<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ------------------------
Commission File Number 0-11655
---------------------------------------------------------
NTS-PROPERTIES IV
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kentucky 61-1026356
- -------------------------------- ---------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
- -------------------------------- ----------------------------
(Address of principal executive (Zip Code)
offices)
(502) 426-4800
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13, or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ----
<PAGE>
TABLE OF CONTENTS
-----------------
Pages
-----
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of March 31, 2000 and December 31, 1999 3
Statements of Operations
for the three months ended March 31, 2000 and 1999 4
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 5
Notes to Financial Statements 6-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
<TABLE>
NTS-PROPERTIES IV
-----------------
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
------------------------------------------------
<CAPTION>
As of As of
March 31, 2000 December 31, 1999 *
-------------- -------------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 464,888 $ 607,512
Cash and equivalents - restricted 100,609 60,809
Accounts receivable, net of allowance
for doubtful accounts of $29,353
(2000) and $0 (1999) 188,682 192,079
Land, buildings and amenities, net 10,394,237 10,480,193
Other assets 351,545 325,084
----------- -----------
TOTAL ASSETS $11,499,961 $11,665,677
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $ 7,690,210 $ 7,861,645
Accounts payable 180,548 224,227
Security deposits 69,763 69,991
Other liabilities 98,869 48,004
----------- -----------
TOTAL LIABILITIES 8,039,390 8,203,867
COMMITMENTS AND CONTINGENCIES (Note 9)
Partners' equity 3,460,571 3,461,810
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $11,499,961 $11,665,677
=========== ===========
</TABLE>
<TABLE>
Limited General
Partners Partner Total
-------- ------- -----
PARTNERS' EQUITY
- ----------------
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 25,834,899 $ -- $ 25,834,899
Net income - prior years 383,189 3,872 387,061
Net loss - current year (1,229) (12) (1,241)
Cash distributions declared to
date (21,586,280) (218,253) (21,804,533)
Repurchase of Limited
Partnership Units (955,615) -- (955,615)
------------ ------------ ------------
Balances at March 31, 2000 $ 3,674,964 $ (214,393) $ 3,460,571
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 30, 2000.
The accompanying notes to financial statements are an integral part of
these statements.
-3-
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended
March 31,
---------------------------
(Unaudited)
2000 1999
---- ----
REVENUES:
- ---------
<S> <C> <C>
Rental income, net of provision for doubtful
accounts of $29,353 (2000) and $0 (1999) $ 833,596 $ 846,090
Interest and other income 8,330 8,428
--------- ---------
841,926 854,518
--------- ---------
EXPENSES:
- ---------
Operating expenses 200,021 190,449
Operating expenses - affiliated 113,063 141,636
Loss on disposal of assets 56,252 10,720
Interest expense 149,189 172,245
Management fees 45,260 46,877
Real estate taxes 48,342 50,856
Professional and administrative expenses 30,816 36,635
Professional and administrative
expenses - affiliated 28,020 41,648
Depreciation and amortization 172,204 179,111
--------- ---------
843,167 870,177
--------- ---------
Net loss $ (1,241) $ (15,659)
========= =========
Net loss allocated to the
Limited Partners $ (1,229) $ (15,502)
========= =========
Net loss per Limited
Partnership Unit $ (0.05) $ (0.62)
========= =========
Weighted average number of
Limited Partnership Units 24,209 25,082
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-4-
<PAGE>
<TABLE>
NTS-PROPERTIES IV
-----------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Three Months Ended
March 31,
-----------------------
(Unaudited)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C>
Net loss $ (1,241) $ (15,659)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Provision for doubtful accounts 29,353 --
Loss on disposal of assets 56,252 10,720
Depreciation and amortization 172,204 179,111
Changes in assets and liabilities:
Cash and equivalents - restricted (39,800) (54,649)
Accounts receivable (25,956) (20,925)
Other assets (26,461) (73,733)
Accounts payable (43,679) 39,663
Security deposits (228) 4,254
Other liabilities 50,867 96,840
--------- ---------
Net cash provided by operating activities 171,311 165,622
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings and amenities (142,500) (77,954)
Maturity of investment securities -- 140,000
Other -- 6,659
--------- ---------
Net cash (used in) provided by investing
activities (142,500) 68,705
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal payments on mortgages payable (171,435) (166,457)
Repurchase of Limited Partnership Units -- (123,000)
Decrease in cash and equivalents - restricted -- 123,000
--------- ---------
Net cash used in financing activities (171,435) (166,457)
--------- ---------
Net (decrease) increase in cash and
equivalents (142,624) 67,870
--------- ---------
CASH AND EQUIVALENTS, beginning of period 607,512 640,969
--------- ---------
CASH AND EQUIVALENTS, end of period $ 464,888 $ 708,839
========= =========
Interest paid on a cash basis $ 151,672 $ 172,866
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-5-
<PAGE>
NTS-PROPERTIES IV
-----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The unaudited financial statements included herein should be read in conjunction
with the Partnership's 1999 Form 10-K as filed with the Commission on March 30,
2000. In the opinion of the General Partner, all adjustments (only consisting of
normal recurring accruals) necessary for a fair presentation have been made to
the accompanying financial statements for the three months ended March 31, 2000
and 1999.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Concentration of Credit Risk
----------------------------
NTS-Properties IV owns and operates commercial rental 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 locations in which they lease space. In Louisville,
Kentucky, one tenant occupies 100% of the net rentable area in Blankenbaker
Business Center 1A. The Partnership also owns and operates, either wholly
or through a joint venture, residential rental properties in Louisville,
Kentucky and Orlando, Florida.
3. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represent funds received for residential
security deposits and funds escrowed with mortgage companies for property
taxes and insurance in accordance with the loan agreements with such
mortgage companies.
4. Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost less
accumulated depreciation to the Partnership. Costs directly associated with
the acquisition, development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 10-30 years for land improvements,
5-30 years for buildings and improvements, 5-30 years for amenities and the
applicable lease term 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 the carrying amount of an asset exceeds
the sum of its expected future cash flows, the asset's carrying value must
be written down to fair value. Application of this standard during the
periods ended March 31, 2000 and 1999 did not result in any impairment
loss.
-6-
<PAGE>
5. Mortgages Payable
-----------------
Mortgages payable consist of the following:
March 31, December 31,
2000 1999
---- ----
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
8.8%, due October 1, 2004, secured by land and
building $1,643,629 $1,715,679
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 1,823,590 1,845,116
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 1,735,970 1,756,462
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
8.5%, due November 15, 2005, secured by land and
building 908,054 940,500
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
8.125%, due August 1, 2008, secured by land and
building 571,458 583,180
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
8.125%, due August 1, 2008, secured by land and
building 531,148 542,043
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 298,239 299,682
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 178,122 178,983
---------- ----------
$7,690,210 $7,861,645
========== ==========
Based on the borrowing rates currently available to the Partnership for
loans with similar terms and average maturities, the fair value of
long-term debt is approximately $7,500,000.
-7-
<PAGE>
6. Reclassification of 1999 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the March 31, 1999 financial
statements to conform to the March 31, 2000 classifications. These
reclassifications have no effect on previously reported operations.
7. Related Party Transactions
--------------------------
Property management fees of $45,260 and $46,877 were paid to NTS
Development Company, an affiliate of the General Partner of the
Partnership, for the three months ended March 31, 2000 and 1999,
respectively, pursuant to an agreement with the Partnership. The fee is
equal to 5% of the gross revenues from residential properties and 6% of the
gross revenues from commercial properties. Also permitted by an agreement,
NTS Development Company will receive a repair and maintenance fee equal to
5.9% of costs which relate to capital improvements. The Partnership has
incurred $13,662 and $2,569 as a repair and maintenance fee during the
three months ended March 31, 2000 and 1999, respectively, and has
capitalized these costs as a part of land, buildings and amenities. As
permitted by an agreement, the Partnership was also charged the following
amounts from NTS Development Company for the three months ended March 31,
2000 and 1999. These charges include items which have been expensed as
operating expenses - affiliated or professional and administrative expenses
- affiliated and items which have been capitalized as other assets or as
land, buildings and amenities.
Three Months Ended
March 31,
---------------------------------
2000 1999
---- ----
Administrative $ 47,451 $ 51,573
Leasing 25,450 47,091
Property Management 74,452 81,477
Other 1,292 12,662
-------- --------
$148,645 $192,803
======== ========
On February 7, 2000, ORIG, LLC. (the "Affiliate") purchased Interests in
the Partnership pursuant to an Agreement, Bill of Sale and Assignment, by
and among the Affiliate and four investors in the Partnership (the
"Purchase Agreement"). The Affiliate purchased 565 Interests in the
Partnership for a 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
substantial numbers of Interests without incurring the significant expenses
involved with a tender offer and multiple transfers.
