UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-14695
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 Identification No.)
incorporation or organization)
10172 Linn Station Road
Louisville, Kentucky 40223
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Exhibit Index: See page 18
Total Pages: 19
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of September 30, 1997 and December 31, 1996 3
Statements of Operations
For the three months and nine months ended
September 30, 1997 and 1996 4
Statements of Cash Flows
For the three months and nine months ended
September 30, 1997 and 1996 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-17
PART II
1. Legal Proceedings 18
2. Changes in Securities 18
3. Defaults upon Senior Securities 18
4. Submission of Matters to a Vote of Security Holders 18
5. Other Information 18
6. Exhibits and Reports on Form 8-K 18
Signatures 19
- 2 -
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES VI,
A Maryland Limited Partnership
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
September 30,1997 December 31, 1996*
---------------- ------------------
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 805,109 $ 640,541
Cash and equivalents - restricted 593,882 390,677
Investment securities 1,040,949 1,085,267
Accounts receivable 124,202 136,394
Land, buildings and amenities, net 39,138,808 40,436,784
Assets held for development, net 1,686,881 1,714,511
Other assets 568,871 367,628
------------ -------------
$ 43,958,702 $ 44,771,802
============ =============
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $ 26,903,627 $ 27,403,056
Accounts payable 314,221 349,168
Distributions payable 216,091 216,692
Security deposits 246,125 250,814
Other liabilities 536,169 52,086
------------ ------------
28,216,233 28,271,816
Partners' equity 15,742,469 16,499,986
------------ ------------
$ 43,958,702 $ 44,771,802
============ ============
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
<S> <C> <C> <C>
PARTNERS' EQUITY
- ----------------
Capital contributions, net of
offering costs $ 40,518,631 $ 100 $ 40,518,731
Net income (loss) - prior years (12,308,341) (75,936) (12,384,277)
Net loss - current year (66,781) (675) (67,456)
Cash distributions declared to
date (10,882,981) (109,929) (10,992,910)
Repurchase of limited
partnership Units (1,331,619) -- (1,331,619)
------------ ------------ ------------
Balances at September 30, 1997 $ 15,928,909 $ (186,440) $ 15,742,469
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Annual
Report on Form 10-K as filed with the Commission on March 28, 1997.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
REVENUES:
<S> <C> <C> <C> <C>
Rental income $ 2,406,443 $ 2,428,236 $ 7,015,617 $ 7,113,142
Interest and other income 28,707 30,015 85,129 89,634
----------- ----------- ----------- -----------
2,435,150 2,458,251 7,100,746 7,202,776
EXPENSES:
Operating expenses 676,959 699,364 1,904,410 1,882,073
Operating expenses - affiliated 270,203 247,495 821,521 786,872
Interest expense 542,070 586,023 1,691,016 1,759,840
Management fees 122,426 123,699 354,610 361,666
Real estate taxes 198,134 191,141 589,978 573,267
Professional and administrative
expenses 44,155 33,192 129,911 106,239
Professional and administrative
expenses - affiliated 74,991 49,239 232,145 147,106
Depreciation and amortization 481,253 479,510 1,444,611 1,438,382
----------- ----------- ----------- -----------
2,410,191 2,409,663 7,168,202 7,055,445
----------- ----------- ----------- -----------
Net income (loss) $ 24,959 $ 48,588 $ (67,456) $ 147,331
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners $ 24,709 $ 48,102 $ (66,781) $ 145,858
=========== =========== =========== ===========
Net income (loss) per limited
partnership Unit $ .58 $ 1.09 $ (1.56) $ 3.20
=========== =========== =========== ===========
Weighted average number of
limited partnership Units 42,786 44,120 42,822 45,590
=========== =========== =========== ===========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- -----------------------------
1997 1996 1997 1996
------------ ----------- ------------ --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 24,959 $ 48,588 $ (67,456) $ 147,331
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Accrued interest on investment
securities (7,470) (4,294) (6,071) (1,010)
Depreciation and amortization 481,253 479,510 1,444,611 1,438,382
Changes in assets and
liabilities:
Cash and equivalents -
restricted (129,242) (227,703) (244,705) (505,460)
Accounts receivable 16,304 (1,484) 12,192 6,209
Other assets 15,839 16,026 18,512 41,165
Accounts payable 15,897 59,330 (34,947) 89,178
Security deposits (1,580) 2,307 (4,689) 5,444
Other liabilities 213,541 228,462 484,078 502,925
------------ ------------ ------------ ------------
Net cash provided by operating
