<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- --------------------------
Commission File Number 0-13400
----------------------------------------------------------
NTS-PROPERTIES V, A Maryland Limited Partnership
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 61-1051452
------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
------------------------------------ ------------------------------------
(Address of principal executive offices) (Zip Code)
(502) 426-4800
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
[X] Yes [ ] No
<PAGE>
TABLE OF CONTENTS
-----------------
PART I
------
Pages
-----
Item 1. Financial Statements
Balance Sheets as of June 30, 2000 and December 31, 1999 3
Statement of Partners' Equity as of June 30, 2000 3
Statements of Operations for the three months and six months ended
June 30, 2000 and 1999 4
Statements of Cash Flows for the six months ended
June 30, 2000 and 1999 5
Notes to Financial Statements 6-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II
-------
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
<TABLE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
BALANCE SHEETS
--------------
<CAPTION>
As of As of
June 30, December 31,
2000 1999*
---- -----
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and equivalents $ 1,741,044 $ 2,807,198
Cash and equivalents - restricted 239,265 117,220
Accounts receivable 53,670 103,245
Land, buildings and amenities, net 17,946,822 17,008,482
Other assets 493,934 439,664
----------- -----------
TOTAL ASSETS $20,474,735 $20,475,809
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Mortgages payable $11,319,390 $11,726,240
Accounts payable 592,287 280,791
Security deposits 160,507 159,642
Other liabilities 342,839 159,337
----------- -----------
TOTAL LIABILITIES 12,415,023 12,326,010
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' EQUITY 8,059,712 8,149,799
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $20,474,735 $20,475,809
=========== ===========
</TABLE>
<TABLE>
STATEMENT OF PARTNERS' EQUITY
-----------------------------
<CAPTION>
Limited General
Partners Partner Total
-------- ------- ----
PARTNERS' EQUITY/(DEFICIT)
--------------------------
<S> <C> <C> <C>
Capital contributions, net of offering costs $ 30,582,037 $ 100 $ 30,582,137
Net income (loss) - prior years (4,676,912) 66,556 (4,610,356)
Net loss - current year (89,186) (901) (90,087)
Cash distributions declared to date (16,641,480) (168,177) (16,809,657)
Repurchase of Limited Partnership Units (1,012,325) -- (1,012,325)
------------- ------------- -------------
BALANCES AT JUNE 30, 2000 $ 8,162,134 $ (102,422) $ 8,059,712
============= ============= =============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Securities and Exchange Commission on March 31, 2000.
The accompanying notes to financial statements are an integral part of these
statements.
3
<PAGE>
<TABLE>
NTS PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF OPERATIONS
------------------------
(UNAUDITED)
-----------
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES
--------
<S> <C> <C> <C> <C>
Rental income $ 1,028,385 $ 959,708 $2,010,085 $1,880,494
Interest and other income 75,373 38,530 112,099 83,025
----------- ----------- ----------- -----------
TOTAL REVENUES 1,103,758 998,238 2,122,184 1,963,519
----------- ----------- ----------- -----------
EXPENSES
--------
Operating expenses 269,088 223,430 492,966 422,637
Operating expenses - affiliated 123,357 104,667 250,287 238,423
Loss on disposal of assets -- 15,067 146,335 24,899
Interest expense 205,523 218,371 427,166 438,902
Management fees 58,712 55,207 114,319 107,574
Real estate taxes 90,311 84,701 190,512 167,237
Professional and administrative expenses 37,130 55,339 72,046 105,753
Professional and administrative expenses
- affiliated 35,347 39,604 67,925 85,754
Depreciation and amortization 226,902 199,396 450,715 399,475
----------- ----------- ----------- -----------
TOTAL EXPENSES 1,046,370 995,782 2,212,271 1,990,654
----------- ----------- ----------- -----------
Net income (loss) $ 57,388 $ 2,456 $ (90,087) $ (27,135)
=========== =========== =========== ===========
Net income (loss) allocated to the Limited
Partners $ 56,814 $ 2,431 $ (89,186) $ (26,863)
=========== =========== =========== ===========
Net income (loss) per Limited Partnership
Unit $ 1.86 $ .07 $ (2.91) $ (0.80)
=========== =========== =========== ===========
Weighted average number of Limited
Partnership Units 30,621 33,394 30,621 33,533
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE>
<TABLE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<CAPTION>
Six Months Ended
June 30,
--------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
<S> <C> <C>
Net loss $ (90,087) $ (27,135)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on disposal of assets 146,335 24,899
Depreciation and amortization 450,715 399,475
Changes in assets and liabilities:
Cash and equivalents - restricted (179,545) (5,128)
Accounts receivable 49,575 (53,321)
Other assets (71,511) (90,777)
Accounts payable 311,496 41,751
Security deposits 865 33,762
