<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-13400
NTS-PROPERTIES V, a Maryland Limited Partnership
(Exact name of registrant as specified in its charter)
Maryland 61-1051452
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10172 Linn Station Road
Louisville, Kentucky 40223
(Address of principal executive
offices) (Zip Code)
Registrant's telephone number,
including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Exhibit Index: See page 19
Total Pages: 20
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TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of March 31, 1996 and December 31, 1995 3
Statements of Operations
For the three months ended March 31, 1996 and 1995 4
Statements of Cash Flows
For the three months ended March 31, 1996 and 1995 5
Notes To Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-18
PART II
1. Legal Proceedings 19
2. Changes in Securities 19
3. Defaults upon Senior Securities 19
4. Submission of Matters to a Vote of Security Holders 19
5. Other Information 19
6. Exhibits and Reports on Form 8-K 19
Signatures 20
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES V,
A Maryland Limited Partnership
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
March 31, 1996 December 31, 1995*
-------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 200,750 $ 218,331
Cash and equivalents - restricted 184,949 56,318
Accounts receivable, net of allowance
for doubtful accounts of $31,715 (1996)
and $53,582 (1995) 705,303 766,624
Land, buildings and amenities, net 25,821,569 26,149,956
Assets held for development, net 3,547,355 3,585,818
Other assets 908,707 760,426
----------- -----------
$31,368,633 $31,537,473
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $22,822,722 $22,839,940
Accounts payable - operations 407,963 365,431
Accounts payable - construction 152,544 231,566
Security deposits 150,240 147,330
Other liabilities 167,587 35,717
----------- -----------
23,701,056 23,619,984
Partners' equity 7,667,577 7,917,489
----------- -----------
$31,368,633 $31,537,473
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
<S> <C> <C> <C>
PARTNERS' EQUITY
Capital contributions, net of
offering costs $ 30,582,037 $ 100 $ 30,582,137
Net income (loss) - prior years (7,124,963) 41,828 (7,083,135)
Net loss - current year (247,415) (2,499) (249,914)
Cash distributions declared to
date (15,389,204) (155,527) (15,544,731)
Repurchases of limited
partnership units (36,780) -- (36,780)
------------ ---------- ------------
Balances at March 31, 1996 $ 7,783,675 $ (116,098) $ 7,667,577
============ ========== ===========
</TABLE>
*Reference is made to the audited financial statements in the Form 10-K as filed
with the Commission on March 29, 1996.
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<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Rental income, net of provision for
doubtful accounts of $-0- (1996)
and $14,119 (1995) $ 1,391,314 $ 1,280,164
Interest and other income 4,161 5,132
----------- -----------
1,395,475 1,285,296
Expenses:
Operating expenses 252,141 210,599
Operating expenses - affiliated 135,966 127,832
Amortization of capitalized leasing
costs -- 6,779
Interest expense 540,524 465,104
Management fees 85,699 78,023
Real estate taxes 134,449 117,746
Professional and administrative
expenses 26,087 35,933
Professional and administrative
expenses - affiliated 42,506 38,826
Depreciation and amortization 428,017 419,817
----------- -----------
1,645,389 1,500,659
----------- -----------
Net loss $ (249,914) $ (215,363)
=========== ===========
Net loss allocated to the limited
partners $ (247,415) $ (213,209)
=========== ===========
Net loss per limited partnership unit $ (6.90) $ (5.94)
=========== ===========
Weighted average number of limited
partnership units 35,876 35,876
=========== ===========
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</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (249,914) $ (215,363)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for doubtful accounts -- 14,119
Amortization of capitalized leasing costs -- 6,779
Depreciation and amortization 428,017 419,817
Changes in assets and liabilities:
Cash and equivalents - restricted (142,352) (51,929)
Accounts receivable 61,321 107,137
Other assets (123,512) (6,628)
Accounts payable - operations 42,532 71,194
Security deposits 2,910 (1,500)
Other liabilities 131,864 (232,667)
----------- -----------
Net cash provided by operating activities 150,866 110,959
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (123,127) (19,846)
Increase in cash and equivalents - restricted -- (78,177)
Decrease in cash and equivalents - restricted 13,721 --
----------- -----------
Net cash used in investing activities (109,406) (98,023)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage and note payable 6,500,000 --
Principal payments on mortgages and notes payable (6,517,218) (192,068)
Capital contribution by a joint venture partner -- 519,225
Additions to loan costs (41,823) (95,792)
----------- -----------
Net cash provided by (used in) financing
activities (59,041) 231,365
----------- -----------
Net increase (decrease) in cash and equivalents (17,581) 244,301
CASH AND EQUIVALENTS, beginning of period 218,331 207,600
----------- -----------
CASH AND EQUIVALENTS, end of period $ 200,750 $ 451,901
=========== ===========
Interest paid on a cash basis $ 553,035 $ 458,366
=========== ===========
</TABLE>
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<PAGE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein should be read in conjunction with the
Partnership's 1995 Annual Report. 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, 1996 and 1995.
1. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed with
mortgage companies for property taxes in accordance with the loan
agreements.
Cash and equivalents - restricted at December 31, 1995 also included
escrow funds which were to be released as capital expenditures, leasing
commissions and tenant improvements were incurred at the properties owned
by to Lakeshore/University II Joint Venture. In 1996, these escrow funds
were released.
2. Mortgages and Notes Payable
---------------------------
Mortgages and notes payable consist of the following:
March 31, December 31,
1996 1995
---- ----
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 7.65%, due February 1, 2008,
secured by land, buildings and
amenities $ 5,078,281 $ --
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.5%, due December 5, 2003,
secured by land, buildings and
amenities 2,920,951 2,929,404
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 7.5%, due December 5, 2003,
secured by land, buildings and
amenities 1,743,851 1,748,897
Note payable with a bank bearing
interest at the Prime Rate, due
February 1, 2009, secured by land,
buildings and amenities 1,394,769 --
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land
and building 6,347,006 6,371,930
(continued next page)
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<PAGE>
2. Mortgages and Notes Payable - Continued
---------------------------------------
March 31, December 31,
1996 1995
---- ----
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land
and building $ 3,948,880 $ 3,973,802
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 829,375 854,298
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 324,227 324,227
Note payable to a bank bearing
interest at a fixed rate of 10.6%,
due January 31, 1998, secured by land 235,382 235,382
Note payable to a bank bearing
interest at the Prime Rate + 1%, due
March 31, 1996, secured by certain
land and buildings -- 6,402,000
---------- ----------
$22,822,722 $22,839,940
========== ==========
The Prime Rate was 8.25% at March 31, 1996 and was 8.5% at December 31,
1995.
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms, the fair value of long-term debt is
approximately $26,700,000.
3. Related Party Transactions
--------------------------
Property management fees of $85,699 and $78,023 for the three months ended
March 31, 1996 and 1995, respectively, 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. Also pursuant to the partnership 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 $2,356 and $1,752 as a repair and maintenance fee
during the three months ended March 31, 1996 and 1995, respectively, and
has capitalized this cost as part of land, buildings and amenities.
As permitted by the Partnership Agreement, the Partnership also was
charged the following amounts from NTS Development Company for the three
months ended March 31, 1996 and 1995. 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.
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<PAGE>
3. Related Party Transactions - Continued
--------------------------------------
These charges were as follows:
1996 1995
--------- ---------
Administrative $ 58,879 $ 51,629
Leasing agents 70,392 39,789
Property manager 77,235 75,566
Other 412 3,847
-------- --------
$ 206,918 $ 170,831
======== ========
4. Reclassification of 1995 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the March 31, 1995 financial
statements to conform with March 31, 1996 classifications. These
reclassifications have no effect on previously reported operations.
5. New Accounting Pronouncement
----------------------------
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (the "Statement") on accounting for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to assets
to be held and used. The Statement also establishes accounting standards
for long-lived assets and certain identifiable intangibles to be disposed
of. The Partnership adopted the Statement as of January 1, 1996 as
required. No adjustments were required.
6. Interest Repurchase Reserve
---------------------------
On June 30, 1996, the Partnership will establish an Interest Repurchase
Reserve in the amount of $50,000 pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited Partnership. Under
Section 16.4, limited partners may request the Partnership to repurchase
their respective interests (Units) in the Partnership. With this Interest
Repurchase Reserve, the Partnership will be able to repurchase up to 370
Units at a currently contemplated price of $135 per Unit. The Partnership
notified the limited partners by letter dated February 1, 1996 of the
establishment of the Interest Repurchase Reserve and the opportunity to
request that the Partnership repurchase Units at the established price.
Repurchased Units will be retired by the Partnership, thus increasing the
share of ownership of each remaining investor. The Partnership plans to
fund the Interest Repurchase Reserve from cash reserves.
