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, 1999
--------------------------------------
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, 1999 and December 31, 1998 3
Statements of Operations
For the three months ended March 31, 1999 and 1998 4
Statements of Cash Flows
For the three months ended March 31, 1999 and 1998 5
Notes To Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-18
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, 1999 December 31, 1998*
-------------- ------------------
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 3,419,294 $ 4,543,666
Cash and equivalents - restricted 155,137 208,682
Accounts receivable, net of allowance
for doubtful accounts of $4,678
for 1999 and 1998 120,918 77,560
Land, buildings and amenities, net 14,719,958 14,847,989
Asset held for development or sale 1,737,219 1,953,868
Other assets 474,753 409,580
------------ -----------
$ 20,627,279 $ 22,041,345
============ ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages and note payable $ 11,278,515 $ 11,450,225
Accounts payable - operations 214,664 116,056
Accounts payable - construction 28,446 47,150
Distribution payable 12,649 --
Security deposits 132,785 124,309
Other liabilities 186,045 111,897
------------ -----------
11,853,104 11,849,637
Commitments and Contingencies (Note 10)
Partners' equity 8,774,175 10,191,708
------------ -----------
$ 20,627,279 $ 22,041,345
============ ===========
</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 (4,598,435) 67,349 (4,531,086)
Net loss - current year (29,313) (296) (29,609)
Cash distributions declared to
date (16,641,480) (168,177) (16,809,657)
Repurchase of limited
partnership Units (437,610) -- (437,610)
------------ ----------- ------------
Balances at March 31, 1999 $ 8,875,199 $ (101,024) $ 8,774,175
============ =========== ===========
*Reference is made to the audited financial statements in the Form 10-K as filed
with the Commission on April 15, 1999.
</TABLE>
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Rental income $ 935,185 $ 1,587,372
Interest and other income 50,048 11,003
---------- ----------
985,233 1,598,375
Expenses:
Operating expenses 208,661 298,304
Operating expenses - affiliated 133,756 134,987
Write-off of unamortized building costs 9,833 --
Amortization of capitalized leasing costs 3,323 3,703
Interest expense 220,531 429,816
Management fees 52,367 93,623
Real estate taxes 93,050 145,457
Professional and administrative expenses 50,414 29,170
Professional and administrative expenses -
affiliated 46,150 57,093
Depreciation and amortization 196,757 418,335
---------- ----------
1,014,842 1,610,488
---------- ----------
Net loss $ (29,609) $ (12,113)
========== ==========
Net loss allocated to the limited partners
$ (29,313) $ (11,992)
========== ==========
Net loss per limited partnership unit $ (.87) $ (.34)
========== ==========
Weighted average number of limited
partnership units 33,674 35,136
========== ==========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (29,609) $ (12,113)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for doubtful accounts 4,678 --
Write-off of unamortized building costs 9,833 --
Amortization of capitalized leasing costs 3,323 3,703
Depreciation and amortization 196,757 418,335
Changes in assets and liabilities:
Cash and equivalents - restricted (69,455) (131,940)
Accounts receivable (48,036) (99,578)
Other assets (72,446) (7,497)
Accounts payable - operations 98,608 73,755
Security deposits 8,476 (5,270)
Other liabilities 74,147 182,926
----------- -----------
Net cash provided by operating activities 176,276 422,321
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (93,311) (87,766)
Proceeds from sale of asset 216,649 --
----------- -----------
Net cash provided by (used in) investing
activities 123,338 (87,766)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages and note payable -- 200,000
Principal payments on mortgages and note
payable (171,710) (287,524)
Decrease in loan costs -- 11,474
Cash distribution (1,264,925) --
Distribution payable 12,649 --
Repurchase of Limited Partnership Units (123,000) --
Cash and equivalents - restricted 123,000 (30,000)
----------- -----------
Net cash used in financing activities (1,423,986) (106,050)
----------- -----------
Net increase (decrease) in cash and
equivalents (1,124,372) 228,505
CASH AND EQUIVALENTS, beginning of period 4,543,666 473,362
----------- -----------
CASH AND EQUIVALENTS, end of period $ 3,419,294 $ 701,867
=========== ===========
Interest paid on a cash basis $ 221,821 $ 429,509
=========== ===========
</TABLE>
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<PAGE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The financial statements included herein should be read in conjunction with the
Partnership's 1998 Form 10-K as filed with the Commission on April 15, 1999. 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, 1999 and
1998.
