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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 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission file number 0-14695
NTS-PROPERTIES VI, a Maryland Limited Partnership
(Exact name of registrant as specified in its charter)
Maryland 61-1066060
(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)
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
(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 ______
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 40
Total Pages: 44
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TABLE OF CONTENTS
Pages
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 24-37
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 38
PART III
Item 10 Directors and Executive Officers of
the Registrant 38
Item 11 Management Remuneration and Transactions 38-39
Item 12 Security Ownership of Certain Beneficial
Owners and Management 39
Item 13 Certain Relationships and Related
Transactions 39
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 40-43
Signatures 44
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PART I
Items 1. and 2. Business and Properties
General
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Some of the statements included in Items 1 and 2, Business and Properties, 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.
The registrant, NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership"), is a limited partnership formed in December 1984 under the laws
of the State of Maryland. The general partner is NTS-Properties Associates VI, a
Kentucky limited partnership. As of December 31, 1996, the Partnership owned the
following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex located on
a 13 acre tract in Orlando, Florida, constructed by the Partnership.
- Park Place Apartments Phase I, a 180-unit luxury apartment complex
located on an 18 acre tract in Lexington, Kentucky, constructed by
the Partnership.
- Willow Lake Apartments, a 207-unit luxury apartment complex located
on an 18 acre tract in Indianapolis, Indiana, constructed by the
Partnership.
- A joint venture interest in Golf Brook Apartments, a 195-unit luxury
apartment complex located on a 16 acre tract in Orlando, Florida,
constructed by the joint venture between the Partnership and NTS-
Properties IV., Ltd. ("NTS-Properties IV"), an affiliate of the
general partner of the Partnership. The Partnership's percentage
interest in the joint venture was 96% at December 31, 1996.
- A joint venture interest in Plainview Point III Office Center, an
office center with approximately 62,000 net rentable square feet,
located in Louisville, Kentucky, constructed by the joint venture
between the Partnership and NTS-Properties IV. The Partnership's
percentage interest in the joint venture was 95% at December 31,
1996.
The Partnership also owns approximately 15 acres of land in Lexington, Kentucky
which is zoned for 163 apartment units (Park Place Apartments Phase III). The
Partnership continues to evaluate whether to sell or develop the tract of land.
At this time, no final decision has been made.
The Partnership or Joint Venture in which the Partnership is a partner has a fee
title interest in the above listed properties. In the opinion of the
Partnership's management, the properties are adequately covered by insurance.
Sabal Park Apartments 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, 1996 was $4,729,104
($2,837,462 and $1,891,642). Both mortgages currently bear a fixed interest rate
of 7.25% for the first 60 months and are due January 5,
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Items 1. and 2. Business and Properties - Continued
General - Continued
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2003. Current monthly principal payments on both mortgages are based upon a
27-year amortization schedule. The outstanding balance at maturity based on the
current rate of amortization would be $4,122,326 ($2,473,396 and $1,648,930).
Park Place Apartments Phase I 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, 1996 was $4,946,181
($3,994,992 and $951,189). Both mortgages currently bear a fixed interest rate
of 8.375% for the first 60 months and are due October 5, 2002. Current monthly
principal payments on both mortgages are based upon a 27- year amortization
schedule. The outstanding principal balance at maturity based on the current
rate of amortization would be $4,413,955 ($3,565,118 and $848,837).
Willow Lake Apartments is encumbered by a permanent mortgage with an insurance
company. The outstanding balance at December 31, 1996 was $8,527,771. The
mortgage currently bears interest at a fixed rate of 9.20%. Monthly principal
payments are based upon a 25-year amortization schedule. The mortgage is due
November 1, 1997. The outstanding balance at maturity based on the current rate
of amortization will be $8,433,356.
Subsequent to December 31, 1996, the Partnership submitted an application with
an insurance company for $8,500,000 of debt financing. The proceeds from the new
financing will be used to pay off the Partnership's current $8,527,771 mortgage
payable discussed above. Based upon discussions with the insurance company, the
Partnership anticipates that the financing will be completed during the fourth
quarter of 1997.
Golf Brook Apartments, a joint venture between the Partnership and NTS-
Properties IV, is encumbered by a mortgage payable to an insurance company. The
mortgage replaced the loan which the Partnership had obtained to fund a portion
of its capital contribution to the Joint Venture. The mortgage is recorded as a
liability by the Partnership in accordance with the Joint Venture Agreement. The
outstanding balance at December 31, 1996 was $9,200,000. The mortgage bears a
fixed interest rate of 8.625% and the unpaid balance of $9,200,000 is due August
1, 1997.
As of December 31, 1996, the Partnership has obtained a commitment from an
insurance company for $9,000,000 of debt financing. The proceeds from the new
financing along with cash reserves will be used to pay off the Partnership's
current $9,200,000 mortgage payable discussed above. The mortgage will bear
interest at a fixed rate of 7.43% and will be fully amortized over a 12 year
period. Based upon the terms of the commitment, the Partnership anticipates that
the financing will be completed in April 1997.
Plainview Point III Office Center and the 15 acres of land in Lexington,
Kentucky are not encumbered by any outstanding mortgages at December 31, 1996.
For a further discussion regarding the terms of the debt financings see
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7).
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements at the Partnership's commercial
property as required by lease negotiations. 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
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Items 1. and 2. Business and Properties - Continued
General - Continued
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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/or cash reserves. The Partnership had no material
commitments for renovations or capital improvements at December 31, 1996.
The Partnership is presently engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate. A presentation of information concerning industry segments is not
applicable.
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to purchase and develop parcels of unimproved or
partially improved land, directly or by joint venture, in order to construct and
otherwise develop thereon apartment complexes, business parks and/or retail,
industrial and office buildings and to own and operate the completed properties.
The Partnership's properties are in a condition suitable for their intended use.
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. The General Partner of the Partnership is currently
exploring the marketability of certain of its properties, and has not yet
determined if any of the properties might be sold in the next 12 months, and
there are no contracts for sale under negotiation at the present time.
Sabal Park Apartments
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Units at Sabal Park Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, ovens, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, swimming pool and tennis courts.
Monthly rental rates at Sabal Park Apartments start at $879 for two-bedroom
apartments and $1,199 for three-bedroom apartments, 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 90% (1996), 98% (1995), 91% (1994), 94% (1993), and 93% (1992).
Park Place Apartments Phase I
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Units at Park Place Apartments Phase I include one and two-bedroom apartments
and two-bedroom townhomes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices. The amenities are
shared with
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Items 1. and 2. Business and Properties - Continued
Park Place Apartments Phase I - Continued
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Phase II of the Park Place development. Park Place Apartments Phase II is owned
by NTS-Properties VII, Ltd., an affiliate of the general partner of the
Partnership. The cost to construct and operate the common amenities is shared
proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase I start at $699 for
one-bedroom apartments, $889 for two-bedroom apartments and $1,089 for
two-bedroom townhomes, 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 90% (1996), 92%
(1995), 93% (1994), $93% (1993), and 96% (1992).
Willow Lake Apartments
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Units at Willow Lake Apartments include one and two-bedroom apartments and
two-bedroom townhomes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices.
Monthly rental rates at Willow Lake Apartments start at $740 for one-bedroom
apartments, $955 for two-bedroom apartments and $1,145 for two-bedroom
townhomes, 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 91% ( 1996), 93% (1995), 92%
(1994), 84% (1993), and 87% (1992).
Golf Brook Apartments
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Units at Golf Brook Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, pool and tennis courts.
Monthly rental rates at Golf Brook Apartments start at $1,120 for two-bedroom
apartments and $1,350 for three-bedroom apartments, 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 97% (1996), 91% (1995), 93% (1994), 91% (1993), 94% (1992).
