Enclosures
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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 0-14695
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 19
Total Pages: 20
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of September 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and nine months ended
September 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and nine months ended
September 30, 1998 and 1997 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-18
PART II
Item 3. Default on Senior Securities 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
September 30, 1998 December 31, 1997*
------------------ ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 979,652 $ 276,891
Cash and equivalents - restricted 378,184 507,568
Investment securities 102,072 1,562,813
Accounts receivable 125,088 111,152
Land, buildings and amenities, net 37,717,744 38,660,912
Construction in progress 3,021,106 1,774,455
Other assets 431,220 395,817
----------- -----------
$42,755,066 $43,289,608
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $26,123,029 $26,872,563
Accounts payable - operations 243,560 195,165
Accounts payable - construction 440,557 --
Distributions payable 102,497 213,687
Security deposits 237,430 237,501
Other liabilities 526,579 67,340
----------- -----------
27,673,652 27,586,256
Commitments and Contingencies
Partners' equity 15,081,414 15,703,352
----------- -----------
$42,755,066 $43,289,608
=========== ===========
</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 (12,202,299) (74,865) (12,277,164)
Net income - current year 490,110 4,951 495,061
Cash distributions declared to
date (11,508,398) (116,247) (11,624,645)
Repurchase of limited
partnership units (2,030,569) -- (2,030,569)
------------ ------------ ------------
Balances at September 30, 1998 $ 15,267,475 $ (186,061) $ 15,081,414
============ ============ ============
<FN>
* Reference is made to the audited financial statements in the Annual
Report on Form 10-K as filed with the Commission on March 30, 1998.
</FN>
</TABLE>
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 2,537,372 $ 2,406,443 $ 7,372,524 $ 7,015,617
Interest and other income 20,234 28,707 81,770 85,129
----------- ----------- ----------- -----------
2,557,606 2,435,150 7,454,294 7,100,746
EXPENSES:
Operating expenses 718,335 676,959 1,896,817 1,904,410
Operating expenses - affiliated 310,728 270,203 918,269 821,521
Write-off of unamortized
land improvements and
amenities 4,984 -- 17,582 --
Interest expense 493,145 542,070 1,475,067 1,691,016
Management fees 129,155 122,426 374,571 354,610
Real estate taxes 201,374 198,134 605,194 589,978
Professional and administrative
expenses 56,498 44,155 126,273 129,911
Professional and administrative
expenses - affiliated 62,088 74,991 197,046 232,145
Depreciation and amortization 451,815 481,253 1,348,414 1,444,611
----------- ----------- ----------- -----------
2,428,122 2,410,191 6,959,233 7,168,202
----------- ----------- ----------- -----------
Net income (loss) $ 129,484 $ 24,959 $ 495,061 $ (67,456)
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners $ 128,189 $ 24,709 $ 490,110 $ (66,781)
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit $ 3.12 $ .58 $ 11.78 $ (1.56)
=========== =========== =========== ===========
Weighted average number of
limited partnership units 41,097 42,786 41,586 42,822
=========== =========== =========== ===========
</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,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 129,484 $ 24,959 $ 495,061 $ (67,456)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Accrued interest on investment
securities 4,130 (7,470) 9,354 (6,071)
Write-off of unamortized land
improvements and amenities 4,984 -- 17,582 --
Depreciation and amortization 451,815 481,253 1,348,414 1,444,611
Changes in assets and liabilities:
Cash and equivalents - restricted (35,389) (129,242) (129,286) (244,705)
Accounts receivable 40,767 16,304 (13,936) 12,192
Other assets 21,570 15,839 17,196 18,512
Accounts payable - operations (27,491) 15,897 48,395 (34,947)
Security deposits (5,058) (1,580) (71) (4,689)
Other liabilities 201,063 213,541 459,239 484,078
------------ ------------ ------------ ------------
Net cash provided by operating
activities 785,875 629,501 2,251,948 1,601,525
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities and construction in
progress (568,163) (31,135) (1,211,659) (47,088)
Purchase of investment securities -- (798,604) (1,004,314) (2,380,000)
Maturity of investment securities 402,272 675,000 2,455,701 2,430,389
------------ ------------ ------------ ------------
Net cash provide by in investing
activities (165,891) (154,739) 239,728 3,301
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages
payable (252,108) (8,628,553) (749,534) (17,999,429)
Proceeds from mortgage loan -- 8,500,000 -- 17,500,000
Loan costs (38,061) (284,167) (69,863) (291,668)
Cash distributions (104,510) (216,177) (529,238) (649,161)
Repurchase of limited partnership
units (421,750) (4,250) (698,950) (41,500)
Cash and equivalents - restricted 101,470 4,250 258,670 41,500
------------ ------------ ------------ ------------
Net cash used in financing
activities (714,959) (628,897) (1,788,915) (1,440,258)
------------ ------------ ------------ ------------
Net increase in cash and
equivalents (94,975) (154,135) 702,761 164,568
CASH AND EQUIVALENTS, beginning of
period 1,074,627 959,244 276,891 640,541
------------ ------------ ------------ ------------
CASH AND EQUIVALENTS, end of period $ 979,652 $ 805,109 $ 979,652 $ 805,109
============ ============ ============ ============
Interest paid on a cash basis $ 492,864 $ 575,248 $ 1,482,200 $ 1,763,882
============ ============ ============ ============
</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 1997 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, 1998 and
1997.
