UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
-------------------------
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 (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Exhibit Index: See page 19
Total Pages: 20
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of March 31, 1997 and December 31, 1996 3
Statements of Operations
For the three months ended March 31, 1997 and 1996 4
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996 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
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
March 31, 1997 December 31, 1996*
-------------- -----------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 243,683 $ 315,816
Cash and equivalents - restricted 205,480 84,992
Accounts receivable, net of allowance
for doubtful accounts of $15,899 (1997)
and (1996) 484,671 517,267
Land, buildings and amenities, net 24,678,273 24,972,650
Asset held for development, net 2,240,635 2,279,098
Asset held for sale 1,152,868 1,152,868
Other assets 1,026,431 1,011,565
----------- -----------
$30,032,041 $30,334,256
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $22,428,520 $22,688,331
Accounts payable - operations 341,306 256,451
Accounts payable - construction 181,447 215,059
Security deposits 163,800 152,931
Other liabilities 184,944 39,865
----------- -----------
23,300,017 23,352,637
Commitments and Contingencies
Partners' equity 6,732,024 6,981,619
----------- -----------
$30,032,041 $30,334,256
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
PARTNERS' EQUITY
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 30,582,037 $ 100 $ 30,582,137
Net income (loss) - prior years (7,952,573) 33,468 (7,919,105)
Net loss - current year (247,100) (2,496) (249,596)
Cash distributions declared to
date (15,389,204) (155,528) (15,544,732)
Repurchase of limited
partnership Units (136,680) -- (136,680)
------------ ------------ ------------
Balances at March 31, 1997 $ 6,856,480 $ (124,456) $ 6,732,024
============ ============= ============
</TABLE>
*Reference is made to the audited financial statements in the Form 10-K as filed
with the Commission on March 31, 1997.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
---------------------
1997 1996
------------ ------------
Revenues:
<S> <C> <C>
Rental income $ 1,355,746 $ 1,391,314
Interest and other income 6,577 4,161
----------- -----------
1,362,323 1,395,475
Expenses:
Operating expenses 277,992 252,141
Operating expenses - affiliated 160,830 135,966
Amortization of capitalized leasing
costs 5,203 --
Interest expense 442,606 540,524
Management fees 82,857 85,699
Real estate taxes 139,998 134,449
Professional and administrative
expenses 27,767 26,087
Professional and administrative
expenses - affiliated 56,350 42,506
Depreciation and amortization 418,316 428,017
----------- -----------
1,611,919 1,645,389
----------- -----------
Net loss $ (249,596) $ (249,914)
=========== ===========
Net loss allocated to the limited
partners $ (247,100) $ (247,415)
=========== ===========
Net loss per limited partnership unit $ (7.03) $ (6.90)
=========== ===========
Weighted average number of limited
partnership units 35,136 35,876
=========== ===========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (249,596) $ (249,914)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of capitalized leasing costs 5,203 --
Depreciation and amortization 418,316 428,017
Changes in assets and liabilities:
Cash and equivalents - restricted (120,488) (142,352)
Accounts receivable 32,596 61,321
Other assets (29,939) (123,512)
Accounts payable - operations 84,855 42,532
Security deposits 10,869 2,910
Other liabilities 145,079 131,864
----------- -----------
Net cash provided by operating activities 296,895 150,866
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (109,217) (123,127)
Decrease in cash and equivalents - restricted -- 13,721
----------- -----------
Net cash used in investing activities (109,217) (109,406)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage and note payable -- 6,500,000
Principal payments on mortgages and notes payable (259,811) (6,517,218)
Additions to loan costs -- (41,823)
----------- -----------
Net cash used in financing activities (259,811) (59,041)
----------- -----------
Net decrease in cash and equivalents (72,133) (17,581)
CASH AND EQUIVALENTS, beginning of period 315,816 218,331
----------- -----------
CASH AND EQUIVALENTS, end of period $ 243,683 $ 200,750
=========== ===========
Interest paid on a cash basis $ 449,466 $ 553,035
=========== ===========
</TABLE>
- 5 -
<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 1996 Annual Report. In the opinion of the general partner, all
adjustments (only consisting of normal recurring accruals) necessary for a fair
presentation have been made to the accompanying financial statements for the
three months ended March 31, 1997 and 1996.