Plainview Point III Office Center
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Base annual rents, which include the cost of utilities, range from $13.90 to
$15.00 per square foot for first and second floor office space and $13.00 per
square foot for lower level office space. The average base annual rental for all
types of space leased as of December 31, 1996 was $14.16 per square foot. Office
space is ordinarily leased for between two and six years with the majority of
current square footage being leased for a term of five years. Current leases
terminate between 1997 and 2001. Some leases
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Items 1. and 2. Business and Properties - Continued
Plainview Point III Office Center - Continued
- ---------------------------------------------
provide for renewal options of between two and five years 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 increases in common area maintenance expenses, insurance, utilities
and real estate taxes. As of December 31, 1996, there were six tenants leasing
space aggregating approximately 56,882 square feet of rentable area. The tenants
who occupy Plainview Point III Office Center are professional service oriented
organizations. The principal occupations/professions practiced include real
estate and insurance. Four tenants lease more than 10% of the office center's
rentable area: The Prudential Company of America (10.4%), Underwriters Safety &
Claims, Inc. (18.4%), Re/max Properties East, Inc. (24.5%) and Univa Health
Network (26.8%). The occupancy levels at the office center as of December 31
were 91% (1996), 91% (1995), 91% (1994), 87% (1993) and 95% (1992).
The following table contains approximate data concerning the leases in effect on
December 31, 1996.
Major Tenants
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
The Prudential Company
of America 1997 6,474 (10.4%) $ 95,964 (11.9%) 1 Five-Year
Underwriters Safety &
Claims, Inc. 2001 11,535 (18.4%) $149,952 (18.6%) None
Re/max Properties East,
Inc. 1999 15,300 (24.5%) $225,600 (28.0%) 1 Two-Year
Univa Health Network 2000 16,727 (26.8%) $232,500 (28.9%) 1 Five-Year
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- ---- ------ -------
None 1997-1999 -- -- --
2 2000 6,846 (10.9%) $101,604 (12.6%) 1 Three-Year
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
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Wholly-Owned Properties
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Sabal Park Apartments $11,213,438 $.01894 $151,108
Park Place Apartments
Phase I 11,221,275 .00991 111,375
Willow Lake Apartments 15,530,469 .09037 226,700
(Table continued next page)
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Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
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Properties Owned in Joint
Venture with NTS-
Properties IV
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Golf Brook Apartments $16,100,810 $ .01894 $ 259,816
Plainview Point III
Office Center 4,189,222 .01120 34,911
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
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
3 - 30 years for amenities. The estimated realty taxes on all other planned
renovations, primarily tenant improvements, would not be material. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) for explanations regarding the fluctuations of income and
occupancy at the Partnership's properties.
Investment in Joint Ventures
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NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV, an affiliate of
the general partner of the Partnership, to develop, construct, own and operate a
158-unit luxury apartment complex on a 13.15-acre site in Orlando, Florida known
as Golf Brook Apartments Phase I. On January 1, 1987, the joint venture
agreement was amended to include Golf Brook Apartments Phase II, a 37-unit
luxury apartment complex located on a 3.069-acre site adjacent to Golf Brook
Apartments Phase I. 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, 2025.
The Partnership contributed approximately $15.8 million, the cost of
constructing and leasing the apartments. NTS-Properties IV contributed land
valued at $1,900,000 with a related note payable to a bank of $1,200,000. The
Partnership also contributed funds to retire the $1,200,000 note payable to a
bank. No future contributions are anticipated as of December 31, 1996.
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Items 1. and 2. Business and Properties - Continued
Investment in Joint Venture - Continued
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Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. This mortgage payable replaced the Contribution Loan which the
Partnership had obtained to fund a portion of its capital contribution to the
Joint Venture. The $9,200,000 mortgage payable is recorded as a liability by the
Partnership in accordance with the Joint Venture Agreement. The mortgage bears a
fixed interest rate of 8.625%. The unpaid balance of the loan ($9,200,000) is
due August 1, 1997. See above for information regarding the refinancing of this
mortgage.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all 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 Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only 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 96%
at December 31, 1996.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1996.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties IV, an affiliate of the
general partner, to develop, construct, own and operate an office building in
Louisville, Kentucky known as Plainview Point III Office Center. The terms 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 Real Property, unless such
disposition is, in whole or in part, represented by a promissory
note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
The Partnership contributed approximately $4.1 million, the cost to construct
and lease the building. NTS-Properties IV contributed land valued at $790,000
with an outstanding note of $550,000 which was secured by the land. The
Partnership also contributed the funds to retire the $550,000 note payable to
the bank. No future contributions are anticipated as of December 31, 1996.
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Items 1. and 2. Business and Properties - Continued
Investment Joint Ventures - Continued
- -------------------------------------
As of December 31, 1996, Plainview Point III Office Center is not encumbered by
any mortgage indebtedness.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all 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 Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only 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 95%
at December 31, 1996.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1996.
Competition
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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 service provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1996, there are no properties under construction
in the respective vicinities in which the properties are located except for the
following: In close proximity to Sabal Park Apartments and Golf Brook
Apartments, there are 150 apartment units currently under construction which are
scheduled to be completed during the first quarter of 1997. In the vicinity near
Park Place Apartments, there are currently 738 apartment units currently under
construction which are scheduled to be completed during the second and third
quarters of 1997. Also, in the vicinity of Willow Lake Apartments, there are
currently 1,200 apartment units under construction. It is anticipated that
construction of these units will be completed during the second quarter of 1997.
At this time it is unknown the effect these new units will have on occupancy at
the Partnership's properties. 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.
- 10 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates VI, 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 VI. 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 $485,250
for the year ended December 31, 1996. $45,443 was received from the commercial
property and $439,807 was received from residential properties. The fee is equal
to 6% of gross revenues from the commercial property 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 term of five years, and thereafter for succeeding
one-year periods, unless cancelled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1996, the
Management Agreement is still in effect.
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 arms-length
negotiations but through the exercise of the General Partner's good judgment
consistent with its 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. With respect to these potential conflicts of interest, 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
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<PAGE>
Items 1. and 2. Business and Properties - Continued
Conflict of Interest - Continued
- --------------------------------
Partnership than those which could be obtained from a third party 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 other 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.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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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 4,136 limited partners as of
February 28, 1997. Cash distributions and allocations of net income (loss) are
made as described in Note 1C to the Partnership's 1996 financial statements.
Annual distributions totalling $20.00, $20.00 and $18.75 per limited partnership
unit were paid during the years ended December 31, 1996, 1995 and 1994,
respectively. 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.
Distributions were paid quarterly as follows:
1996 1995 1994
---------- ---------- --------
First quarter $ 5.00 $ 5.00 $ 3.75
Second quarter 5.00 5.00 5.00
Third quarter 5.00 5.00 5.00
Fourth quarter 5.00 5.00 5.00
------ ------ ------
$20.00 $20.00 $18.75
====== ====== =====
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1996, 1995 and 1994.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1996 $ 224,783 $ 886,000 $ 661,217
1995 (324,417) 948,700 948,700
1994 (803,780) 889,380 889,380
General Partners:
1996 $ 2,271 $ 8,950 $ 6,679
1995 (3,277) 9,583 9,583
1994 (8,119) 8,984 8,984
- 13 -
<PAGE>
Item 6. Selected Financial Data
<TABLE>
Years ended December 31, 1996, 1995, 1994, 1993 and 1992.
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 9,670,261 $ 8,939,055 $ 8,796,072 $ 8,515,951 $ 7,831,434
Total expenses (9,443,207) (9,266,749) (9,607,971) (9,549,251) (9,794,478)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 227,054 $ (327,694) $ (811,899) $ (1,033,300) $ (1,963,044)
============ ============ ============ ============ ============
Net income (loss)
allocated to:
General partner $ 2,271 $ (3,277) $ (8,119) $ (10,333) $ (19,630)
Limited partners $ 224,783 $ (324,417) $ (803,780) $ (1,022,967) $ (1,943,414)
Net income (loss) per
limited partnership
unit $ 4.97 $ (6.84) $ (16.94) $ (21.57) $ (40.97)
Weighted average
number of limited
partnership units 45,243 47,435 47,435 47,435 47,435
Cumulative net income
(loss) allocated to:
General partner $ (75,936) $ (78,207) $ (74,930) $ (66,811) $ (56,478)
Limited partners $(12,308,341) $(12,533,124) $(12,208,707) $(11,404,927) $(10,381,960)
Cumulative net
taxable income (loss)
allocated to:
General partner $ 1,192,830 $ 78,617 $ 64,858 $ 55,986 $ 46,533
Limited partners $(16,357,888) $(15,401,294) $(14,859,402) $(13,885,668) $(12,769,887)
Distributions
declared:
General partner $ 8,950 $ 9,583 $ 8,984 $ 7,187 $ 5,390
Limited partners $ 886,000 $ 948,700 $ 889,380 $ 711,525 $ 533,643
Cumulative
distributions
declared:
General partner $ 103,444 $ 94,494 $ 84,911 $ 75,927 $ 68,740
Limited partners $ 10,240,906 $ 9,354,906 $ 8,406,206 $ 7,516,826 $ 6,805,301
At year end:
Cash and equivalents $ 640,541 $ 393,552 $ 1,617,604 $ 1,394,905 $ 1,530,572
Investment
securities $ 1,085,267 $ 1,151,355 $ -- $ -- $ --
Land, buildings and
amenities, net $ 40,436,784 $ 42,196,272 $ 43,872,072 $ 45,799,467 $ 47,621,659
Total assets $ 44,771,802 $ 46,813,791 $ 48,267,884 $ 50,221,728 $ 52,751,897
Mortgages payable $ 27,403,056 $ 27,653,044 $ 27,883,025 $ 28,101,474 $ 28,900,767
</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.