- 8 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
1996 1995
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II 67% 100%
University Business Center Phase I 95% 90%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership
% at March 31, 1996)
- ---------------------------------
The Willows of Plainview Phase II (90%) 97% 90%
Lakeshore Business Center Phase I
(See L/U II Joint Venture below) See below See below
(1) (1)
Property Owned in Joint Venture with
NTS-Properties Plus Ltd. (Ownership
% at March 31, 1996)
- ------------------------------------
University Business Center Phase II
(See L/U II Joint Venture below) See below See below
(1) (1)
Properties Owned Through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at March
31, 1996)
- ------------------------------------
Lakeshore Business Center Phase I (69%) 97% 79%
Lakeshore Business Center Phase II (69%) 72% 77% (2)
University Business Center Phase II (69%) 100% 100%
(1) During the first quarter of 1995, the Partnership's ownership interest
in the property changed. See below for a discussion regarding this
change.
(2) The Partnership obtained an interest in this property during the first
quarter of 1995. See below for a discussion regarding this change.
- 9 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1996 and 1995 was as follows:
1996 1995
--------- ----------
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II $ 125,735 $ 177,426
University Business Center I $ 362,807 $ 339,174
Properties Owned in Joint Venture with
NTS-Properties IV (Ownership % at March
31, 1996)
- ----------------------------------------
The Willows of Plainview Phase II (90%) $ 281,652 $ 255,798
Lakeshore Business Center Phase I
(See L/U II Joint Venture below) N/A $ 74,043 (1)
Property Owned in Joint Venture with
NTS-Properties Plus Ltd. (Ownership %
at March 31, 1996)
- -------------------------------------
University Business Center Phase II
(See L/U II Joint Venture below) N/A $ 17,263 (1)
Properties Owned Through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at March
31, 1996)
- ------------------------------------
Lakeshore Business Center Phase I (69%) $ 237,135 $ 130,672
Lakeshore Business Center Phase II (69%) $ 181,691 $ 139,637 (2)
University Business Center Phase II (69%) $ 205,053 $ 148,930
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
(1) During the first quarter of 1995, the Partnership's ownership interest
in the property changed. The Partnership's proportionate share of rental
and other income from January 23, 1995 to March 31, 1995 is reflected
below (see L/U II Joint Venture). See below for a discussion regarding
this change.
(2) The Partnership obtained an interest in this property during the first
quarter of 1995. See below for a discussion regarding this change.
The 33% decrease in occupancy at Commonwealth Business Center Phase II from
March 31, 1995 to March 31, 1996 is a result of four tenant move-outs totalling
approximately 22,000 square feet. Included in this total is one tenant of 1,600
square feet which vacated at the end of the lease term. The other three tenants,
who had occupied approximately 20,000 square feet, vacated the premises prior to
the end of the lease terms. Two of the three tenants, who occupied approximately
19,000 square feet, exercised
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
termination options. The third tenant, who had occupied approximately 1,000
square feet, continued to pay rent through the end of its lease term (February
1996). There was no accrued income associated with these leases. Partially
offsetting the move-outs is one new lease for 1,600 square feet. The Partnership
is actively seeking new tenants to occupy the vacant space. At this time, the
extent and cost of any tenant improvements which will be required to attract new
tenants remains unknown. 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 downward occupancy trend. Average occupancy
for the three months ended March 31 decreased from 100% (1995) to 67% (1996).
The decrease in rental and other income at Commonwealth Business Center Phase II
for the three months ended March 31, 1996 as compared to the same period in 1995
is a result of the decrease in average occupancy. Partially offsetting the
decrease in rental and other income is an increase in common area expense
reimbursements. Tenants at Commonwealth Business Center Phase II reimburse the
Partnership for common area expenses as part of the lease agreements.
The 5% increase in occupancy at University Business Center Phase I from March
31, 1995 to March 31, 1996 is a result of six new leases totalling approximately
9,400 square feet. Partially offsetting the new leases is a tenant move-out of
approximately 2,500 square feet at the end of the lease term and one tenant, who
occupied approximately 2,800 square feet, vacating the premises prior to the end
of the lease term due to bankruptcy. Accrued income of approximately $3,800
associated with this lease was written-off as uncollectible. Average occupancy
at University Business Center Phase I for the three months ended March 31
increased from 90% (1995) to 95% (1996). The increase in rental and other income
at University Business Center Phase I for the three months ended March 31, 1996
as compared to the same period in 1995 is primarily due to the increase in
average occupancy.
The Willows of Plainview Phase II's occupancy increased from 90% as of March 31,
1995 to 97% as of March 31, 1996. Average occupancy increased from 89% for the
three months ended March 31, 1995 to 96% for the same period in 1996. Occupancy
at residential properties fluctuate on a continuous basis. Period-ending
occupancy percentages represent occupancy only on a specific date; therefore, it
is more meaningful to consider average occupancy percentages which are
representative of the entire period's results. The increase in average occupancy
along with an increase in income from fully furnished units at The Willows of
Plainview Phase II resulted in an increase in rental and other income. Fully
furnished units are apartments which rent at an additional premium above base
rent.
