<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A (Amendment Number 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------------------------------------------
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
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NTS-PROPERTIES VI, A Maryland Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrants specified in its charter)
Maryland 61-1066060
- -------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
- -------------------------------- ----------------------------
(Address of principal executive (Zip Code)
offices)
(502) 426-4800
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
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<PAGE>
TABLE OF CONTENTS
-----------------
Pages
-----
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of March 31, 2000 and December 31, 1999 3
Statements of Operations
for the three months ended March 31, 2000 and 1999 4
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 5
Notes To Financial Statements 6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
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
March 31, 2000 December 31, 1999 *
-------------- -------------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 586,982 $ --
Cash and equivalents - restricted 287,701 206,697
Accounts receivable 149,866 195,399
Land, buildings and amenities, net 49,114 573 48,357,129
Other assets 527,194 451,425
----------- -----------
TOTAL ASSETS $50,666,316 $49,210,650
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable and notes payable $35,203,006 $33,312,443
Accounts payable 1,144,460 1,650,675
Security deposits 217,483 214,523
Other liabilities 449,024 221,597
----------- -----------
TOTAL LIABILITIES 37,013,973 35,399,238
COMMITMENTS AND CONTINGENCIES (Note 9)
Partners' equity 13,652,343 13,811,412
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $50,666,316 $49,210,650
=========== ===========
</TABLE>
<TABLE>
Limited General
Partners Partner Total
------------ ------------ ------------
<CAPTION>
PARTNERS' EQUITY
- ----------------
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 40,518,631 $ 100 $ 40,518,731
Net loss - prior years (11,934,430) (72,160) (12,006,590)
Net loss - current year (157,477) (1,591) (159,068)
Cash distributions declared to
date (12,006,384) (121,277) (12,127,661)
Repurchase of Limited
Partnership Units (2,573,069) -- (2,573,069)
------------ ------------ ------------
Balances at March 31, 2000 $ 13,847,271 $ (194,928) $ 13,652,343
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 29, 2000.
The accompanying notes to financial statements are an integral part of these
statements.
3
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended
March 31,
------------------------------
(Unaudited)
2000 1999
----------- -----------
REVENUES:
- ---------
<S> <C> <C>
Rental income $ 2,451,461 $ 2,351,348
Interest and other income 12,315 11,574
Gain on sale of assets 5,188 --
----------- -----------
2,468,964 2,362,922
=========== ===========
EXPENSES:
- ---------
Operating expenses 592,348 822,612
Operating expenses - affiliated 342,333 342,424
Loss on disposal of assets 72 16,042
Interest expense 632,543 472,309
Management fees 126,729 120,119
Real estate taxes 257,731 203,311
Professional and administrative
expenses 57,809 57,351
Professional and administrative
expenses - affiliated 72,681 59,660
Depreciation and amortization 545,786 451,785
----------- -----------
2,628,032 2,545,613
----------- -----------
Net loss $ (159,068) $ (182,691)
=========== ===========
Net loss allocated
to the Limited Partners $ (157,477) $ (180,864)
=========== ===========
Net loss per Limited
Partnership Unit $ (4.03) $ (4.52)
=========== ===========
Weighted average number of
Limited Partnership Units 39,089 40,037
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Three Months Ended
March 31,
------------------------------
(Unaudited)
2000 1999
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C>
Net loss $ (159,068) $ (182,691)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Amortization of capitalized leasing costs 10,035 673
Loss on disposal of assets 72 16,042
Gain on sale of assets (5,188) --
Depreciation and amortization 545,786 451,785
Changes in assets and liabilities:
Cash and equivalents - restricted (43,004) (45,206)
Accounts receivable 45,533 7,562
Other assets (77,873) (52,778)
Accounts payable (506,215) 613,835
Security deposits 2,960 664
Other liabilities 227,427 172,654
---------- ----------
Net cash provided by operating activities 40,465 982,540
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings and amenities (1,287,615) (1,468,522)
---------- ----------
Net cash used in investing activities (1,287,615) (1,468,522)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal payments on mortgages payable (260,721) (281,479)
Proceeds from mortgage loan 2,151,284 1,261,741
Cash distributions -- (102,497)
Repurchase of Limited Partnership Units -- (262,500)
Cash and equivalents - restricted (38,000) 87,500
Additions to loan costs (18,431) (16,042)
---------- ----------
Net cash provided by financing activities 1,834,132 686,723
---------- ----------
Net increase in cash and equivalents 586,982 200,741
CASH AND EQUIVALENTS, beginning of period -- 362,822
---------- ----------
CASH AND EQUIVALENTS, end of period $ 586,982 $ 563,563
========== ==========
Interest paid on a cash basis $ 638,409 $ 475,138
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
5
<PAGE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The unaudited financial statements and schedules included herein should be read
in conjunction with the Partnership's 1999 Form 10-K as filed with the
Securities Exchange Commission on March 29, 2000. 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, 2000 and 1999.