activities 629,501 600,742 1,601,525 1,724,164
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (31,135) (19,807) (47,088) (94,944)
Purchase of investment securities (798,604) (880,517) (2,380,000) (2,467,955)
Maturity of investment securities 675,000 565,192 2,430,389 2,271,672
------------ ------------ ------------ ------------
Net cash used in investing
activities (154,739) (335,132) 3,301 (291,227)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages
payable (8,628,553) (63,135) (17,999,429) (185,522)
Proceeds from mortgage loan 8,500,000 -- 17,500,000 --
Loan costs (284,167) -- (291,668) --
Cash distributions (216,177) (224,808) (649,161) (696,152)
Repurchase of limited partnership
Units (4,250) (155,000) (41,500) (885,750)
Cash and equivalents - restricted 4,250 155,000 41,500 430,370
------------ ------------ ------------ ------------
Net cash used in financing
activities (628,897) (287,943) (1,440,258) (1,337,054)
------------ ------------ ------------ ------------
Net increase (decrease) in cash
and equivalents (154,135) (22,333) 164,568 95,883
CASH AND EQUIVALENTS, beginning of
period 959,244 511,768 640,541 393,552
------------ ------------ ------------ ------------
CASH AND EQUIVALENTS, end of period $ 805,109 $ 489,435 $ 805,109 $ 489,435
============ ============ ============ ============
Interest paid on a cash basis $ 575,248 $ 586,023 $ 1,763,882 $ 1,761,585
============ ============ ============ ============
</TABLE>
- 5 -
<PAGE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
NOTES TO FINANCIAL STATEMENTS
The financial statements and schedules included herein should be read in
conjunction with the Partnership's 1996 Annual Report. In the opinion of the
general partner, all adjustments (only consisting of normal recurring accruals)
necessary for a fair presentation have been made to the accompanying financial
statements for the three months and nine months ended September 30, 1997 and
1996.
1. Use of Estimates in the Preparation of Financial Statements
------------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Cash and Equivalents - Restricted
----------------------------------
Cash and equivalents - restricted represents 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.
3. 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 1997, the Partnership sold no investment
securities. The following provides details regarding the investments held
at September 30, 1997:
Amortized Maturity Value At
Type Cost Date Maturity
-------- -------- -------- ----------
Certificate of Deposit $ 131,136 10/10/97 $ 131,384
Certificate of Deposit 202,647 10/15/97 203,049
Certificate of Deposit 202,359 11/04/97 203,337
Certificate of Deposit 102,099 11/08/97 102,646
Certificate of Deposit 151,165 12/04/97 152,546
Certificate of Deposit 151,165 12/30/97 153,107
Certificate of Deposit 100,378 12/30/97 101,684
--------- ---------
$1,040,949 $1,047,753
========= =========
- 6 -
<PAGE>
3. Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at December
31, 1996:
Amortized Maturity Value At
Type Cost 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
========= =========
4. Mortgages Payable
-----------------
Mortgages payable consist of the following:
September 30, December 31,
1997 1996
------------ -----------
Mortgage payable with an insurance company,
bearing interest at a fixed rate of
7.43%, due May 14, 2009, secured by land,
buildings and amenities $ 8,845,369 $ --
Mortgage payable with an insurance
company, bearing interest at 7.32%,
due October 15, 2002, secured by land,
building and amenities 8,500,000 --
Mortgage payable with an insurance
company, bearing interest at 8.375%,
due October 5, 2002, secured by land,
buildings and amenities 3,949,907 3,994,992
Mortgage payable with an insurance
company, bearing interest at 8.375%,
due October 5, 2002, secured by land,
buildings and amenities 940,454 951,189
Mortgage payable with an insurance
company, bearing interest at 7.25%,
due January 5, 2003, secured by land,
buildings and amenities 2,800,738 2,837,462
Mortgage payable with an insurance
company, bearing interest at 7.25%,
due January 5, 2003, secured by land,
buildings and amenities 1,867,159 1,891,642
(Continued next page)
- 7 -
<PAGE>
4. Mortgages Payable - Continued
-----------------------------
September 30, December 31,
1997 1996
------------ -----------
Mortgage payable with an insurance
company,bearing interest at 8.625%,
due August 1, 1997, secured by land,
buildings and amenities $ -- $ 9,200,000
Mortgage payable with an insurance
company, bearing interest at 9.20%,
due November 1, 1997, secured by land,
buildings and amenities -- 8,527,771
----------- -----------
$26,903,627 $27,403,056
=========== ===========
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 $29,600,000.
