UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14695
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NTS-PROPERTIES VI, a Maryland Limited Partnership
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(Exact name of registrant as specified in its charter)
Maryland 61-1066060
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 426-4800
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Exhibit Index: See page 48
Total Pages: 53
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TABLE OF CONTENTS
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Pages
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PART I
Items 1 and 2. Business and Properties 3-12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote
of Security Holders 12
PART II
Item 5. Market for the Registrant's Limited
Partnership Interests and Related
Partner Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-25
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 26
Item 8. Financial Statements and Supplementary
Data 27-43
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 44
PART III
Item 10. Directors and Executive Officers of
the Registrant 45
Item 11. Management Remuneration and Transactions 46
Item 12. Security Ownership of Certain Beneficial
Owners and Management 46
Item 13. Certain Relationships and Related
Transactions 46-47
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 48-52
Signatures 53
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PART I
Items 1. and 2. Business and Properties
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Development of Business
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The registrant, NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership"), is a limited partnership formed in December 1984 under the laws
of the State of Maryland. The General Partner is NTS-Properties Associates VI, a
Kentucky limited partnership. As of December 31, 1999, the Partnership owned the
following properties:
- Sabal Park Apartments, a 162-unit luxury apartment complex
located on a 13 acre tract in Orlando, Florida, constructed by
the Partnership.
- Park Place Apartments Phase I, a 180-unit luxury apartment
complex located on an 18 acre tract in Lexington, Kentucky,
constructed by the Partnership.
- Park Place Apartments Phase III, a 152-unit luxury apartment
complex, located on a 15 acre tract in Lexington, Kentucky,
currently under construction by the Partnership. As of
December 31, 1999, 68 Units were certified for occupancy. See
Item 8 Note 10 for more information regarding the construction
of Park Place Apartments Phase III.
- Willow Lake Apartments, a 207-unit luxury apartment complex
located on an 18 acre tract in Indianapolis, Indiana,
constructed by the Partnership.
- A joint venture interest in Golf Brook Apartments, a 195-unit
luxury apartment complex located on a 16 acre tract in
Orlando, Florida, constructed by the joint venture between the
Partnership and NTS- Properties IV., Ltd. ("NTS-Properties
IV"), an affiliate of the General Partner of the Partnership.
The Partnership's percentage interest in the joint venture was
96% at December 31, 1999.
- A joint venture interest in Plainview Point III Office Center,
an office center with approximately 62,000 net rentable square
feet, located in Louisville, Kentucky, constructed by the
joint venture between the Partnership and NTS-Properties IV.
The Partnership's percentage interest in the joint venture was
95% at December 31, 1999.
The Partnership or Joint Venture in which the Partnership is a partner has a fee
title interest in the above listed properties. In the opinion of the
Partnership's management, the properties are adequately covered by insurance.
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Development of Business - Continued
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As of December 31, 1999, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance at
Property Rate Date 12/31/99
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Park Place Apartments
Phase I and III 7.74% 10/15/12 (5) $ 11,186,637(4)
Willow Lake Apartments 7.32% 10/15/12 (3)(2) 7,767,882
Golf Brook Apartments 7.43% 05/15/09 (1)(2) 7,677,179
Sabal Park Apartments 7.38% 12/05/12 (3)(2) 2,598,146
Plainview Point III Euro-Rate +225
Office Center basis points 06/23/02 (7) 2,298,001(8)
Sabal Park Apartments 7.38% 12/05/12 (3)(2) 1,732,098
Golf Brook and
Sabal Park Apartments Prime +1% 06/14/01 (6)(2) 52,500
(1) Monthly principal payments are based upon a 12-year amortization
schedule.
(2) At maturity, the mortgage will have been repaid based on the current
rate of amortization.
(3) Monthly principal payments are based upon a 15-year amortization
schedule.
(4) The mortgage payable has additional availability of $1,013,363 which
will be used to fund the remaining construction of Park Place
Apartments Phase III.
(5) 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.
(6) Monthly principal payments are based upon a 24-month amortization
schedule.