The 18% increase in occupancy at Lakeshore Business Center Phase I from March
31, 1995 to March 31, 1996 can be attributed to 10 new leases, totalling
approximately 23,500 square feet which includes approximately 7,600 square feet
in expansions by three current tenants. The new leases and expansions are
partially offset by three tenant move-outs, who vacated at the end of the lease
terms, totalling approximately 4,300 square feet. Average occupancy for the
three months ended March 31 increased from 79% (1995) to 98% (1996). The
Partnership's proportionate share of the rental and other income at Lakeshore
Business Center Phase I decreased for the three months ended March 31, 1996 as
compared to the same period in 1995 as a result of the Partnership's decreased
ownership in Lakeshore Business Center Phase I. (See below for a discussion
regarding the change.) Overall, Lakeshore Business Center Phase I's rental and
other income increased for the three months ended March 31, 1996 as compared to
the same period in 1995. The increase in rental and other income can be
attributed primarily to the increase in average occupancy and a decrease in the
provision for doubtful accounts.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 5% decrease in occupancy at Lakeshore Business Center Phase II from March
31, 1995 to March 31, 1996 can be attributed to four tenant move-outs totalling
approximately 11,000 square feet and a downsizing by a current tenant of its
existing space of approximately 6,000 square feet. Two of the move-outs,
totalling approximately 5,100 square feet, represent tenants who vacated the
premises prior to the end of the lease term but are continuing to pay rent
through the end of the lease term. The third tenant, who occupied approximately
4,500 square feet, vacated the premises at the end of the lease term. The fourth
tenant, who occupied approximately 1,400 square feet, vacated the premises and
ceased making rental payments in breach of the lease terms due to bankruptcy.
The write-off of accrued income connected with this lease was not significant.
Partially offsetting the tenant move-outs are four new leases totalling
approximately 8,800 square feet and a 3,600 square foot expansion by a current
tenant of its existing space. Average occupancy at Lakeshore Business Center
Phase II decreased for the three months ended March 31 from 78% in 1995 to 72%
in 1996. In the opinion of the General Partner of the Partnership, the decrease
in occupancy at Lakeshore Business Center Phase II is only a temporary
fluctuation and does not represent a downward occupancy trend. The Partnership's
proportionate share of the rental and other income at Lakeshore Business Center
Phase II increased during the first quarter of 1996 as compared to the first
quarter of 1995. This is due to the fact that the Partnership obtained an
interest in Lakeshore Business Center Phase II as a result of the formation of
the Lakeshore/University II Joint Venture in January 1995. (See below for a
discussion regarding this change.) Overall, rental and other income decreased at
Lakeshore Business Center Phase II during the period due primarily to the
decrease in average occupancy.
During the first quarter of 1996, a new six-year lease was signed at Lakeshore
Business Center Phase II for approximately 7,000 square feet. The tenant took
occupancy in April 1996 improving the building's occupancy to 80%.
Philip Crosby Associates, Inc. ("PCA") has leased 100% of University Business
Center Phase II. The lease term is for seven years, and the tenant took
occupancy in April 1991. The tenant has currently sub-leased approximately
52,000 square feet (or 67%) of University Business Center Phase II. Of the total
being sub-leased, approximately 41,000 square feet (or 79%) is being leased by
Full Sail Recorders, Inc. (a major tenant at University Business Center Phase
I). In December 1995, Full Sail Recorders, Inc. ("Full Sail") signed a 33 month
lease with the L/U II Joint Venture for the approximately 41,000 square feet it
currently sub-leases from PCA. The lease term commences April 1998 when PCA's
lease ends. As part of the lease negotiations, Full Sail will receive a $200,000
tenant finish allowance in 1996, of which approximately $92,000 will be
reimbursed by Full Sail over a 27-month period beginning January 1996. The Joint
Venture has received notice that PCA will not renew its lease when it expires in
1998. At this time, it is not known whether the other sublessees will sign
renewal leases with the Joint Venture.