As of September 30, 1997, the Partnership has obtained a commitment from an
insurance company for $4,700,000 of debt financing. The proceeds from the
new financing will be used to pay off the Partnership's current $2,800,738
and $1,867,159 (total of $4,667,897) mortgages payable which are secured by
the land, buildings and amenities of Sabal Park Apartments which matures
January 5, 2003. The mortgage will bear interest at a fixed rate of 7.38%
and will be fully amortized over a 15- year period. Based upon the terms of
the commitment, the Partnership anticipates that the financing will be
completed in the fourth quarter of 1997.
Subsequent to September 30, 1997, the Partnership obtained a mortgage loan
from an insurance company in the amount of $12,200,000. Loan proceeds of
$5,000,000 were advanced and used to pay off the Partnership's current
$3,949,907 and $940,454 (total of $4,890,361) mortgages payable, which were
secured by the land, buildings and amenities of Park Place Apartments Phase
I, and fund loan closing costs. The remaining $7,200,000 loan proceeds will
be used to construct Park Place Apartments Phase III. These loan proceeds
will be advanced as needed in accordance with the loan agreements. The
mortgage bears interest at a fixed rate of 7.74% and will be amortized over
19 years.
The mortgage loan matures October 15, 2012.
5. Interest Repurchase Reserve
------------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve. Through September 30, 1997, the Partnership has funded
a total amount of $1,179,730 to the Reserve which will allow the
Partnership to repurchase up to 4,718 Units at a price of $250 per Unit.
Through September 30, 1997, the Partnership has repurchased a total of
4,649 Units for $1,162,250. Repurchased Units are retired by
- 8 -
<PAGE>
5. Interest Repurchase Reserve - Continued
-----------------------------------------
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 September 30,
1997 was $17,480.
Subsequent to September 30, 1997, the Partnership elected to fund an
additional $300,000 to the Interest Repurchase Reserve. With this funding,
the Partnership will be able to repurchase up to 1,000 Units at a currently
contemplated price of $300 per Unit.
6. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$354,610 and $361,666 for the nine months ended September 30, 1997 and
1996, respectively, were paid to NTS Development Company, an affiliate of
the general partner. The fee is equal to 5% of gross revenues of the
residential properties and 6% of the gross revenues of the commercial
property. The Partnership was also charged the following amounts from NTS
Development Company for the nine months ended September 30, 1997 and 1996.
These charges include items which have been expensed as operating expenses
- affiliated or professional and administrative expenses - affiliated and
items which have been capitalized as other assets or as land, buildings and
amenities.
1997 1996
---------- ----------
Administrative $ 274,622 $ 187,515
Property manager 629,077 598,679
Leasing 146,732 160,803
Other 30,607 4,574
--------- ---------
$1,081,038 $ 951,571
========= =========
7. Reclassification of 1996 Financial Statements
----------------------------------------------
Certain reclassifications have been made to the September 30, 1996
financial statements to conform with the September 30, 1997
classifications. These reclassifications have no effect on previously
reported operations.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
0F OPERATIONS
-------------
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of September 30 were as
follows:
1997 1996
-------- -------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 97% 96%
Park Place Apartments Phase I 94% 96%
Willow Lake Apartments 91% 93%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership % at
September 30, 1997)
- --------------------------------------
Golf Brook Apartments (96%) 97% 97%
Plainview Point III Office Center (95%) 88% 91%
Rental and other income generated by the Partnership's properties for the three
months and nine months ended September 30, 1997 and 1996 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments $ 435,922 $ 460,585 $1,263,027 $1,332,568
Park Place Apartments Phase I $ 495,690 $ 481,698 $1,403,240 $1,361,823
Willow Lake Apartments $ 598,768 $ 595,553 $1,786,773 $1,816,291
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership
% at September 30, 1997)
- --------------------------------
Golf Brook Apartments (96%) $ 700,928 $ 724,860 $2,026,261 $2,073,395
Plainview Point III Office $ 181,970 $ 174,211 $ 556,488 $ 554,958
Center (95%)
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Sabal Park Apartments' occupancy increased from 96% at September 30, 1996 to 97%
at September 30, 1997. Average occupancy for the nine month period ended
September 30 decreased from 94%(1996) to 91%(1997). Average occupancy for the
three month period ended September 30 decreased from 97% (1996) to 95% (1997).