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.
2. Mortgages and Note Payable
--------------------------
Mortgages and note payable consist of the following:
March 31, December 31,
1997 1996
---- ----
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.65%, due February 1, 2008,
secured by land and building $ 4,806,603 $ 4,876,477
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 4,048,272 4,101,627
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,880,293 3,931,435
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,762,709 3,812,300
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 2,881,555 2,893,401
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 1,720,331 1,727,404
Note payable to a bank, bearing
interest at the Prime Rate, due
February 1, 2009, secured by land
and building 1,328,757 1,345,687
------------ ------------
$ 22,428,520 $ 22,688,331
============ ============
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<PAGE>
2. Mortgages and Notes Payable - Continued
---------------------------------------
The Prime Rate was 8.5% at March 31, 1997 and was 8.25% at December 31,
1996
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms, the fair value of long-term debt is
approximately $23,900,000.
3. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$82,857 and $85,699 for the three months ended March 31, 1997 and 1996,
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. 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 $5,981 and $2,356 as a repair and maintenance fee during the
three months ended March 31, 1997 and 1996, 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 three months ended
March 31, 1997 and 1996. 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.
1997 1996
--------- ---------
Administrative $ 71,553 $ 58,879
Leasing 73,647 70,392
Property manager 93,389 77,235
Other 623 412
-------- --------
$ 239,212 $ 206,918
======== ========
4. Commitment and Contingencies
----------------------------
Philip Crosby Associates, Inc. ("Crosby") has leased 100% of University
Business Center Phase II. The business center is owned by the
Lakeshore/University II (L/U II) Joint Venture in which the Partnership
has a 69% interest. The original lease term is for seven years, and the
tenant took occupancy in April 1991. During 1994, 1995 and 1996, Crosby
sub-leased a portion of the business center. Currently, Crosby has
sub-leased, through the end of their lease term, approximately 85,000
square feet (including approximately 10,000 square feet of mezzanine
space) of University Business Center Phase II's approximately 88,000
square feet of net rentable area (or 96%). Of the total being sub-leased,
approximately 73,000 square feet (or 86%) is being leased by Full Sail
Recorders, Inc. ("Full Sail"), a major tenant at University Business
Center Phase I. Through December 1996, Crosby continued to make rent
payments pursuant to the original lease terms. The Joint Venture has
received notice that Crosby does not intend to pay full rental due under
the original lease agreement from and after January 1997. The rental
income from this property accounted for approximately 15% of the
partnership's total revenues during 1996. The Joint Venture has
- 7 -
<PAGE>
4. Commitment and Contingencies - Continued
----------------------------------------
instituted legal action to seek resolution of this situation. Although the
Joint Venture does not presently have lease agreements (except as noted
below) with the sub-lessees noted above, beginning February 1997 rent
payments from these sub-lessees are being made directly to the Joint
Venture. The Joint Venture is currently negotiating directly with the
sub-lessees to enter into lease agreements for the space presently sublet.
At this time, the future leasing and tenant finish costs which will be
required to release this space are unknown except as noted below for the
negotiations with Full Sail.
In December 1995, 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
Crosby. In November 1996, Full Sail signed a lease amendment which
increased the square footage from 41,000 square feet to 48,000 square feet
and extended the lease term from 33 months to 76 months. In November 1996,
Full Sail also signed a 52 month lease for an additional approximately
21,000 square feet it presently sub-leases from Crosby. Both lease terms
commence April 1998 when the Crosby lease ends. As part of the lease
negotiations, Full Sail will receive a total of $450,000 in special tenant
allowances ($200,000 resulting from the original lease signed December
1995 and $250,000 resulting from the lease amendment signed November
1996). Approximately $92,000 of the total allowance is to be reimbursed by
Full Sail to the L/U II Joint Venture. The Partnership's proportionate
share of the net commitment ($450,000 less $92,000) is approximately
$247,000 or 69%. The tenant allowance will be due and payable to Full Sail
pursuant to the previously mentioned lease agreements, as appropriate
invoices for tenant finish costs incurred by Full Sail are submitted to
the L/U II Joint Venture. The source of funds for this commitment is
expected to be cash flow from operations and/or cash reserves.
