<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
------ SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
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NTS-PROPERTIES V, a Maryland Limited Partnership
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(Exact name of registrant as specified in its charter)
Maryland 61-1051452
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 426-4800
---------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Exhibit Index: See page 47
Total Pages: 51
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
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<S> <C>
PART I
Items 1 and 2 Business and Properties 3-12
Item 3 Legal Proceedings 12
Item 4 Submission of Matters to a Vote
of Security Holders 12
PART II
Item 5 Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-23
Item 8 Financial Statements and Supplementary
Data 24-42
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 43
PART III
Item 10 Directors and Executive Officers of
the Registrant 44
Item 11 Management Remuneration and Transactions 44-45
Item 12 Security Ownership of Certain Beneficial
Owners and Management 45
Item 13 Certain Relationships and Related
Transactions 46
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 47-50
Signatures 51
</TABLE>
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<PAGE>
PART I
Items 1. and 2. BUSINESS AND PROPERTIES
DEVELOPMENT OF BUSINESS
NTS-Properties V, a Maryland Limited Partnership, (the "Partnership") is a
limited partnership organized under the laws of the State of Maryland on April
30, 1984. The General Partner is NTS-Properties Associates V (a Kentucky limited
partnership). As of December 31, 1998 the Partnership owned the following
properties:
- Commonwealth Business Center Phase II, a business center with
approximately 61,000 net rentable ground floor square feet and
approximately 9,000 net rentable mezzanine square feet located in
Louisville, Kentucky, constructed by the Partnership.
- A joint venture interest in The Willows of Plainview Phase II, a
144-unit luxury apartment complex located in Louisville, Kentucky,
constructed by the joint venture between the Partnership and
NTS-Properties IV, an affiliate of the General Partner of the
Partnership. The Partnership's percentage interest in the joint
venture was 90% at December 31, 1998.
- A joint venture interest in the Lakeshore/University II Joint Venture
(L/U II Joint Venture). The L/U II Joint Venture was formed on
January 23, 1995 among the Partnership and NTS-Properties IV,
NTS-Properties Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of
the General Partner of the Partnership. The Partnership's percentage
interest in the joint venture was 69% at December 31, 1998. A
description of the properties owned by the L/U II Joint Venture
appears below:
- LAKESHORE BUSINESS CENTER PHASE I - a business center with
approximately 103,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- LAKESHORE BUSINESS CENTER PHASE II - a business center with
approximately 97,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- OUTPARCEL BUILDING SITES - approximately 6.2 acres of undeveloped
land adjacent to the Lakeshore Business Center development which
is zoned for commercial development.
The Partnership also owns approximately 6.21 acres of land, adjacent to the
University Place development (University Business Center III), in Orlando,
Florida, which is zoned for commercial development. (See Item 8 note 15 for
information regarding the sale of a portion of the land).
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. The General Partner believes that
the Partnership's properties are adequately covered by insurance.
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<PAGE>
As of December 31, 1998, the Partnership's properties were encumbered by
mortgages as shown in the table below:
<TABLE>
<CAPTION>
Interest Maturity Balance
Property Rate Date at 12/31/98
-------- -------- -------- -----------
<S> <C> <C> <C>
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 2,768,077 (2)
Willows of Plainview Phase II 7.2% 01/05/13 (1) $ 1,653,217 (2)
Lakeshore Business Center Phase I 8.125% 08/01/08 (3) $ 3,385,979 (4)
Lakeshore Business Center Phase II 8.125% 08/01/08 (3) $ 3,642,952 (4)
</TABLE>
(1) Current monthly principal payments are based upon a 15-year amortization
schedule. At maturity, the mortgages will have been repaid based on the
current rate of amortization.
(2) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1998. The outstanding balance of the
mortgages at December 31, 1998 were $3,080,776 and $1,839,975, respectively.
(3) Current monthly principal payments are based upon a 12-year amortization
schedule. At maturity, the mortgage will have been repaid based on the
current rate of amortization.
(4) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1998. The outstanding balance of the
mortgage at December 31, 1998 was $4,890,913 for Phase I and $5,262,099 for
Phase II.
Commonwealth Business Center Phase II is not encumbered by an outstanding
mortgage at December 31, 1998.
Currently, the Partnership's plans for renovations and other major
capital expenditures include tenant finish improvements as required by lease
negotiations at the Partnership's commercial properties. 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. The tenant finish improvements will be funded by cash
flow from operations and, if needed, cash reserves.
The Partnership had no material commitments for renovations or capital
improvements at December 31, 1998.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership is engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate, although the Partnership may also develop retail centers. See Item 8
for information regarding the Partnership's operating segments.
NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The current business of the Partnership is consistent with the original
purpose of the Partnership which was to invest in real property, which was
either under development or proposed for development, on which it would
develop, construct, own and operate apartment complexes, business parks, and
retail, industrial and office buildings. The Partnership's properties are in
a condition suitable for their intended use.
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The Partnership intends to hold the properties until such time as sale or
other disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will
not be met. In deciding whether to sell a property, the Partnership will
consider factors such as potential capital appreciation, cash flow and
Federal income tax considerations, including possible adverse Federal income
tax consequences to the Limited Partners. As of December 31, 1998, the L/U II
Joint Venture has a contract for the sale of approximately 2.4 acres of land
it owns at the Lakeshore Business Center development. See below for the
details of this contract. See below for information regarding the sale of
University Business Center Phase I and II.
COMMONWEALTH BUSINESS CENTER PHASE II
Base annual rents, which exclude the cost of utilities, currently range from
$7.08 to $13.50 per square foot for ground floor office space, $3.42 to $5.86
per square foot for ground floor warehouse space, $6.38 to $8.64 per square
foot for mezzanine office space and $2.84 per square foot for mezzanine
storage space. The average base annual rental for all space leased as of
December 31, 1998 was $8.21. Space is ordinarily leased for between three and
five years with the majority of current square footage being leased for a
term of five years. Current leases terminate between 1999 and 2003. All
leases provide for tenants to contribute toward the payment of common area
expenses, insurance and real estate taxes. As of December 31, 1998, there
were 12 tenants leasing office, warehouse and storage space aggregating
approximately 47,530 square feet of rentable area (1). The tenants who occupy
Commonwealth Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include
engineering and an encoding center. Two tenants individually lease more than
10% of Commonwealth Business Center Phase II's rentable area. The occupancy
levels at the business center as of December 31 were 79% (1998), 78% (1997),
84% (1996),67% (1995) and 100% (1994). See Item 7 for average occupancy
levels for the periods ending December 31, 1998, 1997 and 1996.
The following table contains approximate data concerning the leases in effect
on December 31, 1998.
<TABLE>
<CAPTION>
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
No. Of Tenants Expiration Area(1) Rental Options
- -------------- ---------- ------------ --------------- ---------
<S> <C> <C> <C> <C>
Major Tenants (2):
1 1999 6,325 (10.5%) $ 72,768 (16.4%) None
1 2000 13,846 (22.9%) $124,620 (28.1%) 1 Five-Year
Other Tenants:
5 1999 9,721 (16.1%) $ 82,392 (18.7%) None
3 2000 6,401 (10.6%) $ 59,436 (13.5%) 1 Three-Year
1 2001 3,200 (5.3%) $ 23,196 ( 5.2%) None
None 2002 -- -- --
1 2003 8,037 (13.3%) $ 80,376 (18.1%) None
</TABLE>
(1) Rentable area includes only ground floor square feet (office and
warehouse space).
(2) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
THE WILLOWS OF PLAINVIEW PHASE II
Units at The Willows of Plainview Phase II include one and two-bedroom loft
and deluxe apartments and two-bedroom town homes. All units have wall-to-wall
carpeting, individually controlled heating and air conditioning, dishwashers,
ranges, refrigerators and garbage disposals. All units, except one-bedroom
lofts, have washer/dryer hook-ups. The one-bedroom lofts have stackable washers
and dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, swimming pool, whirlpool and tennis
courts.
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<PAGE>
Monthly rental rates at The Willows of Plainview Phase II start at $659 for
one-bedroom apartments, $919 for two-bedroom apartments and $1,019 for
two-bedroom town homes, with additional monthly rental amounts for special
features and locations. Tenants pay all costs of heating, air conditioning and
electricity. Most leases are for a period of one year. Units will be rented in
some cases, however, on a shorter term basis at an additional charge. The
occupancy levels at the apartment complex as of December 31 were 92% (1998), 90%
(1997), 92% (1996), 94% (1995) and 93% (1994). See Item 7 for average occupancy
levels for the periods ending December 31, 1998, 1997 and 1996.
LAKESHORE BUSINESS CENTER PHASE I
Base annual rents, which exclude the cost of utilities, currently range
from $9.78 to $12.25 per square foot for first floor office space, $6.18 to
$10.65 per square foot for first floor service space and $9.00 to $12.25 per
square foot for second floor office space. The average base annual rental for
all space leased as of December 31, 1998 was $10.85. Space is ordinarily leased
for between three and five years with the majority of current square footage
being leased for a term of five years. Current leases expire between 1999 and
2004. Five leases provide for renewal options at rates which are based upon
increases in the consumer price index and/or are negotiated between lessor and
lessee. All leases provide for tenants to contribute toward the payment of
common area expenses, insurance and real estate taxes. As of December 31, 1998,
there were 32 tenants leasing office space (first and second floor) and service
space aggregating approximately 88,155 square feet of rentable area. The tenants
who occupy Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include
telemarketing services and management offices for two cellular communications
chains and a soft drink company. There are no tenants that individually lease
more than 10% of Lakeshore Business Center Phase I's rentable area. The
occupancy levels at the business center as of December 31 were 85% (1998), 96%
(1997), 92% (1996 and 1995) and 80% (1994). See Item 7 for average occupancy
levels for the periods ending December 31, 1998, 1997 and 1996.
The following table contains approximate data concerning the leases in
effect on December 31, 1998.
<TABLE>
<CAPTION>
Current Base
Annual Rental
Sq. Ft. and % of and % of Gross Base
Year of Net Rentable Annual Renewal
No. Of Tenants Expiration Area Rental Options
- -------------- ---------- ----------------- -------------------- -------
<S> <C> <C> <C> <C>
Major tenants (1):
None
Other tenants:
10 1999 36,305 (35.1%) $369,636 (38.6%) 2 Three-Year
11 2000 26,453 (25.6%) $280,764 (29.5%) 2 Three-Year
5 2001 9,037 (8.8%) $105,209 (11.0%) 2 Three-Year
4 2002 8,305 (8.0%) $ 92,592 (9.8%) 2 Three-Year
1 2003 1,728 (1.7%) $ 21,168 (2.2%) None
1 2004 6,327 (6.1%) $ 87,234 (9.1%) None
</TABLE>
(1) Major tenants are those that individually occupy 10 percent or more of
the rentable square footage.
