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, 1998
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 21
Total Pages: 22
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of September 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and nine months ended
September 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and nine months ended
September 30, 1998 and 1997 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-20
PART II
Item 3. Defaults Upon Senior Securities 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
- 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
September 30, 1998 December 31, 1997*
------------------ ------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 581,899 $ 473,362
Cash and equivalents - restricted 469,103 69,858
Accounts receivable, net of allowance
for doubtful accounts of $4,487 (1998)
and $13,304 (1997) 236,705 291,504
Land, buildings and amenities, net
(Note 7) 25,069,602 25,876,019
Asset held for sale 1,152,868 1,152,868
Other assets 755,024 849,287
----------- -----------
$28,265,201 $28,712,898
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $20,958,283 $21,662,821
Accounts payable - operations 201,710 284,829
Accounts payable - construction 61,759 34,486
Security deposits 180,124 167,597
Other liabilities 595,226 189,570
----------- -----------
21,997,102 22,339,303
Commitments and Contingencies
Partners' equity 6,268,099 6,373,595
----------- -----------
$28,265,201 $28,712,898
=========== ===========
</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 (8,554,517) 27,388 (8,527,129)
Net income - current year 71,709 724 72,433
Cash distributions declared to
date (15,389,204) (155,528) (15,544,732)
Repurchase of limited
partnership Units (314,610) -- (314,610)
------------ ------------ ------------
Balances at September 30, 1998 $ 6,395,415 $ (127,316) $ 6,268,099
============ ============ ============
<FN>
*Reference is made to the audited financial statements in the Form 10-K as filed
with the Commission on March 30, 1998.
</FN>
</TABLE>
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 1,495,037 $ 1,446,249 $ 4,737,423 $ 4,210,201
Interest and other income 7,017 6,543 28,597 17,999
----------- ----------- ----------- -----------
1,502,054 1,452,792 4,766,020 4,228,200
EXPENSES:
Operating expenses 312,032 303,927 893,096 871,281
Operating expenses - affiliated 135,470 146,198 404,965 435,347
Write-off of unamortized land
improvements and amenities 13,157 -- 13,452 --
Amortization of capitalized
leasing costs 3,703 5,203 11,107 15,607
Interest expense 415,727 440,130 1,265,288 1,330,524
Management fees 90,123 86,144 281,015 252,239
Real estate taxes 134,821 136,780 402,735 410,342
Professional and administrative
expenses 30,173 29,674 93,872 87,837
Professional and administrative
expenses - affiliated 49,820 55,771 159,794 170,144
Depreciation and amortization 373,908 418,783 1,168,263 1,248,673
----------- ----------- ----------- -----------
1,558,934 1,622,610 4,693,587 4,821,994
----------- ----------- ----------- -----------
Net income (loss) $ (56,880) $ (169,818) $ 72,433 $ (593,794)
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners $ (56,311) $ (168,120) $ 71,709 $ (587,856)
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit $ (1.66) $ (4.78) $ 2.07 $ (16.73)
=========== =========== =========== ===========
Weighted average number of
limited partnership units 33,994 35,136 34,581 35,136
=========== =========== =========== ===========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ (56,880) $ (169,818) $ 72,433 $ (593,794)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Write-off of unamortized land
improvements and amenities 13,157 -- 13,452 --
Amortization of capitalized leasing
costs 3,703 5,203 11,107 15,607
Depreciation and amortization 373,908 418,783 1,168,263 1,248,673
Changes in assets and liabilities:
Cash and equivalents - restricted (134,318) (119,714) (399,245) (361,579)
Accounts receivable 28,181 14,411 54,799 99,586
Other assets 27,369 39,321 50,298 51,082
Accounts payable - operations (98,198) 66,103 (83,119) 89,383
Security deposits (7,013) 3,251 12,527 24,862
Other liabilities 92,692 276,093 405,656 568,425
----------- ----------- ----------- -----------
Net cash provided by operating
activities 242,601 533,633 1,306,171 1,142,245
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (53,620) (8,721) (323,604) (185,796)
----------- ----------- ----------- -----------
Net cash used in investing activities (53,620) (8,721) (323,604) (185,796)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages and note payable -- -- 200,000 --
Principal payments on mortgages and note
payable (310,283) (266,364) (904,538) (788,520)
Decrease (increase) in loan costs (3,047) -- 8,438 --
Repurchase of limited partnership Units -- -- (177,930) --
----------- ----------- ----------- -----------
Net cash used in financing activities (313,330) (266,364) (874,030) (788,520)
----------- ----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (124,349) 258,548 108,537 167,929
CASH AND EQUIVALENTS, beginning of period 706,248 225,197 473,362 315,816
----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 581,899 $ 483,745 $ 581,899 $ 483,745
=========== =========== =========== ===========
Interest paid on a cash basis $ 415,727 $ 440,121 $ 1,264,981 $ 1,337,530
=========== =========== =========== ===========
</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 1997 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, 1998 and 1997.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents 1) funds received for
residential security deposits, 2) funds which have been escrowed with
mortgage companies for property taxes in accordance with the loan
agreements and 3) funds reserved by the Partnership for the repurchase of
limited partnership Units.
3. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of the Limited Partnership, the Partnership has established an
Interest Repurchase Reserve. On January 16, 1998, the Partnership elected
to resume the Repurchase Program and fund $30,000 to the Interest
Repurchase Reserve. On April 7, 1998, the Partnership elected to fund an
additional $30,000 to the Interest Repurchase Reserve and on May 12, 1998,
funded an additional $11,850. With these funds, the Partnership
repurchased 479 Units at a price of $150 per Unit. On May 26, 1998, the
Partnership elected to fund $96,000 to the Interest Repurchase Reserve and
on June 1, 1998, the Partnership elected to fund an additional $10,080.
With the May 26 and June 1, 1998 fundings, the Partnership repurchased 663
Units at a price of $160 per Unit. The offering prices per Unit mentioned
above were established by the General Partner in its sole discretion and
do not purport to represent the fair market value or liquidation value of
the Unit. From June 1996 to September 30, 1998, the Partnership has
repurchased a total of 1,882 Units for $277,830. Repurchased Units are
retired by the Partnership, thus increasing the percentage of ownership of
each remaining limited partner investor. The Interest Repurchase Reserve
was funded from cash reserves. The balance in the repurchase reserve at
September 30, 1998 was $100.
- 6 -
<PAGE>
4. Mortgages and Note Payable
--------------------------
Mortgages and note payable consist of the following:
September 30, December 31,
1998 1997
------------ -----------
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.65%, due February 1, 2008,
secured by land and building (University
Business Center Phase I - see Note 7) $ 4,358,192 $ 4,588,807
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,704,429 3,881,569
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building
(University Business Center Phase II
- see Note 7) 3,550,718 3,720,508
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,443,121 3,607,766
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2% due January 5, 2013,
secured by land, buildings and
amenities 2,796,550 2,871,146
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 7.2% due January 5, 2013,
secured by land, buildings and
amenities 1,670,222 1,714,774
Note payable to a bank, bearing
interest at the Prime Rate, due
February 1, 2009, secured by land
and building (Commonwealth Business
Center Phase II - see Note 7) 1,435,051 1,278,251
----------- -----------
$ 20,958,283 $ 21,662,821
=========== ===========
The Prime Rate was 8.25% at September 30, 1998 and was 8.5% at December
31, 1997.
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms, the fair value of long-term debt
approximates carrying value.
- 7 -
<PAGE>
5. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$281,015 and $252,239 for the nine months ended September 30, 1998 and
1997, 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 $22,136 and $17,283 as a repair and maintenance fee during the
nine months ended September 30, 1998 and 1997, 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, 1998 and 1997. 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.
1998 1997
-------- --------
Administrative $ 199,930 $ 213,853
Leasing 144,138 175,730
Property manager 255,366 267,286
Other 16,498 4,832
-------- --------
$ 615,932 $ 661,701
======== ========
6. Commitment and Contingencies
----------------------------
On September 8, 1998, the Partnership and the Lakeshore/University II
("L/U II") Joint Venture, an affiliate of the General Partner of the
Partnership, entered into a contract with Silver City Properties, Ltd.
("the Purchaser"), an affiliate of Full Sail Recorders, Inc. ("Full
Sail"), for the sale of University Business Center Phases I and II office
buildings and the Phase III vacant land for an aggregate purchase price of
$18,751,000 (specifically the prices for each property were $9,776,000 for
Phase I and Phase III; $8,975,000 for Phase II). University Business
Center Phase I and Phase III are owned by the Partnership. University
Business Center Phase II is owned by the L/U II Joint Venture. The
Partnership owns a 69% interest in this joint venture. Full Sail currently
occupies 28% and 83% of the net rentable area of University Business
Center Phases I and II, respectively. Concurrent with the signing of the
contract, the Purchaser deposited $50,000 into an escrow account. This
deposit will be applied to the purchase price at closing. The Purchaser is
to close on the properties on or before November 7, 1998. See Note 7
Subsequent Events. The contract permits the Purchaser to defer the closing
of the purchase of the Phase III vacant land until the 18-month
anniversary of the closing on Phase I and II.
As of September 30, 1998, Lakeshore Business Center Phase I had a commit-
ment of approximately $98,000 of tenant finish improvements resulting from
a 3,049 square foot expansion by a current tenant. The Partnership's
proportionate share of the commitment is approximately $68,000 or 69%. The
project is expected to be completed during the fourth quarter of 1998. The
source of funds for this project is expected to be cash flow from
operations and/or cash reserves.
As of September 30, 1998, the L/U II Joint Venture had a contract for the
sale of approximately 2.4 acres of land adjacent to the Lakeshore Business
Center development for a purchase price of $528,405. Concurrent with the
signing of the contract, the purchaser deposited into an escrow account
$10,000. This deposit will be applied to the purchase price at closing.