- 8 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
1997 1996
---- ----
Wholly-owned Properties
Commonwealth Business Center Phase II 56% 67%
University Business Center Phase I 100% 95%
Property Owned in Joint Venture
with NTS-Properties IV (Ownership
% at March 31, 1997)
The Willows of Plainview Phase II (90%) 86% 97%
Properties Owned Through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at March
31, 1997)
Lakeshore Business Center Phase I (69%) 95% 97%
Lakeshore Business Center Phase II (69%) 94% 72%
University Business Center Phase II (69%) 99% 99%
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1997 and 1996 was as follows:
1997 1996
--------- ---------
Wholly-owned Properties
Commonwealth Business Center Phase II $ 140,828 $ 125,735
University Business Center I $ 389,419 $ 362,807
Property Owned in Joint Venture with
NTS-Properties IV (Ownership % at March
31, 1997)
The Willows of Plainview Phase II (90%) $ 288,546 $ 281,652
Property Owned Through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at March
31, 1997)
Lakeshore Business Center Phase I (69%) $ 244,909 $ 237,135
Lakeshore Business Center Phase II (69%) $ 229,859 $ 181,691
University Business Center Phase II (69%) $ 65,196 $ 205,053
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 9 -
<PAGE>
Results of Operations - Continued
- ----------------------------------
The 11% decrease in occupancy at Commonwealth Business Center Phase II from
March 31, 1996 to March 31, 1997 is a result of four tenant move-outs, totalling
23,600 square feet. Included in this total are three tenants totalling 22,000
square feet, which vacated at the end of the lease term. The other tenant, who
had occupied approximately 1,600 square feet, vacated the premises prior to the
end of the lease term due to bankruptcy. There was no accrued income connected
with this lease. Partially offsetting the move-outs are three new leases for
approximately 17,400 square feet. Included in this total is a five year lease
for approximately 14,000 square feet. Average occupancy for the three months
ended March 31 increased from 67% (1996) to 77% (1997). The increase in rental
and other income at Commonwealth Business Center Phase II for the three months
ended March 31, 1997 as compared to the same period in 1996 is a result of the
increase in average occupancy and 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.
Subsequent to March 31, 1997, a lease for approximately 11,300 square feet was
signed at Commonwealth Business Center Phase II. The tenant took occupancy
during the second quarter of 1997. With this new lease, the Business Center's
occupancy has improved to 75%. There are no material commitments for tenant
improvements connected with this lease. The Partnership will actively seek new
tenants to occupy the remaining vacant space. At this time, the extent and cost
of the tenant improvements required to attract new tenants is unknown.
The 5% increase in occupancy at University Business Center Phase I from March
31, 1996 to March 31, 1997 is a result of four new leases totalling
approximately 7,700 square feet. Partially offsetting the new leases are three
tenant move-outs of approximately 3,500 square feet. Approximately 1,800 square
feet of the move-outs 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 paid the Partnership a lease termination fee of approximately $5,800
(recorded as rental income) in the third quarter of 1996. There was no accrued
income associated with this lease. Average occupancy at University Business
Center Phase I for the three months ended March 31 increased from 95% (1996) to
99% (1997). The increase in rental and other income at University Business
Center Phase I for the three months ended March 31, 1997 as compared to the same
period in 1996 is primarily due to the increase in average occupancy.
The Willows of Plainview Phase II's occupancy decreased from 97% as of March 31,
1996 to 86% as of March 31, 1997. Average occupancy decreased from 96% for the
three months ended March 31, 1996 to 89% for the same period in 1997. In the
opinion of the General Partner of the Partnership, the decrease in occupancy at
the Willows of Plainview Phase II is only a temporary fluctuation and does not
represent a downward occupancy trend. 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.
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in rental and other income at The Willows of Plainview Phase II for
the three months ended March 31, 1997 as compared to the same period in 1996 is
primarily due to an increase in income from fully furnished units and an
increase in rental rates partially offset by the decrease in average occupancy.
Fully furnished units are apartments which rent at an additional premium above
base rent.