Occupancy at residential properties fluctuate on a continuous basis. Period-
ending occupancy percentages represent occupancy only on a specific date;
therefore, it is more meaningful to consider average occupancy percentages which
are more representative of the entire period's results. Rental and other income
at Sabal Park Apartments decreased for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 as a result of the
decrease in average occupancy and increased rent concessions.
Park Place Apartments Phase I occupancy decreased 2% from September 30, 1996 to
September 30, 1997. Average occupancy for the nine month period decreased from
92% (1996) to 91% (1997). Average occupancy for the three month period ended
September 30 decreased from 95% (1996) to 93%(1997). Rental and other income at
Park Place Apartments Phase I increased for the nine months ended September 30,
1997 as compared to the same periods in 1996 as a result of increased rental
rates and increased income from fully furnished units. Fully furnished units are
apartments which rent at an additional premium above base rent. Therefore, it is
possible for average occupancy to decrease and revenues to increase when the
number of fully furnished units occupied has increased. The increase in rental
and other income for the nine month period at Park Place Apartments Phase I is
partially offset by the decrease in average occupancy. Rental and other income
at Park Place Apartments Phase I increased for the three months ended September
30, 1997 as compared to the same periods in 1996 as a result of increased rental
rates. The increase in rental and other income for the three month period is
partially offset by the decrease in average occupancy and decreased income
collected from fully furnished units.
Willow Lake Apartments' occupancy decreased from 93% at September 30, 1996 to
91% at September 30, 1997. Average occupancy for the nine month period decreased
from 94% (1996) to 90% (1997). Average occupancy for the three month period
ended September 30 decreased from 93%(1996) to 91%(1997). Rental and other
income decreased for the nine months ended September 30, 1997 as compared to the
same period in 1996 as a result of the decrease in average occupancy and
decreased income from fully furnished units. The decrease in rental income is
partially offset by increased fees collected for short term leases and for early
lease termination and increased rental rates. Rental and other income at Willow
Lake Apartments for the three months ended September 30, 1997 as compared to the
same period in 1996 remained fairly constant.
Golf Brook Apartments' occupancy was 97% at September 30, 1997 and 1996. Average
occupancy for the nine month period decreased from 94% (1996) to 93% (1997).
Average occupancy for the three month period remained constant at 97% (1996 and
1997). Rental and other income at Golf Brook Apartments decreased for the three
months and nine months ended September 30, 1997 as compared to the same periods
in 1996 as a result of decreased occupancy and increased rent concessions.
In the opinion of the General Partner of the Partnership, the decreases in
occupancy at the Partnership's residential properties are only temporary
fluctuations and do not represent a downward occupancy trend.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 3% decrease in occupancy at Plainview Point III Office Center from September
30, 1996 to September 30, 1997 is the result of one tenant who vacated
approximately 1,600 square feet due to a downsizing of current space. The
downsizing was done in conjunction with a lease renewal, so there was no
write-off of accrued income. Average occupancy decreased from 90% (1996) to 88%
(1997) for the three month period ended September 30 and from 94% (1996) to 90%
(1997) for the nine month period. Rental and other income remained fairly
constant at Plainview Point III Office Center for the three months and nine
months ended September 30, 1997 as compared to the same periods in 1996.
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 income from investments made by the
Partnership with cash reserves. Interest income remained fairly constant for the
three months and nine months ended September 30, 1997 as compared to the same
periods in 1996.
Operating expenses increased for the nine months ended September 30, 1997 as
compared to the same period in 1996 as a result of increased replacement costs
(carpet, vinyl and wallcoverings) and increased repair and maintenance costs at
Sabal Park Apartments and Golf Brook Apartments. These increases are partially
offset by decreased wallcovering costs, repair and maintenance costs and snow
removal costs at Park Place Apartments Phase I. Operating expenses for the nine
month period remained fairly constant at Willow Lake Apartments and Plainview
Point III Office Center. Operating expenses decreased for the three months ended
September 30, 1997 as compared to the same period in 1996 as a result of
decreased repair and maintenance costs at Golf Brook Apartments, decreased
replacement costs (carpet, vinly and wallcovering) at Park Place Apartments
Phase I, decreased landscaping costs at Park Place Phase I, Golf Brook and Sabal
Park Apartments and decreased insurance costs at Willow Lake and Golf Brook
Apartments. The decreases in operating expenses for the three month period are
partially offset by increased replacement costs (carpet, vinyl, and
wallcovering) at Sabal Park Apartments. Operating expenses for the three month
period remained fairly constant at Plainview Point III Office Center.