The Partnership's proportionate share of the rental and other income at
University Business Center Phase II increased for the three months ended March
31, 1996 as compared to the same period in 1995 as a result of the Partnership's
increased ownership in the business center. (See below for a discussion
regarding the change.) Overall, rental and other income at University Business
Center Phase II decreased for the three months ended March 31, 1996 as compared
to the same period in 1995 as a result of a decrease in common area expense
reimbursements. The decrease in rental and other income is partially offset by a
rent escalation based upon an increase in the consumer price index.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
In cases of tenants who cease making rental payments or abandon the premises in
breach of their leases, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties without the need of any additional financing. In
the opinion of the General Partner of the Partnership, the decreased occupancy
levels at Commonwealth Business Center Phase II and Lakeshore Business Center
Phase II are not indicative of trends in the area in which the property is
located. See the Liquidity and Capital Resources section of this item for a
discussion regarding the cash requirements of the Partnership's current debt
financings.
Interest and other income includes interest earned from investments made by the
Partnership with cash reserves. The decrease in interest income for the three
months ended March 31, 1996 as compared to the same period in 1995 is a result
of a decrease in cash reserves available for investment.
The increase in operating expenses for the three months ended March 31, 1996 as
compared to the same period in 1995 is primarily the result of the Partnership
acquiring an interest in the Lakeshore/University II Joint Venture in January
1995. See below for a discussion regarding the joint venture. The increase in
operating expenses can also be attributed to an increase in vacant suite utility
costs at Commonwealth Business Center Phase II. Operating expenses at the
Partnership's other properties remained fairly constant for the three months
ended March 31, 1996 as compared to the same period in 1995.
The increase in operating expenses - affiliated for the three months ended March
31, 1996 as compared to the same period in 1995 is due primarily to the
Partnership acquiring an interest in the L/U II Joint Venture in January 1995
(discussed below). The increase in operating expenses - affiliated for the three
month period is partially offset by decreases in property management costs at
the Partnership's other properties. Operating expenses - affiliated are expenses
incurred for services performed by employees of NTS Development Company, an
affiliate of the General Partner of the Partnership.
The decrease in the amortization of capitalized leasing costs for the three
month period is due to the fact that costs capitalized during start-up at
University Business Center Phase II became fully amortized at the end of 1995.
The increase in interest expense for the three months ended March 31, 1996 as
compared to the same period in 1995 is primarily the result of the Partnership
acquiring an interest in the L/U II Joint Venture in January 1995 (discussed
below). The increase in interest expense is partially offset by lower interest
rates on the permanent financings obtained in January 1996 (secured by
University Business Center Phase I and Commonwealth Business Center Phase II).
See the Liquidity and Capital Resources section of this item for a discussion of
these permanent financings.
Management fees are calculated as a percentage of cash collections, however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations of
management fee expense. The increase in management fees for the three month
period can also be attributed to the Partnership acquiring an interest in the
L/U II Joint Venture in January 1995 (discussed below).
The increase in real estate taxes for the three months ended March 31, 1996 as
compared to the same period in 1995 is primarily a result of the Partnership
acquiring an interest in the L/U II Joint Venture in January 1995 (discussed
below). The increase in real estate taxes for the three month period is also a
result of an increased assessment for Commonwealth Business Center Phase II.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The decrease in professional and administrative expenses for the three months
ended March 31, 1996 as compared to the same period in 1995 is due to decreased
outside legal fees.
The change in professional and administrative expenses - affiliated for the
three months ended March 31, 1996 as compared to the same period in 1995 was not
significant. Professional and administrative expenses - affiliated are expenses
incurred for services performed by employees of NTS Development Company, an
affiliate of the General Partner.
Depreciation and amortization expense has increased for the three months ended
March 31, 1996 as compared to the same period in 1995 as a result of the
Partnership acquiring an interest in the L/U II Joint Venture in January 1995
(discussed below). The increase in depreciation and amortization expense for the
three month period is partially offset by a portion of the Partnership's assets
having become fully depreciated. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets which are 10
- - 30 years for land improvements, 30 years for buildings, 5 - 30 years for
building improvements and 5 - 30 years for amenities. The aggregate cost of the
Partnership's properties for Federal tax purposes is approximately $41,400,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $150,866 and $110,959 for the three
months ended March 31, 1996 and 1995, respectively. No distribution has been
declared since the three months ended March 31, 1994 as a result of a loan
covenant (the $6,402,000 note payable - balance as of December 31, 1995) which
required the Partnership to have $500,000 remaining in cash or cash equivalents
(excluding residential security deposits and cash escrowed with a lending
institution for the payment of property taxes) following a distribution. The
note payable was repaid in January 1996 (see below for a further discussion).
The Partnership plans to resume distributions once the Partnership has
established adequate cash reserves, which would include funds for future tenant
finish improvements, and the cash flow from operations is sufficient, in
management's opinion, to pay distributions. Cash reserves (which are
unrestricted cash and equivalents as shown on the Partnership's balance sheet at
March 31) were $200,750 and $451,901 at March 31, 1996 and 1995, respectively.