Other liabilities 183,502 171,633
------------ ------------
Net cash provided by operating activities 801,345 495,159
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Additions to land, buildings, and amenities (1,518,149) (34,928)
------------ ------------
Net cash used in investing activities (1,518,149) (34,928)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Principal payments on mortgages payable (406,850) (339,876)
Cash distributions -- (1,264,925)
Capital contributions -- (30,770)
Repurchase of Limited Partnership Units -- (123,000)
Cash and equivalents - restricted 57,500 (44,500)
------------ ------------
Net cash used in financing activities (349,350) (1,803,071)
------------ ------------
Net decrease in cash and equivalents (1,066,154) (1,342,840)
CASH AND EQUIVALENTS, beginning of period 2,807,198 4,543,666
------------ ------------
CASH AND EQUIVALENTS, end of period $ 1,741,044 $ 3,200,826
------------ ------------
Interest paid on a cash basis $ 450,985 $ 440,180
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
5
<PAGE>
NTS-PROPERTIES V,
-----------------
A Maryland Limited Partnership
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The unaudited financial statements and schedules included herein should be read
in conjunction with the Partnership's 1999 Form 10-K as filed with the
Securities and Exchange Commission on March 31, 2000. In the opinion of the
General Partner, all adjustments (only consisting of normal recurring accruals)
necessary for a fair presentation have been made to the accompanying financial
statements for the three months and six months ended June 30, 2000 and 1999.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
2. Concentration of Credit Risk
----------------------------
NTS-Properties V owns and operates or has a joint venture investment in
commercial rental properties in Kentucky (Louisville) and Florida (Ft.
Lauderdale). The Partnership also has a joint venture investment in a
residential rental property in Louisville, Kentucky.
3. Reclassification of 1999 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the June 30, 1999 and December
31, 1999 financial statements to conform to the June 30, 2000
classifications. These reclassifications have no effect on previously
reported operations.
4. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for residential
security deposits, funds which have been escrowed with mortgage companies
for property taxes in accordance with the loan agreements, and funds
reserved by the Partnership for the purchase of Limited Partnership Units
(1999 balance only).
5. Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost less
accumulated depreciation 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
6
<PAGE>
5. Basis of Property and Depreciation - Continued
----------------------------------------------
estimated useful lives of the assets which are 5-30 years for land
improvements, 3-30 years for buildings and improvements, 3-7 years for
amenities and the applicable lease term for tenant improvements.
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 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
periods ended June 30, 2000 and 1999 did not result in any impairment loss.
6. Mortgages Payable
-----------------
Mortgages payable consist of the following:
June 30, December 31,
2000 1999
---- ----
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.125%, due August 1, 2008,
secured by land and building. $ 3,726,062 $ 3,883,797
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.125%, due August 1, 2008,
secured by land and buildings. 3,463,227 3,609,836
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities. 2,585,767 2,649,944
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 7.2%, due January 5, 2013,
secured by land, buildings and amenities. 1,544,334 1,582,663
----------- -----------
$11,319,390 $11,726,240
=========== ===========
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 $11,050,000.
7. Related Party Transactions
--------------------------
Property management fees of $114,319 and $107,574 for the six months ended
June 30, 2000 and 1999, respectively, were paid to NTS Development Company,
an affiliate of the General Partner. The fee is paid monthly in an amount
equal to 5% of the gross revenues from the residential properties and 6% of
the gross revenues from the commercial properties pursuant to an agreement
with the Partnership. Also pursuant to an agreement, NTS Development
Company will receive a repair and maintenance fee equal to 5.9% of costs
incurred which relate to capital improvements.
7
<PAGE>
7. Related Party Transactions - Continued
--------------------------------------
The Partnership has incurred $81,838 and $10,922 for the six months ended
June 30, 2000 and 1999, respectively, as repair and maintenance fees, and
has capitalized these costs as part of land, buildings and amenities. The
Partnership was also charged the following amounts from NTS Development
Company for the six months ended June 30, 2000 and 1999. 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.