LAKESHORE BUSINESS CENTER PHASE II
Base annual rents, which exclude the cost of utilities, currently range from
$10.00 to $12.39 per square foot for first floor office space and $9.80 to
$14.95 per square foot for second floor office space. The average base rental
for all space leased as of December 31, 1998 was $11.21. Space is ordinarily
leased for between three and five years with the majority of current square
footage being leased for a term of three years. Current leases expire between
1999 and 2003. Five leases provide for renewal options at rates which are
based upon increases in the consumer price index and/or are negotiated
between lessor and lessee. All
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<PAGE>
leases provide for tenants to contribute toward the payment of common area
expenses, insurance and real estate taxes. As of December 31, 1998, there
were 17 tenants leasing office space (first and second floor) and service
space aggregating approximately 75,458 square feet of rentable area (1). The
tenants who occupy Lakeshore Business Center Phase II are professional
service oriented organizations. The principal occupations/professions
practiced include medical equipment leasing, insurance services and
management offices for the Florida state lottery. Two tenants individually
lease more than 10% of Lakeshore Business Center Phase II's rentable area.
The occupancy levels at the business center as of December 31 were 79%
(1998), 100% (1997), 89% (1996), 72% (1995) and 78% (1994). See Item 7 for
average occupancy levels for the periods ending December 31, 1998, 1997 and
1996.
The following table contains approximate data concerning the leases in
effect on December 31, 1998:
<TABLE>
<CAPTION>
Current Base
Annual Rental
Sq. Ft. and % of and % of Gross Base
Year of Net Rentable Annual Renewal
No. Of Tenants Expiration Area (1) Rental Options
- -------------- ---------- --------------- -------------------- -------
<S> <C> <C> <C> <C>
Major tenants (2):
1 1999 10,580 (10.9%) $127,176 (14.8%) 1 Three-Year
1 2002 14,665 (15.1%) $166,212 (19.3%) 1 Five-Year
Other tenants:
5 1999 16,241 (16.7%) $184,098 (21.4%) 1 Three-Year
4 2000 11,124 (11.5%) $125,642 (14.6%) None
3 2001 9,985 (10.3%) $106,788 (12.4%) 1 Five-Year
2 2002 8,675 (8.9%) $101,384 (11.8%) (3)
1 2003 4,188 (4.3%) $ 48,156 (5.6%) None
</TABLE>
(1) Excludes approximately 1,218 square feet which is occupied by the
business center's property management and leasing staff.
(2) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
(3) 1 Three-Year and 1 Five-Year
Additional operating data regarding the Partnership's properties is furnished
in the following table.
<TABLE>
<CAPTION>
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
----------- -------- ------------
<S> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
Commonwealth Business Center Phase II $ 4,582,252 $ .010910 $ 46,050
PROPERTY OWNED IN JOINT VENTURE
WITH NTS-PROPERTIES IV
The Willows of Plainview Phase II 7,993,098 .011111 58,360
PROPERTIES OWNED THROUGH
LAKESHORE/UNIVERSITY II JOINT
VENTURE (L/U II JOINT VENTURE)
Lakeshore Business Center Phase I 10,260,812 .026214 126,826
Lakeshore Business Center Phase II 12,227,459 .026214 144,702
</TABLE>
Percentage ownership has not been applied to the information in the above
table for properties owned through a joint venture.
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<PAGE>
Depreciation for book purposes 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 estimated realty taxes on planned
renovations, primarily tenant improvements, is not material.
INVESTMENT IN JOINT VENTURES
NTS WILLOWS PHASE II JOINT VENTURE - On September 1, 1984, the Partnership
entered into a joint venture agreement with NTS-Properties IV to develop,
construct, own and operate a 144-unit luxury apartment complex on an 8.29
acre site in Louisville, Kentucky known as The Willows of Plainview Phase II.
The term of the Joint Venture shall continue until dissolved. Dissolution
shall occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than its
cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2028.
The Partnership contributed approximately $7,455,000, the construction and
carrying costs of the apartment complex, and NTS-Properties IV contributed
land valued at $800,000. No future contributions are anticipated as of
December 31, 1998.
The apartment complex is encumbered by permanent mortgages with two insurance
companies. Both loans are secured by a first mortgage on the property. The
outstanding balance of the mortgages at December 31, 1998 is $4,920,751
($3,080,776 and $1,839,975). The mortgages are recorded as a liability of the
Joint Venture. The Partnership's proportionate interest in the mortgages at
December 31, 1998 is $4,421,294 ($2,768,077 and $1,653,217). Both mortgages
currently bear interest at a fixed rate of 7.2% and are due January 5, 2013.
Monthly principal payments are based upon a fifteen-year amortization
schedule. At maturity, the loans will have been repaid based on the current
rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the gross receipts from the operations of
the Joint Venture Property (including investment income) for such period plus
any funds released from previously established reserves (referred to in
clause (iv) below), over (B) the sum of (i) all cash operating expenses paid
by the Joint Venture Property during such period in the course of business,
(ii) capital expenditures during such period not funded by capital
contributions, loans or paid out of previously established reserves, (iii)
payments during such period on account of amortization of the principal of
any debts or liabilities of the Joint Venture Property and (iv) reserves for
contingent liabilities and future expenses of the Joint Venture Property.
Percentage Interest means that percentage which the capital contributions of
a Partner bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 90%
at December 31, 1998.
NTS FT. LAUDERDALE OFFICE JOINT VENTURE - On April 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV to develop,
construct, own and operate an office warehouse building in Ft.
Lauderdale, Florida known as Lakeshore Business Center Phase I.
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<PAGE>
The Partnership contributed approximately $9,170,000, the cost of
constructing and leasing the building and NTS-Properties IV contributed land
valued at $1,752,982. On January 23, 1995, the partners of the NTS Ft.
Lauderdale Office Joint Venture contributed Lakeshore Business Center Phase I
to the newly formed Lakeshore/University II (L/U II) Joint Venture. See below
for a further discussion of the Lakeshore/University II Joint Venture.
NTS UNIVERSITY BOULEVARD JOINT VENTURE - On January 3, 1989, the Partnership
entered into a joint venture agreement with NTS-Properties Plus Ltd. to
develop, construct, own and operate Phase II of the University Business
Center development in Orlando, Florida.
The Partnership contributed land valued at $1,460,000 and NTS-Properties Plus
Ltd. contributed development and carrying costs of approximately $8,000,000.
In connection with the construction of University Business Center Phase I,
the Partnership incurred the cost of developing certain common areas which
are used by both University Business Center Phase I and Phase II. In 1989,
NTS-Properties Plus Ltd. paid approximately $747,000 to the Partnership for
Phase II's share of the common area costs. During the second quarter of 1994,
the Partnership made an approximate $79,000 capital contribution to the Joint
Venture. The capital contribution increased the Partnership's ownership
percentage in the Joint Venture from approximately 16% to approximately 17%.
The contribution was made to fund a portion of the Joint Venture's operating
costs. On January 23, 1995, the partners of the NTS University Boulevard
Joint Venture contributed University Business Center Phase II to the newly
formed L/U II Joint Venture. See below for a further discussion of the L/U II
Joint Venture.
LAKESHORE/UNIVERSITY II JOINT VENTURE - On January 23, 1995, a joint venture
known as the Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties IV, NTS-Properties Plus Ltd.
and NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of the
Partnership, for purposes of owning Lakeshore Business Center Phases I and
II, University Business Center Phase II (property sold during 1998 - see
below for details regarding the transaction) and certain undeveloped tracts
of land adjacent to the Lakeshore Business Center development.
The table below identifies which properties were contributed to the L/U II
Joint Venture and the respective owners of such properties prior to the
formation of the joint venture.
<TABLE>
<CAPTION>
Property Contributing Owner
-------- -------------------
<S> <C>
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center Phase II NTS-Properties V and NTS-
Properties Plus Ltd.
</TABLE>
The term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the execution
by a Partner of an assignment for the benefit of its creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the Real Property and the sale and/or collection
of any evidences of indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
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<PAGE>
Each of the properties were contributed to the L/U II Joint Venture subject
to existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
University Business Center Phase II in the amount of $3,000,000, in favor of the
banks which held the indebtedness on University Business Center Phase II,
Lakeshore Business Center Phase II and the undeveloped tracts of land prior to
the formation of the joint venture and on Lakeshore Business Center Phase I in
the amount of $5,500,000 subsequent to the formation of the L/U II Joint
Venture. In addition to the above, NTS-Properties IV contributed $750,000 to the
L/U II Joint Venture. As a result of the valuation of the properties contributed
to the L/U II Joint Venture, the Partnership obtained a 69% partnership interest
in the joint venture.
The properties of the L/U II Joint Venture are encumbered by mortgages payable
to an insurance company as follows:
<TABLE>
<CAPTION>
Loan Balance
at 12/31/98 Encumbered Property
------------ -------------------
<S> <C>
$5,262,099 Lakeshore Business Center Phase II
$4,890,913 Lakeshore Business Center Phase I
</TABLE>
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the loans at December 31, 1998 is $7,028,930
($3,642,952, and $3,385,979). The mortgages bear interest at a fixed rate of
8.125% and are due August 1,2008. 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.
On October 6, 1998 pursuant to a contract executed on September 8, 1998, the
Lakeshore/University II Joint Venture ("L/U II") and NTS Properties V sold
University Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser") 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 II was owned by the L/U II Joint Venture of which the
Partnership owns a 69% interest. Portions of the proceeds from this sale were
immediately used to pay the remainder of the outstanding debt (including
interest and prepayment penalties) of approximately $10,672,643 ($4,739,261 for
Phase I and $5,933,382 for Phase II) on these properties. (See Note 12 for
details of this transaction). Subsequent to December 31, 1998, a portion of the
proceeds from the sale were used to make a special cash distribution of $37.50
per limited partnership Unit totaling $1,252,275. See Note 15.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B)(iv) below), over (B) the sum of (i) all cash
operating expenses paid by the Joint Venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the Joint Venture and (iv) reserves for contingent
liabilities and future expenses of the Joint Venture, as established by the
Partners; provided, however, that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 69%
at December 31, 1998.
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<PAGE>
COMPETITION
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents, amenities and services provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1998, there are no properties under construction
in the respective vicinities in which the properties are located. The
Partnership has not commissioned a formal market analysis of competitive
conditions in any market in which it owns properties, but relies upon the market
condition knowledge of the employees of NTS Development Company who manage and
supervise leasing for each property.