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. Concentration of Credit Risk
----------------------------
NTS-Properties V owns and operates or has a joint venture investment in
commercial properties in Kentucky (Louisville) and Florida (Ft.
Lauderdale). Substantially all of the tenants are local businesses or are
businesses which have operations in the location in which they lease
space. The Partnership also has a joint venture investment in a
residential property in Louisville, Kentucky. The apartment unit is
generally the principal residence of the tenant.
3. 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(December 31, 1998 balance only).
4. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve in June 1996.During the years ended December 31, 1998,
1997 and 1996, the Partnership funded $177,930, $0, and $99,900,
respectively, to the Reserve. For the three months ending March 31, 1999,
the Partnership funded $123,000 to the Reserve. Through March 31, 1999,
the Partnership has repurchased a total of 2,482 Units for $400,830 at a
price ranging from $135 to $205 per Unit. The offering price per Unit was
established by the General Partner in its sole discretion and does not
purport to represent the fair market value or liquidation value of the
Units. 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 Reserve at March 31, 1999 was $0.
5. Tender Offer
------------
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 as of the offering date. The
- 6 -
<PAGE>
5. Tender Offer - Continued
------------------------
offer stated that the Partnership would purchase the first 600 Units
tendered and would fund its purchases and its portion of the expenses
from cash reserves. Units acquired by the Partnership were retired. Units
acquired by ORIG, LLC are held by it. The General Partner, NTS-Properties
Associates V, did not participate in the Tender Offer. The Tender Offer
expired on January 11, 1999 at which time 2,458 Units were tendered
pursuant to the Offer. The Partnership repurchased 600 Units at a cost of
$123,000 and ORIG, LLC purchased 1,858 Units at a cost of $380,890.
6. Mortgages and Note Payable
--------------------------
Mortgages and note payable consist of the following:
March 31, December 31,
1999 1998
---- ----
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
8.125%, due August 1, 2008,
secured by land and building $ 3,580,216 $ 3,642,952
Mortgage payable with an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 3,327,669 3,385,979
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 2,736,357 2,768,077
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 1,634,273 1,653,217
$ 11,278,515 $ 11,450,225
=========== ===========
Based on the borrowing rates currently available to the Partnership for
mortgages with similar terms, the fair value of long-term debt is
approximately $11,500,000.
7. Basis of Property
-----------------
Statement of Financial Accounting Standards(SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, specifies circumstances in which certain long-lived assets
must be reviewed for impairment. If such review indicates that the
carrying amount of an asset exceeds the sum of its expected future cash
flows, the asset's carrying value must be written down to fair value.
Application of this standard during the period ended March 31, 1999 and
1998 did not result in an impairment loss.
- 7 -
<PAGE>
8. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$52,367 and $93,623 for the three months ended March 31, 1999 and 1998,
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 $3,221 and $16,390 as a repair and maintenance fee during the
three months ended March 31, 1999 and 1998, 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, 1999 and 1998. 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.
1999 1998
--------- ---------
Administrative $ 55,524 $ 70,471
Leasing 68,600 35,262
Property manager 73,288 88,590
Other 10,049 3,217
-------- --------
$ 207,461 $ 197,540
======== ========
9. Sale of Asset Held for Sale or Development
------------------------------------------
On March 17, 1999, NTS-Properties V sold a portion of the University Phase
III vacant land to Orange County Florida for $216,648. Pursuant to a
contract executed on September 8, 1998, Silver City Properties, Ltd. ("the
Purchaser") will receive net condemnation proceeds of $145,824 at the
closing of the Phase III vacant land, less any amount received directly by
the Purchaser from the condemnation. See Note 10 for details of the
contract for the sale of the Phase III vacant land.