Six Months Ended
June 30,
--------
2000 1999
---- ----
Leasing $103,839 $117,956
Administrative 101,775 124,492
Property Management 147,625 106,050
Other 2,564 15,351
-------- --------
$355,803 $363,849
======== ========
On February 7, 2000, ORIG, LLC. (the "Affiliate") purchased Interests in
the Partnership pursuant to an Agreement, Bill of Sale and Assignment, by
and among the Affiliate and four investors in the Partnership (the
"Purchase Agreement"). The Affiliate purchased 1,604 Interests in the
Partnership for total consideration of $425,949, or an average price of
$265.55 per Interest. The Affiliate paid these investors a premium above
the purchase price previously offered for Interests pursuant to prior
tender offers because this purchase allowed the Affiliate to purchase a
substantial number of Interests without incurring the significant expenses
involved with a tender offer and multiple transfers.
8. Transactions Affecting the Investment in Lakeshore/University II Joint
---------------------------------------------------------------------------
Venture
-------
On July 1, 1999, NTS-Properties V contributed $1,737,000 to the
Lakeshore/University II Joint Venture ("L/U II Joint Venture"). The other
Partners in the Joint Venture did not make capital contributions at that
time. Accordingly, the ownership percentages of the other Partners in the
Joint Venture decreased. Effective July 1, 1999, NTS-Properties V's
percentage of ownership in the Joint Venture is 79.45%, as compared to
69.23% prior to July 1, 1999. See Note 12 for details of a contribution
made to the L/U II Joint Venture subsequent to June 30, 2000.
9. Commitments and Contingencies
-----------------------------
The Partnership, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the
Partnership with existing laws has not had a material adverse effect on the
Partnership's financial condition and results of operations. However, the
Partnership cannot predict the impact of new or changed laws or regulations
on its current properties or on properties that it may acquire in the
future.
8
<PAGE>
9. Commitments and Contingencies - Continued
-----------------------------------------
The Partnership does not believe there is any litigation threatened against
the Partnership other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material adverse effect on the
consolidated financial statements of the Partnership.
Pursuant to a contract signed on December 6, 1999, the L/U II Joint Venture
has a commitment to construct a building to be known as Lakeshore Business
Center Phase III on 3.8 acres of land it owns at the Lakeshore Business
Center Development. The construction cost is currently estimated to be
$4,000,000 and will be funded by working capital and approximately
$2,680,000 in debt financing. As of June 30, 2000, the L/U II Joint Venture
has incurred approximately $1,761,000 in expenses for the construction of
Lakeshore Business Center Phase III.
On April 24, 2000, the L/U II Joint Venture obtained a commitment from a
bank for an amount not exceeding $2,680,000 to fund the construction of
Lakeshore Business Center Phase III. The loan bears a variable interest
rate equal to a daily floating LIBOR rate, as quoted for 30-day
investments, plus 230 basis points and is secured by 3.8 acres of land
located at the Lakeshore Business Center Development and the improvements
now and hereafter located on the land.
As of June 30, 2000, the L/U II Joint Venture has a commitment for
approximately $66,000 for tenant improvements on 31,338 square feet at
Lakeshore Business Center Phases I and II. The Partnership's share of this
commitment is approximately $52,400 and will be funded from cash flows from
operations. The L/U II Joint Venture also has a commitment for
approximately $45,700 for tenant improvements on 4,689 square feet at
Lakeshore Business Center Phase III. The Partnership's share of this
commitment is approximately $36,300 and will be funded from the debt
financing discussed above. The construction for these projects has
commenced and is expected to be completed during the third quarter of 2000.
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore
Business Center Phase I for a cost of approximately $200,000. The
Partnership's share of this project will be $158,900 and will be funded
from cash flows from operations.
10. Segment Reporting
-----------------
The Partnership's reportable operating segments include residential and
commercial real estate operations. The residential operations represent the
Partnership's ownership and operating results relative to an apartment
community 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, II and III.
9
<PAGE>
10. Segment Reporting - Continued
-----------------------------
The financial information of the operating segments has been prepared using
a management approach, which is consistent with the basis and manner in
which the Partnership's management internally reports financial information
for the purposes of assisting in making internal operating decisions. The
Partnership's management evaluated performance based on stand-alone
operating segment net income.