MANAGEMENT OF PROPERTIES
NTS Development Company, an affiliate of NTS-Properties Associates V, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a
wholly-owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties
Associates V. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received a total of $332,161
for the year ended December 31, 1998. $271,811 was received from commercial
properties and $60,350 was received from the residential property. The fee is
equal to 6% of gross revenues from commercial properties and 5% of gross
revenues from residential properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial period of five years, and thereafter for
succeeding one-year periods, unless canceled. The Agreement is subject to
cancellation by either party upon sixty days written notice. As of December 31,
1998, the Management Agreement is still in effect.
WORKING CAPITAL PRACTICES
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
SEASONAL OPERATIONS
The Partnership does not consider its operations to be seasonal to any material
degree.
CONFLICT OF INTEREST
Because the principals of the General Partner and/or its affiliates own and/or
operate real estate properties other than those owned by the Partnership that
are or could be in competition with the Partnership, potential conflicts of
interest exist. Because the Partnership was organized by and is operated by the
General Partner, these conflicts are not resolved through arm's length
negotiations but through the exercise of the General Partner's good judgement
consistent with its
- 11 -
<PAGE>
fiduciary responsibility to the Limited Partners and the Partnership's
investment objectives and policies. The General Partner is accountable to the
Limited Partners as a fiduciary and consequently must exercise good faith and
integrity in handling the Partnership's affairs. A provision has been made in
the Partnership Agreement that the General Partner will not be liable to the
Partnership except for acts or omissions performed or omitted fraudulently,
in bad faith or with negligence. In addition, the Partnership Agreement
provides for indemnification of the General Partner by the Partnership for
liability resulting from errors in judgement or certain acts or omissions.
The General Partner and its affiliates retain a free right to compete with
the Partnership's properties including the right to develop competing
properties now and in the future in addition to those existing properties
which may compete directly or indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from third parties for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
EMPLOYEES
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. (See Item 8 Note 11 for further discussion of related party
transactions).
GOVERNMENTAL CONTRACTS AND REGULATIONS
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- 12 -
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED
PARTNER MATTERS
There is no established trading market for the limited partnership interests,
nor is one likely to develop. The Partnership had 2,303 limited partners as of
March 1, 1999. Cash distributions and allocations of net income (loss) are made
as described in Note 1C to the Partnership's 1998 financial statements.
No distributions were paid during 1998, 1997 or 1996. Quarterly distributions
are determined based on current cash balances, cash flow being generated by
operations and cash reserves needed for future leasing costs, tenant finish
costs, and capital improvements.
Due to the fact that no distributions were made during 1998, 1997 and 1996, the
table which presents that portion of the distributions that represent a return
in capital on a Generally Accepted Accounting Principal basis has been omitted.
- 13 -
<PAGE>
Item 6. SELECTED FINANCIAL DATA
For the years ended December 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Rental and other income $ 5,752,977 $ 5,906,286 $ 5,693,700 $ 5,388,726 $ 3,787,118
Gain on sale of property 5,004,628(1) -- -- -- --
Total expenses (5,719,124) (6,464,964) (6,479,552) (6,685,340) (4,292,057)
------------ ------------ ------------ ----------- -----------
Income (loss) before
extraordinary item 5,038,481 (558,678) (785,852) (1,296,614) (504,939)
Extraordinary item (1,042,438) (49,346) (50,118) -- --
------------ ------------ ------------ ----------- -----------
Net income (loss) $ 3,996,043 $ (608,024) $ (835,970) $(1,296,614) $ (504,939)
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Net income (loss) allocated to:
General Partner $ 39,961 $ (6,080) $ (8,360) $ (12,966) $ (5,049)
Limited partners $ 3,956,082 $ (601,944) $ (827,610) $(1,283,648) $ (499,890)
Net income (loss) per limited
partnership unit $ 114.89 $ (17.13) $ (23.23) $ (35.78) $ (13.93)
Weighted average number
of limited partnership
units 34,433 35,136 35,632 35,876 35,876
Cumulative net income (loss) allocated to:
General Partner $ 67,349 $ 27,388 $ 33,468 $ 41,828 $ 54,794
Limited partners $(4,598,435) $(8,554,517) $ (7,952,573) $(7,124,963) $(5,841,315)
Cumulative taxable income (loss) allocated to:
General Partner $ 189,030 $ 153,955 $ 149,844 $ 145,990 $ 148,475
Limited partners $(3,720,315) $(7,160,797) $ (7,217,069) $(6,835,826) $(6,069,120)
Distributions declared (2):
General Partner $ -- $ -- $ -- $ -- $ 786
Limited partners $ -- $ -- $ -- $ -- $ 77,851
Cumulative distributions
declared (2):
General Partner $ 155,527 $ 155,527 $ 155,527 $ 155,527 $ 155,527
Limited partners $15,397,262 $15,397,262 $15,397,262 $15,397,262 $15,397,262
At year end:
Land, buildings and
amenities, net $14,847,989 $23,750,773 $24,972,650 $26,149,956 $17,505,634
Total assets $22,041,345 $28,712,898 $30,334,256 $31,537,473 $21,447,138
Mortgages and notes
payable $11,450,225 $21,662,821 $22,688,331 $22,839,940 $11,743,884
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
(1) See Item 8 Note 12 for details of the sale of University Business Centers
Phase I and II to Silver City Properties, Ltd. on October 6, 1998.
(2) See Item 8 Note 15 for details of special cash distribution paid subsequent
to December 31, 1998.
- 14 -
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's 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 8 and the cautionary statements below.
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
<TABLE>
<CAPTION>
Percentage
Ownership
at 12/31/98 1998 (1) 1997 1996
----------- -------- ---- ----
<S> <C> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
Commonwealth Business Center
Phase II 100% 79% 78% 84%
University Business Center
Phase I N/A(2) N/A(2) 100% 98%
PROPERTIES OWNED IN JOINT VENTURE
WITH NTS-PROPERTIES IV
The Willows of Plainview Phase II 90% 92% 90% 92%
PROPERTIES OWNED THROUGH
LAKESHORE/UNIVERSITY II JOINT VENTURE
(L/U II JOINT VENTURE)
Lakeshore Business Center
Phase I (3) (4) 69% 85% 96% 92%
Lakeshore Business Center
Phase II (3) (5) 69% 79% 100% 89%
University Business Center
Phase II (2) N/A(2) N/A(2) 99% 99%
</TABLE>
(1) Current occupancy levels are considered adequate to continue the
operation of the Partnership's properties.
(2) On October 6, 1998, University Business Center Phases I and II were
sold. See below for the details of this transaction.
(3) In the opinion of the General Partner of the Partnership, the decrease
in year ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(4) Subsequent to December 31, 1998, two new five-year leases totaling
6,880 square feet were signed at Lakeshore Business Center Phase I. Both
tenants are expected to take occupancy during the first quarter of 1999.
With these new leases, the business center's occupancy should improve to
89%.
(5) As of December 31, 1998, Lakeshore Business Center Phase II has an
additional 5,668 square feet leased to two new tenants. Both tenants took
occupancy during the first quarter of 1999 and the business center's
occupancy has increased to 85%.
- 15 -
<PAGE>
The average occupancy levels at the Partnership's properties as of December
31 were as follows:
<TABLE>
<CAPTION>
Percentage
Ownership
at
12/31/98 1998 1997 1996
---------- ---- ---- ----
<S> <C> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
Commonwealth Business Center
Phase II 100% 80% 74% 77%
University Business Center
Phase I N/A(1) 100%(3) 100% 96%
PROPERTIES OWNED IN JOINT VENTURE
WITH NTS-PROPERTIES IV
The Willows of Plainview Phase II 90% 87%(2) 91% 95%
PROPERTIES OWNED THROUGH
LAKESHORE/UNIVERSITY II JOINT
VENTURE (L/U II JOINT VENTURE)
Lakeshore Business Center
Phase I 69% 88%(2) 96% 97%
Lakeshore Business Center
Phase II 69% 91%(2) 94% 80%
University Business Center
Phase II N/A(1) 91%(3) 99% 99%
</TABLE>
(1) On October 6, 1998, University Business Center Phase I and II were sold. See
below for the details of this transaction.
(2) 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.
(3) Represents average occupancy through October 6, 1998.
RENTAL AND OTHER INCOME
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Percentage
Ownership
at 12/31/98 1998 1997 1996
--------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
Commonwealth Business Center Phase II 100% $ 600,124 $ 541,348 $535,619
University Business Center Phase I 100% $1,167,893 (1) $1,530,842 $1,431,094
</TABLE>
Revenues shown in the table above and below for properties owned through a joint
venture represent only the Partnership's percentage interest in those revenues.
(Continued on page 17)
- 16 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
PROPERTIES OWNED IN JOINT
VENTURE WITH NTS-
PROPERTIES IV
The Willows of Plainview Phase II
90% $1,211,384 $1,283,576 $1,150,113
PROPERTIES OWNED THROUGH
LAKESHORE/UNIVERSITY II
JOINT VENTURE (L/U II
JOINT VENTURE)
Lakeshore Business Center Phase I 69% $1,034,468 $984,446 $ 920,643
Lakeshore Business Center Phase II 69% $1,134,469 $977,016 $ 804,221
University Business Center Phase II N/A $539,956 (1) $576,088 $ 837,438
</TABLE>
(1) On October 6, 1998, University Business Centers Phases I and II were sold.
See below for the details of this transaction. Revenues shown here represent
1998 income through the date of disposition.
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1998, 1997 and 1996. 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 $166,000 or 3% in 1998. The decrease was
primarily a result of decreased rental income at University Business Center
Phases I and II as a result of the sale of these properties in October 1998 (see
below for a further discussion of the sale). The decrease is partially offset by
increased common area maintenance income at Commonwealth Business Center Phase
II and Lakeshore Business Center Phase I and II and increased lease buyout
income at Lakeshore Business Center Phase I and II in 1998 compared to 1997.
RENTAL INCOME increased approximately $166,000 or 3% in 1997. The increase was
primarily a result of increased common area maintenance income at Commonwealth
Business Center Phase II and Lakeshore Business Center Phase I and II and
increased income from fully-furnished units at The Willows of Plainview Phase
II. Fully furnished units are apartments which rent at an additional premium
above base rent.
The GAIN ON SALE OF ASSET is the result of selling University Business Center
Phase I and II. On October 6, 1998 pursuant to the contract executed on
September 8, 1998, the Lakeshore/University II Joint Venture ("L/U II") and NTS
Properties V, 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"), 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 II was owned by the L/U II Joint Venture of which the
Partnership owns a 69% interest. Portions of the proceeds from this sale were
immediately used to pay outstanding debt (including interest and prepayment
penalties) of $10,672,643 ($4,739,261 for Phase I and $5,933,382 for Phase II)
on these properties. During October 1998 the Partnership used proceeds from the
sale to pay outstanding debt of approximately $1,448,000 on Commonwealth
Business Center Phase II.
