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 June 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 18
Total Pages: 19
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of June 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and six months ended
June 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and six months ended
June 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 10-17
PART II
Item 3. Default on Senior Securities 18
Item 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
June 30, 1998 December 31, 1997*
------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 1,074,627 $ 276,891
Cash and equivalents - restricted 444,265 507,568
Investment securities 508,474 1,562,813
Accounts receivable 165,855 111,152
Land, buildings and amenities, net 38,106,181 38,660,912
Assets held for development, net 2,105,517 1,774,455
Other assets 420,767 395,817
----------- -----------
$42,825,686 $43,289,608
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $26,375,137 $26,872,563
Accounts payable 301,861 195,165
Distributions payable 104,510 213,687
Security deposits 242,488 237,501
Other liabilities 325,512 67,340
----------- -----------
27,349,508 27,586,256
Commitments and Contingencies
Partners' equity 15,476,178 15,703,352
----------- -----------
$42,825,686 $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 361,921 3,656 365,577
Cash distributions declared to
date (11,406,926) (115,221) (11,522,147)
Repurchase of limited
partnership units (1,608,819) -- (1,608,819)
------------ ------------ ------------
Balances at June 30, 1998 $ 15,662,508 $ (186,330) $ 15,476,178
============ ============ ============
* 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.
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 2,448,476 $ 2,303,855 $ 4,835,153 $ 4,609,172
Interest and other income 27,028 28,474 61,534 56,422
----------- ----------- ----------- -----------
2,475,504 2,332,329 4,896,687 4,665,594
EXPENSES:
Operating expenses 625,172 616,873 1,178,482 1,227,450
Operating expenses - affiliated 299,149 251,829 607,542 551,318
Write-off of unamortized
land improvements and
amenities 12,599 -- 12,599 --
Interest expense 489,725 566,074 981,922 1,148,946
Management fees 126,966 115,370 245,417 232,184
Real estate taxes 203,907 198,752 403,820 391,846
Professional and administrative
expenses 39,926 50,756 69,776 85,756
Professional and administrative
expenses - affiliated 66,389 79,674 134,954 157,154
Depreciation and amortization 446,317 483,806 896,598 963,355
----------- ----------- ----------- -----------
2,310,150 2,363,134 4,531,110 4,758,009
----------- ----------- ----------- -----------
Net income (loss) $ 165,354 $ (30,805) $ 365,577 $ (92,415)
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners $ 163,700 $ (30,497) $ 361,921 $ (91,491)
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit $ 3.90 $ (.71) $ 8.58 $ (2.13)
=========== =========== =========== ===========
Weighted average number of
limited partnership units 41,999 42,810 42,181 42,840
=========== =========== =========== ===========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 165,354 $ (30,805) $ 365,577 $ (92,415)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Accrued interest on investment
securities 5,021 7,764 5,224 1,399
Write-off unamortized land
improvements and amenities 12,599 -- 12,599 --
Depreciation and amortization 446,317 483,806 896,598 963,355
Changes in assets and liabilities:
Cash and equivalents - restricted (46,435) 74,468 (93,897) (115,463)
Accounts receivable (20,168) (9,679) (54,703) (4,112)
Other assets 8,842 27,228 (4,375) 2,674
Accounts payable 97,477 (86,246) 106,696 (50,843)
Security deposits 1,984 5,632 4,987 (3,109)
Other liabilities 53,398 77,750 258,177 270,537
----------- ----------- ----------- -----------
Net cash provided by operating
activities 724,389 549,918 1,496,883 972,023
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (496,195) (12,016) (674,306) (15,953)
Purchase of investment securities (200,000) (753,896) (1,004,314) (1,581,396)
Maturity of investment securities 952,044 1,202,500 2,053,429 1,755,389
----------- ----------- ----------- -----------
Net cash provide by in investing
activities 255,849 436,588 374,809 158,040
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages
payable (247,623) (9,305,051) (497,426) (9,370,876)
Proceeds from mortgage loan -- 9,000,000 -- 9,000,000
Loan costs (21,000) (26) (31,802) (7,500)
Cash distributions (211,041) (216,292) (424,728) (432,984)
Repurchase of limited partnership
units (120,000) (5,750) (277,200) (37,250)
Cash and equivalents - restricted -- 5,750 157,200 37,250
----------- ----------- ----------- -----------
Net cash used in financing
activities (599,664) (521,369) (1,073,956) (811,360)
----------- ----------- ----------- -----------
Net increase in cash and
equivalents 380,574 465,137 797,736 318,703
CASH AND EQUIVALENTS, beginning of
period 694,053 494,107 276,891 640,541
----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 1,074,627 $ 959,244 $ 1,074,627 $ 959,244
=========== =========== =========== ===========
Interest paid on a cash basis $ 497,349 $ 605,303 $ 989,335 $ 1,188,634
=========== =========== =========== ===========
</TABLE>
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<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 six months ended June 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 June 30, 1998:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $ 103,905 07/15/98 $ 104,111
Certificate of Deposit 203,193 07/30/98 204,027
Certificate of Deposit 100,610 08/28/98 101,452
Certificate of Deposit 100,766 11/08/98 102,611
-------- --------
$ 508,474 $ 512,201
======== ========
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<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:
June 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 $ 8,476,231 $ 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 8,286,308 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 2,767,559 2,820,000
(Continued next page)
- 7 -
<PAGE>
4. Mortgages Payable - Continued
-----------------------------
June 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 $ 1,845,039 $ 1,880,000
---------- ----------
$26,375,137 $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 June
30, 1998 has an additional availability 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. From December 31, 1995 to June 30, 1998, the Partnership has
repurchased a total of 5,573 Units for $1,439,450. 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 June 30, 1998 was $160,280. 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. See Note 8 Subsequent Event for additional information regarding
the Interest Repurchase Reserve.
6. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$245,417 and $232,184 for the six months ended June 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 six months ended June 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 changes were as follows:
1998 1997
---------- ---------
Administrative $ 161,188 $ 187,053
Property manager 474,126 418,743
Leasing 98,716 103,928
Construction manager 74,339 --
Other 22,220 2,895
--------- ---------
$ 827,833 $ 712,619
========= =========
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 June 30, 1998, approximately $400,000 of the costs had been
incurred.
8. Subsequent Event
----------------
Subsequent to June 30, 1998, the Partnership elected to make three
additional fundings to its Interest Repurchase Reserve. The first funding
is for $66,000, which will enable the Partnership to repurchase up to 200
Units at a price of $330 per Unit. The second and third fundings are for
$4,000 and $105,000 respectively and will enable the Partnership, along
with funds remaining in the reserve from previous fundings, to repurchase
up to 500 Units at a price of $350 per Unit. If the number of Units
submitted for repurchase exceeds that which can be repurchased by the
Partnership with these fundings, those additional Units may or may not be
repurchased in subsequent quarters with additional fundings.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
1998 1997
-------- --------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 98% 86%
Park Place Apartments Phase I 85% 92%
Willow Lake Apartments 97% 90%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership % at
June 30, 1998)
- --------------------------------------
Golf Brook Apartments (96%) 96% 91%
Plainview Point III Office Center (95%) 96% 88%
Rental and other income generated by the Partnership's properties for the three
months and six months ended June 30, 1998 and 1997 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ -----
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments $ 446,893 $ 410,901 $ 891,122 $ 827,105
Park Place Apartments Phase I $ 460,327 $ 462,592 $ 899,203 $ 907,550
Willow Lake Apartments $ 632,461 $ 591,775 $1,181,971 $1,188,005
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership
% at June 30, 1998)
- ---------------------------------
Golf Brook Apartments (96%) $ 733,505 $ 651,923 $1,453,852 $1,325,333
Plainview Point III Office $ 182,135 $ 194,453 $ 419,953 $ 374,517
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 86% at June 30, 1997 to 98% at
June 30, 1998. Average occupancy for the six month period ended June 30
increased from 89% (1997) to 94% (1998). Average occupancy for the three month
period ended June 30 increased from 88% (1997) to 96% (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 six months ended June 30,
1998 as compared to the same periods in 1997 as a result of the increase in
average occupancy, decreased rent concessions and increased rental rates.
Park Place Apartments Phase I's occupancy decreased from 92% at June 30, 1997 to
85% at June 30, 1998. Average occupancy for the six month period ended June 30
decreased from 89% (1997) to 88% (1998). Average occupancy for the three month
period ended June 30 decreased from 91% (1997) to 87% (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 six months ended June 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 90% at June 30, 1997 to 97% at
June 30, 1998. Average occupancy for the six month period ended June 30
increased from 89% (1997) to 95% (1998). Average occupancy for the three month
period ended June 30 increased from 88% (1997) to 97% (1998). Rental and other
income remained fairly constant for the six months ended June 30, 1998 as
compared to the same period in 1997. Rental and other income increased for the
three months ended June 30, 1998 as compared to the same period in 1997 as a
result of the increase in average occupancy and increased rental rates.
Golf Brook Apartments' occupancy increased from 91% at June 30, 1997 to 96% at
June 30, 1998. Average occupancy for the six month period ended June 30
increased from 91% (1997) to 96% (1998). Average occupancy for the three month
period ended June 30 increased from 89% (1997) to 95% (1998). Rental and other
income at Golf Brook Apartments increased for the three months and six months
ended June 30, 1998 as compared to the same periods in 1997 as a result of
increased occupancy, decreased rent concessions and increased rental rates.
The 8% increase in occupancy at Plainview Point III Office Center from June 30,
1997 to June 30, 1998 is the result of one new lease for approximately 4,800
square feet. Average occupancy increased from 89% (1997) to 96% (1998) for the
three months ended June 30 and from 91% (1997) to 96% (1998) for the six month
period. The change in rental and other income at Plainview Point III Office
Center for the three months and six months ended June 30, 1998 as compared to
the same periods in 1997 was not significant.