Operating expenses - affiliated increased for the three months and nine months
ended September 30, 1997 as compared to the same periods in 1996 as a result of
increased salary costs at the Partnership's residential properties. Operating
expenses - affiliated for the three month and nine month period remained fairly
constant at Plainview Point III Office Center. Operating expenses - affiliated
are expenses incurred for services performed by employees of NTS Development
Company, an affiliate of the General Partner of the Partnership.
The decrease in interest expense for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 is due to the
Partnership's decreasing debt level as a result of principal payments made. The
decrease in interest expense for both periods is also a result of the new debt
financings which were obtained May 15, 1997 and September 12, 1997 (see
discussion below). The $9,200,000 loan which was paid off had an interest rate
of 8.625% compared to 7.43% on the new $9,000,000 loan. The approximately
$8,550,000 loan which was paid off had an interest rate of 9.20% compared to
7.32% on the new $8,500,000 loan. See the Liquidity and Capital Resources
section of this item for details regarding the Partnership's debt.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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.
The increase in real estate taxes for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 is a result of
increased property assessments for Golf Brook and Sabal Park Apartments
partially offset by a decreased property assessment and a decreased tax rate for
Willow Lake Apartments. Real estate taxes at Park Place Apartments Phase I and
Plainview Point III Office Center remained fairly constant for the three months
and nine months ended September 30, 1997 as compared to the same periods in
1996.
Professional and administrative expenses increased for the three months and nine
months ended September 30, 1997 as compared to the same periods in 1996 as a
result of increased outside accounting and legal fees.
Professional and administrative expenses - affiliated increased for the three
months and nine months ended September 30, 1997 as compared to the same periods
in 1996 as a result of increased salary costs. 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 remained fairly constant for the three months and
nine months ended September 30, 1997 as compared to the same periods in 1996.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 5 - 30 years for land improvements, 30
years for buildings, 5 - 30 years for building 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.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $1,601,525 and $1,724,164 for the nine months
ended September 30, 1997 and 1996, respectively. These funds in conjunction with
cash on hand were used to make a 2% (annualized) cash distribution of $648,561
and $678,258 for the nine months ended September 30, 1997 and 1996,
respectively. 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 the 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 and tenant finish costs. Cash reserves (which are unrestricted cash and
equivalents and investment securities as shown on the Partnership's balance
sheet as of September 30) were $1,846,058 and $1,867,813 at September 30, 1997
and 1996, respectively.
On May 15, 1997, the Partnership obtained a mortgage loan from an insurance
company in the amount of $9,000,000. The outstanding balance of the loan at
September 30, 1997 was $8,845,369. The mortgage bears interest at a fixed rate
of 7.43%, is due May 14, 2009 and is secured by the assets of Golf Brook
Apartments. Monthly principal payments are based upon a 12-year amortization
schedule. At maturity, the loan will have been repaid based on the current rate
of amortization. The proceeds from the loan along with cash reserves were used
to pay off the Partnership's $9,200,000 mortgage payable which was secured by
Golf Brook Apartments. The mortgage bore interest at a fixed rate of 8.625% and
had a maturity date of August 1, 1997.
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
On September 12, 1997, the Partnership obtained a mortgage loan from insurance
company in the amount of $8,500,000. The outstanding balance of the loan at
September 30, 1997 was $8,500,000. The mortgage bears interest at a fixed rate
of 7.32%, is due October 15, 2002 and is secured by the assets of Willow Lake
Apartments. Monthly principal payments are based upon a 15-year amortization
schedule. At maturity, the loan will have been repaid based on the current rate
of amortization. The proceeds from the loan were used to pay off the
Partnership's mortgage payable which was secured by Willow Lake Apartments and
fund loan closing costs. The mortgage bore interest at a fixed rate of 9.20% and
had a maturity date of November 1, 1997.