The purchaser has until November 17, 1998 to determine if the land is
satisfactory for their use. If the purchaser determines that it is
- 8 -
<PAGE>
6. Commitment and Contingencies - Continued
----------------------------------------
satisfactory, the contract requires that they proceed, at their cost, to
have the property re-zoned to allow for a self-storage facility. If the
purchaser is unable to obtain the re-zoning, they may cancel the contract.
The General Partner of the Partnership has met with city officials who
seem interested in the project and have voiced a willingness to consider
the re-zoning request. If the re-zoning is granted, the purchaser is to
close on the property by February 1, 1999 or deposit an additional $10,000
with the escrow agent for a 30-day delay. The contract also allows for an
additional deposit of $10,000 for one more delay in closing to April 3,
1999. The Partnership has a 69% interest in the Joint Venture. The
Partnership has not yet determined what the use of net proceeds would be
from the sale of the land.
7. Subsequent Events
-----------------
On October 6, 1998 pursuant to the contract executed on September 8, 1998,
the Partnership and the Lakeshore/University II ("L/U II") Joint Venture,
an affiliate of the General Partner of the Partnership, sold University
Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser"), an affiliate of Full Sail Recorders,
Inc. ("Full Sail"), for an aggregate purchase price of $17,950,000
($8,975,000 for Phase I and $8,975,000 for Phase II). University Business
Center Phase I was owned by the Partnership. University Business Center
Phase II was owned by the L/U II Joint Venture of which the Partnership
owns a 69% interest. As of September 30, 1998, the carrying value of
University Business Center Phase I land and building and University Phase
III vacant land was approximately $5,500,000 and University Business
Center Phase I was encumbered by a mortgage payable of $4,358,192. As of
September 30, 1998, the carrying value of University Business Center Phase
II land and building was approximately $7,300,000 and was encumbered by a
mortgage payable of $5,128,872 ($5,000,000 and $3,550,718), respectively,
are recorded on the accompanying balance sheet). Other net assets and
liabilities associated with these properties included on the accompanying
balance sheet at September 30, 1998 were not significant. The gain
associated with this sale will be reflected in the fourth quarter of 1998.
Portions of the proceeds from this sale were immediately used to pay in
full the outstanding debt (including interest and prepayment penalties) of
$10,468,000 ($4,633,000 for Phase I and $5,835,000 for Phase II) on these
properties. The Partnership also paid in full an outstanding debt of
approximately $1,448,000 secured by Commonwealth Business Center Phase II,
a building owned by the Partnership. It is anticipated that a distribution
of approximately $35 to $50 per Unit will be paid to the Limited Partners
during the first quarter of 1999. The Partnership will consider other
alternatives for the use of the remainder of the proceeds from this sale,
including repayment of additional Partnership debt or possible development
costs associated with Lakeshore Business Center III which is to be
constructed on land owned by the L/U II Joint Venture. As permitted by the
contract, the Purchaser has deferred the closing of the Phase III vacant
land for a period of up to 18-months after the closing date of Phases I
and II.
On October 13, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, commenced a Tender Offer to purchase up to 1,200 of the
Partnership's limited partnership Units at a price of $205 per Unit.
Although the Partnership and ORIG, LLC believes that this price is
appropriate, the price of $205 per Unit may not equate to the fair market
value or the liquidation value of the Unit. Approximately $288,000
($246,000 to purchase 1,200 Units plus approximately $42,000 for expenses
associated with the Offer) is required to purchase all 1,200 Units. The
Partnership will purchase the first 600 Units tendered and will fund its
purchases and its portion of the expenses from cash reserves. If more than
600 Units are tendered, ORIG, LLC will purchase up to an additional 600
Units. If more than 1,200 Units are tendered, the Partnership and ORIG,
LLC may choose to acquire the additional Units on the same terms.
