<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 June 30, 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 (Zip Code)
offices)
Registrant's telephone number,
including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (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
Exhibit Index: See page 19
Total Pages: 20
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of June 30, 1996 and December 31, 1995 3
Statements of Operations
For the three months and six months ended
June 30, 1996 and 1995 4
Statements of Cash Flows
For the three months and six months ended
June 30, 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
June 30, 1996 December 31, 1995*
------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 220,310 $ 218,331
Cash and equivalents - restricted 312,896 56,318
Accounts receivable, net of allowance
for doubtful accounts of $31,023
(1996) and $53,582 (1995) 652,114 766,624
Land, buildings and amenities, net 25,479,693 26,149,956
Assets held for development, net 3,508,892 3,585,818
Other assets 1,017,601 760,426
----------- -----------
$31,191,506 $31,537,473
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $22,650,861 $22,839,940
Accounts payable - operations 516,637 365,431
Accounts payable - construction 169,498 231,566
Security deposits 146,383 147,330
Other liabilities 298,310 35,717
----------- -----------
23,781,689 23,619,984
Partners' equity 7,409,817 7,917,489
----------- -----------
$31,191,506 $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 (453,147) (4,577) (457,724)
Cash distributions
declared to date (15,389,204) (155,527) (15,544,731)
Repurchase of limited
partnership units (86,730) -- (86,730)
------------ ------------ ------------
Balances at June 30, 1996 $ 7,527,993 $ (118,176) $ 7,409,817
============ ============ ============
</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 Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental income, net of provision
for doubtful accounts of $0
(1996) and $9,320 (1995) $ 1,395,285 $ 1,382,229 $ 2,786,598 $ 2,662,393
Interest and other income 8,376 38,611 12,537 43,743
----------- ----------- ----------- -----------
1,403,661 1,420,840 2,799,135 2,706,136
EXPENSES:
Operating expenses 246,924 229,811 498,087 440,407
Operating expenses - affiliated 125,532 129,258 261,498 257,091
Amortization of capitalized leasing costs 7,331 8,978 8,307 15,757
Interest expense 526,405 578,764 1,066,929 1,043,869
Management fees 83,395 81,874 169,094 159,899
Real estate taxes 134,494 130,770 268,941 248,517
Professional and administrative expenses 28,491 26,164 54,578 62,097
Professional and administrative expenses -
affiliated 36,293 38,953 78,799 77,779
Depreciation and amortization 422,609 476,785 850,626 896,606
----------- ----------- ----------- -----------
1,611,474 1,701,357 3,256,859 3,202,022
----------- ----------- ----------- -----------
Net loss $ (207,813) $ (280,517) $ (457,724) $ (495,886)
=========== =========== =========== ===========
Net loss allocated to the limited partners $ (205,735) $ (277,712) $ (453,147) $ (490,927)
=========== =========== =========== ===========
Net loss per limited partnership unit $ (5.74) $ (7.74) $ (12.63) $ (13.68)
=========== =========== =========== ===========
Weighted average number of units 35,869 35,876 35,873 35,876
=========== =========== =========== ===========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (207,813) $ (280,517) $ (457,724) $ (495,886)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for doubtful accounts -- (4,799) -- 9,320
Amortization of capitalized leasing costs 7,331 8,978 8,307 15,757
Depreciation and amortization 422,609 476,785 850,626 896,606
Changes in assets and liabilities:
Cash and equivalents - restricted (127,947) (100,307) (270,299) (151,683)
Accounts receivable 53,189 4,965 114,510 112,102
Other assets 6,303 39,414 (118,188) 32,786
Accounts payable - operations (11,786) (83,878) 30,746 (12,684)
Security deposits (3,857) 3,917 (947) 2,417
Other liabilities 130,729 125,491 262,593 (107,176)
----------- ----------- ----------- -----------
Net cash provided by operating activities 268,758 190,049 419,624 301,559
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (6,724) (10,865) (129,851) (30,710)
Increase in cash and equivalents - restricted -- -- -- (78,730)
Decrease in cash and equivalents -
restricted -- -- 13,721 --
----------- ----------- ----------- -----------
Net cash used in investing activities (6,724) (10,865) (116,130) (109,440)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in mortgages payable -- -- 6,500,000 --
Principal payments on mortgages and notes payable (171,861) (181,791) (6,689,079) (373,859)
Capital contribution by a joint venture partner -- -- -- 519,225
Additions to loan costs (20,663) (4,180) (62,486) (99,971)
Repurchase of limited partnership units (49,950) -- (49,950) --
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities (242,474) (185,971) (301,515) 45,395
----------- ----------- ----------- -----------
Net increase (decrease) in cash and equivalents 19,560 (6,787) 1,979 237,514
CASH AND EQUIVALENTS, beginning of period 200,750 451,901 218,331 207,600
----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 220,310 $ 445,114 $ 220,310 $ 445,114
=========== =========== =========== ===========
Interest paid on a cash basis $ 527,422 $ 584,806 $ 1,080,457 $ 1,043,172
=========== =========== =========== ===========
</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 and six months ended June 30, 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 the
Lakeshore/University II Joint Venture. In 1996, these escrow funds were
released.