<TABLE>
Three Months Ended June 30, 2000
--------------------------------
Residential Commercial Total
----------- ---------- -----
<CAPTION>
<S> <C> <C> <C>
Rental income $ 310,034 $ 718,351 $1,028,385
Interest and other income 845 3,638 4,483
---------- ---------- ----------
Total net revenues $ 310,879 $ 721,989 $1,032,868
---------- ---------- ----------
Operating expenses and operating expenses -
affiliated $ 136,135 $ 247,331 $ 383,466
Interest expense 74,787 130,736 205,523
Management fees 15,802 42,910 58,712
Real estate taxes 15,095 75,216 90,311
Depreciation and amortization 49,213 161,244 210,457
---------- ---------- ----------
Total expenses $ 291,032 $ 657,437 $ 948,469
---------- ---------- ----------
Net income $ 19,847 $ 64,552 $ 84,399
========== ========== ==========
</TABLE>
<TABLE>
Three Months Ended June 30, 1999
--------------------------------
Residential Commercial Total
----------- ---------- -----
<CAPTION>
<S> <C> <C> <C>
Rental income $ 320,256 $ 639,452 $ 959,708
Interest and other income -- (17,525) (17,525)
---------- ---------- ----------
Total net revenues $ 320,256 $ 621,927 $ 942,183
---------- ---------- ----------
Operating expenses and operating expenses -
affiliated $ 106,182 $ 215,063 $ 321,245
Loss on disposal of assets 15,067 -- 15,067
Interest expense 78,887 139,484 218,371
Management fees 16,758 38,449 55,207
Real estate taxes 13,028 63,161 76,189
Depreciation and amortization 48,371 139,820 188,191
---------- ---------- ----------
Total expenses $ 278,293 $ 595,977 $ 874,270
---------- ---------- ----------
Net income $ 41,963 $ 25,950 $ 67,913
========== ========== ==========
</TABLE>
10
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Six Months Ended June 30, 2000
------------------------------
Residential Commercial Total
----------- ---------- -----
<CAPTION>
<S> <C> <C> <C>
Rental income $ 591,189 $ 1,418,896 $ 2,010,085
Interest and other income 1,707 8,454 10,161
------------ ------------ ------------
Total net revenues $ 592,896 $ 1,427,350 $ 2,020,246
------------ ------------ ------------
Operating expenses and operating expenses -
affiliated $ 249,780 $ 484,453 $ 734,233
Loss on disposal of assets 41,855 104,480 146,335
Interest expense 151,069 276,097 427,166
Management fees 29,854 84,465 114,319
Real estate taxes 30,140 160,372 190,512
Depreciation and amortization 97,884 319,766 417,650
------------ ------------ ------------
Total expenses $ 600,582 $ 1,429,633 $ 2,030,215
------------ ------------ ------------
Net loss $ (7,686) $ (2,283) $ (9,969)
============ ============ ============
</TABLE>
<TABLE>
Six Months Ended June 30, 1999
------------------------------
Residential Commercial Total
----------- ---------- -----
<CAPTION>
<S> <C> <C> <C>
Rental income $ 619,955 $ 1,260,539 $ 1,880,494
Interest and other income -- 239 239
------------ ------------ ------------
Total net revenues $ 619,955 $ 1,260,778 $ 1,880,733
------------ ------------ ------------
Operating expenses and operating expenses -
affiliated $ 194,784 $ 459,425 $ 654,209
Loss on disposal of assets 24,899 -- 24,899
Interest expense 157,459 281,443 438,902
Management fees 32,947 74,627 107,574
Real estate taxes 26,055 126,285 152,340
Depreciation and amortization 96,051 281,015 377,066
------------ ------------ ------------
Total expenses $ 532,195 $ 1,222,795 $ 1,754,990
------------ ------------ ------------
Net income $ 87,760 $ 37,983 $ 125,743
============ ============ ============
</TABLE>
11
<PAGE>
10. Segment Reporting - Continued
-----------------------------
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements for the
three months and six months ended June 30, 2000 and 1999 is necessary given
amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes.