(7) In addition to monthly interest payments, beginning July 1, 2000 a
monthly payment of $31,000 is required. It will be applied first to
accrued interest with the remaining balance applied to the outstanding
principal balance.
(8) The mortgage payable has additional availability of $201,999.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant finish improvements at the Partnership's commercial
property as required by lease negotiations. Changes to current tenant finish
improvements 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 the
improvements are determined by the size of the space being leased and whether
the improvements are for a new tenant or incurred because of a lease renewal.
The tenant finish
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Development of Business - Continued
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improvements will be funded by cash flow from operations and/or cash reserves.
The Partnership is currently building Park Place Apartments Phase III (152
units) 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 $11,000,000. Through December 31, 1999, approximately
$9,769,000 has been incurred. The remaining construction costs will be funded by
loan proceeds, as discussed above, and cash reserves.
The Partnership started renovations of the community clubhouse at Park Place,
Golf Brook and Sabal Park Apartments during 1999. It is currently estimated the
aggregate cost for all three renovations will be approximately $630,000. The
Partnership is funding the renovations partly from cash flow from operations and
partly from financing in the amount of $2,500,000 which is secured by Plainview
Point Office Center Phase III. The remaining proceeds are being used to fund a
portion of the capital expenditures at Park Place Apartments Phase III and
Plainview Point III Office Center.
Financial Information About Industry Segments
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The Partnership is presently engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate. See Item 8 Note 11 for information regarding the Partnership's operating
segments.
Narrative Description of Business
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General
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The current business of the Partnership is consistent with the original purpose
of the Partnership which was to purchase and develop parcels of unimproved or
partially improved land, directly or by joint venture, in order to construct and
otherwise develop thereon apartment complexes, business parks and/or retail,
industrial and office buildings and to own and operate the completed properties.
The Partnership's properties are in a condition suitable for their intended use.
The Partnership intends to hold the Properties until such time as sale or other
disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a Property, the Partnership will consider
factors such as potential capital appreciation, cash flow and federal income tax
considerations, including possible adverse federal income tax consequences to
the Limited Partners.
Description of Real Property
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Sabal Park Apartments
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Units at Sabal Park Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, ovens, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, swimming pool and tennis courts.
Monthly rental rates at Sabal Park Apartments start at $939 for two-bedroom
apartments and $1,279 for three-bedroom apartments, with additional monthly
rental amounts for special features and locations. Tenants pay all costs of
heating, air conditioning and electricity. Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional charge. The occupancy levels at the apartment complex as of December
31 were 99% (1999), 94% (1998), 97% (1997), 90% (1996) and 98% (1995).
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Park Place Apartments Phase I
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Units at Park Place Apartments Phase I include one and two-bedroom apartments
and two-bedroom town homes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices. The amenities are
shared with Phase II of the Park Place development and with Phase III which is
currently being constructed, see discussion above. Park Place Apartments Phase
II is owned by NTS-Properties VII, Ltd., an affiliate of the General Partner of
the Partnership. The cost to construct and operate the common amenities is
shared proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase I start at $739 for one-
bedroom apartments, $939 for two-bedroom apartments and $1,119 for two-bedroom
town homes, with additional monthly rental amounts for special features and
locations. Tenants pay all costs of heating, air conditioning and electricity.
Most leases are for a period of one year. Units will be rented in some cases,
however, on a shorter term basis at an additional charge. The occupancy levels
at the apartment complex as of December 31 were 89% (1999), 80% (1998), 89%
(1997), 90% (1996) and 92% (1995).