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. Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at historical cost, less
accumulated depreciation, to the Partnership. Costs directly associated
with the acquisition, development and construction of a project are
capitalized. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements, 5-30 years for
amenities and the applicable lease term for tenant improvements.
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," specifies circumstances in which certain long-lived assets
must be reviewed for impairment. If the carrying amount of an asset exceeds
the sum of its expected future cash flows, the asset's carrying value must
be written down to fair value. Application of this standard during the
periods ended March 31, 2000 and 1999 did not result in any impairment
loss.
3. Concentration of Credit Risk
----------------------------
The Partnership owns and operates, either wholly or through a joint
venture, residential rental properties, all of which are apartment
complexes, in Kentucky (Louisville and Lexington), Indiana (Indianapolis)
and Florida (Orlando). The Partnership also owns and operates, through a
joint venture, a commercial rental property in Louisville, Kentucky.
Substantially all of the tenants are local businesses or are businesses
which have operations in the Louisville area.
6
<PAGE>
4. Reclassifications of 1999 Financial Statements
----------------------------------------------
Certain reclassifications have been made to the March 31, 1999 financial
statements to conform with March 31, 2000 classifications. These
reclassifications have no effect on previously reported operations.
5. 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 purchase of Limited Partnership Units
through tender offers (See Notes to Financial Statements "7. Tender
Offer").
6. Mortgages Payable
-----------------
Mortgages payable consist of the following:
March 31, December 31,
2000 1999
------------ -----------
Mortgage payable with an insurance
company, bearing interest at 7.74%,
due October 15, 2012, secured by
certain land, buildings and
amenities. $ 11,968,856 $ 11,186,637
Mortgage payable with an insurance
company, bearing interest at 7.32%,
due October 15, 2012, secured by
certain land, buildings and
amenities. 7,675,013 7,767,882
Mortgage payable with an insurance
company, bearing interest at 7.43%,
until February 2, 2000 when the loan
was refinanced. The interest rate
after February 2, 2000 is 7.57%, due
May 15, 2009, secured by certain land,
buildings and amenities. 8,941,680 7,677,179
Mortgage payable with an insurance
company, bearing interest at 7.38%,
due December 5, 2012, secured by
certain land, buildings and
amenities. 2,568,048 2,598,146
(Continued on next page)
7
<PAGE>
6. Mortgages Payable - Continued
-----------------------------
March 31, December 31,
2000 1999
------------ -----------
Note payable to a bank,
currently bearing interest at
the Euro-Rate plus 225 basis
points, due June 23, 2002,
secured by certain land,
buildings and amenities. At
March 31, 2000, the interest
rate was approximately 8.125%. $ 2,298,001 $ 2,298,001
Mortgage payable with an insurance
company, bearing interest at 7.38%,
due December 5, 2012, secured by
certain land, buildings and
amenities. 1,712,033 1,732,098
Note payable to a bank, bearing
interest at the Prime Rate + 1%,
due June 14, 2001, secured by
certain land, buildings and amenities.
At March 31, 2000, the interest
rate was 10.0%. 39,375 52,500
------------ ------------
$ 35,203,006 $ 33,312,443
============ ============
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 $34,583,000.
The mortgage payable with an outstanding balance of $11,968,856 as of March
31, 2000 has an additional availability of $231,144. The proceeds are being
used to fund the construction of Park Place Apartments Phase III (See Notes
to Financial Statements "9. Commitments and Contingencies").
On February 2, 2000, the Partnership obtained additional financing in the
amount of $1,369,064 by re-financing an existing loan secured by the land,
buildings and amenities of Golf Brook Apartments. The refinancing resulted
in an increase in the interest rate from 7.43% to 7.57%. The maturity date
remained the same (May 15, 2009).
