<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 September 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
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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 September 30, 1996 and December 31, 1995 3
Statements of Operations
For the three months and nine months ended
September 30, 1996 and 1995 4
Statements of Cash Flows
For the three months and nine months ended
September 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
September 30, 1996 December 31, 1995*
---------------------------- --------------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 499,138 $ 218,331
Cash and equivalents - restricted 438,629 56,318
Accounts receivable, net of
allowance for doubtful accounts of
$31,188 (1996) and $53,582 (1995) 666,330 766,624
Land, buildings and amenities, net 25,316,191 26,149,956
Assets held for development, net 3,470,429 3,585,818
Other assets 1,020,059 760,426
------------------- --------------------
$ 31,410,776 $ 31,537,473
=================== ====================
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $ 22,938,434 $ 22,839,940
Accounts payable - operations 414,571 365,431
Accounts payable - construction 236,871 231,566
Security deposits 156,285 147,330
Other liabilities 452,871 35,717
------------------- --------------------
24,199,032 23,619,984
Partners' equity 7,211,744 7,917,489
------------------- --------------------
$ 31,410,776 $ 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 (642,289) (6,488) (648,777)
Cash distributions
declared to date (15,389,204) (155,527) (15,544,731)
Repurchase of limited
partnership units (93,750) -- (93,750)
------------ ------------ ------------
Balances at September 30, 1996 $ 7,331,831 $ (120,087) $ 7,211,744
============ ============ ============
</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 Nine Months Ended
September 30, September 30,
-------------------------------------- --------------------------------------
1996 1995 1996 1995
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income, net of provision
for doubtful accounts of $3,110
(1996) and $30,605 (1995) $ 1,466,449 $ 1,345,168 $ 4,253,047 $ 4,007,560
Interest and other income 6,869 8,091 19,406 51,834
----------------- ---------------- ----------------- -----------------
1,473,318 1,353,259 4,272,453 4,059,394
EXPENSES:
Operating expenses 297,674 271,105 795,761 711,512
Operating expenses - affiliated 126,624 127,001 388,122 384,092
Write-off of unamortized loan
costs 50,118 -- 50,118 --
Amortization of capitalized
leasing costs 5,225 8,978 13,532 24,735
Interest expense 476,080 575,755 1,543,009 1,619,623
Management fees 85,068 80,490 254,162 240,389
Real estate taxes 139,884 143,095 408,824 391,613
Professional and administrative
expenses 25,307 41,430 79,884 103,527
Professional and administrative
expenses - affiliated 43,549 39,954 122,348 117,733
Depreciation and amortization 414,843 452,229 1,265,470 1,348,836
----------------- ---------------- ----------------- -----------------
1,664,372 1,740,037 4,921,230 4,942,060
----------------- ---------------- ----------------- -----------------
Net loss $ (191,054) $ (386,778) $ (648,777) $ (882,666)
================= ================ ================= =================
Net loss allocated to the limited
partners $ (189,143) $ (382,910) $ (642,289) $ (873,839)
================= ================ ================= =================
Net loss per limited partnership
unit $ (5.31) $ (10.67) $ (17.97) $ (24.35)
================= ================ ================= =================
Weighted average number of units 35,647 35,876 35,748 35,876
================= ================ ================= =================
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES V
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (191,054) $ (386,778) $ (648,777) $ (882,666)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Provision for doubtful accounts 3,110 21,285 3,110 30,605
Write-off of unamortized loan
costs 50,118 -- 50,118 --
Amortization of capitalized leasing
costs 5,225 8,978 13,532 24,735
Depreciation and amortization 414,843 452,229 1,265,470 1,348,836
Changes in assets and liabilities:
Cash and equivalents - restricted (125,733) (126,432) (396,032) (278,115)
Accounts receivable (17,326) 4,728 97,184 116,830
Other assets 17,308 23,347 (100,880) 55,977
Accounts payable - operations 18,394 26,837 49,140 14,153
Security deposits 9,902 1,722 8,955 4,139
Other liabilities 154,561 161,283 417,154 54,107
----------- ----------- ----------- -----------
Net cash provided by operating
activities 339,348 187,199 758,974 488,601
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (134,656) (1,154) (264,509) (31,865)
Increase in cash and equivalents -
restricted -- (499) -- (79,229)
Decrease in cash and equivalents -
restricted -- 19,132 13,721 19,132
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities (134,656) 17,479 (250,788) (91,962)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable 12,046,020 -- 18,546,020 --
Principal payments on mortgages and
notes payable (11,758,447) (180,522) (18,447,526) (554,381)
Capital contribution by a joint
venture partner -- -- -- 519,225
Additions to loan costs (206,417) -- (268,903) (99,813)
Repurchase of limited partnership
units (7,020) -- (56,970) --
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities 74,136 (180,522) (227,379) (134,969)
----------- ----------- ----------- -----------
Net increase in cash and equivalents 278,828 24,156 280,807 261,670
CASH AND EQUIVALENTS, beginning of
period 220,310 445,114 218,331 207,600
----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 499,138 $ 469,270 $ 499,138 $ 469,270
=========== =========== =========== ===========
Interest paid on a cash basis $ 502,490 $ 578,414 $ 1,582,947 $ 1,621,586
=========== =========== =========== ===========
</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 nine months ended September 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. On August 30, 1996, the Partnership
elected to fund an additional $50,000 to its Interest Repurchase Reserve.