Otherwise, tendered Units will be purchased on a pro rata basis up to
1,200. Units that are acquired by the Partnership will be retired. Units
that are acquired by ORIG, LLC will be held by it. The General Partner,
NTS-Properties Associates V, does not intend to participate in the Tender
Offer. The Tender Offer will expire January 11, 1999 unless extended.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Management's discussion and analysis of financial condition and results of
operations included herein should be read in conjunction with the Partnership's
1997 Annual Report.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of September 30 were as
follows:
1998 1997
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II 77% 75%
University Business Center Phase I 100% 100%
Property Owned in Joint Venture
with NTS-Properties IV (Ownership
% at September 30, 1998)
- -------------------=--------------
The Willows of Plainview Phase II (90%) 89% 90%
Properties Owned Through Lakeshore/
University II Joint Venture (L/U II
Joint Venture) (Ownership % at
September 30, 1998)
- ------------------------------------
Lakeshore Business Center Phase I (69%) 82% 99%
Lakeshore Business Center Phase II (69%) 86% 96%
University Business Center Phase II (69%) 88% 99%
The rental and other income generated by the Partnership's properties for the
three months and nine months ended September 30, 1998 and 1997 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------ ------ -------- --------
Wholly-owned Properties
- -----------------------
Commonwealth Business Center
Phase II $ 141,937 $ 143,043 $ 455,396 $ 406,621
University Business Center
Phase I $ 389,410 $ 381,508 $1,171,585 $1,150,743
Property Owned in Joint Venture
with NTS-Properties IV (Ownership
% at September 30, 1998)
- ---------------------------------
The Willows of Plainview
Phase II (90%) $ 313,362 $ 310,459 $ 897,439 $ 907,840
(Continued next page)
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
-------- -------- -------- --------
Properties Owned Through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
(Ownership % at September 30,
1998)
- -----------------------------
Lakeshore Business Center
Phase I (69%) $ 217,657 $ 252,139 $ 794,834 $ 738,665
Lakeshore Business Center $ 243,970 $ 241,900 $ 906,648 $ 719,161
Phase II (69%)
University Business Center $ 192,889 $ 119,897 $ 530,061 $ 296,396
Phase II (69%)
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The 2% increase in occupancy at Commonwealth Business Center Phase II from
September 30, 1997 to September 30, 1998, is a result of five new leases
totaling approximately 12,400 square feet. Partially offsetting the new leases
is one tenant who vacated approximately 11,200 square feet at the end of the
lease term. Average occupancy increased from 74% (1997) to 77% (1998) for the
three months ended September 30 and from 73% (1997) to 80% (1998) for the nine
months ended September 30. The increase in rental and other income at
Commonwealth Business Center Phase II for the nine months ended September 30,
1998 as compared to the same period in 1997 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. Rental and other income at
Commonwealth Business Center Phase II for the three months ended September 30,
1998 as compared to the same period in 1997 remained fairly constant.
Occupancy at University Business Center I was 100% at September 30, 1997 and
September 30, 1998. Average occupancy at University Business Center Phase I
remained constant at 100% for the three months and nine months ended September
30. The increase in rental and other income at University Business Center Phase
I for the three months and nine months ended September 30, 1998 as compared to
the same periods in 1997 is primarily due to increased rental rates on lease
renewals during the twelve month period.
The Willows of Plainview Phase II's occupancy decreased from 90% at September
30, 1997 to 89% at September 30, 1998. Average occupancy decreased from 91%
(1997) to 88% (1998) for the three months ended September 30 and from 91% (1997)
to 85% (1998) for the nine months ended September 30. Occupancy at residential
properties fluctuates 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 decrease in rental and other income at The Willows of
Plainview Phase II for the nine months ended September 30, 1998 as compared to
the same period in 1997 is primarily due to a decrease in average occupancy. The
decrease in rental and other income at The Willows of Plainview Phase II is
partially offset by an increase in income from fully-furnished units. Rental and
other income for the three months ended September 30, 1998 as compared to the
same period in 1997 increased due to an increase in income from fully-furnished
units. The increase is partially offset by the decrease in average occupancy.
Fully-furnished units are apartments which rent at an additional premium above
base rent. Therefore, it is possible for average occupancy to decrease and
revenues to increase when the number of fully-furnished units has increased.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 17% decrease in occupancy at Lakeshore Business Center Phase I from
September 30, 1997 to September 30, 1998 can be attributed to nine tenant
move-outs totaling approximately 25,000 square feet. Two of the nine tenants
vacated prior to the end of the lease term. The write-off of accrued income
connected with these leases was not significant. The remaining seven tenants
vacated at the end of the lease term. The move-outs are partially offset by four
new leases totaling approximately 7,300 square feet. Average occupancy at
Lakeshore Business Center Phase I decreased from 98% (1997) to 81% (1998) for
the three months ended September 30 and from 96% (1997) to 90% (1998) for the
nine month period. The increase in rental and other income at Lakeshore Business
Center Phase I for the nine months ended September 30, 1998 as compared to the
same period in 1997 is due primarily to a $61,000 lease buy-out received in
February 1998 (the Partnership's proportionate share is approximately $42,200 or
69%). The lease buy-out income was received from a tenant whose lease expires
during July 1999; however, the tenant has notified the Partnership that it will
vacate the space at the end of 1998 due to the fact that it will be
consolidating several of its regional offices. The increase in rental and other
income for the nine month period is also due to an increase in common area
expense reimbursements. Tenants at the business center reimburse the Partnership
for common area expenses as part of the lease agreements. The increases in
rental and other income for the nine month period are partially offset by the
decrease in average occupancy. The decrease in rental and other income for the
three months ended September 30, 1998 as compared to the same period in 1997 is
primarily a result of the decrease in average occupancy.
As of September 30, 1998 Lakeshore Business Center Phase I has 3,049 square feet
of additional space leased to a current tenant. The tenant is expected to take
occupancy of the additional space during the fourth quarter of 1998. With this
expansion, the business center's occupancy should improve to 85%. See the
Liquidity and Capital Resources Section of this item for the tenant finish
commitment related to this lease.