The 2% decrease in occupancy at Lakeshore Business Center Phase I from March 31,
1996 to March 31, 1997 can be attributed to five tenants move-outs totalling
approximately 10,300 square feet. The five move-outs consist of one tenant
vacating at the end of the lease term (1,800 square feet), one tenant exercising
a termination option (1,600 square feet - no termination fee was required) and
three tenants vacating prior to the end of the lease term - one due to a
business decision to consolidate its office space at another location (700
square feet - tenant paid rent through end of lease), one due to a downsizing
decision by the tenant's parent company (1,200 square feet - tenant paid the L/U
II Joint Venture a lease termination fee (recorded as rental income) of
approximately $7,000 of which the Partnership's proportionate share is
approximately $4,800 or 69%) and one due to bankruptcy (5,000 square feet -
tenant ceased rental payments). The write-off of accrued income connected with
these leases was not significant. The move-outs are partially offset by six new
leases totalling approximately 7,300 square feet and an expansion by a current
tenant of its existing space totalling 1,000 square feet. Average occupancy for
the three months ended March 31 decreased from 98% in 1996 to 94% in 1997. The
increase in rental and other income at Lakeshore Business Center Phase I for the
three months ended March 31, 1997 as compared to the same period in 1996 is due
primarily to an increase in common area expense reimbursements and the lease
termination fee received in the first quarter of 1997 (discussed above). There
was no similar fee received in the first quarter of 1996. Partially offsetting
the increase in rental and other income at Lakeshore Business Center Phase I is
the decrease in average occupancy.
As of March 31, 1997 Lakeshore Business Center Phase I has approximately 2,000
square feet of additional space leased to a current tenant. The tenant is
expected to take occupancy during the second quarter of 1997. With the new
lease, the business center's occupancy should improve to 97%. See the Liquidity
and Capital Resources section of this item for the tenant finish commitment
relating to this lease.
The 22% increase in occupancy at Lakeshore Business Center Phase II from March
31, 1996 to March 31, 1997 can be attributed to seven new leases totalling
approximately 24,400 square feet which includes approximately 7,000 square feet
in expansions by two current tenants. One tenant, Lambda Physik, accounts for
nearly 11,000 square feet of the total new leases and has become the largest
tenant in the building, occupying approximately 11% of the total building
rentable square feet. Partially offsetting the new leases is a downsizing by a
current tenant of its existing space of approximately 3,600 square feet. The
downsizing was a result of a decision by the tenant's management to centralize
its warehouse operation with another location. The downsizing was done in
conjunction with a lease renewal; therefore, there was no write-off of accrued
income. Average occupancy at Lakeshore Business Center Phase II increased for
the three months ended March 31 from 72% (1996) to 91% (1997). The increase in
rental and other income at Lakeshore Business Center Phase II for the three
months ended March 31, 1997 as compared to the three months ended March 31, 1996
is due primarily to the increase in average occupancy.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Philip Crosby Associates, Inc, ("Crosby") has leased 100% of the University
Business Center Phase II. The original lease term is for seven years, and the
tenant took occupancy in April 1991. As a result of Crosby downsizing and
sub-leasing a portion of its leased space, occupancy has decreased to 99% at
March 31, 1997 and 1996. During January 1997, Crosby vacated the remaining space
it occupied at the business center. See below for a further discussion of Crosby
and its leased space.
The decrease in rental and other income at University Business Center Phase II
for the three months ended March 31, 1997 as compared to the same period in 1996
is due to the following. Through the end of 1996, Crosby continued to make rent
payments pursuant to the original lease term. The Joint Venture has received
notice that Crosby does not intend to pay full rental due under the lease
agreement from and after January 1997. Although the Joint Venture does not
presently have lease agreements (except as noted below) with Crosby's
sub-tenants, beginning February 1997, rent payments from Crosby's sub-tenants
(see discussion below) are being made directly to the Joint Venture, which are
substantially less than what Crosby owed. Currently, the Joint Venture is
recognizing income to the extent of what is being collected from the
sub-tenants. The decrease in rental and other income is also due to the fact
that approximately $70,000 of accrued income connected with the Crosby lease was
written-off during the first quarter of 1997, of which the Partnership's
proportionate share is approximately $48,000 or 69%.