With this funding, the Partnership will be able to repurchase an
additional 370 Units at a price of $135 per Unit. As of September 30,
1996, 422 Units have been repurchased. 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)
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<PAGE>
4. Mortgages and Notes Payable
Mortgages and notes payable consist of the following:
September 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 $ 4,945,031 $ --
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 4,153,913 --
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,981,551 --
Mortgage payable with an insurance
company bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,860,898 --
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 2,902,144 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 1,732,623 1,748,897
Note payable with a bank bearing
interest at the Prime Rate, due
February 1, 2009, secured by land and
building 1,362,274 --
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land and building -- 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 -- 3,973,802
Note payable to a bank bearing interest
at a fixed rate of 10.6%, due January
31, 1998, secured by land -- 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
(continued next page)
-7-
<PAGE>
4. Mortgages and Notes Payable - Continued
September 30, 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 $ -- $ 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
---------------- --------------
$ 22,938,434 $ 22,839,940
================ ==============
The Prime Rate was 8.25% at September 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 $24,600,000.
5. Related Party Transactions
Property management fees of $254,162 and $240,389 for the nine months
ended September 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 an agreement, NTS
Development Company will receive a repair and maintenance fee equal to
5.9% of costs incurred which relate to capital improvements. The
Partnership has incurred $14,747 and $6,157 as a repair and maintenance
fee during the nine months ended September 30, 1996 and 1995,
respectively, and has capitalized this cost as part of land, buildings and
amenities.
As permitted by an agreement, the Partnership also was charged the
following amounts from NTS Development Company for the nine months ended
September 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 $ 163,425 $ 156,174
Leasing 167,680 123,258
Property manager 234,029 242,617
Other 23,604 8,092
------------------ ----------------
$ 588,738 $ 530,141
================== ================
6. Reclassification of 1995 Financial Statements
Certain reclassifications have been made to the September 30, 1995
financial statements to conform with September 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 September 30 were as
follows:
1996 1995
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II 90% 68%
University Business Center Phase I 98% 92%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership % at
September 30, 1996)
- --------------------------------------
The Willows of Plainview Phase II (90%) 96% 94%
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
September 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 September
30, 1996)
- ----------------------------------------
Lakeshore Business Center Phase I (69%) 97% 87%
Lakeshore Business Center Phase II (69%) 83% 73%(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 and nine months ended September 30, 1996 and 1995 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -----------------------
1996 1995 1996 1995
--------- --------- ---------- -----------
Wholly-owned Properties
- -----------------------
Commonwealth Business Center
Phase II $160,983 $ 129,221 $ 392,953 $ 483,946
University Business Center
Phase I $355,076 $ 333,331 $1,069,250 $1,028,913
Properties Owned in Joint
Venture with NTS-Properties IV
(Ownership % at September 30,
1996)
- -------------------------------
The Willows of Plainview
Phase II (90%) $303,860 $ 276,554 $ 873,419 $ 793,715
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 September 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 September 30,
1996)
- ------------------------------
Lakeshore Business Center
Phase I (69%) $237,867 $ 197,505 $ 720,035 $ 519,180
Lakeshore Business Center
Phase II (69%) $201,317 $ 205,733 $ 580,731 $ 567,466
(2)
University Business Center
Phase II (69%) $210,762 $ 206,613 $ 626,636 $ 561,861
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 September 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.