7. Tender Offer
------------
On March 24, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), filed a tender offer (the "Fourth Tender
Offer") with the Securities and Exchange Commission, commencing on March
27, 2000, to purchase up to 200 of the Partnership's Limited Partnership
Units at a price of $380 per Unit as of the date of the Fourth Tender
Offer. Approximately $94,000 ($76,000 to purchase 200 Units plus
approximately $18,000 for expenses associated with the Fourth Tender Offer)
is required to purchase all 200 Units. The Fourth Tender Offer
8
<PAGE>
7. Tender Offer - Continued
------------------------
stated that the Partnership will purchase the first 100 Units tendered and
will fund its purchase and its portion of the expenses from cash flow from
operations. If more than 100 Units are tendered, ORIG, LLC. will purchase
up to an additional 100 Units. If more than 200 Units are tendered, the
bidders may choose to acquire the additional Units on a pro rata basis.
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 Fourth
Tender Offer. The Fourth Tender Offer will expire on June 27, 2000 unless
extended.
8. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees of
$126,729 and $120,119 for the three months ended March 31, 2000 and 1999,
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. Also pursuant to an agreement, NTS Development Company will
receive a repair and maintenance fee equal to 5.9% of costs incurred which
relate to capital improvements and major repair and renovation projects.
The Partnership incurred repair and maintenance fees of $14,177 and $8,092
during the three months ended March 31, 2000 and 1999, respectively. The
Partnership was also charged the following amounts from NTS Development
Company for the three months ended March 31, 2000 and 1999, respectively.
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.
Three Months Ended
March 31,
--------------------------
2000 1999
---------- ----------
Administrative $ 149,402 $ 72,777
Property Management 218,683 257,307
Leasing 48,593 76,259
Construction Management 22,654 128,245
Other 3,125 8,926
---------- ----------
$ 442,457 $ 543,514
========== ==========
On February 7, 2000, ORIG, LLC. (the "Affiliate") purchased Interests in
the Partnership pursuant to an Agreement, Bill of Sale and Assignment by
and among the Affiliate and four investors in the Partnership. The
Affiliate purchased 675 Interests in the Partnership for a total
consideration of $281,128 or an average price of $416 per Interest. The
Affiliate paid these investors a premium above the purchase price
previously offered for Interests pursuant to prior tender offers because
this purchase allowed the Affiliate to purchase substantial numbers of
Interests without incurring the significant expenses involved with a tender
offer and multiple transfers.
9
<PAGE>
9. Commitments and Contingencies
-----------------------------
The Partnership, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the
Partnership with existing laws has not had a material adverse effect on the
Partnership's financial condition and results of operations. However, the
Partnership cannot predict the impact of new or changed laws or regulations
on its current properties or on properties that it may acquire in the
future.
The Partnership does not believe there is any litigation threatened against
the Partnership other than routine litigation arising out of the ordinary
course of business some of which is expected to be covered by insurance,
none of which is expected to have a material effect on the consolidated
financial statements of the Partnership except as discussed herein.
The Partnership began the construction of Park Place Apartments Phase III
(152 units) during 1999 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 construction cost of the project will be
$11,000,000. Construction costs will be funded by loan proceeds of
$7,200,000 from a mortgage loan obtained during 1997 and cash reserves.
Through March 31, 2000, approximately $10,724,000 of the cost has been
incurred.
As of March 31, 2000, 12 buildings (138 units) out of 13 (152 units), at
Park Place Apartments Phase III, have been certified for occupancy. As a
result of units being turned over, approximately $9,942,000 of the total
estimated construction costs of $11,000,000 has been reclassed from
construction in progress to land, buildings and amenities, net.
The Partnership is also in the final process of renovating the community
clubhouse at Park Place Apartments, Golf Brook Apartments and Sabal Park
Apartments. It is estimated that the aggregate cost for all three
renovations will be approximately $800,000. Through March 31, 2000,
approximately $510,000 of the cost has been incurred. The Partnership is
funding the renovations partly from cash flow from operations, partly from
financing in the amount of $2,500,000 (remaining proceeds were used to fund
a portion of the capital expenditures at Park Place Apartments Phase III
and Plainview Point III Office Center), which is secured by Plainview Point
III Office Center, and partly from additional financing in the amount of
$1,369,064 on the loan secured by Golf Brook Apartments (remaining proceeds
will be used to fund a portion of the capital expenditures at Park Place
Apartments Phase III and normal operating costs for the Partnership).