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 three
months ended March 31, 1997 and 1996.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties without the need of any additional financing. In
the opinion of the General Partner of the Partnership, the decreased occupancy
level at Commonwealth Business Center Phase II is not indicative of trends in
the area in which the property is located. See the Liquidity and Capital
Resources section of this item for a discussion regarding the cash requirements
of the Partnership's current debt financings.
The increase in interest and other income for the three months ended March 31,
1997 as compared to the same period in 1996 is due primarily to the forfeit of a
deposit in 1997 (recorded as other income) which had been received in connection
with a contract for the sale of a parcel of land owned by the L/U II Joint
Venture. The contract for sale was cancelled by the purchaser due to the fact
that bids for construction exceeded their borrowing potential. There was no
similar income in the 1996 period.
The increase in operating expenses for the three months ended March 31, 1997 as
compared to the same period in 1996 is primarily the result of increased legal
fees at Lakeshore Business Center Phase I and increased carpet and vinyl
replacement costs at the Willows of Plainview Phase II.
The increase in operating expenses - affiliated for the three months ended March
31, 1997 as compared to the same period in 1996 is due primarily to increased
leasing costs at Commonwealth Business Center Phase II and increased property
management costs at all of the Partnership's properties except for Commonwealth
Business Center Phase II. Operating expenses affiliated are expenses incurred
for services performed by employees of NTS Development Company, an affiliate of
the General Partner of the Partnership.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in the amortization of capitalized leasing costs for the three
months ended March 31, 1997 as compared to the same period in 1996 is due
primarily to the addition of special tenant allowances at Lakeshore Business
Center Phase II and University Business Center Phase I since March 31, 1996.
The decrease in interest expense for the three months ended March 31, 1997 as
compared to the same period in 1996 is primarily the result of the lower
interest rate on the permanent financings obtained in July 1996 by the L/U II
Joint Venture (8.125% compared to 10.6% on the previous debt). The decrease can
also be attributed to continued principal payments on the mortgages and note
payable of the Partnership and its Joint Venture properties. See the Liquidity
and Capital Resources section of this item for details regarding the
Partnership's debt.
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 real estate taxes for the three months ended March 31, 1997 as
compared to the same period in 1996 is primarily a result of increased property
assessments for Lakeshore Business Center Phase I and University Business Center
Phases I and II.
The change in professional and administrative expenses for the three months
ended March 31, 1997 as compared to the same period in 1996 was not significant.
The increase in professional and administrative expenses - affiliated for the
three months ended March 31, 1997 as compared to the same period in 1996 is
primarily the result of increased salary costs. 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 ended
March 31, 1997 as compared to the same period in 1996 primarily due to a portion
of the Partnership's assets having become fully depreciated. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets which are 10 - 30 years for land improvements, 30 years for buildings, 5
- - 30 years for building improvements and 5 - 30 years for amenities. The
aggregate cost of the Partnership's properties for Federal tax purposes is
approximately $39,800,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $296,895 and $150,866 for the three
months ended March 31, 1997 and 1996, respectively. No distribution was declared
during the last nine months of 1994 and all of 1995 as a result of a loan
covenant pursuant to a 1993 loan agreement 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 loan was repaid in January
1996. No distributions were declared during 1996 or during the three months
ended March 31, 1997. The Partnership plans to resume distributions once the
Partnership has established adequate cash reserves, which would include funds
for future tenant finish improvements, and the cash flow from operations is
sufficient, in management's opinion, to pay distributions. Cash reserves (which
are unrestricted cash and equivalents as shown on the Partnership's balance
sheet at March 31) were $243,683 and $200,750 at March 31, 1997 and 1996,
respectively.
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 of March 31, 1997, the Partnership had a mortgage loan with an insurance
company in the amount of $4,806,603. 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.
As of March 31, 1997, the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at March 31, 1997 were
$5,847,568, $5,604,931 and $5,435,084 for a total of $16,887,583. The loans are
recorded as a liability of the Joint Venture. The Partnership's proportionate
share in the loans at March 31, 1997 was $4,048,272, $3,880,293 and $3,762,709
respectively, for a total of $11,691,274. 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.