The 10% decrease in occupancy at Lakeshore Business Center Phase II from
September 30, 1997 to September 30, 1998 can be attributed to five tenant move-
outs totaling approximately 19,000 square feet. The move-outs consist of three
tenants (4,500 square feet) vacating prior to the end of the lease term. One of
the three tenants (2,300 square feet) is continuing to pay rent through the end
of the lease term (February 2000). There was no write-off of accrued income
associated with the other two leases. One tenant (4,500 square feet) vacated at
the end of the lease term and one tenant negotiated a lease termination (10,000
square feet - the tenant paid the L/U II Joint Venture a lease termination fee
{recorded as rental income} of $185,000 of which the Partnership's proportionate
share is approximately $128,000 or 69%). Partially offsetting the move-outs are
three new leases totaling approximately 10,000 square feet which includes an
expansion of approximately 2,000 square feet by the largest tenant in the
building which occupies approximately 15% of the building's total rentable
square feet. Average occupancy at Lakeshore Business Center Phase II decreased
from 95% (1997) to 90% (1998) for the three months ended September 30 and
increased from 93% (1997) to 95% (1998) for the nine month period. The increase
in rental and other income at Lakeshore Business Center Phase II for the nine
months ended September 30, 1998 as compared to the same period in 1997 is due
primarily to the termination fee paid to the L/U II Joint Venture, as discussed
above. Also contributing to the increase in rental and other income is an
increase in average occupancy and an increase in common area expense
reimbursements. Tenants at the business center reimburse the partnership for
common area expenses as part of the lease agreements. Rental and other income at
Lakeshore Business Center Phase II for the three months ended September 30, 1998
as compared to the same period in 1997 remained fairly constant.
In the opinion of the General Partner of the Partnership, the decrease in
occupancy at Lakeshore Business Center Phases I and II is only a temporary
fluctuation and does not represent a downward occupancy trend.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 11% decrease in occupancy at University Business Center Phase II from
September 30, 1997 to September 30, 1998 is the result of one of Philip Crosby
Associates, Inc's ("Crosby") sub-tenants (approximately 9,000 square feet)
vacating at the end of Crosby's lease term (March 31, 1998) and one tenant move-
out of approximately 3,700 square feet. The move-outs are partially offset by an
expansion of approximately 3,700 square feet by one of Crosby's former
subtenants, Full Sail Recorders, Inc.("Full Sail"). In 1995 and 1996, Full Sail
had signed leases with the Joint Venture for the approximately 73,000 square
feet it was leasing from Crosby. These leases commenced April 1, 1998. (See
below for a discussion regarding Crosby and Full Sail). Average occupancy at
University Business Center Phase II decreased from 99% (1997) to 86% (1998) for
the three months ended September 30 and decreased from 99% (1997) to 91% (1998)
for the nine month period. The increase in rental and other income at University
Business Center Phase II for the nine months ended September 30, 1998 as
compared to the same period in 1997 is primarily 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 was approximately $48,000 or 69%. The increase in rental and
other income at University Business Center Phase II for the nine month period
can also be attributed to two leases that became effective during 1998 at a
higher rental rate than the sub-tenant rate and an increase in common area
expense reimbursements. The increase in rental and other income at University
Business Center Phase II for the three months ended September 30, 1998 as
compared to the same period in 1997 is a result of an increase in common area
expense reimbursements. Sub-tenants at the business center were not required to
reimburse the Partnership for common area expenses. However, as part of Full
Sail's lease agreement, which commenced April 1, 1998, Full Sail is required to
reimburse the Partnership for such expenses, attributing to the increase in
rental and other income beginning the second quarter of 1998.
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of University
Business Center Phase II, which is owned by the Lakeshore/University II ("L/U
II") Joint Venture. The original lease term was for seven years, and the tenant
took occupancy in April 1991. During 1994, 1995 and 1996, Crosby 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%)
was leased by Full Sail Recorders, Inc. ("Full Sail"), a major tenant at
University Business Center Phase I. During this period and through December
1996, Crosby continued to make rent payments pursuant to the original lease
terms. During 1996, the Joint Venture received notice that Crosby did not intend
to pay full rental due under the original lease agreement, including and
subsequent to January 1997. Although the Joint Venture did not have formal lease
agreements with the sub-lessees noted above during this period, beginning
February 1997 and through March 31, 1998 rent payments from these sub-lessees
were made directly to the Joint Venture.
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 possible collection. There have
been no funds recovered as a result of these actions during the nine months
ended September 30, 1998 and 1997.
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.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Interest and other income includes income from short-term investments made by
the Partnership with cash reserves. Interest and other income increased for the
nine months ended September 30, 1998 as compared to the same period in 1997
primarily as a result of an increase in cash reserves available for investment.
Interest and other income for the three months ended September 30, 1998 as
compared to the same period in 1997 remained fairly constant.