The primary source of future liquidity and distributions is expected to be
derived from cash generated by the Partnership's properties after adequate cash
reserves are established for future leasing costs, tenant finish costs and
capital improvements.
As previously disclosed in the Partnership's Form 10-K for the year ended
December 31, 1995, a new joint venture known as Lakeshore/University II Joint
Venture (L/U II Joint Venture) was formed on January 23, 1995 among the
Partnership and NTS-Properties IV, 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 and certain undeveloped tracts adjacent to the
Lakeshore Business Center development.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 for other capital additions and are funded by operating
activities and 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 also include cash which is being escrowed for
capital expenditures, leasing commissions and tenant improvements at the
properties owned by the L/U II Joint Venture as required by the loan agreements
discussed below. Cash flows provided by investing activities were the result of
a release of these escrow funds. Cash flows provided by financing activities are
from debt refinancings. Cash flows used in financing activities are for loan
costs and principal payments on mortgages and notes payable. The capital
contribution by a joint venture partner represents the Partnership's interest in
the L/U II Joint Venture's increase in cash which resulted from a capital
contribution. 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 are combined on
a line-by-line basis with the Partnership's own assets, liabilities, revenues,
expenses and cash flows. The Partnership does not expect any material changes in
the mix and relative cost of capital resources except for the changes resulting
from the investment in the L/U II Joint Venture. See above for a discussion of
the Joint Venture formation. The Partnership also expects a change in the cost
of capital resources as a result of the permanent financing of Commonwealth
Business Center Phase II and University Business Center Phase I as discussed
below.
Due to the fact that no distributions were made during the three months ended
March 31, 1996 and 1995, the table which presents that portion of the
distribution that represents a return of capital on a Generally Accepted
Accounting Principle basis has been omitted.
As of March 31, 1996, the Partnership has accrued approximately $150,000
(included in the accounts payable - construction balance) for certain
improvements to the undeveloped land at the University Place development. The
purchaser of the approximately 1 acre tract of land at the University Place
development has paid the cost of these improvements. The Partnership will
reimburse the purchaser for these costs, along with interest at the Prime Rate,
at the earlier of (1) the start of construction of University Business Center
Phase III, (2) the sale by the Partnership of any portion of the remaining
undeveloped land, or (3) five years from the date of the Agreement (agreement
dated November 1992).
The remaining balance in accounts payable - construction at March 31, 1996
represents payables that are a result of tenant finish improvements. Tenant
finish improvements are a typical part of any lease negotiation. None of the
Partnership's properties were in the construction stage as of March 31, 1996.
As of March 31, 1996, the L/U II Joint Venture had a commitment for an
approximately $105,000 special tenant finish allowance. The commitment is the
result of a new six-year lease for approximately 7,000 square feet at Lakeshore
Business Center Phase II. The Partnership's proportionate share of this
commitment is approximately $72,000 or 69%. As of March 31, 1996, approximately
$70,000 had been incurred toward this commitment, of which the Partnership's
proportionate share is approximately $48,000 or 69%.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of March 31, 1996, the L/U II Joint Venture also had a commitment for a
$200,000 special tenant finish allowance, of which approximately $92,000 will be
reimbursed by the tenant over a 27-month period beginning in January 1996. This
commitment is the result of lease negotiations with Full Sail Recorders, Inc.
("Full Sail") which currently sub-leases approximately 41,000 square feet from
Philip Crosby Associates, Inc. ("PCA") at University Business Center Phase II.
PCA currently leases 100% of the business center through April 1998. Full Sail's
lease term with the Joint Venture is for 33 months (April 1998 to December
2000). The Partnership's proportionate share of the net commitment($200,000 less
$92,000) is approximately $75,000 or 69%.
The Partnership had no other material commitments for renovations or capital
improvements at March 31, 1996.
On January 29, 1996, the Partnership obtained permanent financing from a bank
totalling $1,600,000 with $200,000 held for future fundings. The outstanding
balance at March 31, 1996 was $1,394,769. The mortgage payable is due February
1, 2009, bears interest at the Prime Rate and is secured by Commonwealth
Business Center Phase II ("CBC II"). The remaining $200,000 will be disbursed by
February 1, 1999 in one additional advance when the following conditions are
met: 1) CBC II reaches a minimum occupancy of 75% based on leases acceptable to
the bank with a minimum term of not less than three years, 2) CBC II achieves a
minimum gross monthly base rental income of $37,500 for at least three months,
3) the Partnership is not in default on the loan and 4) the bank receives tenant
estoppel certificates from the tenants of CBC II. Monthly principal payments are
based on a 13-year amortization schedule. At maturity, the mortgage will have
been repaid based on the current rate of amortization.