<TABLE>
Three Months Ended
June 30,
--------
2000 1999
---- ----
<CAPTION>
NET REVENUES
------------
<S> <C> <C>
Total revenues for reportable segments $ 1,032,868 $ 942,183
Other income for Partnership 130,278 101,135
Eliminations (59,388) (45,080)
------------ ------------
Total consolidated net revenues $ 1,103,758 $ 998,238
============ ============
OPERATING EXPENSES AND OPERATING
--------------------------------
EXPENSES - AFFILIATED
----------------------
Total operating expenses and operating expenses -
affiliated for reportable segments $ 383,466 $ 321,245
Operating expenses and operating expenses - affiliated
for Partnership 8,979 6,852
------------ ------------
Total operating expenses and operating expenses -
affiliated $ 392,445 $ 328,097
============ ============
REAL ESTATE TAXES
-----------------
Total real estate taxes for reportable segments $ 90,311 $ 76,189
Real estate taxes for Partnership -- 8,512
------------ ------------
Total real estate taxes $ 90,311 $ 84,701
============ ============
DEPRECIATION AND AMORTIZATION
-----------------------------
Total depreciation and amortization for reportable
segments $ 210,457 $ 188,191
Depreciation and amortization for Partnership 8,699 3,459
Eliminations 7,746 7,746
----------- ------------
Total depreciation and amortization $ 226,902 $ 199,396
============ ============
NET INCOME (LOSS)
-----------------
Total net income for reportable segments $ 84,399 $ 67,913
Net income (loss) for Partnership 40,123 (12,630)
Eliminations (67,134) (52,827)
------------ ------------
Total net income $ 57,388 $ 2,456
============ ============
</TABLE>
12
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Six Months Ended
June 30,
--------
2000 1999
---- ----
<CAPTION>
NET REVENUES
------------
<S> <C> <C>
Total revenues for reportable segments $ 2,020,246 $ 1,880,733
Other income for Partnership 37,465 160,612
Eliminations 64,473 (77,826)
------------ ------------
Total consolidated net revenues $ 2,122,184 $ 1,963,519
============ ============
OPERATING EXPENSES AND OPERATING
--------------------------------
EXPENSES - AFFILIATED
---------------------
Total operating expenses and operating expenses -
affiliated for reportable segments $ 734,233 $ 654,209
Operating expenses and operating expenses - affiliated
for Partnership 9,020 6,851
------------ ------------
Total operating expenses and operating expenses -
affiliated $ 743,253 $ 661,060
============ ============
REAL ESTATE TAXES
-----------------
Total real estate taxes for reportable segments $ 190,512 $ 152,340
Real estate taxes for Partnership -- 14,897
------------ ------------
Total real estate taxes $ 190,512 $ 167,237
============ ============
DEPRECIATION AND AMORTIZATION
-----------------------------
Total depreciation and amortization for reportable
segments $ 417,650 $ 377,066
Depreciation and amortization for Partnership 17,573 6,917
Eliminations 15,492 15,492
------------ ------------
Total depreciation and amortization $ 450,715 $ 399,475
============ ============
NET INCOME (LOSS)
-----------------
Total net (loss) income for reportable segments $ (9,969) $ 125,743
Net loss for Partnership (129,099) (59,560)
Eliminations 48,981 (93,318)
------------ ------------
Total net loss $ (90,087) $ (27,135)
============ ============
</TABLE>
13
<PAGE>
11. Recent Accounting Pronouncement
-------------------------------
The Emerging Issues Task Force ("EITF") of the Financial Accounting
Standards Board ("FASB") has reached a consensus on Issue No. 00-1,
"Applicability of the Pro Rata Method of Consolidation to Investments in
Certain Partnerships and Other Unincorporated Joint Ventures." The EITF
reached a consensus that a proportionate gross financial statement
presentation (referred to as "proportionate consolidation" in the
Partnership's 1999 Form 10-K Notes to Financial Statements) is not
appropriate for an investment in an unincorporated legal entity accounted
for by the equity method of accounting, unless the investee is in either
the construction industry or an extractive industry where there is a
longstanding practice of its use.
The consensus is applicable to financial statements for annual periods
ending after June 15, 2000. Upon application of the consensus, all
comparative financial statements shall be restated to conform with the
consensus. The application of this consensus will not result in a
restatement of previously reported partners' equity or results of
operations, but will result in a recharacterization or reclassification of
certain financial statements' captions and amounts. The Partnership plans
to restate its financial statements using the equity method to account for
its joint venture investments for the year ending December 31, 2000.
12. Subsequent Event
----------------
On July 1, 2000, NTS-Properties V contributed $500,000 to the L/U II Joint
Venture. The other partners in the L/U II Joint Venture did not make
capital contributions at that time. Accordingly the ownership percentages
of the other partners in the L/U II Joint Venture decreased. Effective July
1, 2000, NTS-Properties V's percentage of ownership in the L/U II Joint
Venture is 81.19%, as compared to 79.45% prior to July 1, 2000.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") 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. A discussion of certain market risks also
follows. MD&A should be read in conjunction with the Financial Statements in
Item 1 and the Cautionary Statements below.