INTEREST AND OTHER INCOME includes interest income earned from short-term
investments made by the Partnership with cash reserves. Interest income
increased approximately $13,000 or 17% in 1998 and approximately $47,000 or 170%
in 1997 as a result of an increase in cash reserves available for investment.
- 17 -
<PAGE>
OPERATING EXPENSES decreased approximately $42,000 or 4% in 1998 due primarily
to the sale of University Business Center Phase I and II in October 1998. The
decrease is partially offset by increased janitorial and exterior improvements
at Commonwealth Business Center Phase II and increased executive unit expenses
at The Willows of Plainview Phase II. (Executive units are fully-furnished
apartments that rent at a premium above base rent).
OPERATING EXPENSES increased approximately $111,000 or 10% in 1997 due to
increased expenses associated with fully furnished units and increased
advertising and landscaping costs at The Willows of Plainview Phase II and
increased janitorial costs at all of the Partnership's commercial properties
except University Business Center Phase II.
OPERATING EXPENSES - AFFILIATED decreased approximately $48,000 or 8% in 1998
due primarily to the sale of University Business Center Phase I and II in
October 1998.
OPERATING EXPENSES - AFFILIATED increased approximately $51,000 or 10% in 1997
as a result of increased leasing and property management costs at Commonwealth
Business Center Phase II, increased property management costs at Lakeshore
Business Center Phases I and II and The Willows of Plainview Phase II.
The 1998 WRITE-OFF OF UNAMORTIZED LAND IMPROVEMENTS AND AMENITIES is primarily
the result of the retirement of improvements and amenities at The Willows of
Plainview Phase II which were not fully depreciated.
INTEREST EXPENSE decreased approximately $257,000 or 15% in 1998 as a result of
the reduction in debt from the sale of University Business Center Phase I and II
(see discussion above) and from regular principal payments.
INTEREST EXPENSE decreased approximately $244,000 or 12% in 1997 primarily as a
result of lower interest rates on the permanent financing the Partnership
obtained in January 1996 and the L/U II Joint Venture obtained in July 1996. The
decrease is also due to 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.
REAL ESTATE TAXES decreased approximately $79,000 or 14% in 1998 as a result of
decreased property tax assessments for Lakeshore Business Center Phases I and II
and the sale of University Business Center Phases I and II in October 1998 (see
discussions above).
REAL ESTATE TAXES increased $29,000 or 5% in 1997 primarily as a result of
increased property tax assessments for Lakeshore Business Center Phases I and
II.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES increased approximately $12,000 or 10%
in 1998 primarily as a result of increased legal fees.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES - AFFILIATED decreased approximately
$18,000 or 8% in 1998 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.
PROFESSIONAL AND ADMINISTRATIVE EXPENSES - AFFILIATED increased approximately
$40,000 or 22% in 1997 primarily as a result of increased salary costs.
DEPRECIATION AND AMORTIZATION decreased approximately $302,000 or 18% in 1998.
The decrease is the result of the sale of University Business Center Phases I
and II in October 1998 (see discussion above). 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.
- 18 -
<PAGE>
The 1998 EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT relates to the sale
of University Business Center Phases I and II (see discussion above). A portion
of the proceeds from the sale was used to retire a $4,358,191 mortgage payable
on University Business Center Phase I (maturity of February 2008), a $5,128,872
mortgage payable on University Business Center Phase II (maturity of August
2008) and a $1,435,051 mortgage payable on Commonwealth Business Center Phase II
(maturity of February 2009). As a result of the prepayment of the University
Business Center Phase I and II mortgages, penalties of $348,655 and $763,995
respectively, were required by the insurance companies who held the mortgages.
The Partnerships proportionate share of the University Business Center Phase II
penalty was $528,914. Unamortized loan costs connected with these loans were
also expensed due to the fact that the mortgages were repaid prior to their
maturity.
The 1997 EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT relates to
unamortized loan costs associated with The Willows of Plainview Phase II's notes
payable. The unamortized loan costs were expensed due to the fact that the notes
were retired in 1997 prior to their maturity (December 5, 2003).
The 1996 EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT relates to
unamortized loan costs associated with L/U II Joint Venture's note payable. The
unamortized loan costs were expensed due to the fact that the notes were repaid
in 1996 prior to their maturity (January 31, 1998).
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 1998 are the result
of the sale of University Business Center Phase I and II (see Items 1 and 2 for
detail 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 an increase in 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 and an
approximate $1,252,000 special cash distribution paid to limited partners in the
first quarter of 1999. 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):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating activities $ 1,462,038 $ 1,666,522 $ 919,765
Investing activities 13,990,823 (431,992) (296,737)
Financing activities (11,382,557) (1,076,984) (525,543)
------------ ----------- ---------
Net increase in cash and equivalents $ 4,070,304 $ 157,546 $ 97,485
------------ ----------- ---------
------------ ----------- ---------
</TABLE>
- 19 -
<PAGE>
Net cash provided by operating activities decreased approximately $204,000 or
12% in 1998. The decrease was driven by an increase in accounts payable and
other liabilities.
Net cash provided by operating activities increased approximately $747,000 or
81% in 1997. The increase was driven by a decrease in net loss and increases in
other assets, accounts payable and other liabilities.
Net cash provided by (used in) investing activities totaled $13,990,823,
($431,992) and ($296,737) in 1998, 1997 and 1996 respectively. The increase in
investing activities in 1998 was primarily the result of the sale of University
Business Center Phase I and II. The increase in net cash used in investing
activities in 1997 was primarily the result of increased capital expenditures.
Net cash used in financing activities totaled $11,382,557, $1,076,984 and
$525,543 in 1998, 1997 and 1996, respectively. The increase in net cash used in
financing activities in 1998 was primarily the result of retirement of mortgages
payable on Commonwealth Business Center II and University Business Center I and
II from the proceeds of the sale of University Business Center I and II and from
repurchases of limited partnership Units. Net cash used in financing activities
increased in 1997 primarily as a result of increased net payments on mortgages
partially offset by decreased loan costs and repurchases of limited partnership
Units in 1997 compared to 1996.
Due to the fact the no distributions were made during 1998, 1997 or 1996, the
table which presents that portion of the distributions that represent a return
of capital on a Generally Accepted Accounting Principal basis has been omitted.
The Partnership has no material commitments for renovations or capital
improvements as of December 31, 1998.
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.
Through December 31, 1998, the Partnership has repurchased a total of 1,882
Units for $277,830 at a price ranging from $135 to $160 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.
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. 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 offer stated that 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 expired January 11, 1999.
As of February 9, 1999, 2,461 Units were tendered pursuant to the Offer. The
Partnership repurchased 600 Units at a cost of $123,000 and ORIG, LLC purchased
1,861 Units at a cost of $381,505.
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 December 31, 1998 in the asset held for
sale is $1,152,868. The Joint Venture continues to actively market the asset for
- 20 -
<PAGE>
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 December 31, 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
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 December 31, 1998,
the re-zoning had not yet been granted and per the contract, the purchaser has
elected to postpone the closing for a period of 30 days. 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 December 31, 1998 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.
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.
- 21 -
<PAGE>
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 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 Partnership's share of the
costs involved will be approximately $60,000 over 1998 and 1999. Costs incurred
through December 31, 1998 are 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. At December 31, 1998, a hypothetical 100 basis point increase in
interest rates would result in an approximately $552,000 decrease in the fair
value of debt.
CAUTIONARY STATEMENTS
Some of the statements included in Item 1 and 2, Business and Properties and
Item 7, 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 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.
- 22 -
<PAGE>
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.
- 23 -
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NTS-Properties V:
We have audited the accompanying balance sheets of NTS-Properties V, a Maryland
Limited Partnership, as of December 31, 1998 and 1997, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties V as of December
31, 1998 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 48
through 50 are presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations and are not a required part of the
basic financial statements. These schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 12 1999
(Except for with respect to the matters
discussed in the first paragraph of note
15 as to which the date is March 15, 1999,
and the second paragraph of note 15
as to which the date is March 17, 1999.)
- 24 -
<PAGE>
NTS-PROPERTIES V
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Cash and equivalents $ 4,543,666 $ 473,362
Cash and equivalents - restricted 208,682 69,858
Accounts receivable, net of allowance
for doubtful accounts of $4,678 (1998) and $13,304
(1997) 77,560 291,504
Land, buildings and amenities, net 14,847,989 23,750,773
Assets held for development or sale 1,953,868 3,278,114
Other assets 409,580 849,287
----------- -----------
$22,041,345 $28,712,898
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $11,450,225 $21,662,821
Accounts payable - operations 116,056 284,829
Accounts payable - construction 47,150 34,486
Security deposits 124,309 167,597
Other Liabilities 111,897 189,570
----------- -----------
11,849,637 22,339,303
Commitments and Contingencies (Note 13)
Partners' equity 10,191,708 6,373,595
----------- -----------
$22,041,345 $28,712,898
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 25 -
<PAGE>
NTS-PROPERTIES V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental income, net of provision for
doubtful accounts of $0 (1998), $3,045 (1997) and
$9,566 (1996) $ 5,665,370 $ 5,831,544 $ 5,665,972
Gain on sale of assets 5,004,628 -- --
Interest and other income 87,607 74,742 27,728
------------ ----------- -----------
10,757,605 5,906,286 5,693,700
Expenses:
Operating expenses 1,147,506 1,189,163 1,077,906
Operating expenses - affiliated 518,742 566,492 515,018
Write-off of unamortized land improvements &
amenities 14,390 -- --
Amortization of capitalized leasing
costs 14,430 20,810 18,735
Interest expense 1,497,171 1,753,841 1,997,728
Management fees 332,161 352,933 342,292
Real estate taxes 498,318 576,997 548,428
Professional and administrative
expenses 129,066 117,016 117,174
Professional and administrative
expenses - affiliated 203,157 221,034 180,699
Depreciation and amortization 1,364,183 1,666,678 1,681,572
------------ ----------- -----------
5,719,124 6,464,964 6,479,552
------------ ----------- -----------
Income (loss) before extraordinary item 5,038,481 (558,678) (785,852)
Extraordinary item - early extinguishment of
debt (1,042,438) (49,346) (50,118)
------------ ----------- -----------
Net income (loss) $ 3,996,043 $ (608,024) $ (835,970)
------------ ----------- -----------
------------ ----------- -----------
Net income (loss) allocated to the limited partners:
Income (loss) before extraordinary item $ 4,988,096 $ (553,091) $ (777,993)
Extraordinary item (1,032,014) (48,853) (49,617)
------------ ----------- -----------
Net income (loss) $ 3,956,082 $ (601,944) $ (827,610)
------------ ----------- -----------
------------ ----------- -----------
Net income (loss) per limited partnership Unit:
Income (loss) before extraordinary item $ 144.86 $ (15.74) $ (21.84)
Extraordinary item (29.97) (1.39) (1.39)
------------ ----------- -----------
Net income (loss) $ 114.89 $ (17.13) $ (23.23)
------------ ----------- -----------
------------ ----------- -----------
Weighted average number of limited
partnership Units 34,433 35,136 35,632
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 26 -
<PAGE>
NTS-PROPERTIES V
STATEMENTS OF PARTNERS' EQUITY (1)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Balances at December 31, 1995 $ 8,031,088 $(113,599) $ 7,917,489
Net loss (827,610) (8,360) (835,970)
Repurchase of Limited Partnership Units (99,900) -- (99,900)
----------- ---------- -----------
Balances at December 31, 1996 7,103,578 (121,959) 6,981,619
Net loss (601,944) (6,080) (608,024)
----------- ----------- -----------
Balances at December 31, 1997 6,501,634 (128,039) 6,373,595
Net loss 3,956,082 39,961 3,996,043
Repurchase of Limited Partnership Units (177,930) -- (177,930)
----------- ----------- -----------
Balances at December 31, 1998 $10,279,786 $ (88,078) $10,191,708
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented, there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board, Statement of
Financial Accounting Standards Statement No. 130, REPORTING COMPREHENSIVE
INCOME.