-10-
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 22% increase in occupancy at Commonwealth Business Center Phase II from
September 30, 1995 to September 30, 1996 is a result of three new leases
totalling approximately 17,000 square feet. Included in this total is a
five-year lease for approximately 14,000 square feet. Partially off-setting the
new leases are three tenant move-outs totalling approximately 4,200 square feet.
Two of the tenants, which occupied 3,200 square feet, vacated the premises at
the end of the lease terms. The third tenant, which 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 this lease. Average
occupancy increased from 80% (1995) to 90% (1996) for the three months ended
September 30 and decreased from 93% (1995) to 75% (1996) for the nine month
period. The decrease in rental and other income at Commonwealth Business Center
Phase II for the nine months ended September 30, 1996 as compared to the same
period in 1995 is primarily the result of the decrease in average occupancy for
the period partially offset by 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
increase in rental and other income at Commonwealth Business Center Phase II for
the three month period is primarily the result of the increase in average
occupancy and an increase in common area expense reimbursements.
The 6% increase in occupancy at University Business Center Phase I from
September 30, 1995 to September 30, 1996 is a result of seven new leases
totalling approximately 14,000 square feet. Partially offsetting the new leases
are four tenant move-outs of approximately 8,900 square feet. Approximately
4,400 square feet represents two tenants who vacated the premises at the end of
the lease term. The third tenant, who occupied approximately 1,700 square feet,
represents a tenant who vacated prior to the end of the lease term. The move-out
was the result of a downsizing by the tenant's parent company. The tenant has
paid the Partnership a lease termination fee of approximately $5,800 (recorded
as rental income). There was no accrued income associated with this lease. The
fourth tenant, who occupied approximately 2,800 square feet, vacated 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 increased
from 92% (1995) to 97% (1996) for the three months ended September 30 and
increased from 91% (1995) to 96% (1996) for the nine month period. The increase
in rental and other income at University Business Center Phase I for the three
months and nine months ended September 30, 1996 as compared to the same periods
in 1995 is primarily due to the increase in average occupancy.
The Willows of Plainview Phase II's occupancy increased from 94% as of September
30, 1995 to 96% as of September 30, 1996. Average occupancy increased from 91%
(1995) to 95% (1996) for the nine months ended September 30 and increased from
93% (1995) to 96% (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 nine months ended September 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 10% increase in occupancy at Lakeshore Business Center Phase I from
September 30, 1995 to September 30, 1996 can be attributed to seven new leases,
totalling approximately 19,500 square feet which includes approximately 6,900
square feet in expansions by three current tenants. The new leases and
expansions are partially offset by three tenants, who occupied a total of
approximately 5,200 square feet, vacating the premises at the end of the lease
terms. Average occupancy for the nine months ended September 30 increased from
81% (1995) to 98%
-11-
<PAGE>
Results of Operations - Continued
- ---------------------------------
(1996) and increased from 84% (1995) to 97% (1996) for the three month period.
The increase in rental and other income at Lakeshore Business Center Phase I for
the three months and nine months ended September 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 nine 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.)
Subsequent to September 30, 1996, an approximately 5,000 square foot tenant
vacated Lakeshore Business Center Phase I prior to the end of the lease term. As
a result of this tenant move-out, the business center's occupancy has decreased
to 92%.
The 10% increase in occupancy at Lakeshore Business Center Phase II from
September 30, 1995 to September 30, 1996 can be attributed to three new leases
totalling approximately 13,800 square feet and expansions by two current tenants
totalling approximately 7,000 square feet. Partially offsetting the new leases
are two tenant move-outs totalling approximately 5,100 square feet and a
downsizing by a current tenant of its existing space of approximately 6,000
square feet. The move-outs represent tenants who vacated 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). Average occupancy at Lakeshore Business Center
Phase II increased from 77% (1995) to 81% (1996) for the three months ended
September 30 and decreased from 79% (1995) to 78% (1996) for the nine month
period. Overall, rental and other income decreased at Lakeshore Business Center
Phase II for the nine months ended September 30, 1996 as compared to the same
period in 1995 primarily as a result of a decrease in rental rates on lease
renewals. As discussed in prior filings, prior to the Ft. Lauderdale area
experiencing an economic downturn, the property was able to negotiate higher net
effective rental rates than current market rental rates. As a result, the leases
that were renewed at the end of 1995 and the beginning of 1996 renewed at a
lower net effective rental rate. The Partnership's proportionate share of the
rental and other income at Lakeshore Business Center Phase II, however,
increased for the nine months ended September 30, 1996 as compared to the same
period in 1995. This is due to the fact that the Partnership acquired an
interest in Lakeshore Business Center Phase II as a result of the formation of
the Lakeshore/University II Joint Venture (L/U II Joint Venture) on January 23,
1995. (See below for a discussion regarding the Joint Venture.) Overall, rental
and other income at Lakeshore Business Center Phase II remained fairly constant
for the three month period ended September 30, 1996 as compared to the same
period in 1995.