Cautionary Statements
---------------------
Some of the statements included in this Item 2 may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Partnership anticipates,"
"believes" or "expects," indicate that it is possible that the event
anticipated, believed, or expected may not occur. Should such event not occur,
then the result which the Partnership expected also may not occur or occur in a
different manner, which may be more or less favorable to the Partnership. The
Partnership does not undertake any obligations to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
Any forward-looking statements included in MD&A, 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 liquidity, capital resources and results of operations are
subject to a number of risks and uncertainties including, but not limited to the
following: the ability of the Partnership to achieve planned revenues; the
ability of the Partnership to make payments due under its debt agreements; the
ability of the Partnership to negotiate and maintain terms with vendors and
service providers for operating expenses; competitive pressures from other real
estate companies, including large commercial and residential real estate
companies, which may affect the nature and viability of the Partnership's
business strategy; trends in the economy as a whole which may affect consumer
confidence and demand for the types of rental property held by the Partnership;
the ability of the Partnership to predict the demand for specific rental
properties; the ability of the Partnership to attract and retain tenants;
availability and costs of management and labor employed; real estate occupancy
and development costs, including substantial fixed investment costs associated
with renovations necessary to obtain new tenants and retain existing tenants;
and the risk of a major commercial tenant defaulting on its lease due 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.
15
<PAGE>
Results of Operations
---------------------
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
Six Months Ended June 30,
-------------------------
2000 (1) 1999
-------- ----
Wholly-owned Properties
-----------------------
Commonwealth Business Center Phase II (2) 82% 84%
Property Owned in Joint Venture
-------------------------------
with NTS-Properties IV
----------------------
(Ownership % at June 30, 2000)
------------------------------
The Willows of Plainview Phase II (90.30%) (2) 94% 95%
Properties Owned through
------------------------
Lakeshore/University II Joint Venture
-------------------------------------
(L/U II Joint Venture)
----------------------
Lakeshore Business Center Phase I (3) 75% 71%
Lakeshore Business Center Phase II (2) (3) 82% 86%
Lakeshore Business Center Phase III (4) 0% N/A
(1) Current occupancy levels are considered adequate to continue the operation
of Commonwealth Business Center Phase II, The Willows of Plainview Phase II
and Lakeshore Business Center Phases I and II. Lakeshore Business Center
Phase III is currently under construction.
(2) In the opinion of the General Partner of the Partnership, the decrease in
period ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) Ownership percentage was 79.45% as of June 30, 2000 and 69.23% as of June
30, 1999. (See Notes to Financial Statements - Note 8).
(4) Ownership percentage was 79.45% as of June 30, 2000. Property was not under
construction until December 1999. As of June 30, 2000, one lease for 4,689
square feet has been signed and the tenant is expected to take occupancy
during the third quarter of 2000.
The average occupancy levels at the Partnership's properties during the three
months and six months ended June 30 were as follows:
Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
Wholly-owned Properties
-----------------------
Commonwealth Business Center Phase II 86% 79% 86% 79%
Property Owned in Joint Venture
-------------------------------
with NTS-Properties IV
----------------------
(Ownership % at June 30, 2000)
------------------------------
The Willows of Plainview Phase II (90.30%) (1) 94% 96% 92% 95%
Properties Owned Through
------------------------
Lakeshore/ University II University
-----------------------------------
(L/U II Joint Venture)
----------------------
Lakeshore Business Center Phase I (2) 76% 72% 76% 76%
Lakeshore Business Center Phase II (1) (2) 78% 86% 81% 85%
Lakeshore Business Center Phase III (3) 0% N/A 0% N/A
(1) In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
(2) Ownership percentage was 79.45% for the three months and six months ended
June 30, 2000 and 69.23% for the three months and six months ended June 30,
1999. (See Notes to Financial Statements - Note 8).
(3) Ownership percentage was 79.45% for the three months and six months ended
June 30, 2000. The property was not under construction until December 1999.
16
<PAGE>
Results of Operations - Continued
---------------------------------
Rental and other income generated by the Partnership's properties for the three
months and six months ended June 30, 2000 and 1999 were as follows:
Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
Wholly-owned Properties
-----------------------
Commonwealth Business Center Phase II $162,649 $146,257 $327,220 $295,348
Property Owned in Joint Venture with
------------------------------------
NTS-Properties IV (Ownership % at
---------------------------------
June 30, 2000)
--------------
The Willows of Plainview Phase II
(90.30%) $310,879 $305,190 $592,896 $595,056
Property Owned Through
----------------------
Lakeshore/University II Joint Venture
-------------------------------------
(L/U II Joint Venture)
----------------------
Lakeshore Business Center Phase I (1) $276,199 $223,024 $548,915 $464,100
Lakeshore Business Center Phase II (1) $283,140 $270,173 $551,215 $501,138
Lakeshore Business Center Phase III (2) $ 0 N/A $ 0 N/A
(1) Represents ownership percentage of 79.45% for the three months and six
months ended June 30, 2000 and 69.23% for the three months and six months
ended June 30, 1999. (See Notes to Financial Statements - Note 8).