On January 31, 1996, the Partnership obtained permanent financing from an
insurance company totalling $5,100,000. The outstanding balance at March 31,
1996 was $5,078,281. The mortgage payable is due February 1, 2008, bears
interest at a fixed rate of 7.65% and is secured by University Business Center
Phase I. Monthly principal payments are based on a 12-year amortization
schedule. At maturity, the mortgage will have been repaid based on the current
rate of amortization.
The proceeds of these permanent financings were used to retire the Partnership's
note payable, which had a balance of $6,352,000, to fund loan closing costs and
to increase the Partnership's cash reserves.
As of March 31, 1996, The Willows of Plainview Phase II, a joint venture between
the Partnership and NTS-Properties IV, had two mortgage loans each with an
insurance company in the amount of $3,255,993 and $1,943,876. The mortgages are
recorded as a liability of the joint venture. The Partnership's proportionate
share of the mortgages as of March 31, 1996 was $4,664,802 ($2,920,951 and
$1,743,851). Both mortgages are due December 5, 2003, currently bear interest at
a fixed rate of 7.5% and are secured by the land, buildings and amenities of the
Joint Venture. Current monthly principal payments on both mortgages are based
upon a 27-year amortization schedule. The outstanding balance at maturity based
on the current rate of amortization would be $4,449,434 ($2,786,095 and
$1,663,339).
As of March 31, 1996, the L/U II Joint Venture had notes payable to banks in the
following amounts: $9,168,000, $5,704,000, $1,198,000, $468,333 and $340,000.
The notes are a liability of the joint venture in accordance with the Joint
Venture Agreement. The Partnership's proportionate interest in the notes at
March 31, 1996 was $6,347,006, $3,948,880, $829,375, $324,227 and $235,382,
respectively. As part of the loan agreements with the banks, the Joint Venture
is required to place in escrow funds for capital expenditures, leasing
commissions and tenant improvements at the properties
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
owned by the Joint Venture. During the term of the loans, the Joint Venture is
required to fund a total of $200,000 to the escrow account. The Joint Venture
met this funding requirement in 1995. As of March 31, 1996, all funds in the
escrow account had been released. The notes bear interest at a fixed rate of
10.6%, are due January 31, 1998 and are secured by the assets of the joint
venture. Principal payments required on the $9,168,000, $5,704,000 and
$1,198,000 notes are as follows:
a) 12 monthly payments of $3,000 each, the first of which was due at
closing. The second through 12th payments are due on the first
day of February through December 1995.
b) 12 monthly payments of $12,000 each, commencing on January 1, 1996
through December 1, 1996.
c) 13 monthly payments of $15,000 each, commencing on January 1, 1997
through January 1, 1998.
d) Balloon payment due at maturity on January 31, 1998.
As of March 31, 1996, the L/U II Joint Venture has obtained a commitment from an
insurance company for $17.4 million of debt financing. The mortgage will mature
144 months from the closing date and will bear interest at a fixed rate of
8.125%. The repayment of principal will be amortized over 144 months, with
monthly payments of principal and interest in the amount of $189,541. The
proceeds from the loan will be used to pay off the Joint Venture's current debt
financings of approximately $16.9 million. The remaining proceeds will be used
to fund Joint Venture tenant finish improvements, leasing costs and loan closing
costs. The closing date of the permanent financing is expected to take place
before June 30, 1996.
In the next 12 months, the demand on future liquidity is anticipated to increase
as a result of the principal and interest payments required on the permanent
mortgages obtained by the Partnership in January 1996, principal payments which
will be required on the debt financings of the L/U II Joint Venture and
commitments made for special tenant finish allowances (see above). Additionally,
the Partnership will continue its efforts to lease current unoccupied space at
its commercial properties. The Partnership also expects a demand on future
liquidity based on 68,166 square feet in leases expiring from April 1, 1996 to
March 31, 1997 (Commonwealth Business Center Phase II - 22,000 square feet,
University Business Center Phase I - 13,463 square feet, Lakeshore Business
Center Phase I - 15,641 square feet and Lakeshore Business Center Phase II -
17,062 square feet). At this time, the future leasing and tenant finish costs
which will be required to renew the current leases or obtain new tenants are
unknown.
Cash in the amount of $50,000 will also be required to fund the Interest
Repurchase Reserve which the Partnership will establish on June 30, 1996
pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership. Under Section 16.4, limited partners may request the
Partnership to repurchase their respective interests (Units) in the Partnership.
