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 March 31, 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 17
Total Pages: 18
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of March 31, 1998 and December 31, 1997 3
Statements of Operations
For the three months ended March 31, 1998 and 1997 4
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
PART II
1. Legal Proceedings 17
2. Changes in Securities 17
3. Defaults upon Senior Securities 17
4. Submission of Matters to a Vote of Security Holders 17
5. Other Information 17
6. Exhibits and Reports on Form 8-K 17
Signatures 18
- 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
March 31, 1998 December 31, 1997*
-------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 694,053 $ 276,891
Cash and equivalents - restricted 397,830 507,568
Investment securities 1,265,537 1,562,813
Accounts receivable 145,687 111,152
Land, buildings and amenities, net 38,317,081 38,660,912
Assets held for development, net 1,851,660 1,774,455
Other assets 414,293 395,817
----------- -----------
$43,086,141 $43,289,608
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $26,622,760 $26,872,563
Accounts payable 204,384 195,165
Distributions payable 211,040 213,687
Security deposits 240,504 237,501
Other liabilities 272,119 67,340
----------- -----------
27,550,807 27,586,256
Commitments and contingencies
Partners' equity 15,535,334 15,703,352
----------- -----------
$43,086,141 $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 198,221 2,002 200,223
Cash distributions declared to
date (11,303,461) (114,176) (11,417,637)
Repurchase of limited
partnership units (1,488,819) -- (1,488,819)
------------ ------------ ------------
Balances at March 31, 1998 $ 15,722,273 $ (186,939) $ 15,535,334
============ ============ ============
</TABLE>
* 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.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Rental income $ 2,386,677 $ 2,305,318
Interest and other income 34,507 27,947
----------- -----------
2,421,184 2,333,265
Expenses:
Operating expenses 553,311 609,883
Operating expenses - affiliated 308,392 299,489
Interest expense 492,197 582,872
Management fees 118,450 116,814
Real estate taxes 199,915 193,092
Professional and administrative expenses 29,849 35,693
Professional and administrative expenses
- affiliated 68,565 77,480
Depreciation and amortization 450,282 479,552
----------- -----------
2,220,961 2,394,875
----------- -----------
Net income (loss) $ 200,223 $ (61,610)
=========== ===========
Net income (loss) allocated to the limited
partners $ 198,221 $ (60,994)
=========== ===========
Net income (loss) per limited partnership
unit $ 4.68 $ (1.39)
=========== ===========
Weighted average number of limited
partnership units 42,365 43,750
=========== ===========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
A Maryland Limited Partnership
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 200,223 $ (61,610)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Accrued interest on investment securities 203 (6,365)
Depreciation and amortization 450,282 479,552
Changes in assets and liabilities:
Cash and equivalents - restricted (47,462) (189,931)
Accounts receivable (34,535) 5,567
Other assets (13,218) (24,556)
Accounts payable 9,219 35,403
Security deposits 3,003 (8,741)
Other liabilities 204,779 192,787
----------- -----------
Net cash provided by operating activities 772,494 422,106
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (178,111) (3,937)
Purchase of investment securities (804,314) (827,500)
Maturity of investment securities 1,101,385 552,889
----------- -----------
Net cash provided by (used in) investing activities 118,960 (278,548)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (249,803) (65,825)
Cash distributions (213,687) (216,692)
Repurchase of limited partnership units (157,200) (31,500)
Additions to loan costs (10,802) (7,475)
Cash and equivalents - restricted 157,200 31,500
----------- -----------
Net cash used in financing activities (474,292) (289,992)
----------- -----------
Net increase (decrease) in cash and equivalents 417,162 (146,434)
CASH AND EQUIVALENTS, beginning of period 276,891 640,541
----------- -----------
CASH AND EQUIVALENTS, end of period $ 694,053 $ 494,107
=========== ===========
Interest paid on a cash basis $ 492,087 $ 583,331
=========== ===========
</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 ended March 31, 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 March 31, 1998:
Amortized Maturity Value At
Type Cost Date Maturity
---- ---- ---- --------
Certificate of Deposit $ 152,260 04/06/98 $ 152,373
Certificate of Deposit 101,507 04/15/98 101,718
Certificate of Deposit 101,507 04/30/98 101,944
Certificate of Deposit 102,045 05/08/98 102,569
Certificate of Deposit 126,157 05/15/98 126,941
Certificate of Deposit 125,791 05/29/98 126,834
Certificate of Deposit 102,482 06/15/98 103,583
Certificate of Deposit 150,647 06/29/98 152,567
Certificate of Deposit 102,566 07/15/98 104,111
Certificate of Deposit 200,575 07/30/98 204,027
--------- ---------
$1,265,537 $1,276,667
========= =========
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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:
March 31, 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 $ 8,599,835 $ 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 8,366,225 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 2,794,020 2,820,000
(Continued next page)
- 7 -
<PAGE>
March 31, 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 $ 1,862,680 $ 1,880,000
---------- ----------
$26,622,760 $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 $27,000,000.