Park Place Apartments Phase III
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Units at Park Place Apartments Phase III will include one, two and three-bedroom
apartments. Upon completion, all units will have wall-to-wall carpeting,
individually controlled heating and air conditioning, dishwashers, ranges,
refrigerators with ice makers, garbage disposals and microwave ovens. All units
will have access to coin-operated washers and dryers and some units will have a
washer/dryer hook-up. Amenities include the clubhouse with a party room,
swimming pool, tennis courts, racquetball courts, exercise facility and
management offices. The amenities are shared with Phase I (see discussion above)
and Phase II of the Park Place development. Park Place Apartments Phase II is
owned by NTS-Properties VII, Ltd., an affiliate of the General Partner of the
Partnership. The cost to construct and operate the common amenities is shared
proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase III will start at $725 for
one-bedroom apartments, $950 for two-bedroom apartments and $1,375 for three-
bedroom apartments, with additional monthly rental amounts for special features
and locations. Tenants pay all costs of heating, air conditioning and
electricity. Most leases are for a period of one year. Units will be rented in
some cases, however, on a shorter term basis at an additional charge. As of
December 31, 1999, there were 34 units available for leasing of which 17 are
leased. See Item 8 Note 10 for more information regarding the construction of
Park Place Apartments Phase III.
Willow Lake Apartments
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Units at Willow Lake Apartments include one and two-bedroom apartments and two-
bedroom town homes. All units have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators with
ice makers, garbage disposals and microwave ovens. All units have access to
coin-operated washers and dryers and some units have a washer/dryer hook-up.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise facility and management offices.
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Willow Lake Apartments - Continued
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Monthly rental rates at Willow Lake Apartments start at $730 for one-bedroom
apartments, $1,025 for two-bedroom apartments and $1,236 for two-bedroom town
homes, with additional monthly rental amounts for special features and
locations. Tenants pay all costs of heating, air conditioning and electricity.
Most leases are for a period of one year. Units will be rented in some cases,
however, on a shorter term basis at an additional charge. The occupancy levels
at the apartment complex as of December 31 were 82% (1999), 81% (1998), 88%
(1997), 91% (1996) and 93% (1995).
Golf Brook Apartments
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Units at Golf Brook Apartments include two and three-bedroom units. All units
have wall-to-wall carpeting, individually controlled heating and air
conditioning, dishwashers, ranges, refrigerators, garbage disposals and
washer/dryer hook-ups. Tenants have access to and use of clubhouse, management
offices, pool and tennis courts.
Monthly rental rates at Golf Brook Apartments start at $1,180 for two-bedroom
apartments and $1,410 for three-bedroom apartments, with additional monthly
rental amounts for special features and locations. Tenants pay all costs of
heating, air conditioning and electricity. Most leases are for a period of one
year. Units will be rented in some cases, however, on a shorter term basis at an
additional charge. The occupancy levels at the apartment complex as of December
31 were 95% (1999), 96% (1998), 96% (1997),97% (1996) and 91% (1995).
Plainview Point III Office Center
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As of December 31, 1999, there were 7 tenants leasing space aggregating
approximately 53,660 square feet of rentable area at Plainview Point Office
Center Phase III. All leases provide for tenants to contribute toward the
payment of increases in common area maintenance expenses, insurance and real
estate taxes. The tenants who occupy Plainview Point Office Center Phase III are
professional service-orientated organizations. The principal
occupation/profession practiced is insurance claim processing. Three tenants
individually lease more than 10% of Plainview Point III's rentable area. The
occupancy levels at the office building as of December 31 were 86% (1999), 81%
(1998), 96% (1997), 91% (1996) and 91% (1995).
The following table contains approximate data concerning the major leases in
effect on December 31, 1999:
Sq. Ft. and % of Net Current Annual Rental
Year of Expiration Rentable Area per Square Foot
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Major Tenant (1):
1 2001 11,535 (18.32%) $13.00
2 2004 13,747 (21.84%) 15.00
3 2000 16,727 (26.57%) 13.90
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
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Description of Real Property
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Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
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Wholly-Owned Properties
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Sabal Park Apartments $ 11,401,226 .017895 $ 170,648
Park Place Apartments
Phase I 11,202,845 .009845 111,266
Willow Lake Apartments 15,600,642 .094013 293,809
Properties Owned in
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Joint Venture with
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NTS-Properties IV
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Golf Brook Apartments 16,214,515 .017895 288,325
Plainview Point III
Office Center 4,697,899 .010910 34,007
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
Depreciation for book purposes is computed using the straight-line method over
the estimated useful lives of the assets which are 5-30 years for land
improvements, 30 years for buildings, 5-30 years for building improvements and
3-30 years for amenities. The estimated realty taxes on the completed Park Place
Apartments Phase III will be approximately $90,000. The estimated realty taxes
on all other planned renovations, primarily tenant improvements, would not be
material. See Management's Discussion and Analysis of Financial Condition and
Results of Operations (Item 7) for explanations regarding the fluctuations of
income and occupancy at the Partnership's properties.