- 14 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
Percentage
Ownership
at 12/31/96 1996 1995 1994
----------- -------- -------- ------
Wholly-Owned Properties
Sabal Park Apartments 100% 90% 98% 91%
Park Place Apartments
Phase I 100% 90% 92% 93%
Willow Lake Apartments 100% 91% 93% 92%
Properties Owned in Joint
Venture with NTS-
Properties IV
Golf Brook Apartments 96% 97% 91% 93%
Plainview Point III
Office Center 95% 91% 91% 91%
Rental and other income generated by the Partnership's properties for the years
ended December 31, 1996, 1995 and 1994 were as follows:
Percentage
Ownership
at 12/31/96 1996 1995 1994
----------- -------- -------- ------
Wholly-Owned Properties
Sabal Park Apartments 100% $1,765,302 $1,675,795 $1,650,135
Park Place Apartments
Phase I 100% $1,843,808 $1,739,626 $1,694,519
Willow Lake Apartments 100% $2,434,696 $2,287,408 $2,101,194
Properties Owned in Joint
Venture with NTS-
Properties IV
Golf Brook Apartments 96% $2,801,744 $2,722,451 $2,631,630
Plainview Point III
Office Center 95% $ 729,647 $ 428,269 $ 670,057
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 15 -
<PAGE>
Results of Operations -Continued
- --------------------------------
Sabal Park Apartments' year-ending occupancy decreased 8% from 1995 to 1996 and
average occupancy increased from 92% in 1995 to 94% in 1996. Occupancy at
residential properties fluctuate on a continuous basis. Year-ending occupancy
percentages represent occupancy only on a specific date; therefore, it is more
meaningful to consider average occupancy percentages which are more
representative of the entire year's results. In the opinion of the General
Partner of the Partnership, the decrease in 1996 year-ending occupancy was only
a temporary fluctuation and did not represent a downward occupancy trend. Rental
and other income at Sabal Park Apartments increased from 1995 to 1996 as a
result of the increase in average occupancy, increased rental rates, increased
fees collected upon early lease terminations and increased fees collected for
short term and month-to-month leases.
Sabal Park Apartments' year-ending occupancy increased from 91% in 1994 to 98%
in 1995; however, average occupancy decreased from 93% in 1994 to 92% in 1995.
Rental and other income at Sabal Park Apartments increased from 1994 to 1995 due
to increased rental rates and increased charges to applicants for credit checks.
Year-ending occupancy at Park Place Apartments I decreased from 92% in 1995 to
90% in 1996 and average occupancy decreased from 94% in 1995 to 93% in 1996.
Rental and other income at Park Place Apartments Phase I increased from 1995 to
1996 as a result of increased income collected from the rental of fully
furnished units, increased income collected for short term and month-to-month
leases and increased rental rates. Fully furnished units are apartments which
rent at an additional premium above base rent. Therefore, it is possible for
occupancy to decrease and revenues to increase when the number of fully
furnished units has increased.
Park Place Apartments Phase I's year-ending occupancy decreased from 93% in 1994
to 92% in 1995; however average occupancy remained constant (94%) from 1994 to
1995. Rental and other income at Park Place Apartments Phase I increased from
1994 to 1995 as a result of increased rental rates, increased charges to
applicants for credit checks and decreased rental concessions. The increases in
rental and other income at Park Place Apartments Phase I from 1994 to 1995 are
partially offset by decreased income from fully furnished units. .
Willow Lake Apartments' year-ending occupancy decreased 2% from 1995 to 1996;
however, average occupancy increased 2% from 1995 to 1996. Rental and other
income increased as a result of the increase in average occupancy, increased
rental rates, increased income collected from fully furnished units and
increased fees collected for short term and month-to-month leases.
Willow Lake Apartments' year-ending occupancy increased from 92% in 1994 to 93%
in 1995 and average occupancy increased from 87% in 1994 to 92% in 1995. Rental
income increased from 1994 to 1995 as a result of the 5% increase in average
occupancy, increased rental rates, decreased rental concessions, increased
charges to applicants for credit checks and increased charges to residents for
the cable TV service which is provided to residents. The increases in rental
income from 1994 to 1995 are partially offset by decreased other income. 1994
other income included a $23,000 settlement received from the insurance company
of the manufacturer of the pipe fittings which were used in construction of
Willow Lake Apartments. The reimbursement was for certain repair expenses the
Partnership incurred from 1987 to 1991. The repair costs were expensed at the
time they were incurred due to the length of time it has taken to negotiate the
settlement.
- 16 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Year-ending occupancy at Golf Brook Apartments increased from 91% in 1995 to 97%
in 1996 while average occupancy remained constant at 94% in 1995 and 1996.
Rental and other income increased as a result of increased rental rates,
increased non-refundable pet fees and increased pet rent collected.
Golf Brook Apartments' year-ending occupancy decreased 2% from 1994 to 1995
while average occupancy remained constant at 94% in 1994 and 1995. Rental and
other income at Golf Brook Apartments increased from 1994 to 1995 as a result of
increased rental rates, decreased rental concessions and increased charges to
applicants for credit checks.
Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and
1996 as a result of expansions by two current tenants of existing space
totalling approximately 2,500 square feet offset by one tenant move-out at the
end of the lease term totalling approximately 2,500 square feet. Average
occupancy increased from 55% in 1995 to 93% in 1996. Rental and other income
increased at Plainview Point III Office Center from 1995 to 1996 as a result of
the increase in average occupancy.
Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and
1994 as a result of the following new leases and tenant move-outs. New leases
during 1995 consist of a 10,343 square foot 63 month lease (took occupancy
September 1, 1995) and a 16,727 square foot five-year lease (took occupancy
December 27, 1995). The leases are offset by two tenant move-outs totalling
approximately 26,000 square feet. Of this total, 16,400 square feet represents a
tenant who vacated the office center at the end of the lease term due to the
company's decision to consolidate its Louisville processing center with one
located in another city. The tenant occupied 27% of the office center's rentable
area. Approximately 9,600 square feet of the total move-outs represents a tenant
who vacated the premises January 31, 1995. The tenant's lease was on a
month-to-month basis at the time of move- out. The tenant's original lease term
was for a period of four years. The tenant occupied approximately 16% of the
office center's rentable area. Average occupancy for the 12 month period ended
December 31 decreased from 92% (1994) to 55% (1995). Rental and other income
decreased at Plainview Point III Office Center from 1994 to 1995 as a result of
the decrease in average occupancy during 1995.
If present trends continue, the Partnership will be able to continue at its
current level of operations without the need of any additional financing.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties.
Interest and other income includes interest income from investments made by the
Partnership with cash reserves. The increase in interest and other income from
1995 to 1996 can be attributed to increased miscellaneous income collected by
the Partnership partially offset by decreased interest income resulting from
decreased cash reserves being available for investment and decreased other
income at the Partnership's residential properties. The increase in interest
income from 1994 to 1995 is the result of increased cash reserves being
available for investment.
Operating expenses increased from 1995 to 1996 as a result of increased general
building costs at all the Partnership's properties, increased furniture rental
costs associated with fully furnished units at Willow Lake and Park Place
Apartments, increased replacement costs at Golf Brook, Willow Lake and Park
Place Apartments, increased utility costs at Park Place Apartments, Willow Lake
Apartments and Plainview Point III Office Center,
- 17 -
<PAGE>
Results of Operations - Continued
- ----------------------------------
increased exterior maintenance costs at Golf Brook Apartments, increased
advertising costs at Golf Brook, Park Place and Willow Lake Apartments and
increased amortization of prepaid leasing commissions at Plainview Point III
Officer Center . These increases are partially offset by decreased exterior
painting costs at Willow Lake and Park Place Apartments and decreased interior
painting and carpet replacement costs at Sabal Park Apartments.
