
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Additional operating data regarding the Partnership's properties is furnished in
the following table:
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Wholly-Owned Properties
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Commonwealth Business
Center Phase I $4,055,103 $ .010710 $ 34,493
Plainview Point Office
Center Phases I and II 3,416,402 .010910 17,615
The Willows of
Plainview Phase I 7,374,906 .010910 60,728
Percentage ownership has not been applied to the information in the table above
and below for properties owned through a joint venture.
(Continued on next page)
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<PAGE>
Additional Operating Data - Continued
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Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Property Owned in Joint Venture
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with NTS-Properties V
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The Willows of Plainview Phase II $7,865,171 .010910 $ 65,528
Properties Owned in Joint Venture
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with NTS-Properties VI
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Golf Brook Apartments 16,214,515 .017895 288,325
Plainview Point III Office Center 4,697,899 .010910 34,007
Property Owned in Joint
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Venture with NTS-Properties VII
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and NTS-Properties Plus Ltd.
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Blankenbaker Business
Center 1A 7,356,545 .010710 55,850
Properties Owned Through
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Lakeshore/ University II Joint
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Venture (L/U II Joint Venture)
- ------------------------------
Lakeshore Business Center Phase I 10,273,821 .025496 162,680
Lakeshore Business Center Phase II 12,263,794 .025496 174,122
Depreciation for book purposes 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, 5-30
years for amenities and the life of the lease for tenant improvements.
Investment in Joint Ventures
- ----------------------------
NTS Willows Phase II Joint Venture - On September 1, 1984, the Partnership
entered into a joint venture agreement with NTS-Properties V to develop,
construct, own and operate a 144 - unit luxury apartment complex on an 8.29 acre
site in Louisville, Kentucky known as The Willows of Plainview Phase II. The
term of the Joint Venture shall continue until dissolved.
Dissolution shall occur upon, but not before, the first to occur of the
following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than
its cash and cash equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2028.
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<PAGE>
Investment in Joint Ventures - Continued
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The Partnership contributed land valued at $800,000 and NTS-Properties V
contributed approximately $7,455,000, the construction and carrying costs of the
apartment complex. No future contributions are anticipated as of December 31,
1999.
The apartment complex is encumbered by permanent mortgages with two insurance
companies. Both loans are secured by a first mortgage on the property. The
outstanding balance of the mortgages at December 31, 1999 is $4,711,273
($2,949,626 and $1,761,647). The mortgages are recorded as a liability of the
Joint Venture. The Partnership's proportionate interest in the mortgages at
December 31, 1999 is $478,665 ($299,682 and $178,983). Both mortgages bear
interest at a fixed rate of 7.2% and are due January 5, 2013. At maturity, the
loans will have been repaid based on the current rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (A) the gross receipts from the operations of the
Joint Venture Property (including investment income) for such period plus any
funds released from previously established reserves (referred to in clause (iv)
below), over (B) the sum of (i) all cash operating expenses paid by the Joint
Venture Property during such period in the course of business, (ii) capital
expenditures during such period not funded by capital contributions, loans or
paid out of previously established reserves, (iii) payments during such period
on account of amortization of the principal of any debts or liabilities of the
Joint Venture property and (iv) reserves for contingent liabilities and future
expenses of the Joint Venture Property. Percentage Interest means that
percentage which the capital contributions of a Partner bears to the aggregate
capital contributions of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 10%
at December 31, 1999.
NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties VI to develop,
construct, own and operate a 158-unit luxury apartment complex on a 13.15 acre
site in Orlando, Florida known as Golf Brook Apartments Phase I. On January 1,
1987, the joint venture agreement was amended to include Golf Brook Apartments
Phase II, a 37-unit luxury apartment complex located on a 3.069 acre site
adjacent to Golf Brook Apartments Phase I. The term of the Joint Venture shall
continue until dissolved. Dissolution shall occur upon, but not before, the
first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than
its cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
The Partnership contributed land valued at $1,900,000 with a related note
payable to a bank of $1,200,000. NTS-Properties VI contributed approximately
$15,800,000, the cost of constructing and leasing the apartments. NTS-Properties
VI also contributed funds to retire the $1,200,000 note payable to a bank. No
future contributions are anticipated as of December 31, 1999.
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<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. The original borrowings obtained by NTS-Properties VI for Golf Brook
Apartments were used to fund a portion of NTS-Properties VI's contribution to
the Joint Venture. The current mortgage payable of $7,677,179 is recorded as a
liability by NTS-Properties VI in accordance with the Joint Venture Agreement.
The mortgage payable bears interest at a fixed rate of 7.43%, is due May 15,
2009 and is secured by the assets of Golf Brook Apartments. At maturity, the
loan will have been repaid based on the current rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The Term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken into account only to the
extent not funded by capital contributions or paid out of previously established
reserves. Percentage Interest means that percentage which the capital
contributions of a Partner bears to the aggregate capital contributions of all
the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 4%
at December 31, 1999.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties VI to develop, construct, own
and operate an office building in Louisville, Kentucky known as Plainview Point
III Office Center. The terms of the Joint Venture shall continue until
dissolved. Dissolution shall occur upon, but not before, the first to occur of
the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property, unless
such disposition is, in whole or in part, represented by a
promissory note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
The Partnership contributed land valued at $790,000 with an outstanding note
payable to a bank of $550,000 which was secured by the land. NTS-Properties VI
contributed approximately $4,100,000, the cost to construct and lease the
building. NTS-Properties VI also contributed funds to retire the $550,000 note
payable to the bank. No future contributions are anticipated as of December 31,
1999.
- 12 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
Plainview Point III Office Center is encumbered by a mortgage payable to a bank.
The current mortgage payable of $2,298,000 is recorded as a liability by NTS-
Properties VI in accordance with the Joint Venture Agreement. The mortgage
payable bears interest at Euro Rate plus 225 basis points, matures June 23, 2002
and is secured by the assets of Plainview Point III Office Center. At maturity
the loan will have been repaid based on the current rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken into account only to the
extent not funded by capital contributions or paid out of previously established
reserves. Percentage Interest means that percentage which the capital
contributions of a Partner bears to the aggregate capital contributions of all
the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 5%
at December 31, 1999.
Blankenbaker Business Center Joint Venture - On August 16, 1994, the
Blankenbaker Business Center Joint Venture agreement was amended to admit the
Partnership to the Joint Venture. The Joint Venture was originally formed on
December 28, 1990 between NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd.,
affiliates of the General Partner of the Partnership, to own and operate
Blankenbaker Business Center 1A and to acquire an approximately 2.49 acre
parking lot that was being leased by the business center from an affiliate of
the General Partner. The use of the parking lot is a provision of the tenant's
lease agreement with the business center. The terms of the Joint Venture shall
continue until dissolved. Dissolution shall occur upon, but not before, the
first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property and
Parking Lot and the sale and/or collection of any evidences of
indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
In 1990, when the Joint Venture was originally formed, NTS-Properties VII, Ltd.
contributed $450,000, which was used for additional tenant improvements to the
business center, and contributed $325,000 to purchase the 2.49 acre parking lot.
The additional tenant improvements were made to the business center and the
parking lot was purchased in 1991. NTS-Properties Plus Ltd. contributed
Blankenbaker Business Center 1A together with improvements and personal property
subject to mortgage indebtedness of $4,715,000. During November 1994, this note
- 13 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
payable was replaced with permanent financing in the amount of $4,800,000. The
outstanding balance at December 31, 1999 was $3,121,473. The mortgage is
recorded as a liability of the Joint Venture. The Partnership's proportionate
interest in the mortgage at December 31, 1999 was $940,500. The mortgage bears
interest at a fixed rate of 8.5% and is due November 15, 2005. Monthly principal
payments are based upon an 11-year amortization schedule. At maturity, the
mortgage will have been repaid based on the current rate of amortization.
On April 28, 1994, the Joint Venture obtained $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which were associated with
the Prudential Service Bureau, Inc. [currently known as Sykes Health Plan
Service Bureau, Inc. ("Sykes")] lease renewal and expansion. The $1,100,000 note
bore interest at the Prime Rate + 1 1/2%. In order for the Joint Venture to
obtain the $4,800,000 of permanent financing discussed above, it was necessary
for the Joint Venture to seek an additional Joint Venture partner to provide the
funds necessary for the tenant finish and leasing costs instead of debt
financing. The $1,100,000 note was retired in August 1994. This resulted in the
Joint Venture's debt being at a level where permanent financing could be
obtained and serviced.
On August 16, 1994, NTS-Properties IV contributed $1,100,000 and NTS-Properties
VII, Ltd. contributed $500,000 in accordance with the agreement to amend the
Joint Venture agreement. The need for additional capital by the Joint Venture
was a result of the lease renewal and expansion which was signed April 28, 1994
between the Joint Venture and Sykes. NTS-Properties Plus Ltd. was not in a
position to contribute additional capital, nor was NTS-Properties VII, Ltd. in a
position to contribute all of the capital required for this project. NTS-
Properties IV was willing to participate in the Joint Venture and to contribute,
together with NTS-Properties VII, Ltd., the capital necessary with respect to
the project. NTS-Properties Plus Ltd. agreed to the admission of NTS-Properties
IV to the Joint Venture, and to the capital contributions by NTS-Properties IV
and NTS-Properties VII, Ltd. with the knowledge that its joint venture interest
would, as a result, decrease. With this expansion, Sykes occupied 100% of the
business center. No future contributions are anticipated as of December 31,
1999.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with the respective Percentage Interests. The term Net Cash Flow for
any period shall mean the excess, if any, of (A) the sum of (i) the gross
receipts of the Joint Venture Property for such period, other than capital
contributions, plus (ii) any funds released by the Partners from previously
established reserves (referred to in clause (B) (iv) below), over (B) the sum of
(i) all cash operating expenses paid by the Joint Venture Property during such
period in the course of the business, (ii) capital expenditures paid in cash
during such period, (iii) payments during such period on account of amortization
of the principal of any debts or liabilities of the Joint Venture Property and
(iv) reserves for contingent liabilities and future expenses of the Joint
Venture Property as established by the Partners; provided, however, that the
amounts referred to in (B)(i), (ii) and (iii) above shall only be taken into
account to the extent not funded by capital contributions or paid out of
previously established reserves. Percentage Interest means that percentage which
the capital contributions of a Partner bears to the aggregate capital
contributions of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 30%
at December 31, 1999.
- 14 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
Lakeshore/University II Joint Venture - On January 23, 1995, a joint venture
known as the Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties V, NTS-Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of the Partnership,
for purposes of owning Lakeshore Business Center Phases I and II, University
Business Center Phase II (property sold during 1998 - see below for details
regarding this transaction) and certain undeveloped tracts of land adjacent to
the Lakeshore Business Center development.
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center Phase II NTS-Properties V and NTS-
Properties Plus Ltd.
The term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the Real Property and the sale and/or
collection of any evidences of indebtedness received in
connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
Each of the properties was contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture and on Lakeshore Business Center Phase I in
the amount of $5,500,000 subsequent to the formation of the L/U II Joint
Venture. In addition to the above, the Partnership also contributed $750,000 to
the L/U II Joint Venture. As a result of the valuation of the properties
contributed to the L/U II Joint Venture, the Partnership obtained an 18%
partnership interest in the joint venture.