Investment in Joint Ventures
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NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership
entered into a joint venture agreement with NTS-Properties IV, an affiliate of
the General Partner of the Partnership, to develop, construct, own and operate a
158-unit luxury apartment complex on a 13.15-acre site in Orlando, Florida known
as Golf Brook Apartments Phase I. On January 1, 1987, the joint venture
agreement was amended to include Golf Brook Apartments Phase II, a 37-unit
luxury apartment complex located on a 3.069-acre site adjacent to Golf Brook
Apartments Phase I. The term of the Joint Venture shall continue until
dissolved. Dissolution shall occur upon, but not before, the first to occur of
the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Partnership, other than
its cash and cash-equivalent assets;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) September 30, 2025.
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Investment in Joint Ventures - Continued
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The Partnership contributed approximately $15,800,000, the cost of constructing
and leasing the apartments. NTS-Properties IV contributed land valued at
$1,900,000 with a related note payable to a bank of $1,200,000. The Partnership
also contributed funds to retire the $1,200,000 note payable to a bank. No
future contributions are anticipated as of December 31, 1999.
Golf Brook Apartments is encumbered by a mortgage payable to an insurance
company. The Partnership had originally obtained financing, secured by Golf
Brook Apartments, to fund a portion of its contribution to the Joint Venture.
The contribution loan has subsequently been refinanced. The current mortgage
payable of $7,677,179 is recorded as a liability by the Partnership in
accordance with the Joint Venture Agreement. The mortgage payable bears interest
at a fixed rate of 7.43%, is due May 15, 2009 and is secured by the assets of
Golf Brook Apartments. Monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the mortgage will have been repaid based on
the current rate of amortization.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 96%
at December 31, 1999.
Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered
into a joint venture agreement with NTS-Properties IV, an affiliate of the
General Partner, to develop, construct, own and operate an office building in
Louisville, Kentucky known as Plainview Point III Office Center. The terms of
the Joint Venture shall continue until dissolved. Dissolution shall occur upon,
but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property, unless
such disposition is, in whole or in part, represented by a
promissory note of the purchaser;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 30, 2026.
The Partnership contributed approximately $4,100,000, the cost to construct and
lease the building. NTS-Properties IV contributed land valued at $790,000 with
an outstanding note of $550,000 which was secured by the land. The Partnership
also contributed the funds to retire the $550,000 note payable to the bank. No
future contributions are anticipated as of December 31, 1999.
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Investment in Joint Ventures - Continued
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The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
means the excess, if any, of (a) the sum of (i) the gross receipts of the Joint
Venture Property, for such period, other than capital contributions, plus (ii)
any funds from previously established reserves (referred to in clause (b) (iv)
below), over (b) the sum of (i) all cash expenses paid by the Joint Venture
Property during such period, (ii) all capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property, and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property, as established by the Partners; provided, however, that the amounts
referred to in (i), (ii) and (iii) above shall be taken in to account only to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 95%
at December 31, 1999.