The Partnership plans to replace the roofs at both the Willow Lake
Apartments (26 buildings) and Park Place Apartments Phase I (24 buildings)
all of which were installed using shingles produced by a single
manufacturer. The shingles appear to contain defects which may cause the
roofs to fail before the end of their expected useful lives. As the
manufacturer has declared bankruptcy, the Partnership does not expect to be
able to recover any of the costs of the roof replacements. The Partnership
does not have sufficient working capital to make all of the roof
replacements at once and intends to make the replacements over the next 36
months. The total cost of replacing all of the roofs is estimated to be
$1,000,000 ($20,000 per building).
Such demand as discussed above will be managed by the General Partner via
funds from operations or additional borrowings secured by the Partnership's
properties. There can be no guarantee that such funds will be available at
which time the General Partner will manage the demand on liquidity
according to the best interest of the Partnership.
10
<PAGE>
9. Commitments and Contingencies - Continued
-----------------------------------------
The Partnership has been sued by Elder Construction and Associates, Inc. in
Jefferson Circuit Court, Louisville, Kentucky, in a lawsuit styled Elder
-----
Construction & Associates, Inc. V. NTS Development Company, Frontier
---------------------------------------------------------------------------
Insurance Company, NTS-Properties VI, a Maryland limited partnership,
---------------------------------------------------------------------------
NTS-Properties Associates VI, and NTS Capital Corporation. All of the named
---------------------------------------------------------
NTS entities are represented by Middleton and Reutlinger, a local law firm.
Elder Construction was hired to be the framing subcontractor with respect
to certain improvements at Phase III of Park Place Apartments in Lexington,
Kentucky. After being removed from the job for its failure to provide its
services in a professional, diligent and workmanlike manner, a complaint
was filed on behalf of Elder Construction in November 1999, alleging, inter
-----
alia, breach of contract. The complaint requested judgment against the
----
defendants in the amount of $233,122 plus interest and other relief against
the defendants.
The Partnership and the other defendants have answered the complaint, and
have asserted counterclaims against the plaintiff for, inter alia, breach
----------
of contract. Discovery is proceeding, but because the case is in the early
discovery phase an outcome cannot be predicted at present. The principals
of the NTS defendants have indicated that the suit brought by Elder
Construction is without merit and will be vigorously defended, including
the prosecution by the defendants of counterclaims against Elder
Construction. No amounts have been provided for in the accompanying
statements regarding this matter.
10. Segment Reporting
-----------------
The Partnership's reportable operating segments include residential and
commercial real estate operations. The residential operations represent the
Partnership's ownership and operating results relative to apartment
complexes known as Willow Lake, Park Place Phase I, Park Place Phase III,
Sabal Park and Golf Brook. The commercial operations represent the
Partnership's ownership and operating results relative to suburban
commercial office space known as Plainview Point III Office Center.
The financial information of the operating segments has been prepared using
a management approach, which is consistent with the basis and manner in
which the Partnership's management internally reports financial information
for the purposes of assisting in making operating decisions. The
Partnership evaluates performance based on stand-alone operating segment
net income.
<TABLE>
Three Months Ended March 31, 2000
---------------------------------------------
Residential Commercial Total
----------- ---------- ----------
<S> <C> <C> <C>
Rental income $2,264,694 $ 186,767 $2,451,461
Interest and other income 11,045 689 11,734
Gain on sale of assets 5,188 -- 5,188
---------- ---------- ----------
Total net revenues $2,280,927 $ 187,456 $2,468,383
========== ========== ==========
Operating expenses and
operating expenses - affiliated 853,598 81,083 934,681
Loss on disposal of assets 72 -- 72
Management fees 115,264 11,465 126,729
Real estate taxes 249,488 8,243 257,731
Interest expense 219,125 -- 219,125
Depreciation and amortization 466,342 46,712 513,054
---------- ---------- ----------
Net income $ 377,038 $ 39,953 $ 416,991
========== ========== ==========
</TABLE>
11
<PAGE>
10. Segment Reporting - Continued
-----------------------------
<TABLE>
Three Months Ended March 31, 1999
---------------------------------------------
Residential Commercial Total
----------- ---------- ----------
<S> <C> <C> <C>
Rental income $2,171,583 $ 179,765 $2,351,348
Interest and other income 10,673 312 10,985
---------- ---------- ----------
Total net revenues $2,182,256 $ 180,077 $2,362,333
========== ========== ==========
Operating expenses and
operating expenses - affiliated 1,081,892 83,144 1,165,036
Loss on disposal of assets 16,042 -- 16,042
Management fees 107,389 12,730 120,119
Real estate taxes 195,037 8,274 203,311
Depreciation and amortization 382,816 37,174 419,990
---------- ---------- ----------
Net income $ 399,080 $ 38,755 $ 437,835
========== ========== ==========
</TABLE>
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements for the three
months ended March 31, 2000 and 1999 is necessary given amounts recorded at the
Partnership level and not allocated to the operating properties for internal
reporting purposes.