- 27 -
<PAGE>
NTS-PROPERTIES V
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,996,043 $ (608,024) $ (835,970)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Gain on sale of assets (5,004,628) -- --
Extraordinary item-early extinguishment of debt 1,042,438 49,346 50,118
Provision for doubtful accounts -- 3,045 9,566
Write-off of unamortized land improvements & amenities 14,390 -- --
Amortization of capitalized leasing costs 14,430 20,810 18,735
Depreciation and amortization 1,364,183 1,666,678 1,681,572
Changes in assets and liabilities:
Cash and equivalents - restricted (15,924) 15,134 (42,395)
Accounts receivable 213,944 222,718 239,791
Other assets 126,932 104,065 (102,413)
Accounts payable - operations (168,773) 28,378 (108,980)
Security deposits (43,288) 14,666 5,601
Other liabilities (77,709) 149,706 4,140
------------ ----------- ----------
Net cash provided by operating activities 1,462,038 1,666,522 919,765
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets before payment
of debt 13,279,721 -- --
Additions to land, buildings and amenities (482,942) (431,992) (310,458)
Asset held for development 1,179,268 -- --
Decrease (increase) in cash and equivalents - restricted -- -- 13,721
Other 14,776 -- --
------------ ----------- ----------
Net cash provided by (used in) investing activities 13,990,823 (431,992) (296,737)
------------ ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable 200,000 4,585,920 18,546,020
Principal payments on mortgages and notes payable (10,412,596) (5,611,430) (18,697,629)
Early principal payment penalty (877,569) -- --
Decrease (increase) in loan costs 8,438 (51,474) (274,034)
Repurchase of limited partnership Units (177,930) -- (99,900)
Decrease (increase) in cash and equivalents - restricted (122,900) -- --
------------ ----------- ----------
Net cash used in financing activities (11,382,557) (1,076,984) (525,543)
------------ ----------- ----------
Net increase in cash and
equivalents 4,070,304 157,546 97,485
CASH AND EQUIVALENTS, beginning of year 473,362 315,816 218,331
------------ ----------- ----------
CASH AND EQUIVALENTS, end of year $ 4,543,666 $ 473,362 $ 315,816
------------ ----------- ----------
------------ ----------- ----------
Interest paid on a cash basis $ 1,545,240 $ 1,865,183 $2,037,647
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 28 -
<PAGE>
NTS-PROPERTIES V
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. SIGNIFICANT ACCOUNTING POLICIES
A) ORGANIZATION
NTS-Properties V, a Maryland limited partnership, (the
"Partnership") is a limited partnership organized on April 30,
1984. The General Partner is NTS-Properties Associates V, a
Kentucky limited partnership. The Partnership is in the business of
developing, constructing, owning and operating residential
apartments and commercial real estate.
B) PROPERTIES
The Partnership owns and operates the following properties:
- Commonwealth Business Center Phase II, a business center with
approximately 61,000 net rentable ground floor square feet and
approximately 9,000 net rentable mezzanine square feet located
in Louisville, Kentucky
- A 90% joint venture interest in The Willows of Plainview Phase
II, a 144-unit luxury apartment complex located in Louisville,
Kentucky
- A 69% joint venture interest in the Lakeshore/University II
Joint Venture. A description of the properties owned by the
Joint Venture appears below:
- LAKESHORE BUSINESS CENTER PHASE I - a business center with
approximately 103,000 net rentable square feet located in
Fort Lauderdale, Florida.
- LAKESHORE BUSINESS CENTER PHASE II - a business center with
approximately 97,000 net rentable square feet located in
Fort Lauderdale, Florida.
- OUTPARCEL BUILDING SITES - approximately 6.2 acres of
undeveloped land adjacent to the Lakeshore Business Center
development which is zoned for commercial development.
The Partnership also owns approximately 6.21 acres of land,
adjacent to the University Place development (University Place
Phase III) in Orlando, Florida which is zoned for commercial
development. See Note 7 for details of this asset held for sale.
C) ALLOCATION OF NET INCOME (LOSS) AND CASH DISTRIBUTIONS
Operating Net Cash Receipts, as defined in the partnership
agreement and which are made available for distribution, will be
distributed 1) 99% to the limited partners and 1% to the General
Partner until the limited partners have received their 8% Preferred
Return as defined in the partnership agreement; 2) to the General
Partner in an amount equal to approximately 10% of the limited
partners 8% Preferred Return; 3) the remainder, 90% to the limited
partners and 10% to the General Partner. Net operating income
(loss), exclusive of depreciation, is allocated to the limited
partners and the General Partner in proportion to their respective
cash distributions. Net operating income, exclusive of
depreciation, in excess of cash distributions shall be allocated as
follows: (1) pro rata to all partners with a negative capital
account in an amount to restore their respective negative capital
account to
- 29 -
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
C) ALLOCATION OF NET INCOME (LOSS) AND CASH DISTRIBUTIONS - CONTINUED
zero; (2) 99% to the limited partners and 1% to the General Partner
until the limited partners have received cash distributions from
all sources equal to their original capital; (3) the balance, 75%
to the limited partners and 25% to the General Partner.
Depreciation expense is allocated 99% to the limited partners and
1% to the General Partner.
D) TAX STATUS
The Partnership has received a ruling from the Internal Revenue
Service stating that the Partnership is classified as a limited
partnership for federal income tax purposes. As such, the
Partnership makes no provision for income taxes. The taxable income
or loss is passed through to the holders of the partnership
interests for inclusion on their individual income tax returns.
A reconciliation of net income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) $3,996,043 $(608,024) $ (835,970)
Items handled differently for tax
purposes:
Gain/loss on sale of assets (982,892) -- --
Depreciation and
amortization 421,204 342,809 254,781
Capitalized leasing
costs 11,930 14,484 14,484
Rental income 44,212 353,677 227,838
Allowance for doubtful
accounts (8,626) (2,596) (37,682)
Write-off of unamortized
tenant improvements (6,314) (39,966) (840)
---------- -------- ----------
Taxable income (loss) $3,475,557 $ 60,384 $ (377,389)
---------- -------- ----------
---------- -------- ----------
</TABLE>
E) 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.
F) JOINT VENTURE ACCOUNTING
The Partnership has adopted the proportionate consolidation method
of accounting for joint venture properties. The Partnership's
proportionate interest in the 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. All intercompany accounts and transactions
have been eliminated in consolidation.
- 30 -
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
F) JOINT VENTURE ACCOUNTING - CONTINUED
Proportionate consolidation is utilized by the Partnership due to
the fact that the ownership of the joint venture properties, in
substance, is not subject to joint control. The managing General
Partners of the sole General Partner of the NTS sponsored
partnerships which have formed joint ventures are substantially the
same. As such, decisions regarding financing, development, sale or
operations do not require the approval of different partners.
Additionally, the joint venture properties are in the same
business/industry as their respective joint venture partners and
their asset, liability, revenue and expense accounts correspond
with the accounts of such partner. It is the belief of the General
Partner of the Partnership that the financial statement disclosures
resulting from proportionate consolidation provides the most
meaningful presentation of assets, liabilities, revenues, expenses
and cash flows for the years presented given the commonality of the
Partnership operations.
G) CASH AND EQUIVALENTS - RESTRICTED
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed
with mortgage companies for property taxes in accordance with the
loan agreements.
Cash and equivalents - restricted at December 31, 1998 also
included funds reserved for the repurchase of Limited Partnership
Units under the Tender Offer.
H) BASIS OF PROPERTY AND DEPRECIATION
Land, buildings and amenities are stated at cost to the
Partnership. Costs directly associated with the acquisition,
development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for building and improvements and 5-30
years for amenities.
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 years ended December 31, 1998, 1997 and 1996
did not result in an impairment loss.
I) RENTAL INCOME AND CAPITALIZED LEASING COSTS
Certain of the Partnership's lease agreements for the commercial
properties are structured to include scheduled and specified rent
increases over the lease term. For financial reporting purposes,
the income from these leases is being recognized on a straight-line
basis over the lease term. Accrued income connected with these
leases is included in accounts receivable and totaled $34,901 and
$254,533 as of December 31, 1998 and 1997, respectively.
All commissions paid to commercial leasing agents and incentives
paid to tenants are deferred and amortized on a straight-line basis
over the applicable lease term. In addition, certain other costs
associated with initial leasing of the properties are capitalized
and amortized over a five year period.
- 31 -
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
J) ADVERTISING
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during the
years ended December 31, 1998, 1997 and 1996.
K) STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and equivalents include
cash on hand and short-term, highly liquid investments with initial
maturities of three months or less.
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 (Orlando and
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. 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. Through December 31, 1998, the Partnership
has repurchased a total of 1,882 Units for $277,830 at a price ranging
from $135 to $160 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.
4. 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.
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 offer stated that 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 expired on January 11, 1999.
As of February 9, 1999, 2,461 Units were tendered pursuant to the Offer.
The Partnership repurchased 600 Units at a cost of $123,000 and ORIG, LLC
purchased 1,861 Units at a cost of $381,505.