(2) Building is currently under construction. As of June 30, 2000, one lease
for 4,689 square feet has been signed and the tenant is scheduled to take
occupancy during the third quarter of 2000.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The following is an analysis of material changes in results of operations for
the periods ending June 30, 2000 and 1999. Items that did not have a material
impact on operations for the periods listed above have been excluded from this
discussion.
Rental income increased approximately $68,700 or 7% and $129,600 or 7% for the
three months and six months ended June 30, 2000, as compared to the same periods
in 1999. The increase is primarily a result of increased average occupancy at
Commonwealth Business Center Phase II. Partially offsetting the increase is a
decrease in rental income at The Willows of Plainview Phase II resulting from
decreases in average occupancy.
Period-ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
more representative of the entire period's results.
17
<PAGE>
Results of Operations - Continued
---------------------------------
In cases of tenants who cease making rental payments or abandon the premises in
breach of the lease terms, the Partnership pursues collection through the use of
collection agencies or other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it thought there could be a possible collection. There have
been no funds recovered as a result of these actions during the three months and
six months ended June 30, 2000 or 1999. As of June 30, 2000 no action is being
taken against any tenants to collect funds through the remedies discussed above.
Interest and other income increased approximately $36,800 or 96% and $29,000 or
35% for the three months and six months ended June 30, 2000, as compared to the
same periods in 1999, primarily as a result of an increase in cash reserves
available for investment.
Operating expenses increased approximately $45,700 or 20% and $70,300 or 17% for
the three months and six months ended June 30, 2000, as compared to the same
periods in 1999, due primarily to increased painting and wallcovering, pest
control, and advertising at The Willows of Plainview Phase II. The increase is
also the result of increased landscape maintenance at Lakeshore Business Center
Phase II and The Willows of Plainview Phase II.
Operating expenses - affiliated increased $18,700 or 18% and $11,900 or 5% for
the three months and six months ended June 30, 2000, as compared to the same
periods in 1999, due to increased salaries at The Willows of Plainview Phase II.
Partially offsetting the increase is decreased overhead costs allocated to the
Partnership as a result of personnel status changes. Operating expenses -
affiliated are expenses incurred for services performed by NTS Development
Company, an affiliate of the General Partner.
The 2000 and 1999 loss on disposal of assets can be attributed to the retirement
of assets at The Willows of Plainview Phase II and Lakeshore Business Center
Phases I and II. The retirements are the result of common area improvements and
new alarm system installations. The loss represents the cost to retire assets
which were not fully depreciated at the time of replacement.
Real estate taxes increased approximately $5,600 or 7% and $23,000 or 14% for
the three months and six months ended June 30, 2000, as compared to the same
periods in 1999, as a result of an increased assessment at The Willows of
Plainview Phase II. Partially offsetting the increase is the sale of 2.4 acres
of land owned by the L/U II Joint Venture in July 1999.
Professional and administrative expenses decreased approximately $18,000 or 33%
and $33,700 or 32% for the three months and six months ended June 30, 2000, as
compared to the same periods in 1999, primarily as a result of decreased costs
incurred for legal and accounting fees.
Professional and administrative expenses - affiliated decreased $4,000 or 11%
and $17,800 or 21% for the three months and six months ended June 30, 2000, as
compared to the same periods in 1999, as a result of decreased salary costs due
to personnel changes. Professional and administrative expenses - affiliated are
expenses incurred for services performed by employees of NTS Development
Company, an affiliate of the General Partner.
18
<PAGE>
Results of Operations - Continued
---------------------------------
Depreciation and amortization increased approximately $27,500 or 14% and $51,000
or 13% for the three months and six months ended June 30, 2000, as compared to
the same periods in 1999, as a result of an increase in ownership of the L/U II
Joint Venture as described below. The aggregate cost of the Partnership's
properties for federal tax purposes is approximately $30,084,265.
Contributing to all of the increases discussed above is an increase in ownership
of L/U II Joint Venture from 69.23% to 79.45% effective July 1, 1999. (See Notes
to Financial Statements - Note 8).