8. Transactions Affecting the Investment in Lakeshore/University II Joint
---------------------------------------------------------------------------
Venture
-------
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
11.93%, as compared to 17.86% prior to July 1, 1999.
-8-
<PAGE>
9. Commitments and Contingencies
-----------------------------
The Partnership, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the
Partnership with existing laws has not had a material adverse effect on the
Partnership's financial condition and results of operations. However, the
Partnership cannot predict the impact of new or changed laws or regulations
on its current properties or on properties that it may acquire in the
future.
The Partnership does not believe there is any litigation threatened against
the Partnership other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material adverse effect on the
consolidated financial statements of the Partnership.
Pursuant to a contract signed on December 6, 1999, the Lakeshore/University
II Joint Venture has a commitment to construct a building to be known as
Lakeshore Business Center Phase III. The construction began in December
1999 and the cost is currently estimated to be $4,000,000 and will be
funded by working capital and approximately $2,680,000 in debt financing.
(See Notes to Financial Statements "11. Subsequent Event").
10. Segment Reporting
-----------------
The Partnership's reportable operating segments include residential and
commercial real estate operations. The residential operations represent the
Partnership's ownership and operating results relative to apartment
complexes known as Golf Brook and The Willows of Plainview Phases I and II.
The commercial operations represent the Partnership's ownership and
operating results relative to suburban commercial office space known as
Commonwealth Business Center Phase I, Plainview Point Office Center Phases
I, II and III, Blankenbaker Business Center 1A and Lakeshore Business
Center Phases I and II.
The financial information of the operating segments has been prepared using
a management approach, which is consistent with the basis and manner in
which the Partnership's management internally reports financial information
for the purposes of assisting in making internal operating decisions. The
Partnership evaluates performance based on stand-alone operating segment
net income.
-9-
<PAGE>
10.Segment Reporting - Continued
-----------------------------
<TABLE>
Three Months Ended March 31, 2000
--------------------------------------------------
Residential Commercial Total
----------- ---------- ---------
<S> <C> <C> <C>
Rental income $352,056 $481,540 $833,596
Other 1,109 2,472 3,581
-------- -------- --------
Total net revenues $353,165 $484,012 $837,177
-------- -------- --------
Operating expenses 120,136 192,942 313,078
Loss on disposal of assets 40,563 15,689 56,252
Interest expense 71,353 77,836 149,189
Management fees 17,925 27,335 45,260
Real estate taxes 19,345 28,997 48,342
Depreciation expense 59,233 107,427 166,660
-------- -------- --------
Depreciation expense
Net income $ 24,610 $ 33,786 $ 58,396
======== ======== ========
</TABLE>
<TABLE>
Three Months Ended March 31, 1999
--------------------------------------------------
Residential Commercial Total
----------- ---------- ---------
<S> <C> <C> <C>
Rental income $372,862 $473,228 $846,090
Other 1,687 6,449 8,136
-------- -------- --------
Total net revenues $374,549 $479,677 $854,226
-------- -------- --------
Operating expenses 126,863 205,222 332,085
Loss on disposal of assets 10,720 -- 10,720
Interest expense 8,440 58,518 66,958
Management fees 18,658 28,219 46,877
Real estate taxes 16,803 34,053 50,856
Depreciation expense 57,770 117,775 175,545
-------- -------- --------
Depreciation expense
Net income $135,295 $ 35,890 $171,185
======== ======== ========
</TABLE>
-10-
<PAGE>
10.Segment Reporting - Continued
-----------------------------
A reconciliation of the totals reported for the operating segments to
the applicable line items in the consolidated financial statements for the
three months ended March 31, 2000 and 1999 is necessary given amounts
recorded at the Partnership level and not allocated to the operating
properties for internal reporting purposes.