2. 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.
3. Interest Repurchase Reserve
- ------------------------------
On June 28, 1996, the Partnership established 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
repurchased 370 Units at a 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 are retired by the
Partnership, thus increasing the share of ownership of each remaining investor.
(Notes To Financial Statements continued on next page)
-6-
<PAGE>
4. Mortgages and Notes Payable
- ------------------------------
Mortgages and notes payable consist of the following:
June 30, 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 and building $5,012,292 $ --
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 2,911,648 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 1,738,297 1,748,897
Note payable with a bank bearing
interest at the Prime Rate, due February 1,
2009, secured by land and building 1,378,522 --
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due
January 31, 1998, secured by land and building 6,322,084 6,371,930
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due
January 31, 1998, secured by land and building 3,923,956 3,973,802
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due
January 31, 1998, secured by land 804,453 854,298
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 land and buildings -- 6,402,000
----------- -----------
$22,650,861 $22,839,940
=========== ===========
The Prime Rate was 8.25% at June 30, 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
$26,200,000.
-7-
<PAGE>
4. Mortgages and Notes Payable - Continued
- ------------------------------------------
Subsequent to June 30, 1996, the Lakeshore/University II Joint Venture, of which
the Partnership owns a 69% interest, obtained three mortgage loans from an
insurance company totalling $17,400,000 ($6,025,000, $5,775,000 and $5,600,000).
The mortgages bear interest at a fixed rate of 8.125%, are due August 1, 2008
and are secured by the assets of the Joint Venture. The repayment of principal
will be amortized over 12 years. The proceeds from the loans were used to pay
off the Joint Venture's current debt financings of approximately $16.8 million
which bore interest at a fixed rate of 10.6% and fund loan closing costs of
approximately $280,000. The Partnership's proportionate interest in the notes
that were paid off was approximately $11,600,000 or 69%. The remaining proceeds
will be used to fund Joint Venture tenant finish improvements and leasing costs.
5. Related Party Transactions
- -----------------------------
Property management fees of $169,094 and $159,899 for the six months ended June
30, 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 $3,218 and $3,359 as a repair
and maintenance fee during the six months ended June 30, 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 six months ended June 30,
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.
1996 1995
---- ----
Administrative $107,924 $104,350
Leasing 113,311 79,466
Property manager 155,519 159,261
Other 12,173 4,685
-------- --------
$388,927 $347,762
======== ========
6. Reclassification of 1995 Financial Statements
- ------------------------------------------------
Certain reclassifications have been made to the June 30, 1995 financial
statements to conform with June 30, 1996 classifications. These
reclassifications have no effect on previously reported operations.
-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 June 30 were as
follows:
1996 1995
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II 69% 100%
University Business Center Phase I 95% 91%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership% at June 30, 1996)
- ----------------------------------------------------
The Willows of Plainview Phase II (90%) 94% 89%
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 June 30, 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 June 30, 1996)
- ---------------------------------------------
Lakeshore Business Center Phase I (69%) 99% 83%
Lakeshore Business Center Phase II (69%) 80% 82% (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.
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<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1996 and 1995 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
Wholly-owned Properties
-----------------------
Commonwealth Business Center
Phase II $106,235 $177,279 $231,969 $354,725
University Business Center
Phase I $351,367 $356,408 $714,173 $695,582
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership %
at June 30, 1996)
-----------------------------------
The Willows of Plainview
Phase II (90%) $287,906 $261,363 $569,558 $517,161
Lakeshore Business Center
Phase I
(See L/U II Joint Venture below) N/A N/A N/A $74,043(1)
Property Owned in Joint Venture
with NTS-Properties Plus Ltd.