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 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 1997 and 1998, the Partnership sold no investment
securities. The following provides details regarding the investments held
at September 30, 1998:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $ 102,072 11/08/98 $ 102,611
======== ========
(Continued next page)
- 6 -
<PAGE>
3. Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at December
31, 1997:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $ 222,741 02/03/98 $ 223,805
Certificate of Deposit 205,392 02/12/98 206,654
Certificate of Deposit 101,154 03/02/98 102,042
Certificate of Deposit 101,246 03/12/98 102,272
Certificate of Deposit 205,082 03/27/98 207,639
Certificate of Deposit 125,678 03/30/98 127,336
Certificate of Deposit 150,226 03/30/98 152,215
Certificate of Deposit 150,226 04/06/98 152,373
Certificate of Deposit 100,151 04/15/98 101,718
Certificate of Deposit 100,151 04/30/98 101,944
Certificate of Deposit 100,766 05/08/98 102,569
--------- ---------
$1,562,813 $1,580,567
========= =========
4. Mortgages Payable
-----------------
Mortgages payable consist of the following:
September 30, December 31,
1998 1997
---- ----
Mortgage payable with an insurance
company bearing interest at 7.43%, due May
14, 2009 secured by certain land,
buildings and amenities $ 8,350,279 $ 8,724,588
Mortgage payable with an insurance
company bearing interest at 7.32%, due
October 15, 2012 secured by certain
land, buildings and amenities 8,204,892 8,447,975
Mortgage payable with an insurance
company bearing interest at 7.74%, due
October 15, 2012 secured by certain
land, buildings and amenities 5,000,000 5,000,000
Mortgage payable with an insurance
company bearing interest at 7.38%, due
December 5, 2012 secured by certain
land, buildings and amenities 2,740,715 2,820,000
(Continued next page)
- 7 -
<PAGE>
4. Mortgages Payable - Continued
-----------------------------
September 30, December 31,
1998 1997
---- ----
Mortgage payable with an insurance
company bearing interest at 7.38%, due
December 5, 2012 secured by certain
land, buildings and amenities $ 1,827,143 $ 1,880,000
---------- ----------
$ 26,123,029 $26,872,563
========== ==========
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 $31,000,000.
The mortgage payable with an outstanding balance of $5,000,000 as of
September 30, 1998 has an additional amount available of $7,200,000. The
proceeds will be used to fund the construction of Park Place Apartments
Phase III. See Note 7 Commitments and Contingencies for further
information.
5. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership has established an
Interest Repurchase Reserve. On April 6, 1998, the Partnership elected to
fund an additional $120,000 to its Interest Repurchase Reserve. With this
funding the Partnership will be able to repurchase 400 Units at a price of
$300 per Unit. During the quarter ended September 30, 1998, the Partnership
elected to make four additional fundings to its Interest Repurchase
Reserve. The first funding was for $66,000, which enabled the Partnership
to repurchase 200 Units at a price of $330 per Unit. The three other
fundings totaled $214,000 and will enable the Partnership, along with funds
remaining in the reserve from previous fundings, to repurchase up to 800
Units at a price of $350 per Unit. From December 1995 to September 30,
1998, the Partnership has repurchased a total of 6,849 Units for
$1,861,200. Repurchased Units are retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited partner
investor. The Interest Repurchase Reserve was funded from cash reserves.