Operating expenses for the three months and nine months ended September 30, 1998
as compared to the same periods in 1997 remained fairly constant.
The decrease in operating expenses - affiliated for the nine months ended
September 30, 1998 as compared to the same period in 1997 is due primarily to
decreased leasing costs at Commonwealth Business Center Phase II and decreased
property management costs at all of the Partnership's properties except for
Commonwealth Business Center Phase II and the Willows of Plainview Phase II. The
decrease in operating expenses - affiliated for the three months ended September
30, 1998 as compared to the same period in 1997 is a result of decreased
property management costs at Lakeshore Business Center Phase I and decreased
leasing costs at 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.
The 1998 write-off of unamortized land improvements and amenities can be
attributed to The Willows of Plainview Phase II. The write-off was a result of
new property signage, updating the model apartments and pool renovations. In
order to complete these projects, it was necessary to replace assets which had
not been fully depreciated. This results in a write-off of unamortized land
improvements and amenities.
Amortization of capitalized leasing costs for the three months and nine months
ended September 30, 1998 as compared to the same periods in 1997 remained fairly
constant.
The decrease in interest expense for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 is primarily the
result of continued principal payments on the mortgages and note payable of the
Partnership and its Joint Venture properties. The decrease is partially offset
by an additional draw of $200,000 from a note payable in accordance with the
terms of the note. 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.
Real estate taxes, professional and administrative expenses and professional and
administrative expenses-affiliated remained fairly constant for the three months
and nine months ended September 30, 1998 as compared to the same periods in
1997. 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 for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 decreased primarily
as a result of a portion of the Partnership's assets having become fully
depreciated. The decrease is partially offset by the addition of assets
(primarily tenant improvements at the commercial properties and various projects
at the residential property)at all of the Partnership's properties. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets which are 5 - 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 $40,000,000.
- 14 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1998, the Partnership had a mortgage loan with an insurance
company in the amount of $4,358,192. 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.
Subsequent to September 30, 1998, the Partnership used proceeds received from
the sale of University Business Center Phase I to repay in full the $4,358,192
mortgage payable. See below for the details of this sale.
As of September 30, 1998, the L/U II Joint Venture had three mortgage loans with
an insurance company. The outstanding balances of the loans at September 30,
1998 were $5,350,902, $5,128,872 and $4,973,452 for a total of $15,453,226. The
loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at September 30, 1998 was $3,704,429,
$3,550,718 and $3,443,121 respectively, for a total of $10,698,268. 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.
Subsequent to September 30, 1998, the L/U II Joint Venture used proceeds
received from the sale of University Business Center Phase II to repay in full
the $5,128,872 mortgage payable. See below for the details of this sale.
As of September 30, 1998, The Willows of Plainview Phase II Joint Venture had
two mortgage loans each with an insurance company in the amount of $3,112,118
and $1,858,694. The mortgages are recorded as a liability of the Joint Venture.
The Partnership's proportionate share of the mortgages as of September 30, 1998
was $4,466,772 ($2,796,550 and $1,670,222). Both mortgages are due January 5,
2013, currently bear interest at a fixed rate of 7.2% and are secured by the
land, buildings and amenities of the Joint Venture. Current monthly principal
payments on both mortgages are based upon a 15-year amortization schedule. At
maturity, the note will have been repaid based on the current rate of
amortization.
As of September 30, 1998, the Partnership had a note payable with a bank in the
amount of $1,435,051. On February 1, 1998, the Partnership received an
additional $200,000 funding from this note payable in accordance with the terms
of the loan agreement. The note payable is due February 1, 2009, bears interest
at the Prime Rate and is secured by Commonwealth Business Center Phase 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.
Subsequent to September 30, 1998, the Partnership used proceeds received from
the sale of University Business Center Phase I to repay in full the $1,435,051
note payable. See below for the details of this sale.
Cash provided by operating activities was $1,306,171 and $1,142,245 for the nine
months ended September 30, 1998 and 1997, respectively. No distribution has been
made since March 31, 1994. 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 $581,899 and $483,745 at September 30, 1998
and 1997, respectively.
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.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 financing activities are from a decrease in loan
costs (refund of application fee) and from a debt funding received in 1998 (loan
secured by the assets of Commonwealth Business Center Phase II). Cash flows used
in financing activities are for principal payments on mortgages and note
payable, the repurchase of limited partnership Units and loan costs. The
Partnership does not expect any material changes in the mix and relative cost of
capital resources except for the repayment of various mortgages payable, as
discussed above.
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.
Due to the fact that no distributions were made during the nine months ended
September 30, 1998 and 1997, 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.
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare our information systems (IT) and non-information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separate from the Year 2000 since the
company saw the need to move to more advanced management and accounting systems
made available by new technology and software developments during the decade of
the 1990's.