(Ownership % at June 30, 1996)
------------------------------
University Business Center
Phase II
(See L/U II Joint Venture below) N/A N/A N/A $17,263(1)
Properties Owned Through
Lakeshore/University II
Joint Venture (L/U II Joint Venture)
(Ownership % at June 30, 1996)
------------------------------
Lakeshore Business Center
Phase I (69%) $245,034 $191,004 $482,169 $321,675
Lakeshore Business Center
Phase II (69%) $197,722 $222,096 $379,413 $361,733(2)
University Business Center
Phase II (69%) $210,821 $206,318 $415,874 $355,248
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 June 30, 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.
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<PAGE>
Results of Operations - Continued
- ---------------------------------
The 31% decrease in occupancy at Commonwealth Business Center Phase II from June
30, 1995 to June 30, 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 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 are two new leases for 3,200
square feet. See the following paragraph for information regarding leasing
activity at the business center. Average occupancy for both the three months and
six months ended June 30 decreased from 100% (1995) to 67% (1996). The decrease
in rental and other income at Commonwealth Business Center Phase II for the
three months and six months ended June 30, 1996 as compared to the same periods
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.
A new five year lease has been signed at Commonwealth Business Center Phase II
for approximately 14,000 square feet. The tenant took occupancy during the third
quarter of 1996 and has reimbursed the Partnership for the cost of the tenant
improvements made to its leased space. With this new lease, the business
center's occupancy improves to 89%.
The 4% increase in occupancy at University Business Center Phase I from June 30,
1995 to June 30, 1996 is a result of five new leases totalling approximately
8,000 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 and six months ended
June 30 increased from 90% (1995) to 95% (1996). The increase in rental and
other income at University Business Center Phase I for the six months ended June
30, 1996 as compared to the same period in 1995 is primarily due to the increase
in average occupancy. The change in rental and other income for the three month
period at University Business Center Phase I was not significant.
The Willows of Plainview Phase II's occupancy increased from 89% as of June 30,
1995 to 94% as of June 30, 1996. Average occupancy increased from 90% (1995) to
95% (1996) for the six months ended June 30 and from 92% (1995) to 93% (1996)
for the three month period. 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, an increase in rental rates, along with an
increase in income from fully furnished units resulted in an increase in rental
and other income at The Willows of Plainview Phase II for the three months and
six months ended June 30, 1996 as compared to the same periods in 1995. Fully
furnished units are apartments which rent at an additional premium above base
rent.
The 16% increase in occupancy at Lakeshore Business Center Phase I from June 30,
1995 to June 30, 1996 can be attributed to eight new leases, totalling
approximately 20,400 square feet which includes approximately 6,900 square feet
in expansions by three current tenants. The new leases and expansions are
-11-
<PAGE>
Results of Operations - Continued
- ---------------------------------
partially offset by two tenants, who occupied a total of approximately 3,400
square feet, vacating the premises at the end of the lease terms. Average
occupancy for the six months ended June 30 increased from 79% (1995) to 98%
(1996) and from 80% (1995) to 98% (1996) for the three month period. The
increase in rental and other income at Lakeshore Business Center Phase I for the
three months and six months ended June 30, 1996 as compared to the same periods
in 1995 is primarily due to the increase in average occupancy and a decrease in
the provision for doubtful accounts. The increase in rental and other income for
the six month period is partially offset by the Partnership's decreased
ownership in Lakeshore Business Center Phase I. (See below for a discussion
regarding this change.)
The 2% decrease in occupancy at Lakeshore Business Center Phase II from June 30,
1995 to June 30, 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 by 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 (September 1996 and August 1997). The third
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.
The fourth tenant, who occupied approximately 4,500 square feet, vacated the
premises at the end of the lease term. Partially offsetting the tenant move-outs
are three new leases totalling approximately 13,800 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 six months
ended June 30 from 80% (1995) to 76% (1996) and from 81% (1995) to 80% (1996)
for the three month period. 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.
Overall, rental and other income decreased at Lakeshore Business Center Phase II
during the six month period primarily due to the decrease in average occupancy.
The Partnership's proportionate share of the rental and other income at
Lakeshore Business Center Phase II, however, increased for the six months ended
June 30, 1996 as compared to the same period in 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 on
January 23, 1995. (See below for a discussion regarding this change.)