The mortgage payable with an outstanding balance of $5,000,000 as of March
31, 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 established an Interest
Repurchase Reserve. Through March of 1998, the Partnership has funded a
total amount of $1,479,730 to the Reserve. Through March 31, 1998, the
Partnership has repurchased a total of 5,173 Units for $1,319,450.
Repurchased Units are retired by the Partnership, thus increasing the share
of ownership of each remaining investor. The Interest Repurchase Reserve
was funded from cash reserves. The amount remaining in the Interest
Repurchase Reserve at March 31, 1998 was $160,208. These remaining funds
will be used by the Partnership to repurchase 534 Units at a price $300 per
Unit. 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 of 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
$118,450 and $116,814 for the three months ended March 31, 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 three months ended March 31, 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.
1998 1997
---------- ----------
Administrative $ 82,202 $ 92,428
Property manager 239,035 223,117
Leasing 54,535 64,219
Construction manager 32,880 --
Other 11,986 1,352
---------- ----------
$ 420,638 $ 381,116
========== ==========
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<PAGE>
7. Commitments and Contingencies
-----------------------------
The Partnership began the construction of Park Place Apartments Phase III
(152 units) subsequent to March 31, 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
$9,000,000. Construction costs will be funded by the remaining loan
proceeds ($7,200,000) of a mortgage loan obtained during 1997 and cash
reserves. Through March 31, 1998, approximately $180,000 of pre-development
costs had been incurred.
8. Subsequent Event
----------------
Subsequent to March 31, 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 up to 400 Units at a price of $300
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.
- 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 March 31 were as
follows:
1998 1997
-------- --------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 93% 91%
Park Place Apartments Phase I 88% 90%
Willow Lake Apartments 97% 91%
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership %
at March 31, 1998)
- -----------------------------------
Golf Brook Apartments (96%) 96% 90%
Plainview Point III Office Center (95%) 96% 91%
Rental and other income generated by the Partnership's properties for the three
months ended March 31, 1998 and 1997 was as follows:
1998 1997
--------- ---------
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments $ 444,228 $ 416,204
Park Place Apartments Phase I $ 438,876 $ 444,958
Willow Lake Apartments $ 549,510 $ 596,230
Properties Owned in Joint Venture
with NTS-Properties IV (Ownership %
at March 31, 1998)
- -----------------------------------
Golf Brook Apartments (96%) $ 720,348 $ 673,410
Plainview Point III Office Center (95%) $ 237,818 $ 180,064
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 91% at March 31, 1997 to 93% at
March 31, 1998. Average occupancy for the three month period ended March 31
increased from 91% in 1997 to 93% in 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 ended March 31, 1998 as compared to the same period 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 90% at March 31, 1997
to 88% at March 31, 1998. Average occupancy for the three month period ended
March 31 increased from 88% in 1997 to 89% in 1998. Rental and other income and
Park Place Apartments Phase I decreased for the three months ended March 31,
1998 as compared to the same period in 1997 primarily as a result of increased
rent concessions.
Willow Lake Apartments' occupancy increased from 91% at March 31, 1997 to 97% at
March 31, 1998. Average occupancy for the three month period ended March 31
increased from 91% in 1997 to 93% in 1998. Rental and other income decreased for
the three months ended March 31, 1998 as compared to the same period in 1997 as
a result of increased rent concessions.
Golf Brook Apartments' occupancy increased from 91% at March 31, 1997 to 96% at
March 31, 1998. Average occupancy for the three month period ended March 31
remained constant at 93% for both 1997 and 1998. Rental and other income at Golf
Brook apartments increased for the three months ended March 31, 1998 as compared
to the same period in 1997 primarily as a result of decreased rent concessions
and increased rental rates.
The 5% increase in occupancy at Plainview Point III Office Center from March 31,
1997 to March 31, 1998 is the result of one new lease for approximately 4,800
square feet. Partially offsetting the new lease is the downsizing of an existing
tenant of approximately 1,600 square feet. Average occupancy increased for the
three months ended March 31 from 91% in 1997 to 93% in 1998. Rental and other
income increased at Plainview Point III Office Center for the three months ended
March 31, 1998 as compared to the same period in 1997 as a result of an increase
in common area expense reimbursements. 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.
If present trends continue, the Partnership will be able to continue at its
current level of operations without the need of any additional financing.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties.
Interest and other income includes income from short-term investments made by
the Partnership with cash reserves. Interest income increased for the three
months ended March 31, 1998 as compared to the same period in 1997 as a result
of increased cash reserves being available for investment.
Operating expenses decreased for the three months ended March 31, 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 and vinyl flooring) at
Park Place Apartments Phase I. Operating expenses for the three month period
remained fairly constant at Sabal Park Apartments, Golf Brook Apartments and
Plainview Point III Office Center.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Operating expenses - affiliated remained fairly constant for the three months
ended March 31, 1998 as compared to the three months ended March 31, 1997.
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 ended March 31, 1998 as compared
to the same period 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 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 ended March 31, 1998 as compared to the
same period in 1997 remained fairly constant.
Professional and administrative expenses for the three months ended March 31,
1998 as compared to the same period in 1997 decreased primarily as a result of
decreased outside accounting fees.