The amount remaining in the Interest Repurchase Reserve at September 30,
1998 was $18,530. The above offering price per Unit was established by the
General Partner in its sole discretion and does not purport to represent
the fair market value or liquidation value of the Unit.
6. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$374,571 and $354,610 for the nine months ended September 30, 1998 and
1997, 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, 1998 and 1997.
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.
- 8 -
<PAGE>
6. Related Party Transactions - Continued
--------------------------------------
The charges were as follows:
1998 1997
---------- ----------
Administrative $ 236,397 $ 274,622
Property manager 712,216 629,077
Leasing 154,381 146,732
Construction manager 145,654 --
Other 61,024 30,607
--------- ---------
$1,309,672 $1,081,038
========= =========
7. Commitments and Contingencies
-----------------------------
The Partnership began the construction of Park Place Apartments Phase III
(152 units) during the Spring of 1998 on the 15 acres of land it owns which
is adjacent to the existing Park Place Apartments in Lexington, Kentucky.
It is currently estimated that the cost of the project will be $9,100,000.
Construction costs will be funded by the remaining loan proceeds
($7,200,000) of a mortgage loan obtained during 1997 and cash reserves.
Through September 30, 1998, approximately $1,300,000 of the cost had been
incurred.
8. Subsequent Event
----------------
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, Commenced a Tender Offer to purchase up to 1,250 of the
Partnership's limited Partnership Units at a price of $350 per Unit.
Although the Partnership and ORIG, LLC believes that this price is
appropriate, the price of $350 per Unit may not equate to the fair market
value or the liquidation value of the Unit, and is less than the book value
per Unit. Approximately $499,500 ($437,500 to purchase 1,250 Units plus
approximately $62,000 for expenses associated with the Offer) is required
to purchase all 1,250 Units. The Partnership will purchase the first 750
Units tendered and will fund its purchases and its portion of the expenses
from cash reserves. If more than 750 Units are tendered, ORIG, LLC will
purchase up to an additional 500 Units. If more than 1,250 Units are
tendered, the Partnership and ORIG, LLC may choose to acquire the
additional Units on the same terms. Otherwise, tendered Units will be
purchased on a pro rata basis up to 1,250. Units that are acquired by the
Partnership will be retired. Units that are acquired by ORIG, LLC will be
held by it. The General Partner, NTS- Properties Associates VI, does not
intend to participate in the Tender Offer. The Tender Offer will expire
January 18, 1999 unless extended.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The management's discussion and analysis of financial condition and results of
operations included herein should be read in conjunction with the Partnership's
1997 Annual Report.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of September 30 were as
follows:
1998 1997
------ ------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 98% 97%
Park Place Apartments Phase I 82% 94%
Willow Lake Apartments 96% 91%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership % at
September 30, 1998)
- --------------------------------------
Golf Brook Apartments (96%) 96% 97%
Plainview Point III Office Center (95%) 100% 88%
Rental and other income generated by the Partnership's properties for the three
months and nine months ended September 30, 1998 and 1997 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
------ ------ ------ ------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments $ 465,484 $ 435,922 $1,356,606 $1,263,027
Park Place Apartments Phase I $ 457,245 $ 495,690 $1,356,448 $1,403,240
Willow Lake Apartments $ 656,472 $ 598,768 $1,838,443 $1,786,773
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership
% at September 30, 1998)
- ---------------------------------
Golf Brook Apartments (96%) $ 753,628 $ 700,928 $2,207,481 $2,026,261
Plainview Point III Office $ 211,696 $ 181,970 $ 631,650 $ 556,488
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 97% at September 30, 1997 to 98%
at September 30, 1998. Average occupancy for the nine month period ended
September 30 increased from 91% (1997) to 95% (1998). Average occupancy for the
three month period ended September 30 increased from 95% (1997) to 97% (1998).
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 increased for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 as a result of the
increase in average occupancy and increased rental rates.
Park Place Apartments Phase I's occupancy decreased from 94% at September 30,
1997 to 82% at September 30, 1998. Average occupancy for the nine month period
ended September 30 decreased from 91% (1997) to 86% (1998). Average occupancy
for the three month period ended September 30 decreased from 93% (1997) to 82%
(1998). In the opinion of the General Partner of the Partnership, the decrease
in occupancy at Park Place Apartments Phase I is only a temporary fluctuation
and does not represent a downward occupancy trend. Rental and other income at
Park Place Apartments Phase I decreased for the three months and nine months
ended September 30, 1998 as compared to the same periods in 1997 as a result of
the decrease in average occupancy. The decrease in rental and other income is
partially offset by an increase in income from fully furnished units. 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.