- 32 -
<PAGE>
5. INVESTMENT IN JOINT VENTURES
A) NTS WILLOWS PHASE II JOINT VENTURE
In 1984, the Partnership entered into a joint venture agreement
with NTS-Properties IV, an affiliate of the General Partner of the
Partnership, to develop and construct a 144 unit luxury apartment
complex on an 8.29-acre site in Louisville, Kentucky known as The
Willows of Plainview Phase II. NTS-Properties IV contributed land
valued at $800,000 and the Partnership contributed approximately
$7,455,000, the construction and carrying costs of the apartment
complex. The project was completed in August 1985. Net income or
net loss is allocated each calendar quarter based on the respective
partnership's contribution. The Partnership's ownership share was
90% at December 31, 1998. The Partnership's share of the joint
venture's revenues was $1,211,384 (1998), $1,283,576 (1997), and
$1,150,133 (1996). The Partnership's share of the joint venture's
expenses was $1,207,379 (1998), $1,260,767 (1997) and $1,088,475
(1996).
B) NTS FT. LAUDERDALE OFFICE JOINT VENTURE
In 1985, the Partnership entered into a joint venture agreement
with NTS-Properties IV to develop an approximately 103,000
square-foot commercial business center known as Lakeshore Business
Center Phase I, located in Fort Lauderdale, Florida.
NTS-Properties IV contributed land valued at $1,752,982 and the
Partnership contributed approximately $9,170,000, the construction
and carrying costs of the business center. The net income or net
loss is allocated each calendar quarter based on the respective
partnership's contribution.
On January 23, 1995, the partners of the NTS Ft. Lauderdale Office
Joint Venture contributed Lakeshore Business Center Phase I to the
newly formed Lakeshore/University II (L/U II) Joint Venture. Refer
to Note 5D for a further discussion of the new joint venture.
C) NTS UNIVERSITY BOULEVARD JOINT VENTURE
In 1989, the Partnership entered into a joint venture agreement
with NTS-Properties Plus Ltd., an affiliate of the General Partner
of the Partnership, to develop an approximately 88,000 square foot
commercial business center (includes 10,000 square feet of
mezzanine space) known as University Business Center Phase II,
located in Orlando, Florida. The Partnership contributed land
valued at $1,460,000 and NTS-Properties Plus Ltd. contributed
development and carrying costs of approximately $8,000,000. In
connection with the construction of University Business Center
Phase I, the Partnership incurred the cost of developing certain
common areas which are used by both University Business Center
Phase I and Phase II. In 1989, NTS-Properties Plus Ltd. paid
approximately $747,000 to the Partnership for Phase II's share of
the common area costs. The net income or net loss is allocated each
calendar quarter based on the respective partnership's
contribution.
On January 23, 1995, the partners of the NTS University Boulevard
Joint Venture contributed University Business Center Phase II to
the newly formed L/U II Joint Venture. Refer to Note 5D for a
further discussion of the new joint venture.
- 33 -
<PAGE>
5. INVESTMENT IN JOINT VENTURES - CONTINUED
D) LAKESHORE/UNIVERSITY II JOINT VENTURE
On January 23, 1995, a joint venture known as the
Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties IV, NTS-Properties
Plus Ltd. and NTS/Fort Lauderdale, Ltd., affiliates of the General
Partner of the Partnership, for purposes of owning Lakeshore
Business Center Phases I and II, University Business Center Phase
II (sold October 1998 - see Note 12) and certain undeveloped tracts
adjacent to the Lakeshore Business Center development. The table
below identifies which properties were contributed to the L/U II
Joint Venture and the respective owners of such properties prior to
the formation of the joint venture.
<TABLE>
<CAPTION>
Property (Net Asset Contributed) Contributing Owner
-------------------------------- ------------------
<S> <C>
Lakeshore Business Center NTS-Properties IV and NTS-
Phase I ($6,249,667) Properties V
Lakeshore Business Center NTS-Properties Plus Ltd.
Phase II (-$1,023,535)
Undeveloped land adjacent to the NTS - Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)(-$670,709)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)($27,104)
University Business Center Phase II NTS-Properties V and NTS
($953,236)(Note 12) Properties Plus Ltd.
</TABLE>
Each of the properties were contributed to the L/U II Joint Venture
subject to existing indebtedness, except for Lakeshore Business
Center Phase I which was contributed to the joint venture free and
clear of any mortgage liens, and all such indebtedness was assumed
by the L/U II Joint Venture. Mortgages were recorded on University
Business Center Phase II in the amount of $3,000,000, in favor of
the banks which held the indebtedness on University Business Center
Phase II, Lakeshore Business Center Phase II and the undeveloped
tracts prior to the formation of the joint venture and on Lakeshore
Business Center Phase I in the amount of $5,500,000 subsequent to
the formation of the L/U II Joint Venture. In addition to the
above, NTS/Properties IV contributed $750,000 to the L/U II Joint
Venture. The Partnership's ownership share was 69% at December 31,
1998. The Partnership's share of the joint ventures revenues was
$3,521,941 (1998), ($2,539,973) (1997) and ($2,567,619) (1996). The
Partnership's share of the joint ventures expenses was $3,219,909
(1998), $3,066,313 (1997) and $3,251,607 (1996).
6. LAND, BUILDINGS AND AMENITIES
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Land and improvements $ 7,040,411 $ 9,791,949
Buildings, improvements
and amenities 21,215,905 32,984,399
------------ -----------
28,256,316 42,776,348
Less accumulated depreciation 13,408,327 19,025,575
------------ -----------
$ 14,847,989 $23,750,773
------------ -----------
------------ -----------
</TABLE>
- 34 -
<PAGE>
7. ASSET HELD FOR SALE
As of December 31, 1998, the Partnership owned approximately 6.21 acres
of land adjacent to the University Place development (Phase III vacant
land) in Orlando, Florida which is zoned for commercial development. The
carrying value of the land as of December 31, 1998 was $801,000. See Note
13 below for details of a contract for the sale of the Phase III vacant
land. If this transaction does not occur, the Partnership will continue
to evaluate the possibility of building University Business Center Phase
III on the vacant land. The decision to build will be based on market
conditions, availability of financing and availability of the necessary
resources from the Partnership. In management's opinion, the net book
value of the asset approximates its fair market value.
8. ASSET HELD FOR DEVELOPMENT OR SALE
As of December 31, 1998, the L/U II Joint Venture owned approximately 6.2
acres of land adjacent to the Lakeshore Business Center development in
Ft. Lauderdale, Florida. The Partnership's proportionate interest at
December 31, 1998 in the asset held for sale is $1,152,868. 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
and construction of Lakeshore Business Center Phase III.
As of December 31, 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 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 December 31,
1998, the re-zoning had not yet been granted and per the contract, the
purchaser has elected to postpone the closing for a period of 30 days. 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 December 31, 1998 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.
- 35 -
<PAGE>
9. MORTGAGES AND NOTE PAYABLE
Mortgages and note payable as of December 31 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ---------
<S> <C> <C>
Mortgage payable with an insurance company bearing
interest at fixed rate of 8.125%, due August 1, 2008,
secured by land and building $ 3,642,952 $ 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 3,385,979 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 2,768,077 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 1,653,217 1,714,774
Mortgage payable with an insurance company bearing interest
at a fixed rate of 7.65% due February 1, 2008, secured by
land and building -- 4,588,807
Mortgage payable with an insurance company bearing interest at
a fixed rate of 8.125%, due August 1, 2008, secured by land
and building -- 3,720,508
Note payable with a bank bearing interest at the Prime
Rate, due February 1, 2009, secured by land and building -- 1,278,251
----------- -----------
$11,450,225 $21,662,821
----------- -----------
----------- -----------
</TABLE>
The Prime Rate was 8.5% at December 31, 1997.
The mortgages are payable in aggregate monthly installments of $157,890 include
principal, interest and property tax escrow. Scheduled maturities of debt are
as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31, Amount
-------------------------------- -----------
<S> <C>
1999 $ 687,453
2000 743,569
2001 804,279
2002 869,961
2003 941,021
Thereafter 7,403,942
-----------
$11,450,225
-----------
-----------
</TABLE>
- 36 -
<PAGE>
Based on the borrowing rates currently available to the Partnership
for mortgages with similar terms and average maturities, the
fair value of long-term debt is approximately $11,700,000.
Certain of the proceeds from the sale of University Business Center
Phase I and II (see discussion below) were used to retire mortgages
payable associated with these properties as well as a mortgage
payable on Commonwealth Business Center Phase II. The early
extinguishment resulted in early prepayment penalties and the write-off
of unamortized loan costs. Such amounts are included within
extraordinary item-early extinguishment of debt on the accompanying
statement of operations.
The 1997 EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT relates to
unamortized loan costs associated with The Willows of Plainview Phase
II's note payable. The unamortized loan costs were expensed due to
the fact that the notes were retired in 1997 prior to their maturity
(December 5, 2003).
The 1996 EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT relates to
unamortized loan costs associated with L/U II Joint Venture's note
payable. The unamortized loan costs were expensed due to the fact
that the notes were repaid in 1996 prior to their maturity (January 31,
1998).
10. RENTAL INCOME UNDER OPERATING LEASES
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1998:
<TABLE>
<CAPTION>
For the Years Ended December 31: Amount
-------------------------------- -----------
<S> <C>
1999 $ 1,429,384
2000 969,042
2001 592,721
2002 300,470
2003 88,930
Thereafter 57,846
-----------
$ 3,438,393
-----------
-----------
</TABLE>
11. RELATED PARTY TRANSACTIONS
Pursuant to an agreement with the Partnership, property management fees of
$332,161 (1998), $352,933 (1997) and $342,292 (1996)were paid to NTS
Development Company, an affiliate of the General Partner. 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 $29,004 and $25,763 as a repair and maintenance fee during the
years ended December 31, 1998 and 1997, respectively, and has capitalized
this cost as part of land, building and amenities.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the years ended December
31, 1998, 1997 and 1996. These charges included 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, building and amenities.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Leasing $ 254,266 $ 216,100 $ 242,890
Administrative 184,283 279,933 236,800
Property manager 324,439 353,002 313,048
Other 22,230 5,752 28,846
--------- --------- ---------
$ 785,218 $ 854,787 $ 821,584
--------- --------- ---------
--------- --------- ---------
</TABLE>
- 37 -
<PAGE>
12. SALE OF ASSET
On October 6, 1998 pursuant to a contract executed on September 8, 1998, the
Lakeshore/University II Joint Venture ("L/U II") and NTS Properties V sold
University Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser") 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 II was owned by the L/U II Joint Venture of which the
Partnership owns a 69% interest. Portions of the proceeds from this sale
were immediately used to pay the remainder of the outstanding debt
(including interest and prepayment penalties) of approximately $10,672,643
($4,739,261 for Phase I an $5,933,382 for Phase II) on these properties.