<TABLE>
Three Months Ended
March 31,
------------------------------
2000 1999
----------- -----------
NET REVENUES
- ------------
<S> <C> <C>
Total revenues for reportable segments $ 2,468,383 $ 2,362,333
Other income for Partnership 338,516 186,326
Eliminations (337,935) (185,737)
----------- -----------
Total consolidated net revenues $ 2,468,964 $ 2,362,922
=========== ===========
INTEREST EXPENSE
- ----------------
Total interest expense for reportable
segments $ 219,125 $ --
Total interest expense for Partnership 413,418 472,309
----------- -----------
Total interest expense $ 632,543 $ 472,309
=========== ===========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciation and amortization for
reportable segments $ 513,054 $ 419,990
Depreciation and amortization for Partnership 32,732 31,795
----------- -----------
Total depreciation and amortization $ 545,786 $ 451,785
=========== ===========
NET INCOME (LOSS)
- -----------------
Total net income for reportable segments $ 416,991 $ 437,835
Net loss for Partnership (238,124) (434,789)
Eliminations (337,935) (185,737)
----------- -----------
Total net loss $ (159,068) $ (182,691)
=========== ===========
</TABLE>
12
<PAGE>
11. Subsequent Event
----------------
Subsequent to March 31, 2000, the Partnership obtained a commitment from a
bank to increase a loan (current balance of $2,298,001) secured by certain
land, buildings and amenities of Plainview Point III Office Center, by
$500,000. The agreement will change the stated principal payment from
$31,000 to $37,000 which will begin on July 1, 2000. The maturity date of
June 23, 2002 will not change.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is structured in four major sections. The first section
provides information related to occupancy levels and rental and other income
generated by the Partnership's properties. The second analyzes results of
operations on a consolidated basis. The final sections address consolidated cash
flows and financial condition. A discussion of certain market risks also
follows. MD&A should be read in conjunction with the Financial Statements in
Item 1 and the Cautionary Statements below.
Cautionary Statements
- ---------------------
Some of the statements included in this Item 2 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.
Any forward-looking statements included in MD&A, 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 those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of a
commercial office building and apartments complexes. If a major commercial
tenant or a large number of apartment lessees default on their leases, 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.
14
<PAGE>
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
2000 1999
-------------- ------------
Wholly-owned Properties
- -----------------------
Sabal Park Apartments 99% 98%
Park Place Apartments Phase I 84% 83%
Willow Lake Apartments 87% 77%
Park Place Apartments Phase III (1) 47% N/A
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties IV (Ownership % at March 31, 2000)
- -------------------------------------------------
Golf Brook Apartments (96.03%) (2) 91% 96%
Plainview Point III Office Center (95.04%)(2) 87% 93%
1) Park Place Phase III had 55 units available for lease at March 31, 2000 of
which 26 were leased.
2) In the opinion of the General Partner of the Partnership, the decrease in
occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
The average occupancy levels at the Partnership's properties during the three
months ended March 31 were as follows:
Three Months
Ended
March 31,
---------------------------------
2000 1999
-------------- --------------
Wholly-owned Properties
- -----------------------
Sabal Park Apartments 98% 96%
Park Place Apartments Phase I 87% 83%
Willow Lake Apartments 86% 77%
Park Place Apartments Phase III (1) N/A N/A
Property Owned in Joint Venture with
- ------------------------------------
NTS-Properties IV (Ownership % at March 31, 2000)
- --------------------------------------------------
Golf Brook Apartments (96.03%) (2) 94% 95%
Plainview Point III Office Center (95.04%) (2) 87% 92%
1) Average occupancy is not applicable for Park Place Apartments Phase III due
to the fact that the units are being turned over for leasing at different
times. As of March 31, 2000 only 55 units out of 152 were available for
leasing.