Willow Lake Apartments' occupancy increased from 91% at September 30, 1997 to
96% at September 30, 1998. Average occupancy for the nine month period ended
September 30 increased from 90% (1997) to 96% (1998). Average occupancy for the
three month period ended September 30 increased from 91% (1997) to 97% (1998).
Rental and other income increased for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 as a result of the
increase in average occupancy, increased rental rates and an increase in income
from fully furnished units.
Golf Brook Apartments' occupancy decreased from 97% at September 30, 1997 to 96%
at September 30, 1998. Average occupancy for the nine month period ended
September 30 increased from 93% (1997) to 96% (1998). Average occupancy for the
three month period ended September 30 decreased from 97% (1997) to 96% (1998).
Rental and other income at Golf Brook Apartments increased for the three months
and nine months ended September 30, 1998 as compared to the same periods in 1997
as a result of increased rental rates and increased penalty rents. The increase
in rental and other income for the nine month period is also a result of the
increase in average occupancy.
The 12% increase in occupancy at Plainview Point III Office Center from
September 30, 1997 to September 30, 1998 is the result of two new leases
totaling approximately 7,400 square feet. Average occupancy increased from 88%
(1997) to 100% (1998) for the three months ended September 30 and from 90%
(1997) to 97% (1998) for the nine month period. Rental and other income at
Plainview Point III Office Center for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 remained fairly
constant.
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.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Interest and other income includes income from investments made by the
Partnership with cash reserves. Interest income decreased for the three months
and nine months ended September 30, 1998 as compared to the same periods in 1997
as a result of decreased cash reserves available for investment.
Operating expenses decreased for the nine months ended September 30, 1998 as
compared to the same period in 1997 primarily as a result of decreased repair
and maintenance costs and decreased replacement costs (carpet and wallcovering)
at Park Place Apartments Phase I and Willow Lake Apartments. The decrease in
operating expenses for the nine month period is also a result of decreased
landscaping costs at Park Place Apartments Phase I. The decreases in operating
expenses for the nine month period are partially offset by increased repair and
maintenance costs at Sabal Park Apartments and Plainview Point III Office Center
and increased wood replacement costs at Golf Brook Apartments. Operating
expenses increased for the three months ended September 30, 1998 as compared to
the same period in 1997 as a result of increased wood replacement costs at Golf
Brook Apartments and increased repair and maintenance costs at Plainview Point
III Office Center and Golf Brook Apartments. The increases in operating expenses
for the three month period are partially offset by decreased repair and
maintenance, landscaping and replacement (carpet and wallcovering) costs at Park
Place Apartments Phase I and Willow Lake Apartments. Operating expenses at Sabal
Park Apartments for the three month period remained fairly constant.
Operating expenses - affiliated increased for the three months and nine months
ended September 30, 1998 as compared to the same periods in 1997 primarily as a
result of increased property management costs at the residential properties. The
increase in operating expenses - affiliated for the three month and nine month
periods is also due to increased leasing costs 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.
Interest expense decreased for the three months and nine months ended September
30, 1998 as compared to the same periods in 1997 primarily due to the
Partnership's decreasing debt level as a result of principal payments made and a
result of new debt financings at lower interest rates which were obtained May
15, September 12, and October 8, 1997. The $9,200,000 mortgage, which was paid
off May 15, 1997, had an interest rate of 8.625% compared to 7.43% on the new
$9,000,000 loan. The approximately $8,500,000 mortgage which was paid off
September 12, 1997, had an interest rate of 9.20% compared to 7.32% on the new
$8,500,000 loan. The approximately $3,900,000 and $950,000 mortgages, which were
paid off October 8, 1997, had an interest rate of 8.375% compared to 7.74% on
the new $5,000,000 loan. See the Liquidity and Capital Resources 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.
Real estate taxes for the three months and nine months ended September 30, 1998
as compared to the same periods in 1997 remained fairly constant.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Professional and administrative expenses remained fairly constant for the nine
months ended September 30, 1998 as compared to the same period in 1997.
Professional and administrative expenses increased for the three months ended
September 30, 1998 as compared to the same period in 1997 as a result of
increased costs associated with the Interest Repurchase Program.