As of September 30, 1996, Lakeshore Business Center Phase II had approximately
3,900 square feet of additional space leased to a current tenant. The tenant is
expected to take occupancy during the fourth quarter of 1996. With this new
lease, the business center's occupancy should improve to 87%.
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. PCA has currently sub-leased approximately 70,000
square feet (or 91%) of University Business Center Phase II to three tenants. Of
the total being sub-leased, approximately 59,000 square feet (or 84%) 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 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 which began
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 nine months ended
September 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 nine months ended September 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
for the nine month period 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 nine months
ended September 30, 1996 and 1995.
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 nine months ended September
30, 1996 as compared to the same period 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 repaid
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 nine months ended September 30, 1996 as compared to the same
period in 1995 is also a result of a decrease in cash reserves available for
investment. The change in interest income for the three month period was not
significant.
Operating expenses increased for the three months and nine months ended
September 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 legal fees at Lakeshore Business Center Phase I. The increase
in operating expenses for the nine month period can also be attributed to an
increase in vacant suite utilities at Commonwealth Business Center Phase II,
increased exterior painting costs at University Business Center Phase I and
increased utilities and repairs and maintenance costs at Lakeshore Business
Center Phase II. The increase in operating expenses for the nine month period 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.) Partially offsetting the increase in
operating expenses for the three month and nine month periods are decreased
exterior painting costs and decreased carpet and wallcovering replacement costs
at the Willows of Plainview Phase II and decreased janitorial costs at
University Business Center Phase II.
The change in operating expenses - affiliated for the three months and nine
months ended September 30, 1996 as compared to the same periods in 1995 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.
The 1996 write-off of unamortized loan costs relate to loan costs associated
with the Lakeshore/University II Joint Venture's notes payable. The unamortized
loan costs were expensed due to the fact that the notes were retired in 1996
prior to
-13-
<PAGE>
Results of Operations - Continued
- ---------------------------------
their maturity (January 31, 1998). See the Liquidity and Capital Resources
section of this item for further discussion.
The decrease in the amortization of capitalized leasing costs for the three
months and nine months ended September 30, 1996 as compared to the same periods
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.
Interest expense has decreased for the three months and nine months ended
September 30, 1996 as compared to the same periods in 1995 primarily as the
result of lower interest rates on the permanent financings obtained by the
Partnership in January 1996 (secured by University Business Center Phase I and
Commonwealth Business Center Phase II) and obtained by the L/U II Joint Venture
in July 1996 (secured by the assets of the Joint Venture). See the Liquidity and
Capital Resources section of this item for a discussion of these permanent
financings. The decrease in interest expense for the nine month period is
partially offset by the Partnership acquiring an interest in the L/U II Joint
Venture in January 1996 (discussed below).
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 nine 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 nine months ended September 30, 1996
as compared to the same period in 1995 is a result of an increased assessment
for University Business Center Phase I and Lakeshore Business Center Phase I.
The increase in real estate taxes for the nine 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 change in real estate taxes for the three month
period was not significant.
The decrease in professional and administrative expenses for the three months
and nine months ended September 30, 1996 as compared to the same periods in 1995
is due to decreased outside legal fees.
The change in professional and administrative expenses - affiliated for the
three months and nine months ended September 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
nine months ended September 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 nine 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 $758,974 and $488,601 for the nine
months ended September 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
-14-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
(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
September 30) were $499,138 and $469,270 at September 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 September 30, 1996 was $1,362,274. 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 September 30,
1996 was $4,945,031. 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.