The PILOT software system, purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California has been selected to supercede
PILOT. The Yardi system is compatible with Year 2000 and beyond. This system is
being implemented with the help of third party consultants and should be fully
operational by the third quarter of 1999. Our system for multi-family apartment
locations was converted to GEAC's Power Site System earlier in 1998 and is Year
2000 compliant.
The few remaining systems not addressed by these conversions are being modified
by our in-house staff of programmers. The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network. It will be retained as long as necessary to assure smooth operations
and has been upgraded to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
The cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since we had already identified the need to move to a
network based system regardless of the Year 2000. The costs involved will be
approximately $60,000 over 1998 and 1999. These costs include hardware,
software, internal staff and outside consultants.
NTS property management staff has been surveying our vendors to evaluate
embedded technology in our alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of fiscal year 1999.
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
We are also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant vendors and tenants have indicated that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.
Management has determined that at our current state of readiness, the need does
not presently exist for a contingency plan. We will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, more general
public infrastructure failures or failure to successfully conclude our
remediation efforts as planned could have a material adverse impact on our
results of operations, financial conditions and/or cash flows in 1999 and
beyond.
As of September 30, 1998, Lakeshore Business Center Phase I had a commitment for
approximately $98,000 of tenant finish improvements resulting from a 3,049
square foot expansion by a current tenant. The Partnership's proportionate share
of the commitment is approximately $68,000 or 69%. The project is expected to be
completed during the fourth quarter of 1998. 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 September 30, 1998.
In the next twelve months, the demand on future liquidity is anticipated to
increase as a result of future leasing activity at Commonwealth Business Center
Phase II and Lakeshore Business Center Phases I and II. 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 Partnership also anticipates a demand of future liquidity as a result of a
planned renovation of the community's clubhouse at The Willows of Plainview. At
this time, the cost and extent of the renovation has not been determined. The
cost of the common clubhouse renovation will be shared proportionately by Phase
I and Phase II of The Willows of Plainview. The source of funds for this project
will be cash flow from operations and/or cash reserves.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
the Limited Partnership, the Partnership has established an Interest Repurchase
Reserve. On January 16, 1998, the Partnership elected to resume the Repurchase
Program and fund an additional $30,000 to the Interest Repurchase Reserve. On
April 7, 1998, the Partnership elected to fund $30,000 to the Interest
Repurchase Reserve and on May 12, 1998, funded an additional $11,850. With these
funds, the Partnership repurchased 479 Units at a price of $150 per Unit. On May
26, 1998, the Partnership elected to fund $96,000 to the Interest Repurchase
Reserve and on June 1, 1998, the Partnership elected to fund an additional
$10,080. With the May 26 and June 1, 1998 fundings, the Partnership repurchased
663 Units at a price of $160 per Unit. The offering prices per Unit mentioned
above were established by the General Partner in its sole discretion and do not
purport to represent the fair market value or liquidation value of the Unit.
From June 1996 to September 30, 1998, the Partnership has repurchased a total of
1,882 Units for $277,830. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited partner
investor. The Interest Repurchase Reserve was funded from cash reserves. The
balance in the repurchase reserve at September 30, 1998 was $100.
On October 13, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, commenced a Tender Offer to purchase up to 1,200 of the
Partnership's limited partnership Units at a price of $205 per Unit. Although
the Partnership and ORIG, LLC believes that this price is appropriate, the price
of $205 per Unit may not equate to the fair market value or the liquidation
value of the Unit. Approximately $288,000 ($246,000 to purchase 1,200 Units plus
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
approximately $42,000 for expenses associated with the Offer) is required to
purchase all 1,200 Units. The Partnership will purchase the first 600 Units
tendered and will fund its purchases and its portion of the expenses from cash
reserves. If more than 600 Units are tendered, ORIG, LLC will purchase up to an
additional 600 Units. If more than 1,200 Units are tendered, the Partnership and
ORIG, LLC may choose to acquire the additional Units on the same terms.
Otherwise, tendered Units will be purchased on a pro rata basis up to 1,200.
Units that are acquired by the Partnership will be retired. Units that are
acquired by ORIG, LLC will be held by it. The General Partner, NTS-Properties
Associates V, does not intend to participate in the Tender Offer. The Tender
Offer will expire January 11, 1999 unless extended.
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. 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.
As of September 30, 1998, the Partnership owned approximately 6.21 acres of
land, adjacent to the University Place development in Orlando, Florida which is
zoned for commercial development. See below for additional information regarding
the Phase III vacant land.
On September 8, 1998, the Partnership and the L/U II Joint Venture ("L/U II")
entered into a contract with Silver City Properties, Ltd. ("the Purchaser"), an
affiliate of Full Sail Recorders, Inc. ("Full Sail"), for the sale of University
Business Center Phases I and II office buildings and the Phase III vacant land
for an aggregate purchase price of $18,751,000 (specifically the prices for each
property were $9,776,000 for Phase I and Phase III; $8,975,000 for Phase II).
University Business Center Phase I and Phase III are owned by the Partnership.