- 15 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
The properties of the L/U II Joint Venture are encumbered by mortgages payable
to an insurance company as follows:
Loan Balance
at 12/31/99 Encumbered Property
----------- -------------------
$4,543,531 Lakeshore Business Center Phase I
$4,888,353 Lakeshore Business Center Phase II
The loans are recorded as liabilities of the Joint Venture. The Partnership's
proportionate interest in the loans at December 31, 1999 was $1,125,223
($542,043 and $583,180). The mortgages bear interest at a fixed rate of 8.125%
and are due August 1, 2008. Monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the loans will have been repaid based on the
current rate of amortization.
On October 6, 1998 pursuant to a contract executed on September 8, 1998, the
Lakeshore/University II Joint Venture ("L/U II") sold University Business Center
Phase II office building to Silver City Properties, Ltd. ("the Purchaser") for
$8,975,000. University Business Center Phase II was owned by the L/U II Joint
Venture of which the Partnership owned an 18% interest as of October 6, 1998.
Portions of the proceeds from this sale were immediately used to pay the
remainder of the outstanding debt of approximately $5,933,382 on University
Business Center Phase II (including interest and prepayment penalty). NTS-
Properties IV reflected a gain of approximately $208,000 associated with this
sale in the fourth quarter of 1998. Net cash proceeds received by the
Partnership from the L/U II Joint Venture as a result of a cash distribution of
the proceeds from the sale were approximately $442,000.
On July 1, 1999, NTS-Properties V contributed $1,737,000 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, 1999, NTS-Properties
IV's percentage of ownership in the Joint Venture is 12%, as compared to 18%
prior to July 1, 1999.
On July 23, 1999, the L/U II Joint Venture sold 2.4 acres of land adjacent to
the Lakeshore Business Center for a purchase price of $528,405. The Partnership
reflects a gain of approximately $11,300 associated with this sale in the third
quarter of 1999 and expects to use the net proceeds from the sale of the land to
help fund the construction of Lakeshore Business Center III. See above for
details of the Partnership's intention to build Lakeshore Business Center III.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B)(iv) below), over (B) the sum of (i) all cash
operating expenses paid by the Joint Venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the Joint Venture and (iv) reserves for contingent
liabilities and future expenses of the Joint Venture, as established by the
Partners; provided, however, that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
- 16 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
Net income or net loss is allocated between the partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 12%
at December 31, 1999.
Competition
- -----------
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents, amenities and service provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1999, the following properties were under
construction in the respective vicinities in which the properties are located;
in the vicinity of Golf Brook Apartments, there are 4 apartment complexes
currently under construction with expected completion dates of January 2000,
March 2000, July 2000 and December 2000, respectively. The complexes consist of
360 units, 551 units, 452 units and 310 units, respectively. In the vicinity of
The Willows of Plainview, there is one new apartment complex currently under
construction which is scheduled to be completed by the fourth quarter of 2000.
The number of units in this complex is unknown at this time. Currently, the
effect these new units will have on occupancy at Golf Brook Apartments and the
Willows of Plainview is unknown. The Partnership has not commissioned a formal
market analysis of competitive conditions in any market in which it owns
properties, but relies upon the market condition knowledge of the employees of
NTS Development Company who manage and supervise leasing for each property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates IV, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a wholly-
owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties
Associates IV. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received a total of $186,264
for the year ended December 31, 1999. $110,227 was received from commercial
properties and $76,037 was received from residential properties. The fee is
equal to 6% of gross revenues from commercial properties and 5% of gross
revenues from residential properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was initially for five years, and thereafter for succeeding one-year
periods, unless cancelled. The Agreement is subject to cancellation by either
party upon sixty days written notice. As of December 31, 1999, the Management
Agreement is still in effect.
- 17 -
<PAGE>
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
Seasonal Operations
- -------------------
The Partnership does not consider its operations to be seasonal to any material
degree.
Conflict of Interest
- --------------------
Because the principals of the General Partner and/or its affiliates own and/or
operate real estate properties other than those owned by the Partnership that
are or could be in competition with the Partnership, potential conflicts of
interest exist. Because the Partnership was organized by and is operated by the
General Partner, these conflicts are not resolved through arms-length
negotiations but through the exercise of the General Partner's good judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification by the General Partner of the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. The General Partner and its affiliates retain a free right to compete
with the Partnership's properties including the right to develop competing
properties now and in the future in addition to those existing properties which
may compete directly or indirectly. NTS Development Company, the Property
Manager and an affiliate of the General Partner, acts in a similar capacity for
other affiliated entities in the same geographic region where the Partnership
has property interests. In management's opinion, the agreement with the Property
Manager is on terms no less favorable to the Partnership than those which could
be obtained from a third party for similar services in the same geographical
region in which the properties are located. The contract is terminable by either
party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than that previously described.
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the allocated costs of providing such
services. (See Item 8 Note 10 for further discussions of related party
transactions).
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
- 18 -
<PAGE>
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
-----------------------------------------------------------------
Partner Matters
---------------
There is no established trading market for the limited partnership interests.
The Partnership had 1,898 limited partners as of February 29, 2000. Cash
distributions and allocations of income and loss are made as described in Note
1C to the Partnership's 1998 financial statements in Item 8.
No distributions were paid during 1999, 1998 or 1997. Quarterly distributions
are determined based on current cash balances, cash flow being generated by
operations and cash reserves needed for future leasing costs, tenant finish
costs, and capital improvements.
Due to the fact that no distributions were made during 1999, 1998 or 1997, the
table which presents that portion of the distributions that represent a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
- 19 -
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
Years ended December 31, 1999, 1998, 1997, 1996 and 1995.
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental and other income $ 3,306,463 $ 3,619,094 $ 3,708,597 $ 3,577,554 $ 3,285,430
Gain on sale of assets 11,256(1) 208,607(2) -- -- --
Total expenses (3,320,410) (3,575,343) (3,680,643) (3,610,839) (3,711,915)
------------ ------------ ------------ ------------ ------------
Income (loss) before
extraordinary item (2,691) 252,358 27,954 (33,285) (426,485)
Extraordinary item -- (154,062) (77,004) (12,896) --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (2,691) $ 98,296 $ (49,050) $ (46,181) $ (426,485)
============ ============ ============ ============ ============
Net income (loss) allocated to:
General Partner $ (27) $ 983 $ (490) $ (462) $ (4,265)
Limited partners $ (2,664) $ 97,313 $ (48,560) $ (45,719) $ (422,220)
Net income (loss) per
limited partnership
units $ (0.11) $ 3.75 $ (1.82) $ (1.63) $ (14.19)
Weighted average number
of limited partnership
units 24,778 25,918 26,708 28,012 29,745
Cumulative net income
(loss)allocated to:
General Partner $ 3,872 $ 3,899 $ 2,916 $ 3,406 $ 3,868
Limited partners $ 383,189 $ 385,853 $ 288,540 $ 337,100 $ 382,819
Cumulative taxable income
(loss) allocated to:
General Partner $ (27,678) $ (26,810) $ (24,092) $ (24,618) $ (24,486)
Limited partners $ (2,740,689) $ (2,654,795) $ (2,385,433) $ (2,437,521) $ (2,424,353)
Distributions declared:
General Partner $ -- $ -- $ -- $ 2,251 $ 11,117
Limited partners $ -- $ -- $ -- $ 222,842 $ 1,100,565
Cumulative distributions
declared to:
General Partner $ 218,253 $ 218,253 $ 218,253 $ 218,253 $ 216,002
Limited partners $ 21,607,636 $ 21,607,636 $ 21,607,636 $ 21,607,636 $ 21,384,794
At year end:
Land, buildings and
amenities, net $ 10,480,193 $ 11,566,911 $ 13,321,032 $ 14,098,502 $ 14,915,069
Total assets $ 11,665,677 $ 13,055,709 $ 14,812,308 $ 15,406,286 $ 16,645,788
Mortgages and notes
payable $ 7,861,645 $ 9,121,979 $ 10,706,802 $ 11,236,625 $ 11,592,641
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
(1) See Item 8 Note 11 for details of the sale of 2.4 acres of land in July
1999.
(2) See Item 8 Note 11 for the details on the sale of University Business
Center Phase II to Silver City Properties, Ltd. on October 6, 1998.
- 20 -
<PAGE>
Item 7. 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 information regarding 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 and our cautionary statements also follow. Management's analysis should be
read in conjunction with the financial statements in Item 8 and the cautionary
statements below.
Occupancy Levels
- ----------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
1999(1) 1998 1997
------- ---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 93% 89% 87%
Plainview Point Office Center Phases I and II 79% 65% 73%
The Willows of Plainview Phase I 96% 86% 92%
Properties Owned in Joint Venture with NTS-
- -------------------------------------------
Properties V (ownership % at December 31, 1999)
- -----------------------------------------------
The Willows of Plainview Phase II (10%)(2) 87% 92% 90%
Properties Owned in Joint Venture with NTS-
- -------------------------------------------
Properties VI (ownership % at December 31, 1999)
- ------------------------------------------------
Golf Brook Apartments (4%)(2) 95% 96% 96%
Plainview Point III Office Center (5%) 86% 81% 96%
Property Owned in Joint Venture with NTS-
- -----------------------------------------
Properties VII, Ltd. and NTS-Properties Plus Ltd.
- -------------------------------------------------
(ownership % at December 31, 1999)
- ----------------------------------
Blankenbaker Business Center 1A (30%) 100% 100% 100%
Properties Owned Through Lakeshore/University II
- ------------------------------------------------
Joint Venture (L/U II Joint Venture)
- ------------------------------------
Lakeshore Business Center Phase I (2)(3)(4) 73% 85% 96%
Lakeshore Business Center Phase II(2)(4) 72% 79% 100%
University Business Center Phase II (5) N/A N/A 99%
(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 year ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) As of December 31, 1999, one new five-year lease totaling 2,406 square
feet was signed at Lakeshore Business Center I. The tenant took
occupancy during the first quarter of 2000 and the business center's
occupancy has increased to 76%.
(4) Ownership percentage was 18% at December 31, 1997 and 1998 and 12% as
of December 31, 1999. See Item 8 Note 5F.
(5) On October 6, 1998, University Center Phase II was sold. See below for
the details of this transaction.
- 21 -
<PAGE>
Occupancy Levels - Continued
- ----------------------------
The average occupancy levels at the Partnership's properties as of December 31
were as follows:
1999 1998 1997
---- ---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I 95% 88% 85%
Plainview Point Office Center Phases I and II (1) 58% 70% 83%
The Willows of Plainview Phase I 94% 90% 93%
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties V (ownership % at December 31,
- ---------------------------------------------
1999)
- -----
The Willows of Plainview Phase II (10%) 93% 87% 91%
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties VI (ownership % at December 31,
- ----------------------------------------------
1999)
- -----
Golf Brook Apartments (4%)(1) 94% 96% 93%
Plainview Point III Office Center (5%)(1) 91% 92% 90%
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties VII, Ltd. and NTS-Properties Plus
- ------------------------------------------------
Ltd. (ownership % at December 31, 1999)
- ---------------------------------------
Blankenbaker Business Center 1A (30%) 100% 100% 100%
Properties Owned through Lakeshore/University II
- ------------------------------------------------
Joint Venture (L/U II Joint Venture)
- ------------------------------------
Lakeshore Business Center Phase I(1)(2) 74% 88% 96%
Lakeshore Business Center Phase II(1)(2) 85% 91% 94%
University Business Center Phase II (3) N/A 91%(4) 99%
(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 18% as of December 31, 1997 and 1998 and 12%
as of December 31, 1999. (See Item 8 Note 5F).