Professional and administrative expenses - affiliated decreased for the three
months and nine months ended September 30, 1998 as compared to the same periods
in 1997 as a result of decreased 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 decreased for the three months and nine months
ended September 30, 1998 as compared to the same periods in 1997 due to a
portion of the assets with shorter lives at the Partnership's residential
properties having become 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 $71,500,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $2,251,948 and $1,601,525 for the nine months
ended September 30, 1998 and 1997, respectively. These funds in conjunction with
cash on hand were used to make a 1.3% (annualized) cash distribution of $418,047
for the nine months ended September 30, 1998 and a 2% (annualized) cash
distribution of $648,561 for the nine months ended September 30, 1997. Cash
distributions were reduced from 2% to 1% per quarter, effective June 30, 1998,
as a result of capital improvements at the Partnership's properties which are
currently in the planning stages. See below for a further discussion regarding
these projects (including the construction of Park Place Apartments Phase III).
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 the construction of Park Place Apartments Phase III and other
capital improvements are funded and 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 $1,081,724 and $1,846,058 September 30,
1998 and 1997, respectively.
As of September 30, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,350,279. 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. The 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.
As of September 30, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,204,892. The mortgage bears interest at a fixed rate
of 7.32%, is due October 15, 2012 and is secured by the assets of Willow Lake
Apartments. The 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.
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of September 30, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $12,200,000. The outstanding balance of the loan at
September 30, 1998 was $5,000,000. 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). 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. Until the construction of Park Place Apartments Phase III is
complete, the mortgage will require only monthly interest payments. Upon the
completion of Park Place Apartments Phase III, the monthly principal payments
will be based upon a 19-year amortization schedule. Due to the fact that it is
not known when principal payments will begin, the outstanding balance at
maturity can not be determined at this time.
As of September 30, 1998, the Partnership had two mortgage loans each with an
insurance company in the amounts of $2,740,715 and $1,827,143 for a total of
$4,567,858. Both mortgages bear interest at a fixed rate of 7.38%, are due
December 5, 2012, and are secured by the assets of Sabal Park Apartments. The
monthly principal payments are based upon a 15-year amortization schedule. At
maturity, the mortgage will have been repaid based upon the current rate of
amortization.
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements, other capital improvements at the Partnership's properties and for
the construction of Park Place Apartments Phase III. 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
1997 except for the following: 1) changes resulting from the new debt financings
obtained by the Partnership during 1997 and 2) the construction of Park Place
Apartments Phase III, as discussed below.
The demand on future liquidity is expected to increase as a result of
construction beginning at Park Place Apartments Phase III (152 units) during the
Spring of 1998 on the 15 acres of land it owns which is adjacent to the existing
Park Place Apartments in Lexington, Kentucky. It is currently estimated that the
cost of the project will be $9,100,000. Construction costs will be funded by the
$7,200,000 of loan proceeds, as discussed above, and cash reserves. Through
September 30, 1998, approximately $1,300,000 of cost had been incurred.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
During the next twelve months, the Partnership also anticipates a demand on
future liquidity as a result of a planned renovation to the Park Place
Apartments' community clubhouse. At this time, the cost and extent of the
renovation has not been determined. The clubhouse is shared with Phase II of the
Park Place development which was developed and constructed by the Partnership.
The cost to construct and operate the common clubhouse is shared proportionately
by each phase. It is anticipated that the cash flow from operations, cash
reserves and loan proceeds will be sufficient to meet the needs of the
Partnership.
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare our information systems (IT) and non- information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separate for the Year 2000 since the
company saw the need to move to more advanced management and accounting systems
made available by new technology and software developments during the decade of
the 1990's.
The PILOT software system, purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California has been selected to supercede
PILOT. The Yardi system is compatible with Year 2000 and beyond. This system is
being implemented with the help of third party consultants and should be fully
operational by the third quarter of 1999. Our system for multi-family apartment
locations was converted to GEAC's Power Site System earlier in 1998 and is Year
2000 compliant.
The few remaining systems not addressed by these conversions are being modified
by our in-house staff of programmers. The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network. It will be retained as long as necessary to assure smooth operations
and has been upgrades to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
The cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since we had already identified the need to move to a
network based system regardless of the Year 2000. The costs involved will be
approximately $100,000 over 1998 and 1999. These costs include hardware,
software, internal staff and outside consultants.
NTS property management staff has been surveying our vendors to evaluate
embedded technology in our alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of fiscal year 1999.