<TABLE>
Three Months Ended
March 31,
-----------------------------
2000 1999
---- ----
NET REVENUES
- ------------
<S> <C> <C>
Total revenues for reportable segments $ 837,177 $ 854,226
Other income for Partnership 4,624 18,204
Eliminations 125 (17,912)
--------- ---------
Total consolidated net revenues $ 841,926 $ 854,518
========= =========
OPERATING EXPENSES
- ------------------
Total operating expenses for
reportable segments 313,078 332,085
Operating expenses for Partnership 6 --
--------- ---------
Total operating expenses $ 313,084 $ 332,085
========= =========
INTEREST EXPENSE
- ----------------
Total interest expense for reportable
segments 149,189 66,958
Interest expense for Partnership -- 105,287
--------- ---------
Total interest expense $ 149,189 $ 172,245
========= =========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization
for reportable segments 166,660 175,545
Depreciation and amortization for
Partnership 4,089 2,110
Eliminations 1,455 1,456
--------- ---------
Total depreciation and amortization $ 172,204 $ 179,111
========= =========
NET INCOME (LOSS)
- -----------------
Total net income for reportable
segments 58,396 171,185
Net loss for Partnership (58,308) (167,477)
Eliminations (1,329) (19,367)
--------- ---------
Total net loss $ (1,241) $ (15,659)
========= =========
</TABLE>
-11-
<PAGE>
11. Subsequent Event
----------------
On April 24, 2000, the Lakeshore/University II Joint Venture 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.
-12-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is structured in four major sections. The first section
provides information related to occupancy levels and rental and other income
generated by the Partnership's properties. The second analyzes results of
operations on a consolidated basis. The final sections address consolidated cash
flows and financial condition. A discussion of certain market risks also
follows. MD&A should be read in conjunction with the Financial Statements in
Item 1 and the Cautionary Statements below.
Cautionary Statements
- ---------------------
Some of the statements included in this Item 2 may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Partnership anticipates,"
"believes" or "expects," indicate that it is possible that the event
anticipated, believed or expected may not occur. Should such event not occur,
then the result which the Partnership expected also may not occur or occur in a
different manner, which may be more or less favorable to the Partnership. The
Partnership does not undertake any obligations to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
Any forward-looking statements included in MD&A or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's 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.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
2000 (1) 1999
-------- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase I 93% 92%
Plainview Point Office Center Phases I & II 78% 53%
The Willows of Plainview Phase I (2) 93% 96%
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties V (Ownership % at March 31, 2000)
- ------------------------------------------------
The Willows of Plainview Phase II (9.7%) (2) 91% 99%
(Continued on next page)
-13-
<PAGE>
Results of Operations - Continued
- ---------------------------------
2000 (1) 1999
-------- ----
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties VI (Ownership % at March 31, 2000)
- -------------------------------------------------
Golf Brook Apartments (3.97%) (2) 91% 96%
Plainview Point III Office Center (4.96%) (2) 87% 93%
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties VII, Ltd. and NTS-Properties Plus
- ------------------------------------------------
Ltd. (Ownership % at March 31, 2000)
- ------------------------------------
Blankenbaker Business Center 1A (29.61%) 100% 100%
Properties Owned through Lakeshore/University II
- ------------------------------------------------
Joint Venture (L/U II Joint Venture)
- ------------------------------------
Lakeshore Business Center Phase I (3) 76% 72%
Lakeshore Business Center Phase II (2) (3) 79% 85%
1) Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties.
2) In the opinion of the General Partner of the Partnership, the decrease in
period ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
3) Ownership percentage was 11.93% as of March 31, 2000 and 17.86% as of March
31, 1999. See Notes to Financial Statements "8. Transactions Affecting the
Investment in Lakeshore/University II Joint Venture."
Average occupancy levels at the Partnership's properties during the three months
ended March 31 were as follows:
Three Months Ended
March 31,
------------------
2000 1999
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase I 93% 92%
Plainview Point Office Center Phases I & II 78% 57%
The Willows of Plainview Phase I 95% 93%
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties V (Ownership % at March 31, 2000)
- ------------------------------------------------
The Willows of Plainview Phase II (9.7%) (1) 89% 94%
(Continued on next page)
-14-
<PAGE>
Results of Operations - Continued
- ---------------------------------
Three Months Ended
March 31,
------------------
2000 1999
---- ----
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties VI (Ownership % at March 31, 2000)
- -------------------------------------------------
Golf Brook Apartments (3.97%) (1) 94% 95%
Plainview Point III Office Center (4.96%) (1) 87% 92%
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties VII, Ltd. and NTS-Properties Plus
- ------------------------------------------------
Ltd. (Ownership % at March 31, 2000)
- ------------------------------------
Blankenbaker Business Center 1A (29.61%) 100% 100%
Properties Owned through Lakeshore/University II
- ------------------------------------------------
Joint Venture (L/U II Joint Venture)
- ------------------------------------
Lakeshore Business Center Phase I (1) (2) 76% 79%
Lakeshore Business Center Phase II (1) (2) 78% 85%
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 11.93% as of March 31, 2000 and 17.86% as of March
31, 1999. See Notes to Financial Statements "8. Transactions Affecting the
Investment in Lakeshore/University II Joint Venture."