Competition
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The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents, amenities and service provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1999, the properties under construction in the
respective vicinities in which the properties are located are as follows: In
close proximity to Sabal Park Apartments and Golf Brook Apartments, there are
four apartment complexes under construction. The complexes consist of 360 units,
551 units, 452 units and 310 units with expected completion dates of January
2000, March 2000, July 2000 and December 2000, respectively. In the vicinity
near Park Place Apartments, there are currently 320 apartment units currently
under construction which are scheduled to be completed during the fourth quarter
of 2000. In the vicinity of Willow Lake Apartments, there are currently 200 to
300 apartment units under construction which are scheduled to be completed
during the second quarter of 2000. At this time it is unknown the effect these
new units will have on occupancy at the Partnership's properties. The
Partnership has not commissioned a formal market analysis of competitive
conditions in any market in which it owns properties, but relies upon the market
condition knowledge of the employees of NTS Development Company who manage and
supervise leasing for each property.
Management of Properties
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NTS Development Company, an affiliate of NTS-Properties Associates VI, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a wholly-
owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties
Associates VI. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received a total of $497,764
for the year ended December 31, 1999. $446,741 was received from the residential
properties and $51,023 was received from the commercial property. The fee is
equal to 6% of gross revenues from the commercial property and 5% of gross
revenues from residential properties.
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Management of Properties - Continued
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In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods, unless canceled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1999, the
Management Agreement is still in effect.
Working Capital Practices
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Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
Seasonal Operations
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The Partnership does not consider its operations to be seasonal to any material
degree.
Conflict of Interest
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Because the principals of the General Partner and/or its affiliates own and/or
operate real estate properties other than those owned by the Partnership that
are or could be in competition with the Partnership, potential conflicts of
interest exist. Because the Partnership was organized by and is operated by the
General Partner, these conflicts are not resolved through arms-length
negotiations but through the exercise of the General Partner's good judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for liability resulting from errors in judgement or certain acts or
omissions. With respect to these potential conflicts of interest, the General
Partner and its affiliates retain a free right to compete with the Partnership's
properties including the right to develop competing properties now and in the
future, in addition to those existing properties which may compete directly or
indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates other than those previously described.
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Employees
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The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services. See Item 8 Note 9 for information regarding the Partnership's related
party transactions.
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
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The Partnership has been sued by Elder Construction & Associates, Inc. in
Jefferson Circuit Court, Louisville, Kentucky, in a lawsuit styled Elder
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Construction & Associates, Inc. V. NTS Development Company, Frontier Insurance
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Company, NTS-Properties VI, a Maryland limited partnership, NTS-Properties
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Associates VI, and NTS Capital Corporation. All of the named NTS entities are
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represented by Middleton & 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 judgement 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.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
- 12 -
<PAGE>
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
-----------------------------------------------------------------
Partner Matters
---------------
There is no established trading market for the limited partnership interests,
nor is one likely to develop. The Partnership had 3,227 limited partners as of
February 29, 2000. Cash distributions and allocations of net income (loss) are
made as described in Note 1C to the Partnership's 1999 financial statements.
Annual distributions totaling $10.00, $12.50 and $20.00 per limited partnership
unit were paid during the years ended December 31, 1999, 1998 and 1997,
respectively. Quarterly distributions are determined based on current cash
balances, cash flow being generated by operations and cash reserves needed for
future leasing costs, tenant finish costs and capital improvements.
Distributions were paid quarterly as follows:
1999 1998 1997
---- ---- ----
First quarter $ 2.50 $ 5.00 $ 5.00
Second quarter 2.50 2.50 5.00
Third quarter 2.50 2.50 5.00
Fourth quarter 2.50 2.50 5.00
------- ------- -------
$ 10.00 $ 12.50 $ 20.00
======= ======= =======
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the
years ended December 31, 1999, 1998 and 1997.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1999 $ (185,285) $ 396,514 $ 396,514
1998 453,154 515,339 62,185
1997 106,042 853,625 747,583
General Partners:
1999 $ (1,872) $ 4,005 $ 4,005
1998 4,577 5,206 629
1997 1,071 8,622 7,551
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.
- 13 -
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
Years ended December 31, 1999, 1998, 1997, 1996 and 1995.