10. Commitments and Contingencies
-----------------------------
On September 8, 1998, NTS-Properties V entered into a contract with Silver
City Properties, Ltd. ("the Purchaser") for the sale of University Phase
III vacant land for $801,000. The contract provides the Purchaser with the
option to defer closing of the purchase of the Phase III vacant land until
the 18th month anniversary (April 2000) of the closing on the University
Phase I and II properties (Phase III Deferral Period). During the Phase
III deferral period the purchaser will have the right to use the parking
area and other improvements on the Phase III Property. Also during this
period, the Purchaser will be responsible for maintaining and shall bear
Seller's share of the cost of all maintenance and repairs necessary to
keep the Phase III property in good repair and condition from and after
Closing of the purchase of Phase I Property and Phase II Property, and for
Seller's portion of all real property taxes and assessments applicable to
the Phase III property accruing from and after Closing of the purchase of
the Phase I Property and Phase II Property (October 1998).
11. Segment Reporting
-----------------
The Partnership's reportable operating segments include Residential and
Commercial real estate operations. The Residential operations represent
the Partnership's ownership and operating results relative to an apartment
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<PAGE>
11. Segment Reporting - Continued
-----------------------------
complex known as the Willows of Plainview Phase II. The Commercial
operations represent the Partnership's ownership and operating results
relative to suburban commercial office space known as Commonwealth
Business Center Phase II and Lakeshore Business Center Phase I and II.
Commercial operations for the period ending March 31, 1998 include
University Business Centers Phases I and II which were sold October 6,
1998.
The financial information of the operating segments has been prepared
using a management approach, which is consistent with the basis and manner
in which the Partnership's management internally disaggregates financial
information for the purposes of assisting in making internal operating
decisions. The Partnership evaluates performance based on stand-alone
operating segment net income.
<TABLE>
<CAPTION>
Three Months ended March 31, 1999
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental Income $ 317,957 $ 617,228 $ 935,185
Other Income 1,695 21,622 23,317
---------- ---------- ----------
Total Net Revenues 319,652 638,850 958,502
Operating Expenses 108,553 233,864 342,417
Write-off of Unamortized
Building Improvements 9,833 -- 9,833
Amortization of Capitalized
Leasing Costs -- 3,323 3,323
Interest Expense 78,572 141,959 220,531
Management Fees 16,189 36,178 52,367
Real Estate Taxes 13,028 73,638 86,666
Depreciation Expense 47,680 137,872 185,552
---------- ---------- ----------
Net Income (Loss) $ 45,797 $ 12,016 $ 57,813
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months ended March 31, 1998
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental Income $ 293,181 $ 1,294,191(1) $ 1,587,372
Other Income 1,603 5,491 7,094
---------- ---------- ----------
Total Net Revenues 294,784 1,299,682 1,594,466
Operating Expenses 112,478 320,811(2) 433,289
Amortization of Capitalized
Leasing Costs -- 3,703 3,703
Interest Expense 87,243 226,574 313,817
Management Fees 14,748 78,875 93,623
Real Estate Taxes 13,091 125,707 138,798
Depreciation Expense 45,907 319,642 365,549
---------- ---------- ----------
Net Income (Loss) $ 21,317 $ 224,370 $ 245,687
========== ========== ==========
</TABLE>
(1) 1998 rental income includes $391,590 and $140,030 revenues from University
Phase I and II respectively.
(2) 1998 Operating expenses include $68,755 and $29,042 expense for University
Phase I and II respectively.