(3) On October 6, 1998, University Center Phase II was sold. See below for
the detail of this transaction.
(4) Represents average occupancy through October 6, 1998.
- 22 -
<PAGE>
Rental and Other Income
- -----------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
---- ---- ----
Wholly-Owned Properties
- -----------------------
Commonwealth Business Center Phase I $ 793,230 $ 705,009 $ 657,888
Plainview Point Office Center Phases
I and $ 331,212 $ 457,904 $ 571,950
The Willows of Plainview Phase I $1,182,573 $1,148,200 $1,231,150
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties V (ownership % at December
- -----------------------------------------
31, 1999)
- ---------
The Willows of Plainview Phase II (10%) $ 130,143 $ 130,126 $ 137,881
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties VI (ownership % at December
- ------------------------------------------
31, 1999)
- ---------
Golf Brook Apartments (4%) $ 118,307 $ 120,971 $ 113,578
Plainview Point Office Center III (5%) $ 42,301 $ 40,779 $ 38,512
Property Owned in Joint Venture with NTS-
- -----------------------------------------
Properties VII, Ltd., and NTS-Properties
- ----------------------------------------
Plus Ltd. (ownership % at December 31,
- --------------------------------------
1999)
- -----
Blankenbaker Business Center 1A (30%) $ 270,791 $ 276,575 $ 277,713
Properties Owned through
- ------------------------
Lakeshore/University II Joint Venture (L/U
- ------------------------------------------
II Joint Venture)
- -----------------
Lakeshore Business Center Phase I (1) $ 192,978 $ 266,873 $ 253,826
Lakeshore Business Center Phase II (1) $ 210,941 $ 292,671 $ 251,910
University Business Center Phase II N/A $ 139,220(2)(3) $ 148,536(3)
(1) Represents ownership percentage of 18% for the periods ending December
31, 1997 and 1998. Ownership percentage is 18% for the six months ended
June 30, 1999 and 12% for the six months ended December 31, 1999.
(2) On October 6, 1998, University Business Centers Phase II was sold. See
below for the details of this transaction. Revenues shown here
represent 1998 income through the date of disposition.
(3) Revenues for 1998 and 1997 are reported at 18% ownership.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 23 -
<PAGE>
Results of Operations
- ---------------------
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1999, 1998 and 1997. 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 approximately $300,000 or 8% in 1999 primarily
as a result of a decrease in lease buy-out income at Lakeshore Business Center
Phases I and II and decreased occupancy at Plainview Point Office Center Phases
I and II and Lakeshore Business Center Phases I and II. Also contributing to the
decrease is the sale of University Business Center Phase II in 1998. The
decrease is partially offset by increased income at Commonwealth Business Center
Phase I and The Willows of Plainview Phase I as a result of increases in average
occupancy.
The 1999 gain on sale of asset was a result of the sale of 2.4 acres of land by
the Lakeshore/University II Joint Venture. The gain totaled $94,347. NTS-
Properties IV's share of the gain is approximately $11,300.
The 1998 gain on sale of asset is the result of selling University Business
Center Phase II. On October 6, 1998 pursuant to a contract executed on September
8, 1998, the Lakeshore/University II Joint Venture ("L/U II") sold University
Business Center Phase II office building to Silver City Properties, Ltd. ("the
Purchaser"), for $8,975,000. University Business Center Phase II was owned by
the L/U II Joint Venture of which the Partnership owned an 18% interest as of
the date of the sale. Portions of the proceeds from this sale were immediately
used to pay outstanding debt on the University II property (including interest
and prepayment penalty) of approximately $5,933,382.
Interest and other income includes income from investments made by the
Partnership with cash reserves. Interest income decreased approximately $12,700
or 22% in 1999 and approximately $34,000 or 37% in 1998 as a result of decreased
cash reserves available for investment.
Operating expenses decreased approximately $67,000 or 9% in 1999 primarily as a
result of decreased landscape replacements and parking lot repairs at
Commonwealth Business Center 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 and
decreased walkway repairs at The Willows of Plainview Phase I. The decrease is
partially offset by an increase in HVAC costs at Plainview Point Office Center
Phases I and II as a result of zoneline replacements and increased maintenance
costs at Plainview Point Office Center Phases I and II resulting from the
purchase of a new building security system.
Operating expenses - affiliated increased approximately $51,000 or 11% in 1999
primarily as a result of increased administrative salaries at Plainview Point
Office Center Phases I and II and Commonwealth Business Center Phase I. The
increase is partially offset by a decrease due to the sale of University
Business Center Phase II. Operating expenses - affiliated are expenses for
services performed by employees of NTS Development Company, an affiliate of the
General Partner of the Partnership.
Operating expenses - affiliated increased approximately $67,000 or 17% in 1998.
The increase was primarily the result of increased allocated property management
payroll costs at Commonwealth Business Center Phase I and Plainview Point Office
Center Phases I and II.
- 24 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 1999 loss on disposal of assets can be attributed to the write-off of tenant
improvements at the Partnership's commercial properties and the write-off of
clubhouse and exterior renovations at the Partnership's residential properties.
The write-offs are the result of various property improvements, including tenant
improvements, to accommodate new leases at the Partnership's commercial
properties and clubhouse and pool renovations at the Partnership's residential
properties. The write-offs represent the costs of unamortized assets which were
replaced as a result of the renovations.
The 1998 loss on disposal of assets can be attributed primarily to The Willows
of Plainview Phases I and II. The write-off was a result of new property
signage, updating the model apartments and pool renovations. In order to
complete these projects, it was necessary to replace assets which had not been
fully depreciated.
Interest expense decreased approximately $147,000 or 18% in 1999 primarily due
to the pay-off of University Business Center Phase II's debt in October 1998 and
required principal payments on the mortgages payable of the Partnership and its
Joint Venture properties.
Interest expense decreased approximately $52,000 or 6% 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 1998 as a result of
the reduction in debt from the sale of University Business Center Phase II (see
discussion above). The decrease in interest expense is partially offset by a
higher interest rate on The Willows of Plainview Phase I financing the
Partnership obtained December 1997 (7.15% as compared to a rate of 7% on the
previous mortgage).
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is recorded on the accrual basis. As a result,
the fluctuations of revenues between periods will differ from the fluctuations
of management fee expense.
Professional and administrative expenses increased approximately $27,000 or 24%
and approximately $13,000 or 12% in 1999 and 1998, respectively, primarily as a
result of costs incurred in connection with the Tender Offers (See Item 8 Note
4).
Depreciation and amortization decreased approximately $137,000 or 17% in 1999
primarily as a result of the sale of University Business Center Phase II in
October 1998 and decreased approximately $107,000 or 12% in 1998 primarily as a
result of a portion of the original assets at Blankenbaker Business Center 1A
becoming fully depreciated and the result of the sale of University Business
Center Phase II. 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, 5-30
years for amenities and the life of the lease for tenant improvements. The
aggregate cost of the Partnership's properties for Federal tax purposes is
approximately $21,447,190.
Also contributing to all of the decreases discussed above is a decrease in
ownership of the Lakeshore/University II Joint Venture from 17.86% to 11.93%
effective July 1, 1999. See Item 8 Note 5F for details of a capital contribution
made to the Joint Venture by NTS-Properties V affecting the change in ownership.
The 1998 extraordinary item - early extinguishment of debt relates to the sale
of University Business Center Phase II (see discussion above). A portion of the
proceeds from the sale was used to retire a $5,128,872 mortgage payable prior to
its maturity (August 2008). As a result of the prepayment, a $763,995 penalty,
of which the Partnerships proportionate share was $136,449, was required by the
insurance company who held the mortgage. Unamortized loan costs connected with
this loan were also expensed due to the fact that the mortgage was repaid prior
to its maturity.
- 25 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 1997 extraordinary item - early extinguishment of debt relates to loan costs
associated with The Willows of Plainview Phase I and II mortgages payable. The
unamortized loan costs were expensed due to the fact that the mortgages were
retired in 1997 prior to their maturity (December 5, 2003).
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements and other capital additions and were funded by operating activities
or cash reserves. Changes to current tenant finish improvements are a typical
part of any lease negotiation. Improvements generally include a revision to the
current floor plan to accommodate a tenant's needs, new carpeting and paint
and/or wallcovering. The extent and cost of these improvements are determined by
the size of the space and whether the improvements are for a new tenant or
incurred because of a lease renewal. Cash flows used in investing activities are
also for the purchase of investment securities. As part of its cash management
activities, the Partnership had purchased Certificates of Deposit or securities
issued by the U.S. Government with initial maturities of greater than three
months to improve the return on its cash reserves. The Partnership held the
securities until maturity. Cash flows provided by investing activities were from
the maturity of investment securities. Cash flows used in financing activities
are for cash distributions, payment of loan costs, principal payments on
mortgages and notes payable, repurchases of limited partnership Units and an
increase in funds reserved by the Partnership for the repurchase of limited
partnership Units through the Tender Offer or the Interest Repurchase Reserve.
Cash flows provided by financing activities represent an increase in mortgages
payable. The Partnership utilizes the proportionate consolidation method of
accounting for joint venture properties. The Partnership's interest in the joint
venture's assets, liabilities, revenues, expenses and cash flows is combined on
a line-by-line basis with the Partnership's own assets, liabilities, revenues,
expenses and cash flows.
Cash flows provided by (used in):
1999 1998 1997
---- ---- ----
Operating activities $ 893,811 $ 985,883 $ 1,176,545
Investing activities (145,418) 1,454,698 (517,720)
Financing activities (781,850) (2,075,757) (729,159)
----------- ----------- -----------
Net increase (decrease) in
cash and equivalents $ (33,457) $ 364,824 $ (70,334)
=========== =========== ===========
Net cash provided by operating activities decreased approximately $92,000 or 9%
in 1999 primarily as a result of decreased net income from operations and as a
result of the sale of University Business Center Phase II in 1998.
Net cash provided by operating activities decreased approximately $191,000 or
16% in 1998. The decrease was primarily driven by a decrease in net working
capital assets and liabilities (excluding cash).
Net cash provided by investing activities decreased approximately $1,600,000 in
1999. The decrease is primarily a result of the 1998 balance including the
Partnership's proportionate share of the proceeds received from the sale of
University Business Center Phase II in October 1998. The decrease is also due to
increased capital expenditures and is partially offset by the positive net
effect on cash flow of the change in the Partnership's ownership percentage of
the Lakeshore/University II Joint Venture.
- 26 -
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
Net cash provided by investing activities increased approximately $1,970,000 in
1998. The increase in cash provided by investing activities was primarily driven
by the proceeds from the sale of assets and net maturities of investment
securities over purchases partially offset by increased capital expenditures.