As of September 30, 1997 the Partnership had two mortgage loans each with an
insurance company in the amount of $3,949,907 and $940,454. Both mortgages
payable are due October 5, 2002, currently 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. 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
$4,413,955 ($3,565,118 and $848,837).
Subsequent to September 30, 1997 the Partnership obtained a mortgage loan from
an insurance company in the amount of $12,200,000. The mortgage bears interest
at a fixed rate of 7.74%, is due October 15, 2012 and is secured by the assets
of Park Place Apartments Phase I and Park Place Apartments Phase III (to be
constructed). On October 8, 1997, $5,000,000 of the loan proceeds were advanced
and used to pay off the Partnership's $3,949,907 and $940,454 (total of
$4,890,361) mortgages payable, which were secured by Park Place Apartments Phase
I, and fund loan closing costs. The mortgages bore interest at a fixed rate of
8.375% and had maturity dates of October 5, 2002. The remaining $7,200,000 loan
proceeds will be advanced during the construction of Park Place Apartments Phase
III as needed in accordance with the loan agreement.
As of September 30, 1997, the Partnership also had two mortgage loans each with
an insurance company in the amount of $2,800,738 and $1,867,159. Both mortgages
payable are due January 5, 2003, currently 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. 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).
As of September 30, 1997, the Partnership has obtained a commitment from an
insurance company for $4,700,000 of debt financing. The proceeds from the new
financing will be used to pay off the Partnership's current $2,800,738 and
$1,867,159 (total of $4,667,897) mortgages payable (as discussed above)which are
secured by the land buildings and amenities of Sabal Park Apartments, and fund
loan closing costs. The mortgage will bear interest at a fixed rate of 7.38% and
will be fully amortized over a 15-year period. Based upon the terms of the
commitment, the Partnership anticipates that the financing will be completed
during the fourth quarter of 1997.
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements and other capital improvements at the Partnership's properties.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements and other capital improvements at the Partnership's properties.
Changes to current tenant finish 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 were 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 provided by financing
activities represent the utilization of cash which has been reserved by the
Partnership for the repurchase of limited partnership Units and proceeds from
mortgage loans. 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 obtained May 15, 1997, the $8,500,000 loan
obtained September 12, 1997, the $12,200,000 loan obtained October 8, 1997, and
the $4,700,000 loan commitment discussed above.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve.
Through September 30, 1997, the Partnership has funded a total amount of
$1,179,730 to the Reserve which will allow the Partnership to repurchase up to
4,718 Units at a price of $250 per Unit. Through September 30, 1997 the
Partnership has repurchased a total of 4,649 Units for $1,162,250. 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 September
30, 1997 was $17,480.
Subsequent to September 30, 1997, the Partnership elected to fund an additional
$300,000 to the Interest Repurchase Reserve. With this funding, the Partnership
will be able to repurchase up to 1,000 Units at a currently contemplated price
of $300 per Unit.
(Continued next page)
- 15 -
<PAGE>
Liquidity and Capital Resources - 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
nine months ended September 30, 1997 and 1996. These distributions were funded
by cash flow derived from operating activities.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
------------ ------------- -------------
Limited Partners:
1997 $ (66,781) $ 642,075 $ 642,075
1996 145,858 671,475 525,617
General Partner:
1997 $ (675) $ 6,486 $ 6,486
1996 1,473 6,783 5,310
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
$1,700,000 is land cost, capitalized interest, common area costs and amenity
costs. The Partnership intends to use the land to construct Park Place
Apartments Phase III. It is anticipated that construction will begin in 1998. In
management's opinion, the net book value approximates the fair market value.
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
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
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 that which is 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 payment of 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, or other operating expenses and acts of God.
- 17 -
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
September 30, 1997.
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NTS-PROPERTIES 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: November 12, 1997
- 19 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND FROM THE STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,398,991
<SECURITIES> 1,040,949
<RECEIVABLES> 124,202
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 39,138,808
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 43,958,702
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,903,627
0
0
<COMMON> 0
<OTHER-SE> 15,742,469
<TOTAL-LIABILITY-AND-EQUITY> 43,958,702
<SALES> 7,015,617
<TOTAL-REVENUES> 7,100,746
<CGS> 0
<TOTAL-COSTS> 5,115,130
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,691,016
<INCOME-PRETAX> (67,456)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,456)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS $0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