As of June 30, 1996, Lakeshore Business Center Phase II had approximately 3,400
square feet of additional space leased to a current tenant. The tenant is
expected to take occupancy during the third quarter. With this new lease, the
business center's occupancy should improve to 83%.
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 lease
renewals with the Joint Venture.
-12-
<PAGE>
Results of Operations - Continued
- ---------------------------------
The Partnership's proportionate share of the rental and other income at
University Business Center Phase II increased for the six months ended June 30,
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 six months ended June 30, 1996 as compared to
the same period in 1995 as a result of a decrease in common area expense
reimbursements. The tenant reimburses the Partnership for common area expenses
as part of the lease agreement. The decrease in rental and other income is
partially offset by a rent escalation based upon an increase in the consumer
price index. The change in rental and other income at University Business Center
Phase II for the three month period was not significant.
In cases of tenants who cease making rental payments or abandon the premises in
breach of their lease, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it was thought there could be a possible collection. There
have been no funds recovered as a result of these actions during the six months
ended June 30, 1996 and 1995. As of June 30, 1996, there were no on-going cases.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties without the need of any additional financing. See
the Liquidity and Capital Resources section of this item for a discussion
regarding the cash requirements of the Partnership's current debt financings.
The decrease in interest and other income for the three months and six months
ended June 30, 1996 as compared to the same periods in 1995 is primarily the
result of approximately $21,600 in interest income being recognized during the
second quarter of 1995 on a receivable from a tenant at University Business
Center Phase I. Interest income was not recognized until the receivable had been
paid in full due to the length of time it had taken the tenant to reimburse the
Partnership.
Interest and other income also includes interest earned from investments made by
the Partnership with cash reserves. The decrease in interest income for the
three months and six months ended June 30, 1996 as compared to the same periods
in 1995 is also a result of a decrease in cash reserves available for
investment.
Operating expenses increased for the three months and six months ended June 30,
1996 as compared to the same periods in 1995 due to increased expenses
associated with fully furnished units at The Willows of Plainview Phase II and
increased exterior painting costs at University Business Center Phase I. The
increase in operating expenses for the six month period can also be attributed
to an increase in vacant suite utilities at Commonwealth Business Center Phase
II and is also 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 for
the three month period is also due to increased utility costs at Lakeshore
Business Center Phase II and University Business Center Phase II. Operating
expenses at Lakeshore Business Center Phase I remained fairly constant during
the three month period.
The increase in operating expenses - affiliated for the six months ended June
30, 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 six
month period is partially offset by decreases in property management costs at
the Partnership's other properties and a decrease in leasing costs at University
Business Center Phase I. The change in operating expenses - affiliated for the
three month period was not significant. Operating expenses - affiliated are
expenses incurred for services performed by employees of NTS Development
Company, an affiliate of the General Partner of the Partnership.
-13-
<PAGE>
Results of Operations - Continued
The decrease in the amortization of capitalized leasing costs for the six months
ended June 30, 1996 as compared to the same period in 1995 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 change in the amortization of
capitalized leasing costs for the three month period was not significant.
The increase in interest expense for the six months ended June 30, 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 for the six month period 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). The decrease in interest expense for the three month period
ended June 30, 1996 as compared to the same period in 1995 is also a result of
these lower interest rates. 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 six 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 and six months ended June
30, 1996 as compared to the same periods in 1995 is a result of an increased
assessment for Commonwealth Business Center Phase II. The increase in real
estate taxes for the six month period is also a result of the Partnership
acquiring an interest in the L/U II Joint Venture in January 1995 (discussed
below).
The decrease in professional and administrative expenses for the six months
ended June 30, 1996 as compared to the same period in 1995 is due to decreased
outside legal fees. The change in professional and administrative expenses for
the three month period was not significant.
The change in professional and administrative expenses - affiliated for the
three months and six months ended June 30, 1996 as compared to the same periods
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 decreased for the three months and six
months ended June 30, 1996 as a result of a portion of the Partnership's assets
(primarily tenant finish improvements) having become fully depreciated. The
decrease in depreciation and amortization for the six month period is partially
offset by the Partnership acquiring an interest in the L/U II Joint Venture in
January 1995 (discussed below). 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 $419,624 and $301,559 for the six
months ended June 30, 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
-14-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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
June 30) were $220,310 and $445,114 at June 30, 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, 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 of land adjacent to the
Lakeshore Business Center development.