The approximate $1,294,000 decrease in net cash used in financing activities in
1999 is primarily driven by a reduction in payments on mortgages. The
approximate $1,347,000 increase in net cash used in financing activities in 1998
is primarily a result of increased principal payments on mortgages payable and
increased funds used for the repurchase of limited partnership Units through the
Interest Repurchase Reserve and increased funds reserved for the repurchase of
limited partnership Units through the Tender Offers.
The Partnership has not made any cash distributions since the quarter ended
September 30, 1996. 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 December
31) were $607,512, $783,538 and $698,481 at December 31, 1999, 1998 and 1997,
respectively.
Due to the fact that no distributions were made during 1999, 1998 or 1997, the
table which presents that portion of the distribution that represents a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
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 wall covering. 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, cash
reserves or additional financing where necessary.
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 2000 or obtain
new tenants are unknown.
As of December 31, 1999, the L/U II Joint Venture has a commitment, pursuant to
a contract signed December 6, 1999, to construct a building to be known as
Lakeshore Business Center Phase III on the 3.8 acres of land it owns at the
Lakeshore Business Center development. Site work began in December 1999 and
shell construction began first quarter 2000. Construction costs are currently
estimated to be $4,000,000 and will be funded by a $1,737,000 capital
contribution from NTS-Properties V and approximately $2,680,000 debt financing
obtained subsequent to December 31, 1999. Construction is expected to be
completed by the fourth quarter of 2000. See Item 8 Note 5F for details of the
capital contribution made by NTS-Properties V and Note 14 for details of the
debt financing obtained subsequent to December 31, 1999.
As of December 31, 1999, the Partnership has also started renovations of the
community clubhouse at Golf Brook Apartments. The estimated cost of the
renovation is $200,000. The renovation is being funded partly from cash flow
from operations and partly from financing obtained by NTS-Properties VI on
September 23, 1999, in the amount of $2,500,000 which is secured by Plainview
Point III Office Center.
- 27 -
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
The Partnership had no other material commitments for renovations or capital
improvements as of December 31, 1999.
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 of the First Tender Offer),
the Partnership had 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. 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 December 31, 1999 was $0.
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), commenced a tender offer (the "First Tender Offer")
to purchase up to 1,200 of the Partnership's limited partnership Units at a
price of $205 per Unit as of the date of the First Tender Offer. The First
Tender offer expired February 19, 1999, at which time 1,259 Units were tendered
pursuant to the First Tender Offer. The Partnership repurchased 600 Units and
ORIG, LLC purchased 659 Units at a total cost of $258,095 plus offering
expenses.
On July 28, 1999, the Partnership commenced a second tender offer (the "Second
Tender Offer") to purchase up to 1,000 of the Partnership's limited partnership
Units at a price of $205.00 per Unit as of the date of the Second Tender Offer.
The initial expiration date of the Second Tender Offer was October 29, 1999 and
this expiration date was extended to December 8, 1999. A total of 2,245 Units
were tendered, pursuant to the Second Tender Offer, and the bidders accepted all
Units. The Partnership repurchased 500 Units and ORIG, LLC purchased 1,745 Units
at a total cost of $460,225 plus offering expenses.
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.
The Partnership reflects a gain of approximately $11,300 associated with this
sale in the third quarter of 1999 and expects to use the net proceeds from the
land sale to help fund the construction of Lakeshore Business Center Phase III
as described above.
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, 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.
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 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.
- 28 -
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
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.
Year 2000
- ---------
During 1999, all divisions of NTS Corporation, including NTS-Properties IV, the
General Partner of the Partnership, reviewed the effort necessary to prepare
NTS' information systems (IT) and non-information technology with embedded
technology (ET) for the Year 2000. The information technology solutions were
addressed separately for the Year 2000 since the Partnership saw the need to
move to more advanced management and accounting systems made available by new
technology and software development during the decade of the 1990's. NTS'
property management staff surveyed vendors to evaluate embedded technology in
our alarm systems, HVAC controls, telephone systems and other computer
associated facilities. Some equipment was replaced, while others had circuitry
upgrades.
In 1999, the PILOT software system, purchased in the early 1990's, needed to be
replaced by a windows based network system both for NTS' headquarter functions
and other locations. The real estate accounting system developed, sold, and
supported by the Yardi Company of Santa Barbara, California was selected to
replace PILOT. The Yardi system is fully implemented and operational as of
December 31, 1999. Our system for multi-family apartment locations was converted
to GEAC's Power Site System earlier in 1998. There have been no Year 2000
related problems with either system.
The cost of these advances in our systems technology is not all attributable to
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 were approximately $70,000 over 1999 and 1998. These costs
primarily include the purchase, lease and maintenance of hardware and software.
At the date of this filing the Partnership did not experience any significant
operating issues relative to the Year 2000 issue. Despite diligent preparation,
unanticipated third-party failures, inability of our tenants to pay rent when
due, more general public infrastructure failures or failure of our remediation
efforts as planned could have a material adverse impact on our results of
operations, financial conditions and/or cash flows in 2000 and beyond.
Cautionary Statements
- ---------------------
Some of the statements included in Item 7, 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.
- 29 -
<PAGE>
Cautionary Statements - Continued
- ---------------------------------
The Partnership's principal activity is the leasing and management of commercial
office buildings, business centers and apartment complexes. If a major
commercial tenant or a large number of apartment lessees default on their
leases, the Partnership's ability to make payments due under its debt
agreements, payment of operating costs and other partnership expenses would be
directly impacted. A 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.
Item 7A. 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 December 31, 1999, a hypothetical 100 basis point increase in
interest rates would result in an approximate $309,000 decrease in the fair
value of debt.
- 30 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties IV, a Kentucky Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties IV (a Kentucky
limited partnership) as of December 31, 1999 and 1998, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties IV as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 57
through 60 are presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations and are not a required part of the
basic financial statements. These schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 24, 2000
- 31 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
<CAPTION>
1999 1998
---- ----
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 607,512 $ 640,969
Cash and equivalents - restricted 60,809 183,050
Investment securities -- 142,569
Accounts receivable, net of allowance
for doubtful accounts of $0 (1999)
and $1,972 (1998) 192,079 183,170
Land, buildings and amenities, net 10,480,193 11,566,911
Other assets 325,084 339,040
----------- -----------
$11,665,677 $13,055,709
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $ 7,861,645 $ 9,121,979
Accounts payable 224,227 115,103
Security deposits 69,991 75,108
Other Liabilities 48,004 53,518
----------- -----------
8,203,867 9,365,708
Commitments and contingencies (Note 12)
Partners' equity 3,461,810 3,690,001
----------- -----------
$11,665,677 $13,055,709
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 32 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
1999 1998 1997
---- ---- ----
Revenues:
- ---------
<S> <C> <C> <C>
Rental income, net of provision for
doubtful accounts of $0 (1999), $2,043
(1998) and $0(1997) $ 3,261,445 $ 3,561,342 $ 3,616,883
Gain on sale of asset 11,256 208,607 --
Interest and other income 45,018 57,752 91,714
----------- ----------- -----------
3,317,719 3,827,701 3,708,597
Expenses:
- ---------
Operating expenses 718,387 785,718 813,091
Operating expenses - affiliated 517,548 466,497 398,950
Loss on disposal of assets 55,262 13,081 --
Interest expense 656,235 803,140 855,488
Management fees 186,264 204,498 208,837
Real estate taxes 203,348 212,763 224,345
Professional and administrative
expenses 142,009 114,956 102,345
Professional and administrative
expenses - affiliated 158,042 154,605 150,715
Depreciation and amortization 683,315 820,085 926,872
----------- ----------- -----------
3,320,410 3,575,343 3,680,643
----------- ----------- -----------
Income (loss) before extraordinary item (2,691) 252,358 27,954
Extraordinary item - early extinguishment
of debt -- (154,062) (77,004)
----------- ----------- -----------
Net income (loss) $ (2,691) $ 98,296 $ (49,050)
=========== =========== ===========
Net income (loss) allocated to the
limited partners:
Income (loss) before extraordinary item $ (2,664) $ 249,834 $ 27,674
Extraordinary item -- (152,521) (76,234)
----------- ----------- -----------
Net income (loss) $ (2,664) $ 97,313 $ (48,560)
=========== =========== ===========
Net income (loss) per limited partnership
Unit:
Income (loss) before extraordinary item $ (0.11) $ 9.64 $ 1.03
Extraordinary item -- (5.89) (2.85)
----------- ----------- -----------
Net income (loss) per limited partnership
Unit $ (0.11) $ 3.75 $ (1.82)
=========== =========== ===========
Weighted average number of limited
partnership units 24,778 25,918 26,708
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 33 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF PARTNERS' EQUITY (1)
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balances at December 31, 1996 $ 4,132,023 $ (214,848) $ 3,917,175
Net loss (48,560) (490) (49,050)
Repurchase of limited partnership
Units (33,900) -- (33,900)
----------- ----------- -----------
Balances at December 31, 1997 4,049,563 (215,338) 3,834,225
Net income 97,313 983 98,296
Repurchase of limited partnership
Units (242,520) -- (242,520)
----------- ----------- -----------
Balances at December 31, 1998 3,904,356 (214,355) 3,690,001
Net loss (2,664) (27) (2,691)
Repurchase of limited partnership
Units (225,500) -- (225,500)
----------- ----------- -----------
Balances at December 31, 1999 $ 3,676,192 $ (214,382) $ 3,461,810
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented, there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board, Statement of
Financial Accounting standards Statement No. 130, Reporting Comprehensive
Income.
- 34 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (2,691) $ 98,296 $ (49,050)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of assets (11,256) (208,607) --
Extraordinary item - early extinguishment of
debt -- 154,062 77,004
Accrued interest on investment securities -- (2,569) (3,877)
Provision for doubtful accounts -- 2,043 --
Write-off of unamortized improvements 55,262 13,081 --
Depreciation and amortization 683,315 820,085 926,872
Changes in assets and liabilities:
Cash and equivalents - restricted (759) 47,924 4,719
Accounts receivable (4,962) 57,921 103,999
Other assets 76,409 44,359 100,947
Accounts payable - operations 109,125 (20,479) (22,608)
Security deposits (5,117) (8,282) (521)
Other liabilities (5,515) (11,951) 39,060
----------- ----------- -----------
Net cash provided by operating activities 893,811 985,883 1,176,545
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from the sale of land 55,742 -- --
Proceeds from the sale of assets before payment
of debt -- 1,498,242 --
Additions to land, buildings and amenities (405,214) (334,563) (99,261)
Purchase of investment securities -- (1,125,550) (799,777)
Maturity of investment securities -- 1,407,885 381,318
Other -- 8,684 --
Change in ownership of Joint Venture (Note 5F) 204,054 -- --
----------- ----------- -----------
Net cash provided by (used in) investing
activities (145,418) 1,454,698 (517,720)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in mortgages payable -- -- 4,414,080
Principal payments on mortgages and notes
payable (679,350) (1,584,823) (4,943,902)
Early principal payment penalty -- (136,449) --
Decrease in loan costs -- 10,285 --
Additions to loan costs -- -- (120,187)
Repurchase of limited partnership Units (225,500) (242,520) (33,900)
Decrease (increase) in cash and equivalents -
restricted 123,000 (122,250) (45,250)
----------- ----------- -----------
Net cash used in financing activities (781,850) (2,075,757) (729,159)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (33,457) 364,824 (70,334)
CASH AND EQUIVALENTS, beginning of year 640,969 276,145 346,479
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 607,512 $ 640,969 $ 276,145
=========== =========== ===========
Interest paid on a cash basis $ 722,163 $ 793,577 $ 876,871
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 35 -
<PAGE>
NTS-PROPERTIES IV
-----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties IV (the "Partnership") is a limited partnership
organized under the laws of the Commonwealth of Kentucky on May 13,
1983. The General Partner is NTS-Properties Associates IV, a Kentucky
limited partnership. The Partnership is in the business of developing,
constructing, owning and operating residential apartments and
commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Commonwealth Business Center Phase I, a business center with
approximately 81,000 net rentable square feet in Louisville,
Kentucky.