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 remained fairly constant for the
three months and six months ended June 30, 1998 as compared to the same periods
in 1997.
Operating expenses decreased for the six months ended June 30, 1998 as compared
to the same period in 1997 primarily as a result of decreased repair and
maintenance costs at Park Place Apartments Phase I and Willow Lake Apartments,
and decreased replacement costs (wallcovering, carpet and vinyl flooring) at
Park Place Apartments Phase I. Operating expenses increased for the three months
ended June 30, 1998 as compared to the same period in 1997 primarily as a result
of increased landscaping costs at Willow Lake Apartments and Sabal Park
Apartments and increased replacement costs (carpet, water heaters and draperies)
at Park Place Apartments Phase I and Sabal Park Apartments. Operating expenses
for the three month and six month period remained fairly constant at Golf Brook
Apartments and Plainview Point III Office Center.
Operating expenses - affiliated increased for the three months and six months
ended June 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 six month
period 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 six months ended June 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.
The increase in real estate taxes for the three months and six months ended June
30, 1998 as compared to the same periods in 1997 is a result of increased
property assessments for Sabal Park Apartments and a result of an increased
property assessment and an increased tax rate for Willow Lake Apartments. Real
estate taxes at Park Place Apartments Phase I, Golf Brook Apartments and
Plainview Point III Office Center remained fairly constant for the three months
and six months ended June 30, 1998 as compared to the same periods in 1997.
Professional and administrative expenses decreased for the three months and six
months ended June 30, 1998 as compared to the same periods in 1997 primarily as
a result of decreased legal fees and decreased outside accounting fees.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Professional and administrative expenses - affiliated decreased for the three
months and six months ended June 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 six months
ended June 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 $1,496,883 and $972,023 for the six months ended
June 30, 1998 and 1997, respectively. These funds in conjunction with cash on
hand were used to make a 1.5% (annualized) cash distribution of $315,550 for the
six months ended June 30, 1998 and a 2% (annualized) cash distribution of
$432,470 for the six months ended June 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 June 30) were $1,583,101 and $1,869,119 at June 30, 1998 and
1997, respectively.
As of June 30, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,476,231. 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 June 30, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,286,308. 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.
As of June 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
June 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
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 June 30, 1998, the Partnership had two mortgage loans each with an
insurance company in the amounts of $2,767,559 and $1,845,039 for a total of
$4,612,598. 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. 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 June
30, 1998, approximately $400,000 of costs had been incurred.
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.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The Partnership has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the issue. The Year 2000 Issue, a
worldwide problem, is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems
failures or miscalculations. The Partnership presently believes that, with
modifications to existing software and conversions to new software, the Year
2000 problem will not pose significant operational problems for the
Partnership's computer systems. The Partnership continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material effect on its financial position or results of
operations. The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1998 was immaterial.
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve.
Through June 1998, the Partnership has funded a total amount of $1,599,730 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
will be able to repurchase 400 Units at a price of $300 per Unit. Through June
30, 1998 the Partnership has repurchased a total of 5,573 Units for $1,439,450.
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 June 30, 1998 was $160,280. 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. See
below for additional information regarding the Interest Repurchase Reserve.
Subsequent to June 30, 1998, the Partnership elected to make three additional
fundings to its Interest Repurchase Reserve. The first funding is for $66,000,
which will enable the Partnership to repurchase up to 200 Units at a price of
$330 per Unit. The second and third fundings are for $4,000 and $105,000
respectively and will enable the Partnership, along with funds remaining in the
reserve from previous fundings, to repurchase up to 500 Units at a price of $350
per Unit. If the number of units submitted for repurchase exceeds that which can
be repurchased by the Partnership with the current funding, those additional
units may or may not be repurchased in subsequent quarters with additional
fundings.
(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 six
months ended June 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 $ 361,921 $ 312,394 $ --
1997 (91,491) 428,145 428,145
General Partner:
1998 $ 3,656 $ 3,156 $ --
1997 (924) 4,325 4,325
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). Included in the cost of approximately $2,100,000 is land cost, capitalized
interest, common area costs, amenity costs and construction costs associated
with Phase III. The Partnership is using the land to construct Park Place
Apartments Phase III. Construction began during the Spring of 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, 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.
- 16 -
<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.
- 17 -
<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 April, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $120,000
to its Interest Repurchase Reserve.
Items 1,2,4, and 5 are not applicable and have been omitted.
- 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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: August 12, 1998
---------------
- 19 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,518,892
<SECURITIES> 508,474
<RECEIVABLES> 165,855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 38,106,181
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 42,825,686
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,375,137
0
0
<COMMON> 0
<OTHER-SE> 15,476,178
<TOTAL-LIABILITY-AND-EQUITY> 42,825,686
<SALES> 4,835,153
<TOTAL-REVENUES> 4,896,687
<CGS> 0
<TOTAL-COSTS> 3,549,188
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 981,922
<INCOME-PRETAX> 365,577
<INCOME-TAX> 0
<INCOME-CONTINUING> 365,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 365,577
<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>