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 2000 and 1999 was as follows:
Three Months Ended
March 31,
----------------------
2000 1999
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase I $188,793 $186,270
Plainview Point Office Center Phases I & II $144,961 $ 87,212
The Willows of Plainview Phase I $292,693 $310,499
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties V (Ownership % at March 31, 2000)
- ------------------------------------------------
The Willows of Plainview Phase II (9.7%) $ 30,294 $ 34,337
(Continued on next page)
-15-
<PAGE>
Results of Operations - Continued
- ---------------------------------
Three Months Ended
March 31,
----------------------
2000 1999
---- ----
Properties Owned in Joint Venture with
- --------------------------------------
NTS-Properties VI (Ownership % at March 31, 2000)
- -------------------------------------------------
Golf Brook Apartments (3.97%) $30,179 $29,713
Plainview Point III Office Center (4.96%) $ 9,783 $ 9,398
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties VII, Ltd. and NTS-Properties Plus
- ------------------------------------------------
Ltd. (Ownership % at March 31, 2000)
- ------------------------------------
Blankenbaker Business Center 1A (29.61%) $59,272 $70,448
Properties Owned through Lakeshore/University II
- ------------------------------------------------
Joint Venture (L/U II Joint Venture)
- ------------------------------------
Lakeshore Business Center Phase I (1) $40,950 $62,193
Lakeshore Business Center Phase II (1) $40,253 $59,584
1) Represents ownership percentage of 11.93% for the three months ended March
31, 2000 and 17.86% for the three months ended March 31, 1999. See Notes to
Financial Statements "8. Transactions Affecting the Investment in
Lakeshore/University II Joint Venture."
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The following is an analysis of material changes in results of operations for
the periods ending March 31, 2000 and 1999. Items that did not have a material
impact on operations for the periods listed above have been excluded from this
discussion.
Operating expenses - affiliated decreased $28,600 or 20% for the three months
ended March 31, 2000, as compared to the same period in 1999. The decrease is
primarily due to decreased salary and overhead costs allocated to the
Partnership as a result of personnel status changes. Operating expenses -
affiliated are expenses incurred for services performed by NTS Development
Company, an affiliate of the General Partner.
Loss on disposal of assets for the three months ended March 31, 2000, can be
attributed to the retirement of building costs at The Willows of Plainview
Phases I and II and Lakeshore Business Centers Phases I and II. The retirements
are the result of exterior wood and paint replacements at The Willows of
Plainview I and II and common area renovations at Lakeshore Business Centers
Phases I and II. Loss on disposal of assets for the three months ended March 31,
1999, can be attributed to the retirement of building costs at the Willows of
Plainview Phases I and II. The retirements are the result of the replacement of
the alarm system. These losses represent the cost to retire assets which were
not fully depreciated at the time of the replacements.
-16-
<PAGE>
Results of Operations - Continued
- ---------------------------------
Interest expense decreased approximately $23,000 or 13% for the three months
ended March 31, 2000, as compared to the same period in 1999. The decreases are
primarily due to required principal payments on the mortgages payable of the
Partnership's properties.
Professional and administrative expenses - affiliated decreased approximately
$13,600 or 33% for the three months ended March 31, 2000 as compared to the same
period in 1999 primarily as a result of decreased overhead costs allocated to
the Partnership as a result of personnel status changes. Professional and
administrative expenses - affiliated are expenses incurred for services
performed by NTS Development Company, an affiliate of the General Partner.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 10-30 years for land improvements, 5-30
years for buildings and improvements, 5-30 years for amenities and the
applicable lease term for tenant improvements. The aggregate cost of the
Partnership's properties for Federal tax purposes is approximately $21,447,190.
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 Notes to Financial Statements "8. Transactions
Affecting the Investment in Lakeshore/University II Joint Venture."
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
In the next 12 months, the demand on future liquidity is anticipated to increase
as the Partnership continues its efforts in the leasing of 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.
Cash flows provided by (used in):
2000 1999
---- ----
Operating activities $ 171,311 $ 165,622
Investing activities (142,500) 68,705
Financing activities (171,435) (166,457)
--------- ---------
Net (decrease) increase in
cash and equivalents $(142,624) $ 67,870
========= =========
Net cash provided by operating activities increased approximately $5,700 for the
three months ended March 31, 2000, as compared to the same period in 1999. The
increase was primarily driven by a decrease in net loss from operations,
partially offset by increased payments on accounts payable.