- Plainview Point Office Center Phases I and II, an office center
with approximately 56,000 net rentable square feet in Louisville,
Kentucky.
- The Willows of Plainview Phase I, a 118-unit luxury apartment
complex in Louisville, Kentucky.
- A 10% joint venture interest in The Willows of Plainview Phase II,
a 144-unit luxury apartment complex in Louisville, Kentucky.
- A 4% joint venture interest in Golf Brook Apartments, a 195- unit
luxury apartment complex in Orlando, Florida.
- A 5% joint venture interest in Plainview Point III Office Center,
an office center with approximately 63,000 net rentable square
feet in Louisville, Kentucky.
- A 30% joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground
floor square feet and approximately 50,000 net rentable mezzanine
square feet in Louisville, Kentucky.
- A 12% joint venture interest in the Lakeshore/University II Joint
Venture. A description of the properties owned by the Joint
Venture appears below:
- Lakeshore Business Center Phase I - a business center with
---------------------------------
approximately 103,000 rentable square feet located in Fort
Lauderdale, Florida.
- Lakeshore Business Center Phase II - a business center
-------------------------------------
with approximately 97,000 net rentable square feet located
in Fort Lauderdale, Florida.
- Outparcel Building Site - approximately 3.8 acres of land
------------------------
adjacent to the Lakeshore Business Center development upon
which construction of Lakeshore Business Center III has
commenced.
- 36 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Net Cash Receipts made available for distribution, as defined in the
partnership agreement, will be distributed 1) 99% to the limited
partners and 1% to the General Partner until the limited partners have
received their 8% Preference Distribution as defined in the partnership
agreement; 2) to the General Partner in an amount equal to
approximately 10% of the limited partners' 8% Preference Distribution;
and 3) the remainder, 90% to the limited partners and 10% to the
General Partner. Starting December 31, 1996, the Partnership has
indefinitely interrupted distributions.
Net Cash Proceeds, as defined in the partnership agreement, which are
available for distribution will be distributed 1) 99% to the limited
partners and 1% to the General Partner until the limited partners have
received distributions from all sources equal to their Original Capital
plus the amount of any deficiency in their 8% Cumulative Distribution
as defined in the partnership agreement; and 2) the remainder, 75% to
the limited partners and 25% to the General Partner. Net income (loss)
is to be allocated 99% to the limited partners and 1% to the General
Partner for all periods presented in the accompanying Financial
Statements.
D) Tax Status
----------
The Partnership has received a ruling from the Internal Revenue Service
stating that the Partnership is classified as a limited partnership for
federal income tax purposes. As such, the Partnership makes no
provision for income taxes. The taxable income or loss is passed
through to the holders of interests for inclusion on their individual
income tax returns.
A reconciliation of net loss for financial statement purposes versus
that for income tax reporting is as follows:
1999 1998 1997
---- ---- ----
Net income (loss) $ (2,691) $ 98,296 $ (49,050)
Items handled differently
for tax purposes:
Gain on sale of assets (9,274) (329,513) --
Depreciation and
amortization (107,141) (46,238) (1,014)
Capitalized leasing
costs 526 324 237
Rental income 10,779 28,217 138,433
Write-off of unamortized
tenant improvements -- (25,037) (28,620)
Allowance for doubtful
accounts (2,032) 1,865 (7,372)
Other 23,071 -- --
--------- --------- ---------
Taxable income (loss) $ (86,762) $(272,086) $ 52,614
========= ========= =========
- 37 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
E) 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.
F) Joint Venture Accounting
------------------------
The Partnership has adopted the proportionate consolidation method of
accounting for joint venture properties. The Partnership's
proportionate interest in the joint venture's assets, liabilities,
revenues, expenses and cash flows are combined on a line-by-line basis
with the Partnership's own assets, liabilities, revenues and expenses
and cash flows. All intercompany accounts and transactions have been
eliminated in consolidation.
Proportionate consolidation is utilized by the Partnership due to the
fact that the ownership of joint venture properties, in substance, is
not subject to joint control. The managing General Partners of the sole
partner of the NTS sponsored partnerships which have formed joint
ventures are substantially the same. As such, decisions regarding
financing, development, sale or operations do not require the approval
of different partners. Additionally, the joint venture properties are
in the same business/industry as their respective joint venture
partners and their asset, liability, revenue and expense accounts
correspond with the accounts of such partners. It is the belief of the
General Partner of the Partnership that the financial statement
disclosures resulting from proportionate consolidation provides the
most meaningful presentation of assets, liabilities, revenues, expenses
and cash flows for the years presented given the commonality of the
Partnership's operations.
G) 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 with said mortgage companies and 3) funds which the
Partnership has reserved for the repurchase of limited partnership
Units (1998 only).
H) 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 held the securities until
maturity.
- 38 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
H) Investment Securities - Continued
---------------------------------
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
========= ========
I) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost 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, 5-30 years for
building and improvements, 5-30 years for amenities and the life of the
lease for tenant improvements.
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 by management during the
years ended December 31, 1999, 1998 and 1997 did not result in an
impairment loss.
J) Rental Income and Capitalized Leasing Costs
-------------------------------------------
Certain of the Partnership's lease agreements for the commercial
properties are structured to include scheduled and specified rent
increases over the lease term. For financial reporting purposes, the
income from these leases is being recognized on a straight-line basis
over the lease term. Accrued income connected with these leases is
included in accounts receivable and totaled $113,359 and $124,909 at
December 31, 1999 and 1998, respectively.
All commissions paid to commercial leasing agents and incentives paid
to tenants are deferred and amortized on a straight-line basis over the
applicable lease term.
K) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during the years
ended December 31, 1999, 1998 and 1997.
L) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents include cash
on hand and short-term, highly liquid investments with initial
maturities of three months or less.
- 39 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
M) Reclassification of 1998 and 1997 Financial Statements
------------------------------------------------------
Certain reclassifications have been made to the December 31, 1998 and
1997 financial statements to conform with December 31, 1999
classifications. These classifications had no material effect on
previously reported operations.
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.
3. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve 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 had 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. 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 December 31, 1999 was $0.
4. Tender Offer
------------
On November 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), commenced a tender offer (the "First Tender
Offer") to purchase up to 1,200 of the Partnership's limited partnership
Units at a price of $205 per Unit as of the date of the First Tender Offer.
The First Tender Offer expired February 19, 1999, at which time 1,259 Units
were tendered pursuant to the First Tender Offer. The Partnership
repurchased 600 Units and ORIG, LLC purchased 659 Units at a total cost of
$258,095 plus offering expenses.
On July 28, 1999, the Partnership commenced a second tender offer (the
"Second Tender Offer") to purchase up to 1,000 of the Partnership's limited
partnership Units at a price of $205 per Unit as of the date of the Second
Tender Offer. The initial expiration date of the Second Tender Offer was
October 29, 1999 and this expiration date was extended to December 8, 1999.
A total of 2,245 Units were tendered, pursuant to the Second Tender Offer,
and the bidders accepted all Units. The Partnership repurchased 500 Units
and ORIG, LLC purchased 1,745 Units at a total cost of $460,225 plus
offering expenses.
- 40 -
<PAGE>
5. Investment in Joint Ventures
----------------------------
A) NTS/Willows Phase II Joint Venture
----------------------------------
In 1984, the Partnership entered into a joint venture agreement with
NTS-Properties V, an affiliate of the General Partner of the
Partnership, to develop and construct a 144-unit luxury apartment
complex on an 8.29 acre site in Louisville, Kentucky known as The
Willows of Plainview Phase II. The Partnership contributed land valued
at $800,000 and NTS-Properties V contributed approximately $7,455,000,
the construction and carrying costs of the apartment complex. The
project was completed in August 1985. Net income or net loss is
allocated each calendar quarter based on the respective partnership's
contribution. The Partnership's ownership share was 10% at December 31,
1999. The Partnership's share of the joint venture's revenues was
$130,143 (1999), $130,126 (1998) and $137,881 (1997). The Partnership's
share of the joint venture's expenses was $130,211 (1999), $129,696
(1998) and $135,431 (1997).
B) NTS Ft. Lauderdale Office Joint Venture
---------------------------------------
In 1985, the Partnership entered into a joint venture agreement with
NTS-Properties V to develop an approximately 103,000 square-foot
commercial business center known as Lakeshore Business Center Phase I,
located in Fort Lauderdale, Florida. The Partnership contributed land
valued at $1,752,982 and NTS-Properties V contributed approximately
$9,170,000, the cost of constructing and leasing the building. The net
income or net loss was allocated each calendar quarter based on the
respective partnership's contribution.
On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the
newly formed Lakeshore/University II (L/U II) Joint Venture. Refer to
Note 5F for a further discussion of the new joint venture.
C) NTS Sabal Golf Villas Joint Venture
-----------------------------------
In 1985, the Partnership entered into a joint venture agreement with
NTS-Properties VI, an affiliate of the General Partner of the
Partnership, to develop and construct a 158-unit luxury apartment
complex on a 13.15 acre site in Orlando, Florida to be known as the
Golf Brook Apartments Phase I. The Partnership contributed land valued
at $1,900,000 with an outstanding note payable to a bank of $1,200,000
which was secured by the land. On January 1, 1987, the joint venture
agreement was amended to include Golf Brook Apartments Phase II, a
37-unit luxury apartment complex located on a 3.069 acre site adjacent
to Golf Brook Apartments Phase I. NTS-Properties VI contributed
approximately $15,800,000, the cost of constructing and leasing the
complexes. NTS-Properties VI also contributed funds to retire the
$1,200,000 note payable to the bank.
Net income or net loss is allocated based on the respective
contribution of each partnership as of the end of each calendar
quarter. The Partnership's ownership share was 4% at December 31, 1999.
The Partnership's share of the joint venture's revenues was $118,307
(1999), $120,971 (1998) and $113,579 (1997). The Partnership's share of
the joint ventures expenses was $82,377 (1999), $78,511 (1998) and
$73,649 (1997).
- 41 -
<PAGE>
5. Investment in Joint Ventures - Continued
----------------------------------------
D) Plainview Point III Joint Venture
---------------------------------
In 1987, the Partnership entered into a joint venture agreement with
NTS-Properties VI to develop and construct an approximately 63,000
square foot office building located in Louisville, Kentucky to be known
as Plainview Point Phase III Office Center. The Partnership contributed
land valued at $790,000 with an outstanding note payable to a bank of
$550,000 which was secured by the land. NTS-Properties VI contributed
approximately $4,100,000, the cost to construct and lease the building.
NTS-Properties VI also contributed funds to retire the $550,000 note
payable to the bank.