During October 1998, a portion of the proceeds was also used to pay the
outstanding debt balance of $1,447,195 on Commonwealth Business Center Phase
II. NTS-Properties V reflects a gain of approximately $5,000,000 associated
with this sale in the fourth quarter of 1998. NTS-Properties V will use a
portion of the remaining proceeds after pay down of mortgages to make a
$37.50 per unit distribution totaling $1,252,275 to be paid to the limited
partners during the first quarter of 1999. See Note 15 below. NTS-Properties
V is considering alternatives for the use of the remainder of the proceeds
from this sale including development costs of Lakeshore Business Center III
which is to be constructed on land owned by the L/U II Joint Venture. See
Note 8 for details.
13. COMMITMENTS AND CONTINGENCIES
The sales contract between the Partnership and the purchaser provides the
Purchaser with the option to defer closing of the purchase of the Phase III
vacant land until the 18th month anniversary 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 the 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. The Partnership expects the
closing of the Phase III vacant land to occur in the second quarter of 2000.
14. SEGMENT REPORTING
The Partnership adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998. SFAS
No. 131 established standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports issued to limited
partners. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group,
in deciding how to allocate resources and in assessing performance. The
standard also allows entities to aggregate operating segments into a single
segment if the segments are similar in each of the six criteria set forth in
SFAS No. 131. The Partnership's chief operating decision-maker is the
General Partner.
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
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 Phases I and II. In addition,
the table below includes the properties known as University Business Center
Phases I and II up until their disposition in October 1998 (see Note 12 for
details of this transaction).
- 38 -
<PAGE>
14. SEGMENT REPORTING - CONTINUED
The financial information of the operating segments have been prepared using
a management approach, which is consistent with the basis and manner in
which the Partnership 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>
1998
Residential Commercial TOTAL
<S> <C> <C> <C>
Rental income $ 1,204,762 $ 4,460,608 $ 5,665,370
Other income 6,622 20,733 27,355
Gain on sale of assets -- (3,099,716) (3,099,716)
------------ ------------ -----------
Total net revenues $ 1,211,384 $ 1,381,625 $ 2,593,009
------------ ------------ -----------
------------ ------------ -----------
Operating expenses $ 481,674 $ 1,184,574 $ 1,666,248
Write Off of Unamortized land improvements
and amenities 14,109 281 14,390
Amortization of capitalized leasing costs
-- 14,430 14,430
Interest expense 330,418 813,525 1,143,943
Management fees 60,350 271,811 332,161
Real estate taxes 52,701 420,086 472,787
Professional and administrative 81,270 -- 81,270
Depreciation expense 186,857 1,012,427 1,199,284
------------ ------------ -----------
Net income (loss) before extraordinary
item $ 4,005 $ (2,335,509) $(2,331,504)
Extraordinary item - early extinguishment
of debt -- (597,188) (597,188)
------------ ------------ -----------
Net income (loss) $ 4,005 $ (2,932,697) $(2,928,692)
------------ ------------ -----------
------------ ------------ -----------
Land, buildings and amenities, net $ 3,866,398 $ 10,965,184 $14,831,582
------------ ------------ -----------
------------ ------------ -----------
Expenditures for land, buildings and
amenities $ 138,231 $ 328,304 $ 466,535
------------ ------------ -----------
------------ ------------ -----------
Segment liabilities $ 4,568,302 $ 7,354,966 $11,923,268
------------ ------------ -----------
------------ ------------ -----------
<CAPTION>
1997
Residential Commercial TOTAL
<S> <C> <C> <C>
Rental income $ 1,228,350 $ 4,603,194 $ 5,831,544
Other income 55,226 8,968 64,194
------------ ------------ -----------
Total net revenues $ 1,283,576 $ 4,612,162 $ 5,895,738
------------ ------------ -----------
------------ ------------ -----------
Operating expenses $ 450,118 $ 1,305,537 $ 1,755,655
Amortization of capitalized leasing costs -- 20,810 20,810
Interest expense 341,390 934,842 1,276,232
Management fees 61,217 291,716 352,933
Real estate taxes 52,436 497,924 550,360
Professional and administrative 117,390 -- 117,390
Depreciation expense 188,962 1,266,562 1,455,524
------------ ------------ -----------
Net income (loss) before extraordinary
item $ 72,063 $ 294,771 $ 366,834
Extraordinary item - early extinguishment
of debt (49,346) -- (49,346)
------------ ------------ -----------
Net income (loss) $ 22,717 $ 294,771 $ 317,488
------------ ------------ -----------
------------ ------------ -----------
Land, buildings and amenities, net $ 3,920,638 $ 19,830,135 $23,750,773
------------ ------------ -----------
------------ ------------ -----------
Expenditures for land, buildings and
amenities $ 28,892 $ 403,100 $ 431,992
------------ ------------ -----------
------------ ------------ -----------
Segment liabilities $ 4,758,365 $ 11,773,240 $16,531,605
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
- 39 -
<PAGE>
14. SEGMENT REPORTING- CONTINUED
<TABLE>
<CAPTION>
1996
Residential Commercial TOTAL
<S> <C> <C> <C>
Rental income $ 1,144,541 $ 4,521,431 $ 5,665,972
Other income 5,593 12,901 18,494
------------ ------------ -----------
Total net revenues $ 1,150,134 $ 4,534,332 $ 5,684,466
------------ ------------ -----------
------------ ------------ -----------
Operating expenses $ 391,289 $ 1,201,635 $ 1,592,924
Amortization of capitalized leasing costs -- 18,735 18,735
Interest expense 350,698 1,130,567 1,481,265
Management fees 56,593 285,699 342,292
Real estate taxes 52,770 468,934 521,704
Professional and administrative 49,665 -- 49,665
Depreciation expense 187,461 1,273,243 1,460,704
------------ ------------ -----------
Net income (loss) before extraordinary
item $ 61,658 $ 155,519 $ 217,177
Extraordinary item - early extinguishment
of debt -- (50,118) (50,118)
------------ ------------ -----------
Net income (loss) $ 61,658 $ 105,401 $ 167,059
------------ ------------ -----------
------------ ------------ -----------
Land, buildings and amenities, net $ 4,067,757 $ 20,904,893 $24,972,650
------------ ------------ -----------
------------ ------------ -----------
Expenditures for land, buildings and
amenities $ 4,090 $ 306,368 $ 310,458
------------ ------------ -----------
------------ ------------ -----------
Segment liabilities $ 4,747,439 $ 12,220,843 $16,968,282
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
- 40 -
<PAGE>
14. SEGMENT REPORTING- CONTINUED
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is necessary
given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET REVENUES
Total revenues for reportable segments $ 2,593,009 $ 5,895,738 $ 5,684,466
Other income for partnership 60,252 10,548 9,234
Gain on sale of assets 8,104,344 -- --
----------- ----------- -----------
Total consolidated net revenues $10,757,605 $ 5,906,286 $ 5,693,700
----------- ----------- -----------
----------- ----------- -----------
INTEREST EXPENSE
Interest expense for reportable segments $ 1,143,943 $ 1,276,232 $ 1,481,265
Interest expense for partnership level 353,228 477,609 516,463
----------- ----------- -----------
Total interest expense $ 1,497,171 $ 1,753,841 $ 1,997,728
----------- ----------- -----------
----------- ----------- -----------
REAL ESTATE TAXES
Total real estate taxes for reportable
segments $ 472,787 $ 550,360 $ 521,704
Real estate taxes for partnership 25,531 26,637 26,724
----------- ----------- -----------
Total real estate taxes $ 498,318 $ 576,997 $ 548,428
----------- ----------- -----------
----------- ----------- -----------
PROFESSIONAL AND ADMINISTRATIVE
Total professional and admin for reportable
segments $ 81,270 $ 117,390 $ 49,665
Professional and admin for partnership level 250,953 220,660 248,208
----------- ----------- -----------
Total professional and administrative $ 332,223 $ 338,050 $ 297,873
----------- ----------- -----------
----------- ----------- -----------
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable
segments $ 1,199,284 $1,455,524 $ 1,460,704
Depreciation and amortization for partnership level 152,608 198,863 208,577
Eliminations 12,291 12,291 12,291
----------- ----------- -----------
Total depreciation and amortization $ 1,364,183 $ 1,666,678 $ 1,681,572
----------- ----------- -----------
----------- ----------- -----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM
Net income (loss) before extraordinary
item for reportable segments $(2,331,504) $ 366,834 $ 217,177
Net income (loss) before extraordinary
item for partnership 6,822,212 (1,416,751) (1,613,068)
Eliminations 547,773 491,239 610,039
----------- ----------- -----------
Total net income (loss) before
extraordinary item $ 5,038,481 $ (558,678) $ (785,852)
----------- ----------- -----------
----------- ----------- -----------
EXTRAORDINARY ITEM-EARLY EXTINGUISHMENT OF DEBT
Total extraordinary item for
reportable segments $ (597,188) $ (49,346) $ (50,118)
Extraordinary item for partnership (445,250) -- --
----------- ----------- -----------
Total extraordinary item-early
extinguishment of debt $(1,042,438) $ (49,346) $ (50,118)
----------- ----------- -----------
----------- ----------- -----------
TOTAL NET INCOME (LOSS) $ 3,996,043 $ (608,024) $ (835,970)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- 41 -
<PAGE>
14. SEGMENT REPORTING - CONTINUED
<TABLE>
<S> <C> <C> <C>
LAND, BUILDINGS AND AMENITIES
Total land, buildings and amenities
for reportable segments $14,831,582 $23,750,773 $24,972,650
Partnership level 16,407 -- --
----------- ----------- -----------
Total land, buildings and amenities,
net $14,847,989 $23,750,773 $24,972,650
----------- ----------- -----------
----------- ----------- -----------
TOTAL EXPENDITURES
Total expenditures for land, buildings and amenities for
reportable segments $ 466,535 $ 431,992 $ 310,458
Expenditures for land, buildings and amenities for
partnership level 16,407 -- --
----------- ----------- -----------
Total expenditures for land, buildings and amenities $ 482,942 $ 431,992 $ 310,458
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Total liabilities for reportable segments $11,923,268 $16,531,605 $16,968,282
Liabilities for partnership (73,669) 5,807,698 6,384,355
----------- ----------- -----------
Total liabilities $11,849,599 $22,339,303 $23,352,637
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
15. SUBSEQUENT EVENTS
On March 15, 1999, a portion of the proceeds from the sale of the University
Business Center Properties were used to make a special cash distribution of
$37.50 per limited partnership unit totaling $1,252,275.
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 13 for details of the contract
for the sale of the Phase III vacant land.