As of March 31, 1997, The Willows of Plainview Phase II, had two mortgage loans
each with an insurance company in the amount of $3,208,859 and $1,915,736. The
mortgages are recorded as a liability of the Joint Venture. The Partnership's
proportionate share of the mortgages as of March 31, 1997 was $4,601,886
($2,881,555 and $1,720,331). Both mortgages are due December 5, 2003, currently
bear interest at a fixed rate of 7.5% and are secured by the land, buildings and
amenities of the Joint Venture. Current monthly principal payments on both
mortgages are based upon a 27-year amortization schedule. The outstanding
balance at maturity based on the current rate of amortization would be
$4,449,434 ($2,786,095 and $1,663,339).
As of March 31, 1997, the Partnership had a note payable with a bank in the
amount of $1,328,757. The note payable is due February 1, 2009, bears interest
at the Prime Rate and is secured by Commonwealth Business Center Phase II ("CBC
II"). Under the loan agreement, an additional $200,000 is available for future
funding and will be disbursed by February 1, 1999 in one 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 note will have been repaid based on the current rate of
amortization.
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. 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 provided by investing activities in 1996
were the result of the release of funds which were 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 financing activities are
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
from debt refinancings obtained in 1996 (loans secured by the assets of
Commonwealth Business Center Phase II and University Business Center Phase I).
Cash flows used in financing activities are for loan costs and principal
payments on mortgages and notes payable. The Partnership does not expect any
material changes in the mix and relative cost of capital resources.
Due to the fact that no distributions were made during the three months ended
March 31, 1997 and 1996, the table which presents that portion of the
distribution that represents a return of capital on a Generally Accepted
Accounting Principle basis has been omitted.
As of March 31, 1997, the Partnership has accrued approximately $160,000
(included in the accounts payable - construction balance) for certain
improvements to the undeveloped land at the University Place development. The
purchaser of the approximately 1 acre tract of land at the University Place
development has paid the cost of these improvements. The Partnership will
reimburse the purchaser for these costs, along with interest at the Prime Rate,
at the earlier of (1) the start of construction of University Business Center
Phase III, (2) the sale by the Partnership of any portion of the remaining
undeveloped land, or (3) five years from the date of the Agreement (agreement
dated November 1992).
The remaining balance in accounts payable - construction at March 31, 1997
represents payables that are a result of tenant finish improvements. Tenant
finish improvements are a typical part of any lease negotiation. None of the
Partnership's properties were in the construction stage as of March 31, 1997.
Philip Crosby Associates, Inc. ("Crosby") has leased 100% of University Business
Center Phase II. The original lease term is for seven years, and the tenant took
occupancy in April 1991. During 1994, 1995 and 1996, Crosby sub-leased a portion
of the business center. Currently, Crosby has sub-leased through the end of
their term, approximately 85,000 square feet (including approximately 10,000
square feet of mezzanine space) of University Business Center Phase II's
approximately 88,000 square feet of net rentable area (or 96%). Of the total
being sub-leased, approximately 73,000 square feet ( or 86%) is being leased by
Full Sail Recorders, Inc. ("Full Sail"), a major tenant at University Business
Center Phase I. Through December 1996, Crosby continued to make rent payments
pursuant to the original lease terms. The Joint Venture has received notice that
Crosby does not intend to pay full rental due under the original lease agreement
from and after January 1997. The rental income from this property accounted for
approximately 15% of the partnership's total revenues during 1996. The Joint
Venture has instituted legal action to seek resolution of this situation.
Although the Joint Venture does not presently have lease agreements (except as
noted below) with the sub-lessees noted above, beginning February 1997 rent
payments from these sub-lessees are being made directly to the Joint Venture.
The Joint Venture is currently negotiating directly with the sub-lessees to
enter into lease agreements for the space presently sublet. At this time, the
future leasing and tenant finish costs which will be required to release this
space are unknown except as noted below for the negotiations with Full Sail.