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 June 30, 1996 was $1,378,522. 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 June 30, 1996
was $5,012,292. 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 June 30, 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 $3,244,538 and $1,937,037. The mortgages are
recorded as a liability of the Joint Venture. The Partnership's proportionate
share of the mortgages as of June 30, 1996 was $4,649,945 ($2,911,648 and
$1,738,297). 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 June 30, 1996, the L/U II Joint Venture had notes payable to banks in the
following amounts: $9,132,000, $5,668,000, $1,162,000, $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
-15-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
June 30, 1996 was $6,322,084, $3,923,956, $804,453, $324,227 and $235,382,
respectively. As part of the loan agreements with the banks, the Joint Venture
was required to place in escrow funds for capital expenditures, leasing
commissions and tenant improvements at the properties 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. In 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 $9,132,000, $5,668,000 and $1,162,000 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 were 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.
Subsequent to June 30, 1996, the L/U II Joint Venture obtained three mortgage
loans from an insurance company totalling $17,400,000 ($6,025,000, $5,779,000
and $5,600,000). The mortgages bear interest at a fixed rate of 8.125%, are due
August 1, 2008 and are secured by the assets of the Joint Venture. The repayment
of principal will be amortized over 12 years, with monthly payments of principal
and interest totalling approximately $190,000. The proceeds from the loans were
used to pay off the Joint Venture's current debt financings of approximately
$16.8 million which bore interest at a fixed rate of 10.6% and fund loan closing
costs of approximately $280,000. The Partnership's proportionate interest in the
notes that were paid off was approximately $11,600,000 or 69%. The remaining
proceeds will be used to fund Joint Venture tenant finish improvements and
leasing costs.
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 above. 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, principal payments on mortgages and notes payable and repurchases of
limited partnership units. 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. The Partnership also expects a change in the cost of
capital resources as a result of the new financings which are secured by
Commonwealth Business Center Phase II, University Business Center Phase I and
the assets of the L/U II Joint Venture as discussed above.
Due to the fact that no distributions were made during the six months ended June
30, 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.
-16-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of June 30, 1996, the Partnership has accrued approximately $153,000
(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 June 30, 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 June 30, 1996.
As of June 30, 1996, the L/U II Joint Venture 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 June 30, 1996.
Subsequent to June 30, 1996, the Partnership entered into a contract in the
amount of approximately $140,000 for the replacement of the roof at Commonwealth
Business Center Phase II. The project is expected to be completed during the
third quarter.
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 new debt financings of the L/U II Joint
Venture and the commitment made for a special tenant finish allowance (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 60,685 square feet in leases expiring from
July 1, 1996 to June 30, 1997 (Commonwealth Business Center Phase II - 22,875
square feet, University Business Center Phase I - 12,550 square feet, Lakeshore
Business Center Phase I - 9,067 square feet and Lakeshore Business Center Phase
II - 16,193 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.
On June 28, 1996, the Partnership established 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 was able
to repurchase 370 Units at a 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 are
retired by the Partnership, thus increasing the share of ownership of each
remaining investor. The Partnership funded the Interest Repurchase Reserve from
cash reserves. The Partnership is currently contemplating an additional funding
to its Interest Repurchase Reserve in the near term.
-17-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
It is anticipated that the cash flow from operations and cash reserves will be
sufficient to meet the needs of the Partnership.
Thefollowing describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's 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 visitsfrom 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 June 30, 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 was filed May 14, 1996 to report in Item 5 that the
Lakeshore/University II Joint Venture had obtained a commitment
for permanent financing from an insurance company totalling
$17,400,000.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
NTS-PROPERTIES 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: August 13 , 1996
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF JUNE 30, 1996 AND FROM THE STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 533,206
<SECURITIES> 0
<RECEIVABLES> 652,114
<ALLOWANCES> 31,023
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,479,693
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 31,191,506
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 22,650,861
0
0
<COMMON> 0
<OTHER-SE> 7,409,817
<TOTAL-LIABILITY-AND-EQUITY> 31,191,506
<SALES> 2,786,598
<TOTAL-REVENUES> 2,799,135
<CGS> 0
<TOTAL-COSTS> 2,056,553
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,066,929
<INCOME-PRETAX> (457,724)
<INCOME-TAX> 0
<INCOME-CONTINUING> (457,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (457,724)
<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>