- 9 -
<PAGE>
11. Segment Reporting - Continued
- ---------------------------------
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements for the three
months ended March 31, 1999 and 1998 is necessary given amounts recorded at the
Partnership level and not allocated to the operating properties for internal
reporting purposes:
1999 1998
---- ----
NET REVENUES
- ------------
Total revenues for reportable segments $ 958,502 $ 1,594,466
Other income for partnership 59,477 20,962
Eliminations (32,746) (17,053)
----------- -----------
Total consolidated net revenues $ 985,233 $ 1,598,375
=========== ===========
INTEREST EXPENSE
- ----------------
Total interest expense for reportable
segments $ 220,531 $ 313,817
Interest expense for partnership -- 115,999
Eliminations -- --
----------- -----------
Total interest expense $ 220,531 $ 429,816
=========== ===========
REAL ESTATE TAXES
- -----------------
Total real estate taxes for reportable
segments $ 86,666 $ 138,798
Real estate taxes for Partnership 6,384 6,659
Eliminations -- --
----------- -----------
Total real estate tax expense $ 93,050 $ 145,457
=========== ===========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization
for reportable segments $ 185,552 $ 365,549
Depreciation and amortization for
partnership 3,459 49,715
Eliminations 7,746 3,071
----------- -----------
Total depreciation and amortization $ 196,757 $ 418,335
=========== ===========
NET INCOME (LOSS)
- -----------------
Total net income (loss) for reportable
segments $ 57,813 $ 245,687
Net income (loss) for partnership (46,930) (237,674)
Eliminations (40,492) (20,126)
----------- -----------
Total net income (loss) $ (29,609) $ (12,113)
=========== ===========
- 10 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Managements Discussion and Analysis of Financial Condition and Results of
Operations is structured in four major sections. The first section provides
information related to occupancy levels and rental and other income generated by
the Partnership's properties. The second analyzes results of operations on a
consolidated basis. The final sections address consolidated cash flows and
financial condition. Discussion of certain market risks and our cautionary
statements also follow. Management's analysis should be read in conjunction with
the financial statements in Item 1 and the cautionary statements below.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
1999 (1) 1998
---- ----
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II (2) 79% 96%
University Business Center Phase I (3) N/A (3) 100%
Property Owned in Joint Venture
- -------------------------------
with NTS-Properties IV (Ownership
- ---------------------------------
% at March 31, 1999)
- --------------------
The Willows of Plainview Phase II (90%) 99% 85%
Properties Owned Through Lakeshore/
- -----------------------------------
University II Joint Venture (L/U II
- -----------------------------------
Joint Venture) (Ownership % at March
- ------------------------------------
31, 1999)
- ---------
Lakeshore Business Center Phase I (69%)(2) 72% 94%
Lakeshore Business Center Phase II (69%)(2) 85% 100%
University Business Center Phase II(69%)(3) N/A (3) 99%
(1) Current occupancy levels are considered adequate to continue the
operation of the Partnership's properties.
(2) In the opinion of the General Partner of the Partnership, the decrease
in period ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) Represents ownership percentage as of March 31, 1998. On October 6,
1998, University Business Center Phases I and II were sold.
Average occupancy levels at the Partnership's properties during the three months
ended March 31, were as follows:
1999 1998
--------- ----------
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II (1) 79% 86%
University Business Center I (2) N/A (2) 100%
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<PAGE>
1999 1998
--------- ----------
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties IV (Ownership % at March
- ---------------------------------------
31, 1999)
- ---------
The Willows of Plainview Phase II (90%) 94% 86%
Property Owned Through Lakeshore/
- ---------------------------------
University II Joint Venture (L/U II
- -----------------------------------
Joint Venture) (Ownership % at March
- ------------------------------------
31, 1999)
- ---------
Lakeshore Business Center Phase I (69%) (1) 79% 94%
Lakeshore Business Center Phase II (69%) (1) 85% 100%
University Business Center Phase II (69%) (2) N/A (2) 99%
(1) In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent
a permanent downward occupancy trend.
(2) Represents ownership percentage as of March 31, 1998. On October 6, 1998,
University Business Center Phases I and II were sold.