Operating expenses decreased from 1994 to 1995 as a result of decreased repair
and maintenance costs at Park Place Apartments Phase I, Golf Brook Apartments,
Sabal Park Apartments and Plainview Point III Office Center, decreased utility
costs at Willow Lake Apartments, Park Place Apartments Phase I and Plainview
Point III Office Center, decreased advertising costs at Sabal Park and Golf
Brook Apartments, decreased janitorial costs at Plainview Point III Office
Center and decreased snow removal costs at Park Place Apartments Phase I, Willow
Lake Apartments and Plainview Point III Office Center. These decreases are
partially offset by increased repair and maintenance costs at Willow Lake
Apartments and increased landscaping costs at Golf Brook and Sabal Park
Apartments.
Operating expenses - affiliated decreased from 1995 to 1996 due to decreased
property management and leasing costs. Operating expenses - affiliated remained
fairly constant for the 12 months ended December 31, 1995 as compared to the
same period in 1994. Operating expenses - affiliated are expenses incurred for
services performed by employees of NTS Development Company, an affiliate of the
General Partner of the Partnership.
Amortization of capitalized leasing costs has decreased from 1994 to 1995 and
from 1995 to 1996 as a result of a portion of the costs capitalized during
start-up having become fully amortized. Capitalized leasing costs were fully
amortized during the second quarter of 1995.
Interest expense decreased from 1995 to 1996 due to the Partnership's decreasing
debt level as a result of principal payments made. The increase in interest
expense from 1994 to 1995 is the result of an interest rate change (in
accordance with the mortgage agreement) effective December 1, 1994. The interest
rate on the Willow Lake Apartments permanent financing ($8,527,771 mortgage
payable) increased from 8.75% to 9.20%. The increase in interest expense from
1994 to 1995 is partially offset by the Partnership's decreasing debt level as a
result of principal payments made. See the Capital Resources and Liquidity
section of this item for details regarding the Partnership's debt.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations of
management fee expense.
Repair and maintenance fees are calculated as a percentage (5.9%) of major
renovation and repair costs. The 1994 repair and maintenance fees are associated
with the wood replacement costs at Sabal Park and Golf Brook Apartments. This
fee was paid to NTS Development Company, an affiliate of the general partner of
the Partnership, pursuant to an agreement with the Partnership.
The increase in real estate taxes from 1995 to 1996 is a result of increased
property assessments for Golf Brook and Sabal Park Apartments. The increase in
real estate taxes is partially offset by a decreased property assessment and
decreased tax rate for Willow Lake Apartments. The assessment for Park Place
Apartments Phase I and Plainview Point III Office Center remained constant from
1995 to 1996. Real estate taxes have remained fairly constant from 1994 to 1995.
- 18 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in professional and administrative expenses from 1995 to 1996 is
the result of increased costs associated with the Interest Repurchase Program.
Professional and administrative expenses have remained fairly constant from 1994
to 1995.
Professional and administrative expenses - affiliated increased from 1995 to
1996 as a result of increased salary costs. Professional and administrative
expenses - affiliated have remained fairly constant from 1994 to 1995.
Professional and administrative expenses - affiliated are expenses incurred for
services performed by employees of NTS Development Company, an affiliate of the
General Partner of the Partnership.
Depreciation and amortization decreased from 1995 to 1996 due to a portion of
the assets with shorter lives at the Partnership's residential properties having
become fully depreciated. The decrease in depreciation and amortization from
1995 to 1996 is partially offset by depreciation of new tenant finish
improvements at Plainview Point III Office Center. Depreciation and amortization
decreased from 1994 to 1995 due to a portion of the assets with shorter lives at
the Partnership's residential properties having become fully depreciated and as
a result of a portion of the original tenant improvements at Plainview Point III
Office Center becoming fully depreciated. Depreciation is computed using the
straight-line method over the useful lives of the assets which are 5 - 30 years
for land improvements, 30 years for buildings, 5 - 30 years for building and
improvements and 5 - 30 years for amenities. The aggregate cost of the
Partnership's properties for Federal tax purposes is approximately $59,300,000.
Capital Resources and Liquidity
- -------------------------------
Cash provided from operations was $2,257,823, $1,648,106, and $1,288,415 during
the years ended December 31, 1996, 1995 and 1994, respectively. These funds in
conjunction with cash on hand were used to make a 2% (annualized) cash
distribution of approximately $895,000 in 1996, a 2% (annualized) cash
distribution of approximately $958,000 in 1995 and a 1.875% (annualized) cash
distribution of approximately $898,000 in 1994. The annualized distribution rate
is calculated as a percent of the original capital contribution. The limited
partners received 99% and the general partner received 1% of these
distributions. The primary source of future liquidity and distributions is
expected to be derived from cash generated by the Partnership's properties after
adequate cash reserves are established for future leasing costs, tenant finish
costs and capital improvements. Cash reserves (which are unrestricted cash and
equivalents and investment securities as shown on the Partnership's balance
sheet as of December 31) were $1,725,808, $1,544,907, and $1,617,604 at December
31, 1996, 1995 and 1994, respectively.
As of December 31, 1996, the Partnership had a mortgage payable to an insurance
company in the amount of $9,200,000. The mortgage payable bears a fixed interest
rate of 8.625% and is secured by the land, buildings and amenities of Golf Brook
Apartments. The unpaid balance of the loan is due August 1, 1997.
As of December 31, 1996, the Partnership had obtained a commitment from an
insurance company for $9,000,000 of debt financing. The proceeds from the new
financing along with cash reserves will be used to pay off the Partnership's
current $9,200,000 mortgage payable discussed above. The mortgage will bear
interest at a fixed rate of 7.43% and will be fully amortized over a 12 year
period. Based upon the terms of the commitment, the Partnership anticipates that
the financing will be complete in April 1997.
- 19 -
<PAGE>
Capital Resources and Liquidity - Continued
- -------------------------------------------
As of December 31, 1996, the Partnership also had a mortgage payable to an
insurance company in the amount of $8,527,771. The mortgage bore a fixed
interest rate of 8.75% through the first three Loan Years (note dated October
16, 1991). The interest rate was adjusted at the end of the third Loan Year
(November 1, 1994) to a fixed interest rate of 9.20%; an interest rate two
hundred ten (210) basis points greater than the yield on 3-year U.S. Treasury
Notes as published in the Treasury Yield Curve of Moody's Bond Survey for the
reference date closest to the end of the third Loan Year. The mortgage payable
is due November 1, 1997 and is secured by the land, buildings and amenities of
Willow Lake Apartments. Monthly principal payments through the first three Loan
Years were based on a 28-year amortization schedule. Effective upon acceptance
of the adjusted interest rate (November 1, 1994), monthly principal payments are
now based upon a 25- year amortization schedule. The outstanding balance at
maturity based on the current rate of amortization will be $8,433,356.
Subsequent to December 31, 1996, the Partnership submitted an application with
an insurance company for $8,500,000 of debt financing. The proceeds from the new
financing will be used to pay off the Partnership's current $8,527,771 mortgage
payable discussed above. Based upon discussions with the insurance company, the
Partnership anticipates that the financing will be completed in the fourth
quarter of 1997.
As of December 31, 1996, the Partnership had two mortgage loans each with an
insurance company in the amount of $3,994,992 and $951,189. The permanent
financings were obtained September 8, 1992 in the amount of $4,200,000 and
$1,000,000. Both mortgages payable are due October 5, 2002, bear a fixed
interest rate of 8.375% for the first 60 months, and are secured by the land,
buildings and amenities of Park Place Apartments Phase I. At the end of the 56th
month from the date of the notes, the insurance companies will notify the
Partnership of the interest rate which is their then prevailing interest rate
for loans with a term of five years on properties comparable to the apartments
(the "Modified Rate"). The Partnership will have 30 days to accept or reject the
Modified Rate. If the Modified Rate is rejected by the Partnership, the entire
unpaid principal balance is due with the 60th installment of interest. If the
Partnership accepts the Modified Rate, it becomes effective the 61st month from
the date of the note. Current monthly principal payments on both mortgages are
based upon a 27-year amortization schedule. If the Partnership accepts the
Modified Rate, the principal balance of both mortgages will be amortized using a
22-year amortization schedule beginning the 61st month. The outstanding balance
at maturity based on the current rate of amortization would be $4,413,955
($3,565,118 and $848,837).