We are also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant vendors and tenants have indicated that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Management has determined that at our current state of readiness, the need does
not presently exist for a contingency plan. We will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, more general
public infrastructure failures or failure to successfully conclude our
remediation efforts as planned could have a material adverse impact on our
results of operations, financial conditions and/or cash flows in 1999 and
beyond.
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 1998, the Partnership has funded a total amount of $1,879,730
to the Reserve. On April 6, 1998, the Partnership elected to fund an additional
$120,000 to its Interest Repurchase Reserve. With this funding the Partnership
was able to repurchase 400 Units at a price of $300 per Unit. During the quarter
ended September 30, 1998, the Partnership elected to make four additional
fundings to its Interest Repurchase Reserve. The first funding was for $66,000,
which enabled the Partnership to repurchase 200 Units at a price of $330 per
Unit. The three other fundings totaled $214,000 and will enable the Partnership,
along with funds remaining in the reserve from previous fundings, to repurchase
up to 800 Units at a price of $350 per Unit. Through September 30, 1998 the
Partnership has repurchased a total of 6,849 Units for $1,861,200. Repurchased
Units are retired by the Partnership, thus increasing the percentage of
ownership of each remaining limited partner investor. The Interest Repurchase
Reserve was funded from cash reserves. The amount remaining in the Interest
Repurchase Reserve at September 30, 1998 was $18,530. The above offering price
per Unit was established by the General Partner in its sole discretion and does
not purport to represent the fair market value or liquidation value of the Unit.
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, Commenced a Tender Offer to purchase up to 1,250 of the
Partnership's limited Partnership Units at a price of $350 per Unit. Although
the Partnership and ORIG, LLC believes that this price is appropriate, the price
of $350 per Unit may not equate to the fair market value or the liquidation
value of the Unit, and is less than the book value per Unit. Approximately
$499,500 ($437,500 to purchase 1,250 Units plus approximately $62,000 for
expenses associated with the Offer) is required to purchase all 1,250 Units. The
Partnership will purchase the first 750 Units tendered and will fund its
purchases and its portion of the expenses from cash reserves. If more than 750
Units are tendered, ORIG, LLC will purchase up to an additional 500 Units. If
more than 1,250 Units are tendered, the Partnership and ORIG, LLC may choose to
acquire the additional Units on the same terms. Otherwise, tendered Units will
be purchased on a pro rata basis up to 1,250. Units that are acquired by the
Partnership will be retired. Units that are acquired by ORIG, LLC will be held
by it. The General Partner, NTS-Properties Associates VI, does not intend to
participate in the Tender Offer. The Tender Offer will expire January 18, 1999
unless extended.
- 16 -
<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, 1998 and 1997. These distributions were funded
by cash flow derived from operating activities.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1998 $ 490,110 $ 413,867 $ --
1997 (66,781) 642,075 642,075
General Partner:
1998 $ 4,951 $ 4,180 $ --
1997 (675) 6,486 6,486
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 (Park Place Apartments Phase
III). The cost of the land, capitalized interest, common area costs, and amenity
costs are combined with the construction costs associated with Phase III on the
balance sheet. Construction began during the Spring of 1998.
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as the Partnership "anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 judgment 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 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.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
3. Default on Senior Securities
None.
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K was filed on July 15, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $66,000 to
its Interest Repurchase Reserve.
Form 8-K was filed on July 24, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $4,000 to
its Interest Repurchase Reserve.
Form 8-K was filed on August 4, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $105,000
to its Interest Repurchase Reserve.
Form 8-K was filed on September 11, 1998 to report in Item 5 that
the Partnership has elected to fund an additional amount of
$105,000 to its Interest Repurchase Reserve.
Items 1,2,4, and 5 are not applicable and have been omitted.
- 19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, 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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: November 13, 1998
- 20 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,357,836
<SECURITIES> 102,072
<RECEIVABLES> 125,088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 37,717,744
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 42,755,066
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,123,029
0
0
<COMMON> 0
<OTHER-SE> 15,081,414
<TOTAL-LIABILITY-AND-EQUITY> 42,755,066
<SALES> 7,372,524
<TOTAL-REVENUES> 7,454,294
<CGS> 0
<TOTAL-COSTS> 5,484,166
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,475,067
<INCOME-PRETAX> 495,061
<INCOME-TAX> 0
<INCOME-CONTINUING> 495,061
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 495,061
<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>