On July 23, 1996, the L/U II Joint Venture obtained three mortgage loans from an
insurance company totalling $17,400,000 ($6,025,000, $5,775,000 and $5,600,000).
The outstanding balances of the loans at September 30, 1996 were $6,000,163,
$5,751,193 and $5,576,915, respectively. The loans are recorded a liability of
the Joint Venture. The Partnership's proportionate share in the loans at
September 30, 1996 was $4,153,913, $3,981,551 and $3,860,898, respectively. 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. Monthly principal payments are
based upon a 12-year amortization schedule. At maturity, the loans will have
been repaid based on the current rate of amortization. The proceeds from the
loans
-15-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
were used to pay off the Joint Venture's notes payable of approximately $16.8
million which bore interest at a fixed rate of 10.6% and to 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 notes which
were paid-off had a maturity date of January 31, 1998. The remaining proceeds
will be used to fund Joint Venture tenant finish improvements and leasing costs.
As of September 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 $3,232,866 and $1,930,069. The mortgages
are recorded as a liability of the Joint Venture. The Partnership's
proportionate share of the mortgages as of September 30, 1996 was $4,634,767
($2,902,144 and $1,732,623). 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).
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 in 1995 also include cash which was being
escrowed for capital expenditures, leasing commissions and tenant improvements
at the properties owned by the L/U II Joint Venture as required by a 1995 loan
agreement. 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 (discussed above). 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 nine months ended
September 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.
As of September 30, 1996, the Partnership has accrued approximately $155,000
(included in the accounts payable - construction balance) for certain
improvements to the undeveloped land plus interest at the University Place
development. The purchaser of the approximately 1 acre tract of land at the
University Place development has paid for 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).
-16-
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The remaining balance in accounts payable - construction at September 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 September 30,
1996.
As of September 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 which began in January 1996.
This commitment is the result of lease negotiations with Full Sail Recorders,
Inc. ("Full Sail") which currently sub-leases approximately 59,000 square feet
from Philip Crosby Associates, Inc. ("PCA") at University Business Center Phase
II. The Joint Venture anticipates that the allowance will be paid to Full Sail
during the fourth quarter of 1996 and/or early 1997. 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%.
As of September 30, 1996, the L/U II Joint Venture has a commitment for
approximately $65,000 of tenant finish improvements at Lakeshore Business Center
Phase II. The Partnership's proportionate share of this commitment is
approximately $45,000 or 69%. The commitment is the result of an expansion by a
current tenant of its existing space by approximately 3,900 square feet. The
tenant is expected to take occupancy of the expansion space in the fourth
quarter of 1996.
The Partnership had no other material commitments for renovations or capital
improvements at September 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
required by the new debt financings of the L/U II Joint Venture, the commitments
made for a special tenant finish allowance and tenant finish improvements (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 57,369 square feet in leases expiring from
October 1, 1996 to September 30, 1997 (Commonwealth Business Center Phase II -
24,475 square feet, University Business Center Phase I - 10,830 square feet,
Lakeshore Business Center Phase I - 6,748 square feet and Lakeshore Business
Center Phase II - 15,316 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. On August 30, 1996, the
Partnership elected to fund an additional $50,000 to its Interest Repurchase
Reserve. With this funding, the Partnership will be able to repurchase an
additional 370 Units at a price of $135 per Unit. As of September 30, 1996, 422
units have been repurchased. 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.
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
- -------------------------------------------
The following 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 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 $2.3 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 September 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 September 4, 1996 to report in Item 5 the
Partnership's election to fund an additional $50,000 to its
Interest Repurchase Reserve.
-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: November 11 , 1996
--------------------------
-20-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND FROM THE STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 149,582
<SECURITIES> 0
<RECEIVABLES> 68,486
<ALLOWANCES> 4,067
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,156,659
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,717,051
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,827,844
0
0
<COMMON> 0
<OTHER-SE> (2,467,067)
<TOTAL-LIABILITY-AND-EQUITY> 1,717,051
<SALES> 623,807
<TOTAL-REVENUES> 625,971
<CGS> 0
<TOTAL-COSTS> 360,366
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270,329
<INCOME-PRETAX> (116,141)
<INCOME-TAX> 0
<INCOME-CONTINUING> (116,141)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (116,141)
<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>