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1999 and 1998 was as follows:
1999 1998
--------- ---------
Wholly-owned Properties
- -----------------------
Commonwealth Business Center Phase II $ 149,091 $ 160,570
University Business Center I N/A (1) $ 392,276
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties IV (Ownership % at March
- ---------------------------------------
31, 1999)
- ---------
The Willows of Plainview Phase II (90%) $ 319,652 $ 294,784
Property Owned Through Lakeshore/
- ---------------------------------
University II Joint Venture (L/U II
- -----------------------------------
Joint Venture) (Ownership % at March
- ------------------------------------
31, 1999)
- ---------
Lakeshore Business Center Phase I (69%) $ 241,076 $ 321,803
Lakeshore Business Center Phase II (69%) $ 230,965 $ 284,799
University Business Center Phase II (69%)(2) N/A (1) $ 140,422
(1) University Business Center Phases I and II were sold October 6, 1998
therefore there were no revenues generated for these properties for the
three months ended March 31, 1999.
(2) Ownership percentage at March 31, 1998.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 12 -
<PAGE>
The following is an analysis of material changes in results of operations for
the periods ending March 31, 1999 and 1998. Items that did not have a material
impact on operations for the periods listed above have been eliminated from this
discussion.
Rental income decreased approximately $650,000 or 41% in 1999. The decrease is
due primarily to the sale of University Business Center Phases I and II in
October 1998. Approximately $392,000 and $140,000 of revenues from University
Business Center Phase I and II, respectively were generated during the three
months ended March 31, 1998. Also contributing to the decrease are decreases in
average occupancy and common area maintenance income at Commonwealth Business
Center Phase II and Lakeshore Business Center Phase I and II and decreased lease
buyout income at Lakeshore Business Center Phase I.
Interest and other income includes interest income earned from short term
investments made by the Partnership with cash reserves. Interest income
increased approximately $39,000 or 355% in 1999 as a result of an increase in
cash reserves available for investment due to proceeds from the sale of
University Business Center Phases I and II.
Operating expenses decreased approximately $89,600 or 30% in 1999 due primarily
to the sale of University Business Center Phase I and II in October 1998. The
decrease is partially offset by increased property maintenance fees and signage
expense at Lakeshore Business Center Phase II.
The 1999 Write-off of unamortized building costs is due to the retirement of
building costs at The Willows of Plainview Phase II which were not fully
depreciated.
Interest expense decreased approximately $209,000 or 49% in 1999 as a result of
the reduction in debt from the sale of University Business Center Phases I and
II and from regular principal payments.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is recorded on the accrual basis. As a result,
the fluctuations of revenues between periods will differ from the fluctuations
of management fee expense. The 44% decrease in management fees in 1999 is
primarily due to the sale of University Business Center Phases I and II in
October 1998.
Real estate taxes decreased approximately $52,000 or 36% in 1999 as a result of
the sale of University Business Center Phases I and II in October 1998.
Professional and administrative expenses increased approximately $21,200 or 73%
in 1999 primarily as a result of increased legal fees relating to the Tender
Offer discussed in Note 5.
Professional and administrative expenses - affiliated decreased approximately
$11,000 or 19% in 1999 primarily as a result of decreased salary costs.
Professional and administrative expenses - affiliated are expenses for services
performed by employees of NTS Development Company, an affiliate of the General
Partner.
Depreciation and amortization decreased approximately $222,000 or 53% in 1999.
The decrease is the result of the sale of University Business Center Phases I
and II in October 1998. 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 $27,526,096.