2) In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
15
<PAGE>
Results of Operations - Continued
- ---------------------------------
Rental and other income generated by the Partnership's properties for the three
months ended March 31, 2000 and 1999 was as follows:
Three Months Ended
March 31,
----------------------------------
2000 1999
-------------- --------------
Wholly-owned Properties
- -----------------------
Sabal Park Apartments $477,855 $459,638
Park Place Apartments Phase I $447,739 $448,513
Willow Lake Apartments $562,921 $555,375
Park Place Apartments Phase III $ 62,425 N/A
Property Owned in Joint Venture with
- -------------------------------------
NTS-Properties IV (Ownership % at March 31, 2000)
- -------------------------------------------------
Golf Brook Apartments (96.03%) $729,987 $718,728
Plainview Point III Office Center (95.04%) $187,456 $180,077
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The following is an analysis of material changes in results of operations for
the periods ending March 31, 2000 and 1999. Items that did not have a material
impact on operations for the periods listed above have been excluded from this
discussion.
Rental income increased approximately $100,000 or 4% for the three months ended
March 31, 2000, as compared to the same period in 1999. The increase in rental
income was primarily a result of rental income collected at Park Place
Apartments Phase III (Park Place Apartments Phase III was not in operation
during the three months ended March 31, 1999), and increased average occupancy
at Willow Lake Apartments, Park Place Apartments Phase I and Sabal Park
Apartments. The increase is partially offset by decreased average occupancy at
Plainview Point III Office Center and Golf Brook Apartments.
Period-ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages that are
representative of the entire year's results.
Operating expenses decreased approximately $230,000 or 28% for the three months
ended March 31, 2000, as compared to the same period in 1999, primarily due to
the following: 1) decreased exterior repairs (wood replacement and painting) at
Golf Brook Apartments and Sabal Park Apartments, 2) decreased landscaping at
Sabal Park Apartments, and 3) decreased garage repairs at Golf Brook Apartments.
The decrease is partially offset by: 1) expenses incurred by Park Place
Apartments Phase III (Park Place Apartments Phase III was not in operation
during the three months ended March 31, 1999), mainly landscaping, utilities and
advertising, 2) increased floor covering, interior painting and wallcovering and
interior repairs at Willow Lake Apartments, 3) increased wood replacement at
Park Place Apartments Phase I, and 4) increased appliance costs at Sabal Park
Apartments.
16
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 1999 loss on disposal of assets can be attributed to Sabal Park Apartments.
The loss is the result of a signage replacement project.
Interest expense increased approximately $160,000 or 34% for the three months
ended March 31, 2000, as compared to the same period in 1999, as a result of the
Partnership's increasing debt level as a result of the following: 1) draws made
on the Park Place Apartments Phase I and III loan (outstanding balance of
$11,968,856 at March 31, 2000), 2) additional financing in the amount of
$1,369,064 obtained on the loan secured by Golf Brook Apartments (outstanding
balance of $8,941,680 at March 31, 2000), and 3) draws made on the loan secured
by Plainview Point III Office Center (outstanding balance of $2,298,001 at March
31, 2000). The increase in debt level is partially offset by principal payments
made.
Real estate taxes increased approximately $54,000 or 27% for the three months
ended March 31, 2000, as compared to the same period in 1999, primarily as a
result of the following: 1) real estate taxes accrued for Park Place Apartments
Phase III (Park Place Apartments Phase III was not in operation during the three
months ended March 31, 1999), and 2) increased estimated property taxes for
Willow Lake Apartments, and increased assessments at Golf Brook Apartments and
Sabal Park Apartments.
Professional and administrative expenses - affiliated increased approximately
$13,000 or 22% for the three months ended March 31, 2000, as compared to the
same period in 1999, primarily as a result of increased finance and accounting
salary costs due to changes in staff. 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, on
behalf of the Partnership.
Depreciation expense increased approximately $94,000 or 21% for the three months
ended March 31, 2000, as compared to the same period in 1999, primarily as a
result of the following: 1) capitalization of a large portion of Park Place
Apartments Phase III's construction costs (approximately $9,942,000), 2) tenant
finish and common area replacements at Plainview Point III Office Center, net of
retirements, and 3) building improvements and fitness equipment, net of
retirements, at Golf Brook Apartments, Sabal Park Apartments and Park Place
Apartments Phase I. The increase is partially offset by original land and
building improvements and amenities at the Partnership's underlying properties
becoming fully depreciated.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are 10-30 years for land improvements, 5-30
years for buildings and improvements, 5-30 years for amenities and the
applicable lease term for tenant improvements. The aggregate cost of the
Partnership's properties for Federal tax purposes is approximately $62,358,000.