Net income or net loss is allocated based on the respective
partnership's contribution as of the end of each calendar quarter. The
Partnership's ownership share was 5% at December 31, 1999. The
Partnership's share of the joint venture's revenues was $42,301 (1999),
$40,779 (1998) and $38,512 (1997). The Partnership's share of the joint
venture's expenses was $35,236 (1999), $44,273 (1998) and $42,023
(1997).
E) Blankenbaker Business Center Joint Venture
------------------------------------------
On August 16, 1994, the Blankenbaker Business Center Joint Venture
agreement was amended to admit the Partnership to the Joint Venture.
The Joint Venture was originally formed on December 28, 1990 between
NTS-Properties Plus Ltd. and NTS-Properties VII, Ltd., affiliates of
the General Partner of the Partnership, to own and operate Blankenbaker
Business Center 1A and to acquire an approximately 2.49 acre parking
lot that was being leased by the business center from an affiliate of
the General Partner. The use of the parking lot is a provision of the
tenants's lease agreement with the business center.
In accordance with the Joint Venture Agreement Amendment, the
Partnership contributed $1,100,000 and NTS-Properties VII, Ltd.
contributed $500,000. The General Partner of the Partnership determined
the utilization of a portion of the Partnership's cash reserves to
participate in the Joint Venture would be consistent with the
investment objectives set forth in the Partnership's partnership
agreement, and should enhance the future returns of the Partnership.
The need for additional capital by the Joint Venture was a result of
the lease renewal and expansion which was signed April 28, 1994 between
the Joint Venture and Prudential Service Bureau, Inc. ("Prudential").
The lease expanded Prudential's leased space by approximately 15,000
square feet and extended its current lease term through July 2005.
Approximately 12,000 square feet of the expansion was into new space
which had to be constructed on the second level of the existing
business center. With this expansion, Prudential occupied 100% of the
business center (approximately 101,000 square feet). The tenant finish
and leasing costs connected with the lease renewal and expansion were
approximately $1,400,000.
In order to calculate the revised joint venture percentage interests,
the assets of the Joint Venture were revalued in connection with the
admission of the Partnership as a joint venture partner and the
additional capital contributions. The value of the Joint Venture's
assets immediately prior to the additional capital contributions was
$6,764,322 and its outstanding debt was
- 42 -
<PAGE>
5. Investment in Joint Ventures - Continued
----------------------------------------
E) Blankenbaker Business Center Joint Venture - Continued
------------------------------------------------------
$4,650,042, with net equity being $2,114,280. The difference between
the value of the Joint Venture's assets and the value at which they
were carried on the books of the Joint Venture has been allocated to
NTS-Properties VII, Ltd. and NTS-Properties Plus Ltd. in determining
each Joint Venture partner's percentage interest.
As a result of its capital contribution, the Partnership obtained a 30%
interest in the Joint Venture. NTS-Properties Plus Ltd.'s interest in
the Joint Venture decreased from 69% to 39% as a result of the capital
contributions made by NTS-Properties VII, Ltd. and the Partnership.
NTS-Properties VII, Ltd.'s interest in the Joint Venture remained at
31%.
Net income or net loss is allocated based on the respective
contribution of each partner as of the end of each calendar quarter.
The Partnership's ownership share was 30% at December 31, 1999. The
Partnership's share of the joint venture's revenues was $270,791
(1999), $276,575 (1998) and $277,712 (1997). The Partnership's share of
the joint venture's expenses was $298,365 (1999), $310,531 (1998) and
$329,529 (1997).
F) Lakeshore/University II Joint Venture
-------------------------------------
On January 23, 1995, a joint venture known as the Lakeshore/University
II Joint Venture (L/U II Joint Venture) was formed among the
Partnership and NTS-Properties V, NTS-Properties Plus Ltd. and NTS/Fort
Lauderdale, Ltd., affiliates of the General Partner of the Partnership,
for purposes of owning Lakeshore Business Center Phases I and II,
University Business Center Phase II (sold October 1998 - see Note 11)
and certain undeveloped tracts of land adjacent to the Lakeshore
Business Center development. The table below identifies which
properties were contributed to the L/U II Joint Venture and the
respective owners of such properties prior to the formation of the
joint venture.
Property (Net Asset Contributed) Contributing Owner
-------------------------------- ------------------
Lakeshore Business Center NTS-Properties IV and NTS-
Phase I ($6,249,667) Properties V
Lakeshore Business Center NTS-Properties Plus Ltd.
Phase II (-$1,023,535)
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)(-$670,709)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)($27,104)
University Business Center NTS-Properties V and NTS-
Phase II ($953,236) Properties Plus Ltd.
- 43 -
<PAGE>
5. Investment in Joint Ventures - Continued
----------------------------------------
F) Lakeshore/University II Joint Venture - Continued
-------------------------------------------------
Each of the properties were contributed to the L/U II Joint Venture
subject to existing indebtedness, except for Lakeshore Business Center
Phase I which was contributed to the joint venture free and clear of
any mortgage liens, and all such indebtedness was assumed by the L/U II
joint venture. Mortgages were recorded on University Business Center
Phase II in the amount of $3,000,000, in favor of the banks which held
the indebtedness on University Business Center Phase II, Lakeshore
Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture and on Lakeshore Business Center
Phase I in the amount of $5,500,000 subsequent to the formation of the
L/U II Joint Venture. In addition to the above, the Partnership also
contributed $750,000 to the L/U II Joint Venture. The Partnership's
ownership share was 12% at December 31, 1999. Net income or net loss is
allocated based on the respective contribution of each partner as of
the end of each calendar quarter. The Partnership's share of the joint
venture's revenues was $422,797 (1999), $908,593 (1998) and $654,897
(1997). The Partnership's share of the joint venture's expenses was
$429,063 (1999), $830,675 (1998) and $790,607 (1997).
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 other partners in the
Joint Venture decreased. Effective July 1, 1999, NTS-Properties IV's
percentage of ownership in the Joint Venture is 11.93%, as compared to
17.86% prior to July 1, 1999.
6. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's investment
in property held for lease as of December 31:
1999 1998
---- ----
Land and improvements $ 4,101,742 $ 5,486,714
Buildings, improvements and
amenities 17,653,734 17,426,923
----------- -----------
21,755,476 22,913,637
Less accumulated depreciation 11,275,283 11,346,726
----------- -----------
$10,480,193 $11,566,911
=========== ===========
7. Asset Held for Development
--------------------------
As of December 31, 1999, the L/U II Joint Venture intends to use the 3.8
acres of the land it owns at the Lakeshore Business Center development to
construct Lakeshore Business Center Phase III. See Note 12 for discussion
of the contract for the construction of Lakeshore Business Center Phase III
signed December 6, 1999.
- 44 -
<PAGE>
8. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
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 $1,715,679 $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 1,845,116 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 1,756,462 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 940,500 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 583,180 939,811
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 542,043 873,517
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 299,682 312,698
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 178,983 186,758
---------- ----------
$7,861,645 $9,121,979
========== ==========
- 45 -
<PAGE>
8. Mortgages Payable - Continued
-----------------------------
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 714,508
2001 775,430
2002 841,586
2003 913,428
2004 918,333
Thereafter 3,698,360
-----------
$ 7,861,645
===========
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms and average maturities, the fair value of
long-term debt is approximately $7,670,000.
The 1998 extraordinary item - early extinguishment of debt relates to the
sale of University Business Phase II (see discussion below). A portion of
the proceeds from the sale was used to retire the $5,128,872 mortgage
payable prior to its maturity (August 2008). As a result of the prepayment,
a $763,995 penalty, of which the Partnership's proportionate share was
$136,449, was required by the insurance company who held the mortgage.
Unamortized loan costs connected with this loan were also expensed due to
the fact that the mortgage was paid prior to its maturity.
The 1997 extraordinary item - early extinguishment of debt relates to
unamortized loan costs associated with The Willows of Plainview Phase I and
II note payable. The unamortized loan costs were expensed due to the fact
that the mortgages were retired in 1997 prior to their maturity (December
5, 2003).
9. Rental Income Under Operating Lease
-----------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1999:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 1,533,272
2001 1,378,740
2002 1,233,374
2003 1,146,115
2004 869,489
Thereafter 207,198
-----------
$ 6,368,188
===========
10. Related Party Transactions
--------------------------
Property management fees of $186,264 (1999), $204,498 (1998) and $208,837
(1997) were paid to NTS Development Company, an affiliate of the General
Partner of the Partnership. The fee is equal to 5% of gross revenues from
residential properties and 6% of 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 $21,620 and $17,697 as a repair and
maintenance fee during the years ended December 31, 1999 and 1998
respectively, and has capitalized this cost as a part of land, buildings
and amenities.
- 46 -
<PAGE>
10. Related Party Transactions - Continued
--------------------------------------
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the years ended December
31, 1999, 1998 and 1997. These charges include items which have been
expensed as operating expenses - affiliated or professional and
administrative expenses - affiliated and items which have been capitalized
as other assets or as land, buildings and amenities.
1999 1998 1997
---- ---- ----
Leasing $148,888 $127,001 $121,834
Administrative 208,739 195,908 196,182
Property manager 340,261 292,427 261,511
Other 13,804 30,301 5,015
-------- -------- --------
$711,692 $645,637 $584,542
======== ======== ========
11. Sale of Asset
-------------
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. The Partnership had a 12% interest in the Joint Venture at the
date of the sale. The Partnership reflects a gain of approximately $11,300
associated with this sale in the third quarter of 1999 and expects to use
the net proceeds from the land sale to help fund the construction of
Lakeshore Business Center Phase III as described below.
On October 6, 1998 pursuant to a contract executed on September 8, 1998,
the Lakeshore /University II Joint Venture ("L/U II") sold University
Business Center Phase II Office building to Silver City Properties, Ltd.
("the Purchaser") for $8,975,000. University Business Center Phase II was
owned by the L/U II Joint Venture of which the Partnership owned an 18%
interest at the date of the sale. Portions of the proceeds from the sale
were immediately used to pay the remainder of the outstanding debt recorded
on the joint venture's books of approximately $5,933,382 on University
Business Center Phase II (including interest and prepayment penalty).
NTS-Properties IV reflected a gain of approximately $208,000 associated
with this sale in the fourth quarter of 1998. Net cash proceeds received by
the Partnership from the L/U II Joint Venture as a result of a cash
distribution of the proceeds from the sale were approximately $442,000.
12. Commitments and Contingencies
-----------------------------
Pursuant to a contract signed on December 6, 1999, the Lakeshore/University
II Joint has a commitment to construct a building to be known as Lakeshore
Business Center Phase III on the 3.8 acres of land it owns at the Lakeshore
Business Center Development. The construction costs are currently estimated
to be $4,000,000 and will be funded by a $1,737,000 capital contribution
from NTS-Properties V made in July 1999 and approximately $2,680,000 debt
financing obtained subsequent to December 31, 1999. The Partnership and
NTS-Properties Plus, which prior to July 1, 1999 had an 18% and 12%
interest respectively, in the L/U II Joint Venture, 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 the capital contribution to
the L/U II Joint Venture with the knowledge that their Joint Venture
interest would, as a result, decrease to 12% and 8% respectively. See Note
14 for information of debt financing obtained for the construction of
Lakeshore Business Center Phase III subsequent to December 31, 1999.