Net cash used in investing activities increased approximately $211,200 for the
three months ended March 31, 2000 as compared to the same period in 1999. The
primary reason for the increase in funds used in investing activities were
increased capital expenditures, offset by the decrease in the maturity of
investment securities.
-17-
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
No distributions were made for the three months ended March 31, 2000 or the year
ended December 31, 1999. Distributions will be resumed once the Partnership has
established adequate cash reserves and is generating cash from operations which,
in management's opinion, is sufficient to warrant future distributions. The
primary source of future liquidity and distributions is expected to be derived
from cash generated by the Partnership's properties after adequate cash reserves
are established for future leasing costs, tenant finish costs and other capital
improvements. Cash reserves (which are unrestricted cash and equivalents) as
shown on the Partnership's balance sheet as of March 31, 2000 were $464,888.
Due to the fact that no distributions were made during the three months ended
March 31, 2000 or 1999, the table, which presents that portion of the
distribution which 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 and the construction of Lakeshore Business Center
Phase III as discussed below. Changes to current tenant finish improvements are
a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of the improvements
are determined by the size of the space being leased and whether the
improvements are for a new tenant or incurred because of a lease renewal. The
tenant finish improvements will be funded by cash flow from operations and cash
reserves.
As of March 31, 2000, the Partnership plans to renovate the community clubhouse
at Golf Brook Apartments. The estimated cost of this renovation is $200,000. The
Partnership plans to fund the renovations out of the $2,500,000 loan obtained
September 23, 1999 secured by the Plainview Point III Office Center.
Pursuant to a contract signed on December 6, 1999, the Lakeshore/University II
Joint Venture has a commitment to construct a building to be known as Lakeshore
Business Center Phase III on 3.8 acres of land it owns at the Lakeshore Business
Center Development. The construction began in December 1999 and the cost is
currently estimated to be $4,000,000 and will be funded by working capital and
approximately $2,680,000 in debt financing.
The Partnership has no other material commitments for renovations or capital
improvements as of March 31, 2000.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's commercial properties. The leasing and
renewal negotiations at the Lakeshore Business Center Development are handled by
an on-site leasing agent, an employee of NTS Development Company (an affiliate
of the General Partner of the Partnership), who makes calls to potential
tenants, negotiates lease renewals with current tenants and manages local
advertising with the assistance of NTS Development Company's marketing staff.
The leasing and renewal negotiations for the Partnership's remaining commercial
properties are handled by leasing agents, who are employees of NTS Development
Company, located in Louisville, Kentucky. The leasing agents are located in the
same city as the commercial properties. All advertising for these properties is
coordinated by NTS Development Company's marketing staff located in Louisville,
Kentucky. In an effort to continue to improve occupancy at the Partnership's
residential properties, the Partnership has an on-site leasing staff, who
-18-
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
are employees of NTS Development Company, at each of the apartment communities.
The staff handles all on-site visits from potential tenants, coordinates local
advertising with NTS Development Company's marketing staff, makes visits to
local companies to promote fully furnished 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, II and III provide for tenants
to contribute toward the payment of increases in common area maintenance
expenses, insurance, utilities and real estate taxes. These lease provisions,
along with the fact that residential leases are generally for a period of one
year, should protect the Partnership's operations from the impact of inflation
and changing prices.
Year 2000
- ---------
During 1999, all divisions of NTS Corporation, including NTS-Properties
Associates 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' headquarters 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 was fully implemented and operational as of
December 31, 1999. Our system for residential 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 NTS' 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate. At March 31, 2000, a hypothetical 100 basis point increase in
interest rates would result in an approximate $300,000 decrease in the fair
value of debt.
-19-
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K:
None.
Items 1, 2 and 4 are not applicable and have been omitted.
-20-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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: May 12, 2000
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 2000 AND FROM THE STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 464,888
<SECURITIES> 0
<RECEIVABLES> 188,682
<ALLOWANCES> 29,353
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,394,237
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 11,499,961
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,690,210
0
0
<COMMON> 0
<OTHER-SE> 3,460,571
<TOTAL-LIABILITY-AND-EQUITY> 11,499,961
<SALES> 833,596
<TOTAL-REVENUES> 841,926
<CGS> 0
<TOTAL-COSTS> 693,978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,189
<INCOME-PRETAX> (1,241)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,241)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET, THEREFORE THE VALUE IS
$0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