University Business Center Phase II is owned by the L/U II Joint Venture. The
Partnership owns a 69% interest in this joint venture. Full Sail currently
occupies 28% and 83% of the net rentable area of University Business Center
Phases I and II, respectively. Concurrent with the signing of the contract, the
Purchaser deposited $50,000 into an escrow account. This deposit will be applied
to the purchase price at closing. The Purchaser is to close on the properties on
or before November 7, 1998. See below for additional information regarding this
transaction. The contract permits the Purchaser to defer the closing of the
purchase of the Phase III vacant land until the 18-month anniversary of the
closing on Phases I and II.
On October 6, 1998 pursuant to the contract executed on September 8, 1998, the
Partnership and the L/U II Joint Venture sold University Business Center Phases
I and II office buildings to Silver City Properties, Ltd. ("the Purchaser"), an
affiliate of Full Sail Recorders, Inc. ("Full Sail"), for an aggregate purchase
price of $17,950,000 ($8,975,000 for Phase I and $8,975,000 for Phase II).
University Business Center Phase I was owned by the Partnership. University
- 18 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Business Center Phase II was owned by the L/U II Joint Venture of which the
Partnership owns a 69% interest. As of September 30, 1998, the carrying value of
University Business Center Phase I land and building and University Phase III
vacant land was approximately $5,500,000 and University Business Center Phase I
was encumbered by a mortgage payable of $4,358,192. As of September 30, 1998,
the carrying value of University Business Center Phase II land and building was
approximately $7,300,000 and was encumbered by a mortgage payable of $5,128,872
($5,000,000 and $3,550,718), respectively, are recorded on the accompanying
balance sheet). Other net assets and liabilities associated with these
properties included on the accompanying balance sheet at September 30, 1998 were
not significant. The gain associated with this sale will be reflected in the
fourth quarter of 1998. Portions of the proceeds from this sale were immediately
used to pay in full the outstanding debt (including interest and prepayment
penalties) of $10,468,000 ($4,633,000 for Phase I and $5,835,000 for Phase II)
on these properties. The Partnership also paid in full an outstanding debt of
approximately $1,448,000 on Commonwealth Business Center Phase II, a building
owned by the Partnership. It is anticipated that a distribution of approximately
$35 to $50 per Unit will be paid to the Limited Partners during the first
quarter of 1999. The Partnership will consider other alternatives for the use of
the remainder of the proceeds from this sale, including repayment of additional
Partnership debt or possible development costs associated with Lakeshore
Business Center III which is to be constructed on land owned by the L/U II Joint
Venture. As permitted by the contract, the Purchaser has deferred the closing of
the Phase III vacant land for a period of up to 18-months after the closing date
of Phase I and II.
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, 1998 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. See below for information
regarding a contract for the sale of a portion of this land.
As of September 30, 1998, the L/U II Joint Venture had a contract for the sale
of approximately 2.4 acres of land adjacent to the Lakeshore Business Center
development for a purchase price of $528,405. Concurrent with the signing of the
contract, the purchaser deposited into an escrow account $10,000. This deposit
will be applied to the purchase price at closing. The purchaser has until
November 17, 1998 to determine if the land is satisfactory for their use. If the
purchaser determines that it is satisfactory, the contract requires that they
proceed, at their cost, to have the property re-zoned to allow for a
self-storage facility. If the purchaser is unable to obtain the re-zoning, they
may cancel the contract. The General Partner of the Partnership has met with
city officials who seem interested in the project and have voiced a willingness
to consider the re-zoning request. If the re-zoning is granted, the purchaser is
to close on the property by February 1, 1999 or deposit an additional $10,000
with the escrow agent for a 30-day delay. The contract also allows for an
additional deposit of $10,000 for one more delay in closing to April 3, 1999.
The Partnership has a 69% interest in the Joint Venture. The Partnership has not
yet determined what the use of net proceeds would be from the sale of the land.
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.
- 19 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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.
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.
- 20 -
<PAGE>
PART II. OTHER INFORMATION
8. Defaults Upon Senior Securities
-------------------------------
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 on September 14, 1998 to report in Item 5
that the Partnership and the Lakeshore/University II Joint
Venture had entered into two contracts with Silver City
Properties, Ltd. for the sale of University Business Center
Phases I and II office buildings and Phase III vacant land.
Items 1,2,4 and 5 are not applicable and have been omitted.
- 21 -
<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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: November 13, 1998
- 22 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,051,002
<SECURITIES> 0
<RECEIVABLES> 236,705
<ALLOWANCES> 4,487
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,059,745
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 28,265,201
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 20,958,283
0
0
<COMMON> 0
<OTHER-SE> 6,268,099
<TOTAL-LIABILITY-AND-EQUITY> 28,265,201
<SALES> 4,737,423
<TOTAL-REVENUES> 4,766,020
<CGS> 0
<TOTAL-COSTS> 3,428,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,265,288
<INCOME-PRETAX> 72,433
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,433
<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>