- 13 -
<PAGE>
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow is typically derived from operating
activities. Cash flows provided by investing activities in 1999 are the result
of the sale of a portion of the University Phase III land (see Item 1 for
discussion of the sale). Cash flows used in investing activities are for tenant
finish improvements and for other capital additions and are funded by operating
activities and cash reserves. Changes to current tenant finish improvements are
a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of these
improvements are determined by the size of the space and whether the
improvements are for a new tenant or incurred because of a lease renewal. Cash
flows provided by financing activities are from debt fundings. Cash flows used
in financing activities are for loan costs, principal payments on mortgages and
notes payable, repurchases of limited Partnership Units and funds reserved by
the Partnership for the repurchase of limited Partnership Units through the
Tender Offer or the Interest Repurchase Reserve. The Partnership utilizes the
proportionate consolidation method of accounting for joint venture properties.
The Partnership's interest in the joint venture's assets, liabilities, revenues,
expenses and cash flows are combined on a line-by-line basis with the
Partnership's own assets, liabilities, revenues, expenses and cash flows.
In the next 12 months, the Partnership expects the demand on future liquidity to
increase as a result of future leasing activity at Commonwealth Business Center
Phase II and Lakeshore Business Center Phases I and II. In addition, demand will
increase due to the intention of the Partnership to make a capital contribution
to the L/U II Joint Venture for Lakeshore III construction costs. 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.
Cash flow provided by (used in):
1999 1998
---- ----
Operating activities $ 176,276 $ 422,321
Investing activities 123,338 (87,766)
Financing activities (1,423,986) (106,050)
------------ -----------
Net increase (decrease) in
cash and equivalents $ (1,124,372) $ 228,505
============ ==========
Net cash provided by operating activities decreased approximately $246,000 or
58% in 1999. The decrease was primarily driven by a decrease from operations as
a result of the sale of University Business Center Phases I and II in October
1998.
Net cash provided by (used in) investing activities totaled $123,338 and
$(87,766) in 1999 and 1998 respectively. The increase in investing activities in
1999 was primarily the result of the sale of a portion of the University Phase
III land (see Note 9).
Net cash used in financing activities totaled $1,423,986 and $106,050 in 1999
and 1998 respectively. The increase in net cash used in financing activities in
1999 was primarily the result of a $1,252,000 cash distribution paid to the
Limited Partners in March 1999.
- 14 -
<PAGE>
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
three months ended March 31, 1999. No distributions were made during the three
months ended March 31, 1998. These were funded by cash flow derived from
operating activities.
Cash
Net Income Distributions Return of
(Loss) Allocated Declared Capital
---------------- -------- -------
Limited Partners:
1999 $ (29,313) $ 1,252,275 $ 1,252,275
1998 -- -- --
General Partners:
1999 $ (296) $ 12,649 $ 12,649
1998 -- -- --
The Partnership has no material commitments for renovations or capital
improvements as of March 31, 1999. See below for discussion regarding the
intention of the Partnership to make a capital contribution to the L/U II Joint
Venture for the construction of Lakeshore Business Center Phase III.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in June 1996. During the years ended December 31, 1998, 1997 and 1996, the
Partnership funded $177,930, $0, and $99,900, respectively, to the reserve. For
the three months ended March 31, 1999, the Partnership funded $123,000 to the
Reserve. Through March 31, 1999, the Partnership has repurchased a total of
2,482 Units for $400,830 at a price ranging from $135 to $205 per Unit. The
offering price per Unit was established by the General Partner in its sole
discretion and does not purport to represent the fair market value or
liquidation value of the Units. 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 reserve at March 31, 1999 was $0.
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 as of the offering date. The offer stated that the Partnership
would purchase the first 600 Units tendered and would fund its purchases and its
portion of the expenses from cash reserves. Units acquired by the Partnership
were retired. Units acquired by ORIG, LLC are held by it. The General Partner,
NTS-Properties Associates V, did not participate in the Tender Offer. The Tender
Offer expired January 11, 1999, at which time 2,458 Units were tendered pursuant
to the Offer. The Partnership repurchased 600 Units at a cost of $123,000 and
ORIG, LLC purchased 1,858 Units at a cost of $380,890.