- 47 -
<PAGE>
13. 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 an apartment
complex 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, and University Business Center Phase II through
October 6, 1998.
The financial information of the operating segments have 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.
<TABLE>
1999
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental income $ 1,428,605 $ 1,832,840 $ 3,261,445
Other income 2,417 8,613 11,030
----------- ----------- -----------
Total net revenues $ 1,431,022 $ 1,841,453 $ 3,272,475
=========== =========== ===========
Operating expenses $ 491,490 $ 744,445 $ 1,235,935
Write-off of unamortized
improvements 27,259 28,003 55,262
Interest expense 33,583 83,535 117,118
Management fees 76,037 110,227 186,264
Real estate taxes 78,536 119,491 198,027
Professional and
administrative 14,550 64,661 79,211
Depreciation expense 231,198 431,740 662,938
----------- ----------- -----------
Net income $ 478,369 $ 259,351 $ 737,720
=========== =========== ===========
Land, buildings and
amenities, net $ 4,540,968 $ 5,915,004 $10,455,972
=========== =========== ===========
Expenditures for land,
buildings and amenities $ 94,770 $ 296,729 $ 391,499
=========== =========== ===========
Segment liabilities $ 563,408 $ 1,223,517 $ 1,786,925
=========== =========== ===========
</TABLE>
- 48 -
<PAGE>
13. Segment Reporting - Continued
-----------------------------
<TABLE>
1998
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental income $ 1,391,996 $ 2,169,346 $ 3,561,342
Other income 7,301 10,907 18,208
Gain of sale of assets -- 208,608 208,608
------------ ------------ ------------
Total net revenues $ 1,399,297 $ 2,388,861 $ 3,788,158
============ ============ ============
Operating expenses $ 540,065 $ 712,150 $ 1,252,215
Write-off of unamortized
improvements 11,213 1,868 13,081
Interest expense 35,493 302,724 338,217
Management fees 70,246 134,252 204,498
Real estate taxes 67,275 145,221 212,496
Professional and
administrative 8,730 68,179 76,909
Depreciation expense 227,003 579,007 806,010
------------ ------------ ------------
Net income (loss)before
extraordinary item $ 439,272 $ 445,460 $ 884,732
Extraordinary item -early
extinguishment of debt -- (154,062) (154,062)
------------ ------------ ------------
Net income (loss) $ 439,272 $ 291,398 $ 730,670
============ ============ ============
Land, buildings and
amenities, net $ 4,014,293 $ 7,539,422 $ 11,553,715
============ ============ ============
Expenditures for land,
buildings and amenities $ 61,872 $ 259,495 $ 321,367
============ ============ ============
Segment liabilities $ 555,247 $ 3,084,149 $ 3,639,396
============ ============ ============
</TABLE>
<TABLE>
1997
Residential Commercial Total
<S> <C> <C> <C>
Rental income $ 1,423,067 $ 2,193,816 $ 3,616,883
Other income 59,542 7,142 66,684
------------ ------------ ------------
Total net revenues $ 1,482,609 $ 2,200,958 $ 3,683,567
============ ============ ============
Operating expenses $ 525,978 $ 686,063 $ 1,212,041
Interest expense 36,672 342,662 379,334
Management fees 70,486 138,351 208,837
Real estate taxes 66,752 157,593 224,345
Professional and
administrative 12,610 51,156 63,766
Depreciation expense 224,440 678,075 902,515
------------ ------------ ------------
Net income (loss) before
extraordinary item $ 545,671 $ 147,058 $ 692,729
Extraordinary item - early
extinguishment of debt (5,291) -- (5,291)
------------ ------------ ------------
Net income (loss) $ 540,380 $ 147,058 $ 687,438
============ ============ ============
Land, buildings and
amenities, net $ 4,084,220 $ 9,236,812 $ 13,321,032
============ ============ ============
Expenditures for land,
buildings and amenities $ 8,750 $ 90,511 $ 99,261
============ ============ ============
Segment liabilities $ 579,395 $ 4,286,836 $ 4,866,231
============ ============ ============
</TABLE>
- 49 -
<PAGE>
13. Segment Reporting - Continued
-----------------------------
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is necessary
given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes:
<TABLE>
1999 1998 1997
---- ---- ----
NET REVENUES
- ------------
<S> <C> <C> <C>
Total revenues for reportable segments $ 3,272,475 $ 3,788,158 $ 3,683,567
Other income for partnership 33,988 39,543 25,030
Gain on sale of assets for partnership 11,256 -- --
----------- ----------- -----------
Total consolidated net revenues $ 3,317,719 $ 3,827,701 $ 3,708,597
=========== =========== ===========
INTEREST EXPENSE
- ----------------
Interest expense for reportable segments $ 117,118 $ 338,217 $ 379,334
Interest expense for partnership 539,117 464,923 476,154
----------- ----------- -----------
Total interest expense $ 656,235 $ 803,140 $ 855,488
=========== =========== ===========
REAL ESTATE TAXES
- -----------------
Total real estate taxes for reportable segments $ 198,027 $ 212,496 $ 224,345
Real estate taxes for partnership 5,321 267 --
----------- ----------- -----------
Total real estate expense $ 203,348 $ 212,763 $ 224,345
=========== =========== ===========
PROFESSIONAL AND ADMINISTRATIVE
- -------------------------------
Total professional and administrative for
reportable segments $ 79,211 $ 76,909 $ 63,766
Professional and administrative for partnership 220,840 192,652 189,294
----------- ----------- -----------
Total professional and administrative $ 300,051 $ 269,561 $ 253,060
=========== =========== ===========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization for
reportable segments $ 662,938 $ 806,010 $ 902,515
Depreciation and amortization for partnership 14,559 8,257 18,540
Eliminations 5,818 5,818 5,817
----------- ----------- -----------
Total depreciation and amortization $ 683,315 $ 820,085 $ 926,872
=========== =========== ===========
NET INCOME (LOSS)BEFORE EXTRAORDINARY ITEM
- ------------------------------------------
Net income (loss) before extraordinary item for
reportable segments $ 737,720 $ 884,732 $ 692,729
Net income (loss) before extraordinary item for
partnership (725,509) (543,243) (807,615)
Eliminations (14,902) (89,131) 142,840
----------- ----------- -----------
Total net income (loss) before extraordinary item $ (2,691) $ 252,358 $ 27,954
=========== =========== ===========
EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT
- -------------------------------------------------
Total extraordinary item for reportable segments $ -- $ (154,062) $ (5,291)
Extraordinary item for partnership -- -- (71,713)
----------- ----------- -----------
Total extraordinary item - early extinguishment
of debt $ -- $ (154,062) $ (77,004)
=========== =========== ===========
TOTAL NET INCOME (LOSS) $ (2,691) $ 98,296 $ (49,050)
=========== =========== ===========
</TABLE>
(Continued on next page)
- 50 -
<PAGE>
13. Segment Reporting - Continued
-----------------------------
<TABLE>
1999 1998 1997
---- ---- ----
LAND, BUILDINGS AND AMENITIES
- -----------------------------
<S> <C> <C> <C>
Total land, buildings and amenities for
reportable segments $10,455,972 $11,553,715 $13,321,032
Partnership 24,221 13,196 --
----------- ----------- -----------
Total land, buildings and amenities $10,480,193 $11,566,911 $13,321,032
=========== =========== ===========
TOTAL EXPENDITURES
- ------------------
Total expenditures for land, buildings and
amenities for reportable segments $ 391,499 $ 321,367 $ 99,261
Expenditures for land, buildings and amenities
for partnership 13,715 13,196 --
----------- ----------- -----------
Total expenditures for land, buildings and
amenities $ 405,214 $ 334,563 $ 99,261
=========== =========== ===========
LIABILITIES
- -----------
Total liabilities for reportable segments $ 1,786,925 $ 3,639,396 $ 4,866,231
Liabilities for partnership 6,416,942 5,726,312 6,111,852
----------- ----------- -----------
Total liabilities $ 8,203,867 $ 9,365,708 $10,978,083
=========== =========== ===========
</TABLE>
14. Subsequent Events
-----------------
Subsequent to December 31, 1999, ORIG, LLC., an affiliate of the
partnership purchased Interests in the Partnership pursuant to an
Agreement, Bill of Sale and Assignment dated February 7, 2000, by and
among the Affiliate and four investors in the Partnership (the
"Purchase Agreement"). The Affiliate purchased 565 Interests in the
Partnership from one of the investors for total consideration of
$136,629 for 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 expenses involved with a tender offer
and multiple transfers.
Subsequent to December 31, 1999, NTS-Properties Plus, with the
Lakeshore/University II Joint Venture, serving as guarantor obtained a
commitment from a bank for an amount not exceeding $2,680,000 to fund
the construction of Lakeshore Business Center Phase III. The funds will
be used by the Lakeshore/University 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.
- 51 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
- 52 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates IV. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The General Partners of NTS-Properties Associates IV are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 58) is the managing General Partner of NTS-Properties
Associates IV and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. At the present time its capital is $1,000 and it is not
anticipated that such capital will be significantly increased. J. D. Nichols is
Chairman of the Board and the sole director of NTS Capital Corporation.
NTS Sub-Partnership IV
- ----------------------
NTS Sub-partnership IV is a Kentucky limited partnership whose primary business
purpose is to acquire, own and hold an interest in NTS-Properties Associates IV.
The partners of NTS Sub-partnership IV include various management personnel of
NTS Corporation and its affiliates.
Alliance Realty Corporation
- ---------------------------
Alliance Realty Corporation was formed in September 1982, and is a wholly-owned
subsidiary of SN Alliance, Inc. SN Alliance, Inc. is also the parent corporation
of Stifel, Nicolaus & Company, Inc. which acted as the Dealer Manager in
connection with the offering for the interests.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Brian F.
Lavin and Gregory A. Wells.
Brian F. Lavin
- --------------
Mr. Lavin (age 46) President of NTS Corporation and NTS Development Company
joined the Manager in June 1997. From November 1994 through June 1997, Mr. Lavin
served as President of the Residential Division of Paragon Group, Inc., and as a
Vice President of Paragon's Midwest Division prior to November 1994. In this
capacity, he directed the development, marketing, leasing and management
operations for the firms expanding portfolios. Mr. Lavin attended the University
of Missouri where he received his Bachelor's Degree in Business Administration.
He has served as a Director of the Louisville Apartment Association. He is a
licensed Kentucky Real Estate Broker and Certified Property Manager. Mr. Lavin
is a member of the Institute of Real Estate Management, and council member of
the Urban Land Institute. He currently serves on the University of Louisville
Board of Overseers and is on the Board of Directors of the National
Multi-Housing Council and the Louisville Science Center.
Gregory A. Wells
- ----------------
Mr. Wells (age 41), Senior Vice President and Chief Financial Officer of NTS
Corporation and NTS Development Company joined the Manager in July, 1999. From
May 1998 through July 1999, Mr. Wells served as Chief Financial Officer of
Hokanson Companies, Inc. and as Secretary and Treasurer of Hokanson Construction
Inc., Indianapolis, Indiana from January 1995 through May 1998. In these
capacities, he directed financial and operational activities for commercial
rental real estate, managed property, building and suite renovations, out of
ground commercial and residential construction and third party property
- 53 -
<PAGE>
Item 10. Directors and Executive Officers of the Registrant - Continued
--------------------------------------------------------------
management. Mr. Wells previously served as Vice President of Operations and
Treasurer of Executive Telecom Systems, Inc. a subsidiary of the Bureau of
National Affairs, Inc. (Washington, D.C.). Mr. Wells attended George Mason
University, where he received a Bachelor's Degree in Business Administration.