As of December 31, 1996, the Partnership also had two mortgage loans each with
an insurance company in the amount of $2,837,462 and $1,891,642. The permanent
financings were obtained December 21, 1992 in the amount of $3,000,000 and
$2,000,000. Both mortgages payable are due January 5, 2003, bear interest at a
fixed rate of 7.25% for the first 60 months and are secured by the land,
buildings and amenities of Sabal Park Apartments. At the end of the 56th month
from the date of the notes, the insurance companies will notify the Partnership
of the interest rate which is their then prevailing interest rate for loans with
a term of five years on properties comparable to the apartments (the "Modified
Rate"). The Partnership will have 30 days to accept or reject the Modified Rate.
If the Modified Rate is rejected by the Partnership, the entire unpaid principal
balance is due with the 60th installment of interest. If the Partnership accepts
the Modified Rate, it becomes effective the 61st month from the date of the
note. Current monthly principal payments on both mortgages are based upon a
27-year amortization schedule. If the Partnership accepts the Modified Rate, the
principal balance of both mortgages will be amortized
- 20 -
<PAGE>
Capital Resources and Liquidity - Continued
- -------------------------------------------
using a 22-year amortization schedule beginning the 61st month. The outstanding
balance at maturity based on the current rate of amortization would be
$4,122,326 ($2,473,396 and $1,648,930).
The General Partner of the Partnership is presently exploring the possibility of
refinancing the mortgages encumbering Park Place Apartments Phase I and Sabal
Park Apartments. If an interest rate can be obtained which would be less than
the Modified Rate, together with a favorable amortization schedule, the loans
will likely be refinanced.
The majority of the Partnership's cash flow is derived from operating
activities. The decrease in accounts receivable during 1995 represents a
settlement received from the insurance company of the manufacturer of the pipe
fittings which were used in the construction of Willow Lake Apartments. Cash
flows used in investing activities are for tenant finish improvements and other
capital improvements at the Partnership's properties. Changes to current tenant
improvements at commercial properties 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 and other capital additions are
funded by cash flow from operations. Cash flows used in investing activities are
also for the purchase of investment securities. As part of its cash management
activities, the Partnership has purchased Certificates of Deposit or securities
issued by the U.S. Government with initial maturities of greater than three
months to improve the return on its cash reserves. The Partnership intends to
hold the securities until maturity. Cash flows provided by investing activities
are derived from the maturity of investment securities. Cash flows used in
financing activities are for cash distributions, principal payments on mortgages
payable, repurchase of limited partnership Units and payment of loan costs. Cash
flows used in financing activities also include cash which has been reserved by
the Partnership for the repurchase of limited partnership Units. The Partnership
does not expect any material changes in the mix and relative cost of capital
resources from those in 1996 except for the changes resulting from the
$9,000,000 loan commitment as discussed above, other debt refinancings which the
Partnership is currently exploring as discussed above and future leasing and
tenant finish costs which is discussed below.
In the next 12 months, the demand on future liquidity is anticipated to increase
as a result of a 6,474 square feet lease expiring at Plainview Point III Office
Center in 1997. At this time, the future leasing and tenant finish costs which
will be required to renew the current lease or obtain new tenants are unknown.
As of December 31, 1996, the Partnership had no material commitments for
renovations or capital improvements. It is anticipated that the cash flow from
operations and cash reserves will be sufficient to meet the needs of the
Partnership.
As of December 31, 1995, the Partnership established an Interest Repurchase
Reserve in the amount of $474,350 pursuant to Section 16.4 of the Partnership's
Amended and Restated Agreement of Limited Partnership. The Partnership elected
to fund additional amounts of $455,380 on May 24, 1996 and $250,000 on October
17, 1996 to its Interest Repurchase Reserve. With these funds, the Partnership
will be able to repurchase up to 4,718 Units at a price of $250 per Unit. During
1996 the Partnership has repurchased a total of 4,483 Units for $1,120,756.
Repurchased Units are retired by the Partnership, thus increasing the share of
ownership of each remaining investor. The Interest Repurchase Reserve was funded
from cash reserves. The amount remaining in the Interest Repurchase Reserve at
December 31, 1996 was $58,980.
- 21 -
<PAGE>
Capital Resources and Liquidity - Continued
- -------------------------------------------
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1996, 1995 and 1994.
Net Cash
Income(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1996 $ 224,783 $ 886,000 $ 661,217
1995 (324,417) 948,700 948,700
1994 (803,780) 889,380 889,38
General Partner:
1996 $ 2,271 $ 8,950 $ 6,679
1995 (3,277) 9,583 9,583
1994 (8,119) 8,984 8,984
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, employees of NTS
Development Company, at each of the apartment communities. The staff handles all
on-site visits from potential tenants, coordinates local advertising with NTS
Development Company's marketing staff, makes visits to local companies to
promote fully furnished units and negotiates lease renewals with current
residents.
The leasing and renewal negotiations for the Partnership's commercial property
are handled by leasing agents, employees of NTS Development Company, located in
Louisville, Kentucky. The leasing agent's are located in the same city as the
commercial property. All advertising for the commercial property is coordinated
by NTS Development Company's marketing staff located in Louisville, Kentucky.
Leases at Plainview Point III Office Center provide for tenants to contribute
toward the payment of increases in common area maintenance expenses, insurance,
utilities and real estate taxes. Leases at the office center also provide for
rent increases which are based upon increases in the consumer price index. These
lease provisions, along with the fact that residential leases are generally for
a period of one year, should protect the Partnership's operations from the
impact of inflation and changing prices.
The Partnership owns approximately 15 acres of land, adjacent to the Park Place
Apartments development, in Lexington, Kentucky which is zoned for 163 apartment
units (Park Place Apartments Phase III). Included in the cost of approximately
$1,715,000 is land cost, capitalized interest, common area costs and amenity
costs. The Partnership continues to evaluate whether to sell or develop the
tract of land. At this time, no decision has been made. In management's opinion,
the net book value approximates the fair market value.
Some of the statements included in 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.