Consolidated Cash Flows and Financial Condition
-----------------------------------------------
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, II and III. 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 flows provided by (used in):
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
Operating activities $ 801,345 $ 495,159
Investing activities (1,518,149) (34,928)
Financing activities (349,350) (1,803,071)
------------ ------------
Net decrease in cash and equivalents $(1,066,154) $(1,342,840)
============ ============
Net cash provided by operating activities increased approximately $306,000 for
the six months ended June 30, 2000, as compared to the same period in 1999. This
increase was primarily driven by an increase in accounts payable, loss on
disposal of assets and a decrease in accounts receivable and is partially offset
by an increase in cash and equivalents restricted.
Net cash used in investing activities increased approximately $1,483,000 for the
six months ended June 30, 2000, as compared to the same period in 1999. The
increase is the result of increased capital expenditures primarily at the
Lakeshore Business Center Development.
Net cash used in financing activities decreased approximately $1,454,000 for the
six months ended June 30, 2000, as compared to the same period in 1999. The
decrease was primarily the result of an approximately $1,264,900 cash
distribution paid to the Limited Partners in March 1999. No distributions were
paid during the six months ended June 30, 2000. Also contributing to the
decrease was $123,000 used for the repurchase of Limited Partnership Units in
1999.
19
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
-----------------------------------------------------------
The table below presents that portion of the distributions which represent a
return of capital on a GAAP basis for the six months ended June 30, 1999. No
distributions were made during the six months ended June 30, 2000.
Net Loss Cash Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
2000 $ (89,186) $ -- $ --
1999 (26,863) 1,252,275 1,252,275
General Partner:
2000 $ (901) $ -- $ --
1999 (272) 12,649 12,649
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations and the construction of Lakeshore Business Center
Phase III as described below. 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 the improvements
are determined by the size of the space being leased 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 cash
reserves.
Pursuant to a contract signed on December 6, 1999, the L/U II Joint Venture has
a commitment to construct a building to be known as Lakeshore Business Center
Phase III on 3.8 acres of land it owns at the Lakeshore Business Center
Development. The construction commenced in December 1999 and cost is currently
estimated to be $4,000,000 and will be funded by working capital and
approximately $2,680,000 in debt financing. As of June 30, 2000, the L/U II
Joint Venture incurred approximately $1,761,000 in expenses for the construction
of Lakeshore Business Center Phase III.
As of June 30, 2000, the L/U II Joint Venture has a commitment for approximately
$66,000 for tenant improvements on 31,338 square feet at Lakeshore Business
Center Phases I and II. The Partnership's share of this commitment is
approximately $52,400 and will be funded from cash flows from operations. The
L/U II Joint Venture also has a commitment for approximately $45,700 for tenant
improvements on 4,689 square feet at Lakeshore Business Center Phase III. The
Partnership's share of this commitment is approximately $36,300 and will be
funded from the debt financing discussed above. The construction for these
projects has commenced and is expected to be completed during the third quarter
of 2000.
The L/U II Joint Venture anticipates replacing the roofs at Lakeshore Business
Center Phase I for a cost of approximately $200,000. The Partnership's share of
this project will be $158,900 and will be funded from cash flows from
operations.
The Partnership has no other material commitments for renovations or capital
improvements as of June 30, 2000.
20
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
-----------------------------------------------------------
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Commonwealth Business
Center Phase II, the leasing and renewal negotiations are handled by leasing
agents, who are 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. A leasing agent, an employee of NTS Development
Company, located at Lakeshore Business Center, handles the leasing and renewal
negotiations at Lakeshore Business Center Phases I, II and III. At The Willows
of Plainview Phase II, the Partnership has an on-site leasing staff, who are
employees of NTS Development Company. The staff handles all on-site visits from
potential tenants, makes visits to local companies to promote fully furnished
apartments, negotiates lease renewals with current residents and coordinates 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. 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.
21
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regard to financial instruments is changes
in interest rates. All of the Partnership's debt bears interest at a fixed rate.
At June 30, 2000, a hypothetical 100 basis point increase in interest rates
would result in an approximately $452,000 decrease in the fair value of the
debt.
22
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
Exhibit 27. Financial Data Schedule
b) Reports on Form 8-K:
Not applicable.
23
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTS-PROPERTIES V,
A Maryland Limited Partnership
------------------------------------------
(Registrant)
BY: NTS-Properties Associates V,
General Partner,
BY: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
------------------------------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: August 11, 2000
24
<PAGE>