In December 1995, 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
Crosby. In November 1996, Full Sail signed a lease amendment which increased the
square footage from 41,000 square feet to 48,000 square feet and extended the
lease term from 33 months to 76 months. In November 1996, Full Sail also signed
a 52 month lease for an additional approximately
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
21,000 square feet it presently sub-leases from Crosby. Both lease terms
commence April 1998 when Crosby's lease ends. As part of the lease negotiations,
Full Sail will receive a total of $450,000 in special tenant allowances
($200,000 resulting from the original lease signed December 1995 and $250,000
resulting from the lease amendment signed November 1996). Approximately $92,000
of the total allowance is to be reimbursed by Full Sail to the L/U II Joint
Venture. The Partnership's proportionate share of the net commitment ($450,000
less $92,000) is approximately $247,000 or 69%. The tenant allowance will be due
and payable to Full Sail pursuant to the previously mentioned lease agreements,
as appropriate invoices for tenant finish costs incurred by Full Sail are
submitted to the L/U II Joint Venture. The sources of funds for this commitment
is expected to be cash flows from operations and/or cash reserves.
As of March 31, 1997, the L/U II Joint Venture had a commitment of approximately
$55,000 for tenant finish improvements at Lakeshore Business Center Phase I as a
result of a lease renewal and expansion. The expansion increases the tenant's
current leased space by approximately 2,000 square feet and the renewal extends
the lease for five years. The Partnership's proportionate share of the
commitment is approximately $38,000 or 69%. The project is expected to be
completed during the second quarter of 1997. The source of funds for this
project is expected to be cash flow from operations and/or cash reserves.
The Partnership had no other material commitments for renovations or capital
improvements at March 31, 1997.
In the next twelve months, the demand on future liquidity is anticipated to
increase as a result of the commitments made for a special tenant finish
allowance and tenant finish improvements (see above). A demand on future
liquidity is also expected as a result of the Crosby situation at University
Business Center Phase II (discussed above). Additionally, the Partnership will
continue its efforts to lease current unoccupied space at its commercial
properties. 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.
It is anticipated that the cash flow from operations and cash reserves will be
sufficient to meet the needs of the Partnership.
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 the 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.
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 $2,240,635 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. In management's opinion, the net book value of
the asset approximates its fair market value.
The L/U II Joint Venture owns approximately 6.2 acres of land adjacent to the
Lakeshore Business Center development in Ft. Lauderdale, Florida. The
Partnership's proportionate interest at March 31, 1997 in the asset held for
sale is $1,152,868. The Joint Venture continues to actively market the asset for
sale. In management's opinion, the net book value of the asset held for sale
approximates the fair market value less cost to sell.
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as the Partnership "anticipates ",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward looking statements that may be made to reflect any
future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
office buildings, business centers and an apartment complex. If a major
commercial tenant or a large number of apartment lessees default on their
leases, the Partnership's ability to make payments due under its debt
agreements, payment of operating costs and other partnership expenses would be
directly impacted. A lessee's ability to make payments are subject to risks
generally associated with real estate, many of which are beyond the control of
the Partnership, including general or local economic conditions, competition,
interest rates, real estate tax rates, other operating expenses and acts of God.
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- --------------------------------------------
A portion of the Partnership's debt service is based on variable interest rates,
any fluctuations in the rate are beyond the control of the Partnership. These
variances could, for example, impact the Partnership's projected cash flow and
cash requirements as well as its ability to pay distributions to the limited
partners.
- 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
No reports on Form 8-K were filed during the three months ended
March 31, 1997.
- 19 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties V has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES V, a Maryland Limited
------------------------------------
Partnership
------------
(Registrant)
By: NTS-Properties Associates V,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
-----------------------------
John W. Hampton
Senior Vice President
Date: May 12, 1997
- 20 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF MARCH 31, 1997 AND FROM THE STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 449,163
<SECURITIES> 0
<RECEIVABLES> 484,671
<ALLOWANCES> 15,899
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,678,273
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 30,032,041
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 22,428,520
0
0
<COMMON> 0
<OTHER-SE> 6,732,024
<TOTAL-LIABILITY-AND-EQUITY> 30,032,041
<SALES> 1,355,746
<TOTAL-REVENUES> 1,362,323
<CGS> 0
<TOTAL-COSTS> 1,085,196
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 442,606
<INCOME-PRETAX> (249,596)
<INCOME-TAX> 0
<INCOME-CONTINUING> (249,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,596)
<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>