17
<PAGE>
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
Cash flows provided by (used in):
2000 1999
----------- -----------
Operating activities $ 40,465 $ 982,540
Investing activities (1,287,615) (1,468,522)
Financing activities 1,834,132 686,723
----------- -----------
Net increase in cash and equivalents $ 586,982 $ 200,741
=========== ===========
Net cash provided by operating activities decreased approximately $942,000 or
96% for the three months ended March 31, 2000, as compared to the same period in
1999. The decrease in net cash provided by operating activities was driven
primarily by a decrease in accounts payable.
The decrease in net cash used in investing activities during the three months
ended March 31, 2000, was primarily due to decreased capital expenditures
(construction of Park Place Apartments Phase III is in its final stage).
The increase in net cash provided by financing activities during the three
months ended March 31, 2000, was primarily due to increased proceeds from
mortgage loans (draws on Park Place Apartments Phase III loan, draws on the loan
secured by Plainview Point III Office Center and the refinancing of the loan
secured by Golf Brook Apartments) and decreased cash distributions.
On March 21, 2000, the Partnership notified its Limited Partners that it would
be suspending distributions starting January 1, 2000. The suspension is
necessary due to significant capital improvements essential to maintaining the
buildings and facilities owned by the Partnership at Willow Lake Apartments,
Park Place Apartments Phase I, Sabal Park Apartments and Golf Brook Apartments.
The Partnership's cash position will be evaluated on an ongoing basis to
determine when resumption of distributions is appropriate.
The Partnership used cash flow from operations and cash on hand to pay a 1%
(annualized) distribution of $100,604 for the three months ended March 31, 1999.
The annualized distribution rate is calculated as a percent of the original
capital contribution. The Limited Partners received 99% and the General Partner
received 1% of these distributions.
18
<PAGE>
Consolidated Cash Flows and Financial Condition - 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, 2000 and 1999. These distributions were funded by
cash flow derived from operating activities.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
2000 $(157,477) $ -- $ --
1999 (180,864) 99,598 99,598
General Partner:
2000 $ (1,591) $ -- $ --
1999 (1,827) 1,006 1,006
The demand on future liquidity has increased as a result of the construction of
Park Place Apartments Phase III (152 units) on the 15 acres of land adjacent to
the existing Park Place Apartments in Lexington, Kentucky. It is currently
estimated that the construction cost of the project will be $11,000,000. Through
March 31, 2000, approximately $10,724,000 of the construction cost has been
incurred. Construction costs will be funded by $7,200,000 of loan proceeds and
cash reserves. As of March 31, 2000, $231,144 is available on the mortgage
payable for construction costs.
As of March 31, 2000, 12 buildings (138 units) out of 13 (152 units), at Park
Place Apartments Phase III, have been certified for occupancy. As a result of
units being turned over, approximately $9,942,000 of the total estimated
construction costs of $11,000,000 has been reclassed from construction in
progress to land, buildings and amenities, net.
The Partnership is also in the final process of renovating the community
clubhouse at Park Place Apartments, Golf Brook Apartments and Sabal Park
Apartments. It is estimated that the aggregate cost for all three renovations
will be approximately $800,000. Through March 31, 2000, approximately $510,000
of the cost has been incurred. The Partnership is funding the renovations partly
from cash flow from operations, partly from financing in the amount of
$2,500,000 (remaining proceeds were used to fund a portion of the capital
expenditures at Park Place Apartments Phase III and Plainview Point III Office
Center), which is secured by Plainview Point III Office Center, and partly from
additional financing in the amount of $1,369,064 on the loan secured by Golf
Brook Apartments (remaining proceeds will be used to fund a portion of the
capital expenditures at Park Place Apartments Phase III and normal operating
costs for the Partnership).
The Partnership plans to replace the roofs at both the Willow Lake Apartments
(26 buildings) and Park Place Apartments Phase I (24 buildings) all of which
were installed using shingles produced by a single manufacturer. The shingles
appear to contain defects which may cause the roofs to fail before the end of
their
19
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
expected useful lives. As the manufacturer has declared bankruptcy, the
Partnership does not expect to be able to recover any of the costs of the roof
replacements. The Partnership does not have sufficient working capital to make
all of the roof replacements at once and intends to make the replacements over
the next 36 months. The total cost of replacing all of the roofs is estimated to
be $1,000,000 ($20,000 per building).