- 22 -
<PAGE>
Capital Resources and Liquidity - Continued
- -------------------------------------------
Should such event not occur, then the result which the Partnership expected also
may not occur or occur in a different manner, which may be more or less
favorable to the Partnership. The Partnership does not undertake any obligations
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of a
commercial office building and apartment complexes. If a major commercial tenant
or a large number of apartment lessees default on their lease, 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 VI, a Maryland Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1996. 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 VI, a Maryland
Limited Partnership, as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 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 41
through 43 are presented for purposes of complying with the Securities and
Exchange Commission's rules 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
February 25, 1997
- 24 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
------------ -----------
ASSETS
<S> <C> <C>
Cash and equivalents $ 640,541 $ 393,552
Cash and equivalents - restricted 390,677 776,000
Investment securities 1,085,267 1,151,355
Accounts receivable 136,394 158,429
Land, buildings and amenities, net 40,436,784 42,196,272
Assets held for development, net 1,714,511 1,751,234
Other assets 367,628 386,949
----------- -----------
$44,771,802 $46,813,791
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $27,403,056 $27,653,044
Accounts payable - operations 349,168 305,779
Accounts payable - construction -- 70,456
Distributions payable 216,692 239,571
Security deposits 250,814 235,187
Other liabilities 52,086 21,122
----------- -----------
28,271,816 28,525,159
Partners' equity 16,499,986 18,288,632
----------- -----------
$44,771,802 $46,813,791
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 25 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
Revenues:
<S> <C> <C> <C>
Rental income $ 9,541,311 $ 8,817,265 $ 8,679,772
Interest and other income 128,950 121,790 116,300
----------- ----------- -----------
9,670,261 8,939,055 8,796,072
Expenses:
Operating expenses 2,529,274 2,382,093 2,578,341
Operating expenses - affiliated 1,044,781 1,055,190 1,053,486
Amortization of capitalized leasing
costs -- 1,091 28,783
Interest expense 2,344,531 2,365,542 2,351,670
Management fees 485,250 441,861 438,523
Repairs and maintenance fees -- -- 15,011
Real estate taxes 771,952 746,200 749,915
Professional and administrative
expenses 145,734 141,948 142,593
Professional and administrative
expenses - affiliated 203,818 191,677 188,131
Depreciation and amortization 1,917,867 1,941,147 2,061,518
----------- ----------- -----------
9,443,207 9,266,749 9,607,971
----------- ----------- -----------
Net income (loss) $ 227,054 $ (327,694) $ (811,899)
=========== =========== ===========
Net income (loss) allocated to the
limited partners $ 224,783 $ (324,417) $ (803,780)
=========== =========== ===========
Net income (loss) per limited partnership $ 4.97 $ (6.84) $ (16.94)
=========== =========== ===========
unit
Weighted average number of limited
partnership units 45,243 47,435 47,435
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 26 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
Limited General
Partners Partners Total
----------- ----------- ---------
<S> <C> <C> <C>
Balances at December 31, 1993 $ 21,427,510 $ (142,638) $ 21,284,872
Net loss (803,780) (8,119) (811,899)
Distributions declared (889,380) (8,984) (898,364)
------------ ------------ ------------
Balances at December 31, 1994 19,734,350 (159,741) 19,574,609
Net loss (324,417) (3,277) (327,694)
Distributions declared (948,700) (9,583) (958,283)
------------ ------------ ------------
Balances at December 31, 1995 18,461,233 (172,601) 18,288,632
Net income 224,783 2,271 227,054
Distributions declared (886,000) (8,950) (894,950)
Repurchase of limited partnership
units (1,120,750) -- (1,120,750)
------------ ------------ ------------
Balances at December 31, 1996 $ 16,679,266 $ (179,280) $ 16,499,986
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 27 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 227,054 $ (327,694) $ (811,899)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Accrued interest on investment securities 7,498 (14,875) --
Amortization of capitalized leasing costs -- 1,091 28,783
Depreciation and amortization 1,917,867 1,941,147 2,061,518
Changes in assets and liabilities:
Cash and equivalents - restricted (30,047) (71,046) 114,977
Accounts receivable 22,035 223,026 (30,079)
Other assets 23,436 (94,952) 10,140
Accounts payable-operations 43,389 40,626 (72,951)
Security deposits 15,627 (47,330) (9,435)
Other liabilities 30,964 (1,887) (2,639)
----------- ----------- -----------
Net cash provided by operating activities 2,257,823 1,648,106 1,288,415
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (103,508) (73,064) (8,796)
Purchase of investment securities (3,344,984) (2,642,085) --
Maturity of investment securities 3,403,575 1,505,605 --
----------- ----------- -----------
Net cash used in investing activities (44,917) (1,209,544) (8,796)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (249,988) (229,981) (218,449)
Cash distributions (917,829) (958,283) (838,471)
Repurchase of limited partnership Units (1,120,750) -- --
Additions to loan costs (92,720) -- --
Cash and equivalents - restricted 415,370 (474,350) --
----------- ----------- -----------
Net cash used in financing activities (1,965,917) (1,662,614) (1,056,920)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents 246,989 (1,224,052) 222,699
CASH AND EQUIVALENTS, beginning of year 393,552 1,617,604 1,394,905
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 640,541 $ 393,552 $ 1,617,604
=========== =========== ===========
Interest paid on a cash basis $ 2,346,643 $ 2,367,146 $ 2,349,889
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 28 -
<PAGE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership") is a limited partnership organized under the laws of
the State of Maryland on December 27, 1984. The general partner is
NTS-Properties Associates VI (a Kentucky limited partnership). The
Partnership is in the business of developing, constructing, owning
and operating apartment complexes and commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex in
Orlando, Florida
- Park Place Apartments Phase I, a 180-unit luxury apartment
complex in Lexington, Kentucky
- Willow Lake Apartments, a 207-unit luxury apartment complex in
Indianapolis, Indiana
- A 96% joint venture interest in Golf Brook Apartments, a 195-
unit luxury apartment complex in Orlando, Florida
- A 95% joint venture interest in Plainview Point III Office
Center, an office center with approximately 62,000 net rentable
square feet located in Louisville, Kentucky
The Partnership also owns approximately 15 acres of land in
Lexington, Kentucky which is zoned for 163 apartment units (Park
Place Apartments Phase III).
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Pre-Termination Date Net Cash Receipts and Interim Net Cash
Receipts, as defined in the partnership agreement and which are
made available for distribution, will be distributed 99% to the
limited partners and 1% to the general partner. Net Cash Proceeds,
as defined in the partnership agreement, will be distributed 1) 99%
to the limited partners and 1% to the general partner until the
limited partners have received cash distributions from all sources
(except Pre-Termination Date Net Cash Receipts) equal to their
Original Capital; and 2) the remainder, 80% to the limited partners
and 20% to the general partner. Net operating income shall be
allocated to the limited partners and the general partner in
proportion to their respective cash distributions.
- 29 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
C) Allocation of Net Income (Loss) and Cash Distributions - Continued
------------------------------------------------------------------
Net Operating Income in excess of cash distributions and Net Gains
from Sales shall be allocated as follows: (1) pro rata to all
partners with a negative capital account in an amount to restore
the negative capital account to zero; (2) 99% to the limited
partners and 1% to the general partner until the limited partners
have received an amount equal to their Original Capital less cash
distributions except distributions of Pre-Termination Date Net Cash
Receipts; (3) the balance, 80% to the limited partners and 20% to
the general partner. Net Operating Losses shall be 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:
1996 1995 1994
---------- ---------- --------
Net income (loss) $ 227,054 $(327,694) $(811,899)
Items handled differently
for tax purposes:
Depreciation and
amortization (139,371) (195,060) (211,507)
Capitalized leasing
costs 34,134 35,750 61,669
Write-off of unamortized
tenant improvements (11,476) (22,832) 424
Rental income 47,278 (18,296) (3,549)
--------- --------- ---------
Taxable income (loss) $ 157,619 $(528,132) $(964,862)
========= ========= =========
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,
- 30 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
F) Joint Venture Accounting - Continued
------------------------------------
expenses and cash flows. All intecompany accounts and transactiosn
have been eliminated in consolidation.
Proportionate consolidation is utilized by the Partnership due to
the fact that the ownership of 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 disclosure
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's operations.
G) 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 and insurance in accordance
with the loan agreements and funds reserved by the Partnership for
the repurchase of limited partnership Units.
H) Investment Securities
---------------------
Investment securities represent investments in Certificates of
Deposit or securities issued by the U.S. Government with initial
maturities of greater than three months. The investments are
carried at cost which approximates market value. The Partnership
intends to hold the securities until maturity. During 1996 and
1995, the Partnership sold no investment securities. The following
provides details regarding the investments held at December 31,
1996:
Amortized Maturity Value At
Type Costs Date Maturity
---- ------- ------ ---------
FHLB Discount Note $ 204,154 01/30/97 $ 205,000
Federal Farm Credit Bank 127,338 03/03/97 128,394
FNMA Discount Note 227,601 03/18/97 230,000
Certificate of Deposit 401,174 04/01/97 406,204
Certificate of Deposit 125,000 05/01/97 127,072
---------- ----------
$1,085,267 $1,096,670
========== ==========
- 31 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
H) Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at
December 31, 1995:
Amortized Maturity Value at
Type Cost Date Maturity
---- ------ ------ ----------
FHLB Discount Note $ 269,271 01/18/96 $ 270,000
FNMA Discount Note 183,637 02/20/96 185,000
Certificate of Deposit 416,469 02/28/96 419,972
FNMA Discount Note 281,978 03/13/96 285,000
---------- ----------
$1,151,355 $1,159,972
========== ==========
The Partnership held no investment securities with initial
maturities greater than three months during 1994.
I) 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
estimated useful lives of the assets which are 5 - 30 years for
land improvements, 5-30 years for building and improvements, 5 - 30
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 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 year ended December 31, 1996 did not result in an
impairment loss.
J) Capitalized Leasing Costs
-------------------------
The Partnership has capitalized certain costs associated with the
initial leasing of the properties. These costs are being amortized
over a five year period.
K) Rental Income and Deferred Leasing Commissions
----------------------------------------------
Certain of the Partnership's lease agreements at Plainview Point
III Office Center 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 totalled
$98,024 and $112,897 at December 31, 1996 and 1995, respectively.