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues $ 9,576,976 $ 9,835,496 $ 9,608,273 $ 9,670,261 $ 8,939,055
Total expenses (9,764,133) (9,377,765) (9,402,616) (9,443,207) (9,266,749)
------------ ------------ ------------ ------------ ------------
Income(loss) before
extraordinary item (187,157) 457,731 205,657 227,054 (327,694)
Extraordinary item(1) -- -- (98,544) -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (187,157) $ 457,731 $ 107,113 $ 227,054 $ (327,694)
============ ============ ============ ============ ============
Net income (loss) allocated to:
General Partner $ (1,872) $ 4,577 $ 1,071 $ 2,271 $ (3,277)
Limited partners $ (185,285) $ 453,154 $ 106,042 $ 224,783 $ (324,417)
Net income (loss) per
limited partnership
unit $ (4.66) $ 10.96 $ 2.48 $ 4.97 $ (6.84)
Weighted average
number of limited
partnership units 39,751 41,334 42,817 45,243 47,435
Cumulative net income (loss) allocated to:
General Partner $ (72,160) $ (70,288) $ (74,865) $ (75,936) $ (78,207)
Limited partners $(11,934,430) $(11,749,145) $(12,202,299) $(12,308,341) $(12,533,124)
Cumulative net
taxable income
(loss) allocated to:
General Partner $ 111,613 $ 104,550 $ 102,664 $ 1,192,830 $ 78,617
Limited partners $(15,165,626) $(14,759,062) $(15,174,826) $(16,357,888) $(15,401,294)
Distributions
declared:
General Partner $ 4,005 $ 5,206 $ 8,622 $ 8,950 $ 9,583
Limited partners $ 396,514 $ 515,339 $ 853,625 $ 886,000 $ 948,700
Cumulative
distributions
declared:
General Partner $ 121,277 $ 117,272 $ 112,066 $ 103,444 $ 94,494
Limited partners $ 12,006,384 $ 11,609,870 $ 11,094,531 $ 10,240,906 $ 9,354,906
At year end:
Cash and equivalents $ -- $ 362,822 $ 276,891 $ 640,541 $ 393,552
Investment
securities $ -- $ -- $ 1,562,813 $ 1,085,267 $ 1,151,355
Land, buildings and
amenities, net $ 48,357,129 $ 41,751,683 $ 40,435,367 $ 42,151,295 $ 42,196,272
Total assets $ 49,210,650 $ 43,179,405 $ 43,289,608 $ 44,771,802 $ 46,813,791
Mortgages payable $ 33,312,443 $ 27,119,180 $ 26,872,563 $ 27,403,056 $ 27,653,044
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
See Item 8 Note 7 for information regarding the extraordinary item.
</TABLE>
- 14 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations 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. Discussion of certain market risks and our cautionary
statements also follow. Management's analysis should be read in conjunction with
the financial statements in Item 8 and the cautionary statements below.
Occupancy Levels
- ----------------
The occupancy levels at the Partnership's properties as of December 31 were as
follows:
Percentage
Ownership
at 12/31/99 1999 (2) 1998 1997
----------- -------- ---- ----
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 100% 99% 94% 97%
Park Place Apartments
Phase I 100% 89% 80% 89%
Willow Lake Apartments 100% 82% 81% 88%
Park Place Apartments
Phase III 100% 50% (3) N/A N/A
Properties Owned in Joint
- -------------------------
Venture with
- ------------
NTS- Properties IV
- ------------------
Golf Brook Apartments (1) 96% 95% 96% 96%
Plainview Point III
Office Center 95% 86% 81% 96%
(1) In the opinion of the General Partners of the Partnership, the decrease
in year ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(2) Current occupancy levels are considered adequate to continue the
operation of the Partnership's properties.
(3) Park Place Apartments Phase III had 34 units available for lease at
December 31, 1999 of which 17 were leased.