In the next 12 months, the demand on future liquidity is also anticipated to
increase as the Partnership continues its efforts in the leasing of Plainview
Point III Office Center. At this time, the future leasing and tenant finish
costs, which will be required to renew the current leases that expire during
2000 or obtain new tenants, are unknown.
On March 24, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), filed a tender offer (the "Fourth Tender Offer")
with the Securities and Exchange Commission, commencing on March 27, 2000, to
purchase up to 200 of the Partnership's limited partnership Units at a price of
$380 per Unit as of the date of the Fourth Tender Offer. Approximately $94,000
($76,000 to purchase 200 Units plus approximately $18,000 for expenses
associated with the Fourth Tender Offer) is required to purchase all 200 Units.
The Fourth Tender Offer stated that the Partnership will purchase the first 100
Units tendered and will fund its purchase and its portion of the expenses from
cash flow from operations. If more than 100 Units are tendered, ORIG, LLC. will
purchase up to an additional 100 Units. If more than 200 Units are tendered, the
bidders may choose to acquire the additional Units on a pro rata basis. 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 Fourth Tender Offer. The Fourth Tender
Offer will expire on June 27, 2000 unless extended.
In an effort to continue to improve occupancy at the Partnership's residential
properties, the Partnership has an on-site leasing staff, who are 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, who are employees of NTS Development Company,
located in Louisville, Kentucky. The leasing agents 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. 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.
20
<PAGE>
Year 2000
- ---------
During 1999, all divisions of NTS Corporation, including NTS-Properties
Associates VI, the General Partner of the Partnership, reviewed the effort
necessary to prepare NTS' information systems (IT) and non-information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions were addressed separately for the Year 2000 since the
Partnership saw the need to move to more advanced management and accounting
systems made available by new technology and software development during the
decade of the 1990's. NTS' property management staff surveyed vendors to
evaluate embedded technology in its alarm systems, HVAC controls, telephone
systems and other computer associated facilities. Some equipment was replaced,
while others had circuitry upgrades.
In 1999, the PILOT software system, purchased in the early 1990's, was replaced
by a windows based network system both for NTS' headquarter functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California was selected to replace PILOT.
This system was fully implemented and operational as of December 31, 1999. NTS'
system for residential apartment locations was converted to GEAC's Power Site
System earlier in 1998. There have been no Year 2000 related problems with
either system.
The cost of these advances in NTS' systems technology are not all attributable
to the Year 2000 issue since NTS had already identified the need to move to a
network based system regardless of the Year 2000. The Partnership's share of the
of the costs involved were approximately $19,000 in 1998 and approximately
$81,000 in 1999. These costs include primarily the purchase, lease and
maintenance of hardware and software.
At the date of this filing the Partnership did not experience any significant
operating issues relative to the Year 2000 issue. Despite diligent preparation,
unanticipated third-party failures, inability of the Partnership's tenants to
pay rent when due, more general public infrastructure failures or failure of
NTS' remediation efforts as planned could have a material adverse impact on the
Partnership's results of operations, financial conditions and/or cash flows in
2000 and beyond.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership's primary risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate with the exception of the $2,298,001 note payable that bears interest
at the Euro-Rate plus 225 basis point and the $39,375 note payable that bears
interest at the Prime Rate + 1%. At March 31, 2000, a hypothetical 100 basis
point increase in interest rates would result in approximately $23,400
additional annual interest expense and an approximately $930,000 decrease in the
fair value of debt.
21
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
Items 1,2 and 4 are not applicable and have been omitted.
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, NTS-
Properties VI, Ltd. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NTS-PROPERTIES VI, LTD.
-----------------------------------------
A Maryland Limited Partnership
(Registrant)
By: NTS-Properties Associates VI,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
-----------------------------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: May 12, 2000
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 2000 AND FROM THE STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 874,683
<SECURITIES> 0
<RECEIVABLES> 149,866
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 49,114,573
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 50,666,316
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 35,203,006
0
0
<COMMON> 0
<OTHER-SE> 13,652,343
<TOTAL-LIABILITY-AND-EQUITY> 50,666,316
<SALES> 2,451,461
<TOTAL-REVENUES> 2,468,964
<CGS> 0
<TOTAL-COSTS> 1,995,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 623,543
<INCOME-PRETAX> (159,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (159,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,068)
<EPS-BASIC> 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.
</FN>
</TABLE>