All commissions paid to commercial leasing agents are deferred and
amortized over the term of the lease to which they apply.
- 32 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
L) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnerhip during the years
ended December 31, 1996, 1995 and 1994.
M) 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.
N) Reclassification of 1995 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the December 31, 1995
financial statements to conform with December 31, 1996
classifications. These reclassifications have no effect on previously
reported operations.
2. Concentration of Credit Risk
---------------------------
The Partnership owns and operates, either wholly or through a joint
venture, residential properties in Kentucky (Louisville and Lexington),
Indiana (Indianapolis) and Florida (Orlando). The apartment unit is
generally the principal residence of the tenant. The Partnership also owns
and operates, through a joint venture, a commercial property in
Louisville, Kentucky. Substantially all of the tenants are local
businesses or are businesses which have operations in the Louisville area.
3. Investment in Joint Ventures
----------------------------
A) NTS Sabal Golf Villas Joint Venture
------------------------------------
In 1985, the Partnership entered into a joint venture agreement with
NTS-Properties IV to develop and construct a 158-unit luxury apartment
complex on a 13.15-acre site located in Orlando, Florida, known as
Golf Brook Apartments Phase I. NTS-Properties IV contributed land
valued at $1,900,000 with an outstanding note payable to a bank of
$1,200,000 which was secured by the land. The Partnership contributed
the construction and carrying costs of the apartment complex.
In 1987, the joint venture agreement was amended to include Golf Brook
Apartments Phase II, a 37-unit luxury apartment complex located on a
3.069 acre site adjacent to Golf Brook Apartments Phase I. The
Partnership contributed land, construction costs, and the cost of the
initial leasing of this second phase.
The Partnership made contributions of approximately $15.8 million for
construction and carrying costs and retired the $1,200,000 note
payable in 1987, which increased the Partnership's percentage interest
in the joint venture.
The net income and net loss is allocated based on the respective
partnership's contribution as of the end of each calendar quarter. The
Partnership's ownership share was 96% at December 31, 1996. The
Partnership's share of the joint venture's net operating income was
$1,023,900 (1996), $1,058,691 (1995) and $816,229 (1994).
- 33 -
<PAGE>
3. Investment in Joint Ventures - Continued
----------------------------------------
B) Plainview Point III Joint Venture
---------------------------------
In 1987, the Partnership entered into a joint venture agreement with
NTS-Properties IV to develop and construct an approximately 62,000
square foot office building located in Louisville, Kentucky known as
Plainview Point III Office Center.
NTS-Properties IV contributed land valued at $790,000 with an
outstanding note payable to a bank of $550,000 which was secured by
the land. The Partnership contributed the construction and carrying
costs of the complex. The Partnership made contributions of
approximately $4.1 million for construction and carrying costs and
retired the $550,000 note payable in 1987, which increased the
Partnership's percentage interest in the joint venture. The net income
and net loss is allocated based on the respective partnership's
contribution as of the end of each calendar quarter. The Partnership's
ownership share was 95% at December 31, 1996. The Partnership's share
of the joint venture's net operating income (loss) was
$(31,953)(1996), $12,423 (1995) and $(59,399) (1994).
4. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1996 1995
----------- -----------
Land and improvements $14,863,110 $14,862,974
Buildings and improvements 45,120,951 45,170,635
Amenities 1,527,465 1,511,656
----------- -----------
61,511,526 61,545,265
Less accumulated depreciation 21,074,742 19,348,993
----------- -----------
$40,436,784 $42,196,272
=========== ===========
5. Assets Held for Development
---------------------------
The Partnership owns approximately 15 acres of land, adjacent to the Park
Place Apartments development, in Lexington, Kentucky which is zoned for
163 apartment units (Park Place Apartments Phase III). Included in the
cost of approximately $1,715,000 is land cost, capitalized interest,
common area costs and amenity costs. The Partnership continues to evaluate
whether to sell or develop the tract of land. At this time, no final
decision has been made.
6. Interest Repurchase Reserve
---------------------------
As of December 31, 1995, the Partnership had established an Interest
Repurchase Reserve in the amount of $474,350 pursuant to Section 16.4 of
the Partnership's Amended and Restated Agreement of Limited Partnership.
The Partnership elected to fund additional amounts of $455,380 on May 24,
1996 and $250,000 on October 17, 1996 to its Interest Repurchase Reserve.
With these funds, the Partnership will be able to repurchase up to 4,718
Units at a price of $250 per Unit. Through December 31, 1996, the
Partnership has repurchased a total of 4,483 Units for $1,120,750.
Repurchased Units are retired by the
- 34 -
<PAGE>
6. Interest Repurchase Reserve - Continued
---------------------------------------
Partnership, thus increasing the share of ownership of each remaining
investor. The Interest Repurchase Reserve was funded from cash reserves.
The amount remaining in the Interest Repurchase Reserve at December 31,
1996 was $58,980.
7. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1996 1995
----------- ----------
Mortgage payable with an insurance
company bearing interest at 8.625%,
due August 1, 1997 secured by
certain land, buildings and
amenities $ 9,200,000 $ 9,200,000
Mortgage payable with an insurance
company bearing interest at 9.20%,
due November 1, 1997 secured by
certain land, buildings and
amenities 8,527,771 8,631,951
Mortgage payable with an insurance
company bearing interest at 8.375%,
due October 5, 2002 secured by
certain land, buildings and
amenities 3,994,992 4,050,879
Mortgage payable with an insurance
company bearing interest at 8.375%,
due October 5, 2002 secured by
certain land, buildings and
amenities 951,189 964,495
Mortgage payable with an insurance
company bearing interest at 7.25%,
due January 5, 2003 secured by
certain land, buildings and
amenities 2,837,462 2,883,431
Mortgage payable to an insurance
company, bearing interest at 7.25%,
due January 5, 2003 secured by
certain land, buildings and
amenities 1,891,642 1,922,288
---------- ----------
$27,403,056 $27,653,044
========== ==========
The mortgages are payable in monthly installments of $282,610 which
includes principal, interest, property taxes and insurance. Scheduled
maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
1997 $17,885,345
1998 170,294
1999 184,046
2000 198,916
2001 214,994
Thereafter 8,749,461
-----------
$27,403,056
===========
- 35 -
<PAGE>
7. Mortgages Payable - Continued
-----------------------------
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 $31,700,000.
As of December 31, 1996, the Partnership had obtained a commitment from
an insurance company for $9,000,000 of debt financing. The proceeds from
the new financing along with cash reserves will be used to pay off the
Partnership's current $9,200,000 mortgage payable which is secured by the
land, buildings and amenities of Golf Brook Apartments which matures
August 1, 1997. The mortgage will bear interest at a fixed rate of 7.43%
and will be fully amortized over a 12 year period. Based upon the terms
of the commitment, the Partnership anticipates that the financing will be
completed in April 1997.
Subsequent to December 31, 1996, the Partnership submitted an application
with an insurance company for $8,500,000 for debt financing. The proceeds
from the new financing will be used to pay off the Partnership's current
$8,527,771 mortgage payable which is secured by the land, building and
amenities of Willow Lake Apartments which matures November 1, 1997. Based
upon discussions with the insurance company, the Partnership anticipates
that the financing will be completed in the fourth quarter of 1997.
8. Rental Income Under Operating Expenses
---------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1996:
For the Years Ended December 31, Amount
-------------------------------- ----------
1997 $ 581,778
1998 533,951
1999 394,401
2000 347,885
2001 126,912
Therefore --
----------
$1,984,927
==========
9. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees
of $485,250 (1996), $441,861 (1995), and $438,523 (1994) were paid to NTS
Development Company, an affiliate of the general partner. The fee is
equal to 5% and 6% of gross revenues from the residential properties and
commercial properties, respectively. 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 and major
repair and renovation projects. The Partnership has incurred $862 (1996)
and $6,200 (1995) as a repair and maintenance fee 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
years ended December 31, 1996, 1995 and 1994. 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.
- 36 -
<PAGE>
9. Related Party Transactions - Continued
--------------------------------------
These charges were as follows:
1996 1995 1994
---------- ---------- ----------
Administrative $ 258,101 $ 245,369 $ 240,133
Property manager 792,366 786,667 803,635
Leasing 212,358 229,309 184,919
Other 4,471 9,285 16,024
--------- --------- ---------
$1,267,296 $1,270,630 $1,244,711
========= ========= =========
- 37 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
N/A
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 VI. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the general partner, to provide property management services.