The Partnership is planning a second Tender Offer during the second quarter of
1999. The Offer will be to purchase up to 1,000 of the Partnership's limited
Partnership Units at a price of $167.50 per Unit. Although the Partnership
believes that this price is appropriate, the price of $167.50 per Unit may not
equate to the fair market value or the liquidation value of the Unit. Neither
the General Partner, NTS Properties Associates V, nor any of the partners,
members, affiliates or associates of the Partnership intend to participate in
the Offer. Further information regarding the proposed Tender Offer, such as the
duration of the Offer, will be available at a later date.
- 15 -
<PAGE>
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, 1999 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 the portion of this land and plans for the
construction of Lakeshore Business Center Phase III.
As of March 31, 1999, 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
original contract, the purchaser deposited into an escrow account $10,000. This
deposit will be applied to the purchase price at closing. The contract requires
that the purchaser 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. Subsequent to March 31, 1999, the
re-zoning has not yet been granted and per the contract, the purchaser has
elected to postpone the closing. At its option, the purchaser may postpone the
Closing Date four times for a period of 30 days each by delivering written
notice and paying to the L/U II Joint Venture $10,000 for each 30-day
postponement period. $5,000 of each payment will be applied toward the purchase
price. 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.
As of March 31, 1999 the L/U II Joint Venture intends to use the remaining 3.8
acres of the land it owns at the Lakeshore Business Center Development to
construct Lakeshore Business Center Phase III. Construction is expected to begin
during 1999. The construction cost is currently estimated to be $4,000,000 and
will be funded by a capital contribution from the Partnership and debt
financing. Construction will not begin until, in the opinion of the General
Partner, financing on favorable terms has been obtained. NTS-Properties Plus and
NTS- Properties IV, which currently have a 12% and 18% interest respectively, in
the L/U II Joint Venture are not in a position to contribute additional capital
required for the construction of Lakeshore Business Center Phase III. NTS-
Properties Plus and NTS-Properties IV have agreed that NTS-Properties V will
make a capital contribution to the L/U II Joint Venture with the knowledge that
their Joint Venture interest will, as a result, decrease.
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.
- 16 -
<PAGE>
Year 2000
- ---------
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 for the Year 2000 since the
Partnership 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 has been tested and 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 the company's 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 the 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 Partnership's share of the
costs involved will be approximately $50,000 during 1999. Costs incurred through
December 31, 1998 were approximately $10,000. These costs include primarily
hardware and software.
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 1999.
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, inability of
our tenants to pay rent when due, 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.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate.
- 17 -
<PAGE>
Cautionary Statements
- ---------------------
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 results 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.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
3. 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
None.
Items 1, 2, 4 and 5 are not applicable and have been omitted.
- 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.
PROPERTIES V, a Maryland Limited
--------------------------------
Partnership
-----------
(Registrant)
By: NTS-Properties Associates V,
General Partner
By: NTS Capital Corporation,
General Partner
-----------------------------
Brian F. Lavin
President and Chief Operating
Officer of NTS Capital
Corporation(acting Chief
Financial Officer)
Date: May 20, 1999
---------------
- 20 -
<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/ Brian F. Lavin
------------------
Brian F. Lavin
President and Chief Operating
Officer of NTS Capital
Corporation(acting Chief
Financial Officer)
Date: May 20, 1999
---------------
- 21 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1999 AND FROM THE STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,574,431
<SECURITIES> 0
<RECEIVABLES> 120,918
<ALLOWANCES> 4,678
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,719,958
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 20,627,279
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,278,515
0
0
<COMMON> 0
<OTHER-SE> 8,774,175
<TOTAL-LIABILITY-AND-EQUITY> 20,627,279
<SALES> 935,185
<TOTAL-REVENUES> 985,233
<CGS> 0
<TOTAL-COSTS> 794,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220,531
<INCOME-PRETAX> (29,609)
<INCOME-TAX> 0
<INCOME-CONTINUING> (29,609)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,609)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSSIFIED BALANCE SHEET, THEREFORE THE VALUE IS
$0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