Mr. Wells is a Certified Public Accountant in both Virginia and Indiana and is
active in various charitable and philanthropic endeavors in the Louisville and
Indianapolis areas.
Mr. Richard L. Good, who was Vice Chairman and former President of NTS Capital
Corporation and NTS Development Company, retired effective September 3, 1999.
Item 11. Management Remuneration and Transactions
----------------------------------------
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross revenues to NTS Development Company, an affiliate
of the General Partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specific
projects and a refinancing fee on Net Cash Proceeds from the refinancing of any
Partnership property. Also, NTS Development Company provides certain other
services to the Partnership. See Note 10 to the financial statements which sets
forth transactions with affiliates of the General Partner for the years ended
December 31, 1999, 1998 and 1997.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocations and cash
distributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following provides details regarding owners of more than 5% of the total
outstanding limited partnership Units as of February 25, 2000.
ORIG, LLC 3,058 Units (12.63%)
10172 Linn Station Road
Louisville, Kentucky 40223
ORIG, LLC is a Kentucky limited liability company, the members of which are J.D.
Nichols, and Brian F. Lavin, Chairman and President of NTS Capital Corporations,
a general partner of NTS Properties Associates, the general partner of the
Partnership.
The General Partner is NTS-Properties Associates IV, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates IV are as follows:
J. D. Nichols 69.69%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Sub-partnership IV 30.00%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .30%
10172 Linn Station Road
Louisville, Kentucky 40223
Alliance Realty Corporation .01%
500 North Broadway
St. Louis, Missouri 63102
- 54 -
<PAGE>
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Property management fees of $186,264 (1999), $204,498 (1998) and $208,837 (1997)
were paid to NTS Development Company, an affiliate of the General Partner of the
Partnership. The fee is equal to 5% of gross revenues from residential
properties and 6% of 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
$21,620 and $17,697 as a repair and maintenance fee during the years ended
December 31, 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 years ended December 31, 1999, 1998
and 1997. These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses - affiliated
and items which have been capitalized as other assets or as land, buildings and
amenities.
1999 1998 1997
---- ---- ----
Leasing $148,888 $127,001 $121,834
Administrative 208,739 195,908 196,182
Property manager 340,261 292,427 261,511
Other 13,804 30,301 5,015
-------- -------- --------
$711,692 $645,637 $584,542
======== ======== ========
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
- 55 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
1. Financial statements
The financial statements for the years ended December 31, 1999, 1998 and
1997 together with the report of Arthur Andersen LLP dated March 24, 2000,
appear in Item 8. The following financial statement schedules should be
read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 57-60
All other schedules have been omitted because they are not applicable, are
not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement and Certificate *
of Limited Partnership of NTS-Properties IV
10. Property Management Agreement and Construction *
Management Agreement between NTS Development
Company and NTS-Properties IV
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the Securities and
Exchange Commission in connection with the filing of the Registration
Statements on Form S-11 on May 16, 1983 (effective August 1, 1983)
under Commission File No. 2-83771.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1999.
- 56 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Commonwealth Plainview
Business Point Office The Willows The Willows
Center Center Phases of Plainview of Plainview
Phase I I and II Phase I Phase II
------- -------- ------- --------
<S> <C> <C> <C> <C>
Encumbrances (A) None (B) (B)
Initial cost to partnership:
Land $ 928,867 $ 356,048 $1,798,292 $ 170,808
Buildings and improvements 1,419,653 2,214,001 5,447,513 585,917
Cost capitalized subsequent to
acquisition:
Improvements 1,740,691 1,024,916 319,638 70,102
Other -- -- -- --
Other -- -- -- --
Gross amount at which carried
December 31, 1999:
Land $ 949,932 $ 455,804 $1,841,525 $ 183,609
Buildings and improvements 3,139,279 3,139,161 5,723,918 643,218
---------- ---------- ---------- ----------
Total $4,089,211 $3,594,965 $7,565,443 $ 826,827
========== ========== ========== ==========
Accumulated depreciation $2,514,292 $1,624,550 $3,833,881 $ 413,498
========== ========== ========== ==========
Date of construction 06/84 N/A 03/85 08/85
Date Acquired N/A 04/84 N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C) (C) (C)
</TABLE>
(A) First mortgage held by an insurance company.
(B) First mortgage held by two insurance companies.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements, 5-30
years for amenities and the life of the lease for tenant
improvements.
- 57 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Lakeshore
Plainview Blankenbaker Business
Golf Brook Point III Business Center
Apartments Office Center Center 1A Phase I
---------- ------------- --------- -------
<S> <C> <C> <C> <C>
Encumbrances (A) (B) (A) (A)
Initial cost to partnership:
Land $ 175,557 $ 65,211 $ 582,561 $ 422,983
Buildings and improvements 474,566 116,284 2,263,506 662,259
Cost capitalized subsequent to
acquisition:
Improvements 4,144 52,736 97,240 585,284
Other (C) -- -- -- 184,250
Other (D) -- -- -- (549,932)
Gross amount at which carried
December 31, 1999:
Land $ 175,316 $ 66,065 $ 673,482 $ 320,279
Buildings and improvements 478,951 168,166 2,269,825 984,565
----------- ----------- ----------- -----------
Total $ 654,267 $ 234,231 $ 2,943,307 $ 1,304,844
=========== =========== =========== ===========
Accumulated depreciation $ 258,185 $ 89,228 $ 1,261,834 $ 663,793
=========== =========== =========== ===========
Date of construction 05/88 01/88 N/A 05/86
Date Acquired N/A N/A 08/94 N/A
Life at which depreciation in
latest income statement is
computed (E) (E) (E) (E)
</TABLE>
(A) First mortgage held by an insurance company.
(B) First mortgage held by a bank.
(C) Represents NTS-Properties IV's increased interest in Lakeshore
Business Center Phase I as a result of the formation of the
Lakeshore/University II Joint Venture in 1995.
(D) Represents NTS-Properties IV's decreased interest in Lakeshore
Business Center Phase I as a result of a capital contribution made
to the Lakeshore/University II Joint Venture by NTS-Properties V
in July 1999.
(E) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements, 5-30
years for amenities and the life of the lease for tenant
improvements.
- 58 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Lakeshore Land Held
Business for Sale
Center and/or Total
Phase II Development Pages 57-59
-------- ----------- -----------
<S> <C> <C> <C>
Encumbrances (A)
Initial cost to partnership:
Land $ 658,760 $ 297,418 $ 5,456,505
Buildings and improvements 1,508,328 -- 14,692,027
Cost capitalized subsequent to
acquisition:
Improvements 72,084 (28,855) 3,937,980
Other -- -- 184,250
Other (B) (734,784) (98,750) (1,383,466)
Gross amount at which carried
December 31, 1999 (C):
Land $ 440,280 $ 154,181 $ 5,260,473
Buildings and improvements 1,064,108 15,632 17,626,823
------------ ------------ ------------
Total (E) $ 1,504,388 $ 169,813 $ 22,887,296
============ ============ ============
Accumulated depreciation $ 613,331 $ -- $ 11,272,592
============ ============ ============
Date of construction N/A
Date Acquired 01/95
Life at which depreciation in
latest income statement is
computed (D)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties IV's decreased interest in Lakeshore Business
Center Phase II and land held by the Lakeshore/University II Joint Venture
as a result of a capital contribution made to the Lakeshore University II
Joint Venture by NTS-Properties V in July 1999.
(C) Aggregate cost of real estate for tax purposes is $21,447,190.
(D) Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5-30 years for land improvements, 5-
30 years for buildings and improvements, 5-30 years for amenities and the
life of the lease for tenant improvements.
(E) Total gross cost at December 31, 1999 $ 22,887,296
Additions to Partnership for computer
hardware and software in 1998 and 1999 26,911
Adjust land contribution from fair
market value to cost:
Golf Brook Apartments (662,731)
Plainview Point III Office Center (496,000)
------------
Balance at December 31, 1999 21,755,476
Less accumulated depreciation (11,272,592)
Less accumulated depreciation for
computer hardware and software in 1999 (2,691)
------------
Land, Buildings and Amenities, net at
December 31, 1999 $ 10,480,193
============
- 59 -
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
Real Accumulated
Estate Depreciation
------ ------------
<S> <C> <C>
Balances at December 31, 1996 $ 24,605,889 $ 10,507,387
Additions during period:
Improvements (a) 99,673 --
Depreciation (b) -- 877,005
Deductions during period:
Retirements (50,298) (50,160)
------------ ------------
Balances at December 31, 1997 24,655,264 11,334,232
Additions during period:
Improvements (a) 350,567 --
Depreciation (b) -- 747,221
Deductions during period:
Retirements (c) (2,092,194) (734,727)
------------ ------------
Balances at December 31, 1998 22,913,637 11,346,726
Additions during period:
Improvements (a) 453,194 --
Depreciation (b) -- 650,738
Deductions during period:
Retirements (c) (227,889) (128,200)
Other (d) (1,383,466) (593,981)
------------ ------------
Balances at December 31, 1999 $ 21,755,476 $ 11,275,283
============ ============
</TABLE>
(a) The additions to improvements on this schedule will differ from
the additions to land, buildings, amenities and construction in
progress on the Statements of Cash Flows primarily due to the fact
that changes in accounts payable - construction are not included
in the real estate balance above.
(b) The additions to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statements of
Cash Flows due to the amortization of loan costs.
(c) Result of the sale of University Business Center Phase II on
October 6, 1998.
(d) Represents NTS-Properties IV's decreased interest in the
Lakeshore/University II Joint Venture as a result of a capital
contribution made to the Joint Venture by NTS-Properties V in July
1999.
- 60 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties IV 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
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: March 30, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
--------- -----
/s/ J. D. Nichols General Partner of NTS-Properties
- ------------------------------
J. D. Nichols Associates IV and Chairman of the
Board and Sole Director of NTS
Capital Corporation
/s/ Brian F. Lavin President and Chief Operating
- ------------------------------
Brian F. Lavin Officer of NTS Capital Corporation
/s/ Gregory A. Wells Senior Vice President and
- ------------------------------
Gregory A. Wells Chief Financial Officer of
NTS Capital Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 61 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1999 AND FROM THE STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 668,321
<SECURITIES> 0
<RECEIVABLES> 192,079
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,480,193
<DEPRECIATION> 11,275,283
<TOTAL-ASSETS> 11,665,677
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,861,645
0
0
<COMMON> 0
<OTHER-SE> 3,461,810
<TOTAL-LIABILITY-AND-EQUITY> 11,665,677
<SALES> 3,261,445
<TOTAL-REVENUES> 3,317,719
<CGS> 0
<TOTAL-COSTS> 2,664,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 656,235
<INCOME-PRETAX> (2,691)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,691)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET,THEREFORE THE VALUE IS $0.
</FN>
</TABLE>