- 42 -
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
- 43 -
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates V. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The partners of NTS-Properties Associates V are as follows:
J. D. NICHOLS
Mr. Nichols (age 57) is the managing General Partner of NTS-Properties
Associates V and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
NTS CAPITAL CORPORATION
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Richard
L. Good and Brian F. Lavin.
RICHARD L. GOOD
Mr. Good (age 59), Vice Chairman of NTS Corporation and NTS Development Company
and Chairman of the Board of NTS Securities, Inc., joined the Manager in January
1985. From 1981 through 1984, he was Executive Vice President of Jacques-Miller,
Inc., a real estate syndication, property management and financial planning firm
Nashville, Tennessee.
BRIAN F. LAVIN
Mr. Lavin (age 45) President of NTS Corporation and NTS Development Company
joined the Manager in June 1998. Prior to joining NTS, Mr. Lavin served as
President of the Residential Division of Paragon Group, Inc., and as a Vice
President of Paragon's Midwest Division. In this capacity, he directed the
development, marketing, leasing and management operations for the firm's
expanding portfolios. Mr. Lavin attended the University of Missouri where he
received his Bachelor's Degree in Business Administration. He has served as a
Director of the Louisville Apartment Association. He is a licensed Kentucky Real
Estate Broker and Certified Property Manager. Mr. Lavin is a member of the
Institute of Real Estate Management, and council member of the Urban Land
Institute. He currently serves on the University of Louisville Board of
Overseers and is on the Board of Directors of the National Multi-Housing Council
and the Louisville Science Center.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company, an affiliate
of the General Partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specified
projects. NTS Development Company provides certain other services to the
Partnership. See Note 11 to the financial statements which sets forth
transactions with affiliates of the General Partner for the years ended December
31, 1998, 1997 and 1996.
- 44 -
<PAGE>
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS - CONTINUED
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocation and cash
distributions.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following provides details regarding owners of more than 5% of the total
outstanding limited partnership Units as of March 6, 1998.
Oceanridge Investments, Ltd.
6110 North Ocean Blvd, #37
Boynton Beach , Florida 33435 2,632 Units (7.89%)
Oceanridge Investments, Ltd. is a limited partnership controlled by
members of the family of Mr. J. D. Nichols, a general partner of the
General Partner of the Partnership.
ORIG, LLC
10172 Linn Station Road
Louisville, Kentucky 40223 1,858 Units (5.56%)
ORIG, LLC is a Kentucky limited liability company, the members of which
are J.D. Nichols and Brian F. Lavin, Chairman and President of NTS
Capital Corporation, a general partner of NTS Properties Associates V,
the general partner of the partnership.
The General Partner is NTS-Properties Associates V, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates V are as follows:
J. D. Nichols 59.90%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .10%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 40% interests are owned by various limited partners of
NTS-Properties Associates V.
- 45 -
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement with the Partnership, property management fees of
$332,161 (1998), $352,933 (1997) and $342,292 (1996) were paid to NTS
Development Company, an affiliate of the General Partner. 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 $29,004 and $25,763
as a repair and maintenance fee during the years ended December 31, 1998 and
1997, respectively, and has capitalized this cost as a part of land, buildings
and amenities.
As permitted by an agreement, the Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31, 1998, 1997
and 1996. These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses - affiliated
and items which have been capitalized as other assets or as land, buildings and
amenities.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Leasing agents $254,266 $216,100 $242,890
Administrative 184,283 279,933 236,800
Property manager 324,439 353,002 313,048
Other 22,230 5,752 28,846
-------- -------- --------
$785,218 $854,787 $821,584
-------- -------- --------
-------- -------- --------
</TABLE>
There were no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 46 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. Financial statements
The financial statements for the years ended December 31, 1998, 1997 and
1996 together with the report of Arthur Andersen LLP, dated March 12,
1999, appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
<TABLE>
<CAPTION>
<S> <C>
Schedules: Page No.
---------------
III-Real Estate and Accumulated Depreciation 48-50
</TABLE>
All other schedules have been omitted because they are not applicable,
are not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page No.
----------- ----------------
<S> <C> <C>
3. Amended and Restated Agreement and *
Certificate of Limited Partnership
of NTS-Properties V, a Maryland
limited partnership
3a. First Amendment to Amended and Restated **
Agreement of Limited Partnership of
NTS-Properties V, a Maryland limited
partnership
10. Management Agreement between NTS *
Development Company and NTS-Properties
V, a Maryland limited partnership
27. Financial Data Schedule Included
herewith
</TABLE>
* Incorporated by reference to documents filed with the
Securities and Exchange Commission in connection with
the filing of the Registration Statements on Form
S-11 on May 1, 1984 (effective August 1, 1984) under
Commission File No. 2-90818.
** Incorporated by reference to Form 10-K filed with the
Securities and Exchange Commission for the fiscal
year ended December 31, 1987 under Commission File
No. 0-13400.
4. Reports on Form 8-K
Form 8-K was filed October 9, 1998 to report in Item 2 that the
Partnership and Lakeshore/University II Joint Venture, an affiliate of
the General Partner of the Partnership, had sold University Business
Center Phase I and II.
Form 8-K/A was filed December 8, 1998 to amend under Item 7 the Form 8-K
that was filed October 9, 1998. The filing included the September 30,
1998 Proforma Balance Sheet and Statements of Operation for the nine
months ended September 30, 1998 and for the year ended December 31,
1997.
Form 8-K/A was filed December 17, 1998 to amend the financial statements
that were filed December 8, 1998.
- 47 -
<PAGE>
NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Commonwealth Lakeshore
Business The Willows Business
Center of Plainview Center
Phase II Phase II Phase I
------------- ------------- ----------
Encumbrances (A) (A)
<S> <C> <C> <C>
Initial cost to partnership:
Land $ 946,039 $ 1,604,739 $ 2,250,741
Buildings and improvements 1,574,747 5,654,188 3,592,918
Cost capitalized subsequent to
acquisition
Improvements 2,174,294 171,084 3,044,071
Other (B) -- -- (1,351,170)
Gross amount at which carried December 31, 1998:
Land $ 1,001,187 $ 1,625,686 $ 1,858,583
Buildings and improvements 3,693,893 5,804,325 5,677,977
----------- ----------- -----------
Total $ 4,695,080 $ 7,430,011 $ 7,536,560
----------- ----------- -----------
----------- ----------- -----------
Accumulated depreciation $ 2,719,157 $ 3,563,607 $ 3,768,530
----------- ----------- -----------
----------- ----------- -----------
Date of construction
Date Acquired
Life at which depreciation in (C) (C) (C)
latest income statement is
computed
</TABLE>
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties V's decreased interest in Lakeshore Business
Center Phase I as a result of the formation of the Lakeshore/University
II Joint Venture in 1995.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
- 48 -
<PAGE>
NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Lakeshore
Business
Center Total
Phase II Pages 48-49
----------- -----------
<S> <C> <C>
Encumbrances (A)
Initial cost to partnership:
Land $ 2,554,955 $ 7,356,474
Buildings and improvements 5,849,946 16,671,799
Cost capitalized subsequent to
acquisition
Improvements 173,363 5,562,812
Other (B) -- (1,351,170)
Gross amount at which carried December 31, 1998 (C):
Land $ 2,554,955 $ 7,040,411
Buildings and improvements 6,023,309 21,199,504
----------- -----------
Total (E) $ 8,578,264 $28,239,915
----------- -----------
----------- -----------
Accumulated depreciation $ 3,357,033 $13,408,327
----------- -----------
----------- -----------
Date of construction N/A
Date Acquired 01/95
Life at which depreciation in
latest income statement is
computed (D)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties V's increased interest in University Business
Center Phase II as a result of the formation of the Lakeshore/University
II Joint Venture in 1995.
(C) Aggregate cost of real estate for tax purposes is $27,526,096.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
<TABLE>
<S> <C>
(E) Total Gross Cost at December 31,1998 $28,239,915
Additions to the Partnership
For Computer software and
Hardware in 1998 16,401
------------
Balance at December 31, 1998 28,256,316
Less Accumulated depreciation (13,408,327)
------------
Land, buildings and amenities,
net at December 31, 1998 $ 14,847,989
------------
------------
</TABLE>
- 49 -
<PAGE>
NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Real Accumulated
Estate Depreciation
------------ ------------
<S> <C> <C>
Balances at December 31, 1995 $ 42,388,287 $ 16,238,331
Additions during period:
Improvements (a) 297,035 --
Depreciation (b) -- 1,474,241
Deductions during period:
Retirements (89,807) (89,707)
------------ ------------
Balances at December 31, 1996 42,595,515 17,622,865
Additions during period:
Improvements (a) 252,121 --
Depreciation (b) -- 1,473,905
Deductions during period:
Retirements (71,288) (71,195)
------------ ------------
Balances at December 31, 1997 42,776,348 19,025,575
Additions during period:
Improvements (a) 474,474 --
Depreciation (b) -- 812,939
Deductions during period:
Retirements (c) (14,994,506) (6,430,187)
------------ ------------
Balances at December 31, 1998 $ 28,256,316 $ 13,408,327
------------ ------------
------------ ------------
</TABLE>
(a) The additions to improvements on this schedule will differ from the
additions to land, buildings, amenities and construction in progress on
the Statements of Cash Flows primarily due to the fact that changes in
accounts payable construction are not included in the real estate
balance above.
(b) The additions charged to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statements of Cash
Flows due to the amortization of loan costs.
(c) Result of Sale of University Business Center Phases I and II on October
6, 1998.
- 50 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties V, a Maryland Limited Partnership, 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
Date: April 15, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
<TABLE>
<CAPTION>
Signature Title
--------- ------
<S> <C>
/s/ J. D. Nichols
- ----------------------------------- General Partner of NTS-Properties
J. D. Nichols Associates V and Chairman of the
Board and Sole Director of
NTS Capital Corporation
/s/ Richard L. Good
- ----------------------------------- Vice Chairman of NTS Capital Corporation
Richard L. Good
/s/ Brian F. Lavin President and Chief Operating Officer
- ----------------------------------- (acting as Chief Financial Officer)
Brian F. Lavin
</TABLE>
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 51 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,752,348
<SECURITIES> 0
<RECEIVABLES> 77,560
<ALLOWANCES> 4,678
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,847,989
<DEPRECIATION> 13,408,327
<TOTAL-ASSETS> 22,041,345
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,450,225
0
0
<COMMON> 0
<OTHER-SE> 10,191,708
<TOTAL-LIABILITY-AND-EQUITY> 22,041,345
<SALES> 5,665,370
<TOTAL-REVENUES> 10,757,605
<CGS> 0
<TOTAL-COSTS> 3,889,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,497,171
<INCOME-PRETAX> 5,038,481
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,038,481
<DISCONTINUED> 0
<EXTRAORDINARY> (1,042,438)
<CHANGES> 0
<NET-INCOME> 3,996,043
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The partnership has an unclassified balance sheet; therefore, the value is $0.
</FN>
</TABLE>