- 15 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations - Continued
- ----------------------
Occupancy Levels - Continued
- ----------------------------
The average occupancy levels at the Partnership's properties as of December 31
were as follows:
Percentage
Ownership
at 12/31/99 1999 1998 1997
----------- ---- ---- ----
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 100% 96% 95% 92%
Park Place Apartments
Phase I 100% 89% 85% 91%
Willow Lake Apartments (1) 100% 78% 93% 90%
Park Place Apartments
Phase III 100% N/A (2) N/A N/A
Properties Owned in Joint
- -------------------------
Venture with
- ------------
NTS- Properties IV
- ------------------
Golf Brook Apartments (1) 96% 94% 96% 93%
Plainview Point III
Office Center (1) 95% 91% 92% 90%
(1) In the opinion of the General Partners of the Partnership, the decrease
in average occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(2) Average occupancy is not applicable for Park Place Apartments Phase III
due to the fact that the units did not start being certified for
occupancy until September 1999. Because the units are being turned over
to leasing at different times, the occupancy of one month is not
comparable to the next month.
- 16 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations - Continued
- ----------------------
Rental and Other Income
- -----------------------
Rental and other income generated by the Partnership's properties for the years
ended December 31, 1999, 1998 and 1997 were as follows:
Percentage
Ownership
at 12/31/99 1999 1998 1997
----------- ---- ---- ----
Wholly-Owned Properties
- -----------------------
Sabal Park Apartments 100% $1,911,772 $1,823,218 $1,725,980
Park Place Apartments
Phase I 100% $1,830,936 $1,787,227 $1,896,871
Willow Lake Apartments 100% $2,105,852 $2,409,227 $2,412,609
Park Place Apartments
Phase III 100% $ 37,077 N/A N/A
Properties Owned in Joint
- -------------------------
Venture with
- ------------
NTS- Properties IV
- ------------------
Golf Brook Apartments 96% $2,861,714 $2,926,168 $2,747,335
Plainview Point III
Office Center 95% $ 810,536 $ 781,388 $ 737,948
Revenues shown in the table on the previous page 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 December 31, 1999, 1998 and 1997. Items that did not have a
material impact on operations for the periods listed above have been eliminated
from this discussion.
Rental income decreased approximately $163,000 or 2% from 1998 to 1999. The
decrease in rental income was mainly a result of decreased average occupancy at
Willow Lake Apartments, Golf Brook Apartments, and Plainview Point III Office
Center and decreased cost recovery income at Plainview Point III Office Center.
All leases at the Office Center provide for tenants to contribute toward the
payment of increases in common area maintenance expenses, insurance, utilities
and real estate taxes. These decreases are partially offset by income from a
letter of credit at Plainview Point III Office Center upon the default of a
tenant's lease, increased rental rates at Sabal Park Apartments and Willow Lake
Apartments, water and sewer income collected at Golf Brook Apartments and Sabal
Park Apartments, increased average occupancy at Park Place Apartments Phase I
and Sabal Park Apartments and income collected from Park Place Apartments Phase
III.
Rental income increased approximately $200,000 or 2% in 1998. The increase in
rental income was a result of increased rental rates and increased average
occupancy at Sabal Park Apartments and Golf Brook Apartments and increased cost
recovery income at Plainview Point III Office Center. These increases are
partially offset by a decrease in rental income at Park Place Apartments Phase I
as a result of decreased average occupancy.
Year ending occupancy percentage represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
representative of the entire year's results.
- 17 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------------
Operations - Continued
- ----------------------
Interest and other income includes interest income from investments made by the
Partnership with cash reserves. Interest income decreased approximately $95,700
or 68% in 1999 primarily as a result of the Partnership holding no investments
in 1999 and therefore earning no interest.
Operating expenses decreased approximately $115,000 or 4% in 1999 due primarily
to the following: 1) decreased advertising costs at Sabal Park Apartments, Golf
Brook Apartments and Park Place Apartments Phase I, 2) decreased floor covering
costs and repair and maintenance costs at Golf Brook Apartments and 3) decreased
repair and maintenance costs at Sabal Park Apartments. These decreases are
partially offset by increased floor covering costs and landscaping costs at
Sabal Park Apartments and Willow Lake Apartments, increased repair and
maintenance costs and advertising costs at Willow Lake Apartments, increased
parking lot repairs at Golf Brook Apartments and expenses incurred (mainly
advertising expenses) at Park Place Apartments Phase III.