The general partners of NTS-Properties Associates VI are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 55) is the managing general partner of NTS-Properties
Associates VI and Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
Richard L. Good
- ---------------
Mr. Good, (age 57) President and Chief Operating Officer of NTS Corporation and
President of 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 in Nashville, Tennessee.
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 John W. Hampton.
John W. Hampton
- ---------------
John W. Hampton (age 47) is Senior Vice President of NTS Corporation with
responsibility for all accounting operations. Before joining NTS in March 1991,
Mr. Hampton was Vice President - Finance and Chief Financial Officer of the
Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for nine
years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is
a Certified Public Accountant and a graduate of the University of Louisville
with a Bachelor of Science degree in Commerce. He is a member of the American
Institute of CPA's and the Kentucky Society of CPA's.
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 specific
projects. Also, NTS Development Company provides certain other
- 38-
<PAGE>
Item 11. Management Renumeration and Transactions - Continued
services to the Partnership. See Note 9 to the financial statements which sets
forth transactions with NTS Development Company for the years ended December 31,
1996, 1995 and 1994.
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 general partner is NTS-Properties Associates VI, 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 VI are as follows:
J. D. Nichols 38.60%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 9.95%
10172 Linn Station Road
Louisville, Kentucky 40223
Richard L. Good 10.00%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 41.45% interests are owned by various limited partners of NTS-
Properties Associates VI.
Item 13. Certain Relationships and Related Transactions
Pursuant to an agreement with the Partnership, property management fees of
$485,250 (1996), $441,861 (1995) and $438,523 (1994) were paid to NTS
Development Company, an affiliate of the general partner. The fee is equal to 5%
and 6% of gross revenues from the residential properties and commercial
properties, respectively. 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 and major repair and renovation projects. The
Partnership has incurred $862 (1996) and $6,200 (1995) as a repair and
maintenance fee 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 years ended December 31, 1996, 1995 and 1994. 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.
1996 1995 1994
---------- ---------- ----------
Administrative $ 258,101 $ 245,369 $ 240,133
Property manager 792,366 786,667 803,635
Leasing 212,358 229,309 184,919
Other 4,471 9,285 16,024
--------- --------- ---------
$1,267,296 $1,270,630 $1,244,711
========= ========= =========
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 39 -
<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, 1996, 1995 and
1994 together with the report of Arthur Andersen LLP, dated February 25,
1997, appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 41-43
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
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement *
Certificate of Limited Partnership
of NTS-Properties VI, a Maryland
limited partnership
3a. First Amendment to Amended and **
Restated Agreement of Limited
Partnership of NTS-Properties VI,
a Maryland limited partnership
10. Property Management and *
Construction Agreement between
NTS Development Company and
NTS-Properties VI, a Maryland
limited partnership
27. Financial Data Schedule Included
herewith
* 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 March 22, 1985
(effective June 25, 1985) under Commission File No.2-96583.
** Incorporated by reference to Form 10-K filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 (Commission File No. 0-14695).
4. Reports on Form 8-K
Form 8-K, dated October 17, 1996, was filed to report in Item 5 the fact
that the Partnership has elected to fund an additional amount of
$250,000 to its Interest Repurchase Reserve.
- 40 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1996
-----------------------
<CAPTION>
Park Place
Sabal Park Apartments Willow Lake
Apartments Phase I Apartments
---------- ------- ----------
<S> <C> <C> <C>
Encumbrances (A) (A) (B)
Initial cost to partnership:
Land $ 3,063,046 $ 2,320,938 $ 3,770,328
Buildings and improvements 8,417,719 9,630,935 12,616,655
Cost capitalized subsequent to
acquisition
Improvements 23,968 32,544 195,946
Carrying costs -- -- --
Gross amount at which carried
December 31, 1996:(C)
Land $ 3,063,046 $ 2,333,428 $ 3,770,328
Buildings and improvements 8,441,687 9,650,989 12,812,601
----------- ----------- -----------
Total $11,504,733 $11,984,417 $16,582,929
=========== =========== ===========
Accumulated depreciation $ 4,445,834 $ 4,116,881 $ 5,367,961
=========== =========== ===========
Date of construction 06/84 04/84 03/85
Date Acquired N/A N/A N/A
Life at which depreciation in
latest income statement is
computed (D) (D) (D)
<FN>
(A) First mortgages held by two insurance companies.
(B) First mortgage held by an insurance company.
(C) Aggregate cost of real estate for tax purposes is $59,252,792.
(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.
</FN>
</TABLE>
- 41 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1996
-----------------------
<CAPTION>
Plainview
Golf Brook Point III Total
Apartments Office Center Pages 42-44
----------- ------------- -----------
<S> <C> <C> <C>
Encumbrances (A) (B)
Initial cost to partnership:
Land $ 4,384,363 $ 1,268,339 $14,807,014
Buildings and improvements 12,302,319 2,270,729 45,238,357
Cost capitalized subsequent to
acquisition
Improvements 80,916 1,132,782 1,466,156
Carrying costs -- -- --
Gross amount at which carried
December 31, 1996:
Land $ 4,405,353 $ 1,290,955 $14,863,110
Buildings and improvements 12,362,245 3,380,894 46,648,416
----------- ----------- -----------
Total $16,767,598 $ 4,671,849 $61,511,526
=========== =========== ===========
Accumulated depreciation $ 5,480,369 $ 1,663,697 $21,074,742
=========== =========== ===========
Date of construction 05/88 01/88
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C)
<FN>
(A) First mortgage held by an insurance company.
(B) None.
(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.
</FN>
</TABLE>
- 42 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<CAPTION>
Real Accumulated
Estate Depreciation
------ ------------
<S> <C> <C>
Balances at December 31, 1993 $ 61,446,995 $ 15,647,528
Additions during period:
Improvements (a) 12,539 --
Depreciation (b) -- 1,936,191
Deductions during period:
Retirements (8,435) (4,692)
------------ ------------
Balances at December 31, 1994 61,451,099 17,579,027
Additions during period:
Improvements (a) 141,550 --
Depreciation (b) -- 1,815,820
Deductions during period:
Retirements (47,384) (45,854)
------------ ------------
Balances at December 31, 1995 61,545,265 19,348,993
Additions during period:
Improvements (a) 39,297 --
Depreciation (b) -- 1,797,649
Deductions during period:
Retirements (73,036) (71,900)
------------ ------------
Balances at December 31, 1996 $ 61,511,526 $ 21,074,742
============ ============
<FN>
(a) The additions to real estate on this schedule will differ from the
expenditures for land, buildings and amenities on the Statements of Cash
Flows as a result of minor changes in the Partnership's joint venture
investment ownership percentages. Changes that may occur in the ownership
percentages are less than one percent.
(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 and depreciation of a portion
of assets held for development.
</FN>
</TABLE>
- 43 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties VI, a Maryland Limited Partnership, has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NTS-PROPERTIES VI, a Maryland Limited
-------------------------------------
Partnership
-----------
(Registrant)
BY: NTS-Properties Associates VI,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
John W. Hampton
Senior Vice President
Date: March 27 , 1997
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.
Signature Title
--------- -----
/s/ J. D. Nichols General Partner of NTS-Properties
J. D. Nichols Associates VI and Chairman of the
Board and Sole Director of NTS
Capital Corporation
/s/ Richard L. Good General Partner of NTS-Properties
Richard L. Good Associates VI and President of NTS
Capital Corporation
/s/ John W. Hampton Senior Vice President of NTS Capital
John W. Hampton Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 44 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF DECEMBER 31, 1996 AND FROM THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,031,218
<SECURITIES> 1,085,267
<RECEIVABLES> 136,394
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 40,436,784
<DEPRECIATION> 21,074,742
<TOTAL-ASSETS> 44,771,802
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,403,056
0
0
<COMMON> 0
<OTHER-SE> 16,499,986
<TOTAL-LIABILITY-AND-EQUITY> 44,771,802
<SALES> 9,541,311
<TOTAL-REVENUES> 9,670,261
<CGS> 0
<TOTAL-COSTS> 6,749,124
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,344,531
<INCOME-PRETAX> 227,054
<INCOME-TAX> 0
<INCOME-CONTINUING> 227,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227,054
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE
IS $0.
</FN>
</TABLE>