Professional and administrative expenses - affiliated decreased for the three
months ended March 31, 1998 as compared to the three months ended March 31, 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 ended March 31,
1998 as compared to the same period 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 $772,494 and $442,106 for the three months ended
March 31, 1998 and 1997, respectively. These funds in conjunction with cash on
hand were used to make a 2% (annualized) cash distribution of $211,040 for the
three months ended March 31, 1998 and a 2% (annualized) cash distribution of
$216,293 for the three months ended March 31, 1997. The annualized distribution
rate is calculated as a percent of the original capital contribution. The
limited partners received 99% and the general partner received 1% of the
distributions. The primary source of future liquidity and distributions is
expected to be derived from cash generated by the Partnership's properties after
adequate cash reserves are established for future leasing and tenant finish
costs. Cash reserves (which are unrestricted cash and equivalents and investment
securities as shown on the Partnership's balance sheet as of March 31) were
$1,959,590 and $1,860,350 at March 31, 1998 and 1997, respectively.
- 12 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of March 31, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,599,835. 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 March 31, 1998, the Partnership had a mortgage payable to an insurance
company in the amount of $8,366,225. 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 March 31, 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
March 31, 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 March 31, 1998, the Partnership had two mortgage loans each with an
insurance company in the amounts of $2,794,020 and $1,862,680 for a total of
$4,656,700. 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 and other capital improvements at the Partnership's properties.
Changes to current tenant finish improvements at commercial properties are a
typical part of any lease negotiation. Improvements generally include a revision
to the current floor plan to accommodate a tenant's needs, new carpeting and
paint and/or wallcovering. The extent and cost of these improvements are
determined by the size of the space and whether the improvements are for a new
tenant or incurred because of a lease renewal. The tenant finish improvements
and other capital additions were funded by cash flow from operations. Cash flows
used in investing activities are also for the purchase of investment securities.
As part of its cash management activities, the Partnership has purchased
Certificates of Deposit or securities issued by the U.S. Government with initial
maturities of greater than three months to improve the return on its cash
reserves. The Partnership intends to hold the securities until maturity. Cash
flows provided by investing activities are derived from the maturity of
investment securities. Cash flows used in financing activities are for cash
distributions, principal payments on mortgages payable, repurchase of limited
partnership Units and payment of loan costs. Cash flows provided by financing
activities represent the utilization of cash which has been reserved by the
Partnership for the repurchase of limited partnership Units. 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.
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The demand on future liquidity is expected to increase as a result of the
Partnership's plans to begin 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. The
construction of the apartments began subsequent to March 31,1998. It is
currently estimated that the cost of the project will be $9,000,000.
Construction costs will be funded by the $7,200,000 of loan proceeds, as
discussed above, and cash reserves. Through March 31, 1998, approximately
$180,000 of pre-development costs had been incurred. As of March 31, 1998, the
Partnership had no material commitments for renovations or capital improvements.
It is anticipated that the cash flow from operations, cash reserves and loan
proceeds will be sufficient to meet the needs of the Partnership.
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 March 1998, the Partnership has funded a total amount of $1,479,730 to
the Reserve. Through March 31, 1998 the Partnership has repurchased a total of
5,173 Units for $1,319,450. Repurchased Units are retired by the Partnership,
thus increasing the share of ownership of each remaining investor. The Interest
Repurchase Reserve was funded from cash reserves. The amount remaining in the
Interest Repurchase Reserve at March 31, 1998 was $160,208. These remaining
funds will be used by the Partnership to repurchase 534 Units at a price of $300
per Unit. 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
regrading the Interest Repurchase Reserve.
Subsequent to March 31, 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 up to 400 Units at a price of $300 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.
- 14 -
<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
three months ended March 31, 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 $ 198,221 $ 208,930 $ 10,709
1997 (60,994) 214,130 214,130
General Partner:
1998 $ 2,002 $ 2,110 $ 8
1997 (616) 2,163 2,163
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 $1,800,000 is land cost, capitalized
interest, common area costs, amenity costs and pre-development costs associated
with the construction of Phase III. The Partnership intends to use the land to
construct Park Place Apartments Phase III. Construction began subsequent to
March 31, 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.
- 15 -
<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.
- 16 -
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
-----------------
None
2. Changes in Securities
---------------------
None
3. Defaults upon Senior Securities
-------------------------------
None
4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
5. Other Information
-----------------
None
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended March
31, 1998.
- 17 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NTS-PROPERTIES VI, a Maryland Limited
Partnership
-------------------------------------
(Registrant)
By: NTS-Properties Associates VI,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
-------------------
John W. Hampton
Senior Vice President
Date: May 14, 1998
------------
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,091,883
<SECURITIES> 1,265,537
<RECEIVABLES> 145,687
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 38,317,081
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 43,086,141
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,535,334
<TOTAL-LIABILITY-AND-EQUITY> 43,086,141
<SALES> 2,386,677
<TOTAL-REVENUES> 2,421,184
<CGS> 0
<TOTAL-COSTS> 1,728,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 492,197
<INCOME-PRETAX> 200,223
<INCOME-TAX> 0
<INCOME-CONTINUING> 200,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,223
<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>