With this Interest Repurchase Reserve, the Partnership will be able to
repurchase up to 370 Units at a currently contemplated price of $135 per Unit.
The Partnership notified the limited partners by letter dated February 1, 1996
of the establishment of the Interest Repurchase Reserve and the opportunity to
request that the Partnership repurchase Units at the established price.
Repurchased Units will be retired by the Partnership, thus increasing the share
of ownership of each remaining investor. The Partnership plans to fund the
Interest Repurchase Reserve from cash reserves. The Partnership is currently
contemplating an additional funding to its Interest Repurchase Reserve during
the third quarter of 1996.
It is anticipated that the cash flow from operations and cash reserves will be
sufficient to meet the needs of the Partnership.
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Historically, extremely weak economic conditions in Ft. Lauderdale, Florida have
caused the low occupancy levels at Lakeshore Business Center Phases I and II. In
the opinion of the general partner, leasing activity is improving in this part
of Florida. In an effort to improve the occupancy at the business center, the
Partnership has an on-site leasing agent, an employee of NTS Development Company
(an affiliate of 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 following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's other properties. At Commonwealth
Business Center Phase II, the leasing and renewal negotiations are handled by
leasing agents, employees of NTS Development Company, located in Louisville,
Kentucky. The leasing agents are located in the same city as the property. All
advertising is coordinated by NTS Development Company's marketing staff located
in Louisville, Kentucky. At University Business Center Phases I and II in
Orlando, Florida, the Partnership has an on-site leasing agent, an employee of
NTS Development Company, who makes calls to potential tenants, negotiates lease
renewals with current tenants and manages local advertising with the assistance
of NTS Development Company's marketing staff. The leasing and renewal
negotiations at Lakeshore Business Center Phases I and II are handled by a
leasing agent, an employee of NTS Development Company, located at the Lakeshore
Business Center development. At The Willows of Plainview Phase II, the
Partnership has an on-site leasing staff, employees of NTS Development Company,
who handle all on-site visits from potential tenants, make visits to local
companies to promote fully furnished units, negotiate lease renewals with
current residents and coordinate all local advertising with NTS Development
Company's marketing staff.
Leases at the Partnership's commercial properties provide for tenants to
contribute toward the payment of common area expenses, insurance and real estate
taxes. Leases at the Partnership's Florida commercial properties also provide
for rent increases which are based upon increases in the consumer price index.
These lease provisions, along with the fact that residential leases are
generally for a period of one year, should protect the Partnership's operations
from the impact of inflation and changing prices.
The Partnership owns approximately 6.21 acres of land, adjacent to the
University Place development, in Orlando, Florida which is zoned for commercial
development. Included in the cost of $2.4 million is land cost, capitalized
interest and common area costs. The Partnership plans to use the remaining land
to build University Business Center Phase III but this decision will be based on
market conditions, availability of financing and availability of the necessary
resources from the Partnership.
The L/U II Joint Venture owns approximately 6.2 acres of land adjacent to the
Lakeshore Business Center development in Ft. Lauderdale, Florida. The
Partnership's proportionate interest at March 31, 1996 in the land held for
development is approximately $1.1 million. The Joint Venture currently has a
contract for the sale of .7 acres of this land for $175,000.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated January 2, 1996, was filed to report in Item 5
the fact that the Partnership had obtained a commitment from an
insurance company for permanent financing in the amount of
$5,100,000.
Form 8-K, dated February 1, 1996, was filed to report in Item 5
the fact that the Partnership will establish an Interest
Repurchase Reserve pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited
Partnership.
- 19 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties V has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES V, a Maryland Limited
Partnership
(Registrant)
By: NTS-Properties Associates V
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
John W. Hampton
Senior Vice President
Date: May 14, 1996
- 20 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF MARCH 31, 1996 AND FROM THE STATEMENT OF OPERATIONS
FOR THE THREE MONHTS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 385,699
<SECURITIES> 0
<RECEIVABLES> 705,303
<ALLOWANCES> 31,715
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,821,569
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 31,368,633
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 22,822,722
0
0
<COMMON> 0
<OTHER-SE> 7,667,577
<TOTAL-LIABILITY-AND-EQUITY> 31,368,633
<SALES> 1,391,314
<TOTAL-REVENUES> 1,395,475
<CGS> 0
<TOTAL-COSTS> 1,036,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 540,524
<INCOME-PRETAX> (249,914)
<INCOME-TAX> 0
<INCOME-CONTINUING> (249,914)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,914)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE
IS $0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