Operating expenses increased approximately $85,000 or 3% in 1998 due primarily
to the following: 1) increased apartment renovation costs at Sabal Park
Apartments and Golf Brook Apartments (replacing wallpaper with texturized walls
which require less maintenance in the future, 2)increased repair and maintenance
costs at Sabal Park Apartments, 3) the parking lot was re-sealed and striped at
Plainview Point III Office Center during 1998 and 4) increased advertising costs
at all the Partnership's residential properties. The increases are partially
offset by decreased repair and maintenance costs at Park Place Apartments Phase
I and decreased utility, repair and maintenance costs and carpet replacement
costs at Willow Lake Apartments.
Operating expenses - affiliated increased approximately $77,300 or 6% in 1999
primarily as a result of increased property management costs at all of the
Partnership's underlying properties. The increase is also a result of increased
leasing salaries and commissions at Sabal Park Apartments, Golf Brook Apartments
and Park Place Apartments Phase I and increased administrative salary costs at
Sabal Park Apartments and Golf Brook Apartments. These increases are partially
offset by decreased leasing salaries and commissions at Willow Lake Apartments.
Operating expenses - affiliated are expenses incurred for services by employees
of NTS Development Company, an affiliate of the General Partner of the
Partnership.
Operating expenses - affiliated increased approximately $128,000 or 12% in 1998
primarily as a result of increased property management costs and the fact that
in years past, apartment managers and maintenance supervisors received free rent
as part of their compensation. Beginning in 1998, free rent for these
individuals was discontinued and their base salary was increased.
The 1999 write-off of unamortized land improvements and amenities can be
attributed to Golf Brook Apartments, Sabal Park Apartments, Willow Lake
Apartments and Plainview Point III Office Center. The write-offs are the result
of various property renovations, including painting and the replacement of
exterior wood at Sabal Park Apartments and Golf Brook Apartments, roof
replacement at Willow Lake Apartments and carpet replacement at Plainview Point
III Office Center. The write-offs represent the costs of unamortized assets,
which were replaced as a result of the renovations.
The 1998 write-off of unamortized land improvements and amenities can be
attributed to Park Place Apartments Phase I and Willow Lake Apartments. The
write-offs are the result of property renovations at Park Place Apartments Phase
I for signage and deck replacements and Willow Lake Apartments for roof
replacements.
- 18 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------------
Operations - Continued
- ----------------------
The 1997 write-off of unamortized loan costs (treated as an extraordinary item)
relates to loan costs associated with the Golf Brook, Park Place Phase I, Willow
Lake and Sabal Park Apartments mortgages payable. The unamortized loan costs
were expensed due to the fact that the mortgages were retired in 1997 prior to
their scheduled maturities - August 1, 1997, October 5, 2002, November 1, 1997
and January 5, 2003, respectively - as a result of new financing being obtained
during 1997.
Interest expense decreased approximately $230,000 or 11% in 1998 as a result of
the 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. Interest expense decreased in 1998 due to the Partnership's
decreasing debt level as a result of principal payments made.
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 increased approximately $69,500 or 8.5% in 1999 primarily due
to additional accruals necessary related to estimated property taxes for Willows
Lake Apartments. The increase is also the result of increased assessments for
Sabal Park Apartments and Golf Brook Apartments.
Real estate taxes increased approximately $36,000 or 5% in 1998 as a result of
increased assessments for Sabal Park Apartments and Golf Brook Apartments.
Professional and administrative expenses increased approximately $65,600 or 35%
in 1999 primarily as a result of legal costs incurred in connection with tender
offers (see below for information regarding the Tender Offers), increased legal
costs for general services and increased employee search fees and temporary
services due to various vacant positions.
Professional and administrative expenses increased approximately $35,000 or 24%
in 1998 primarily as a result of costs incurred in connection with the Tender
Offer. See below for information regarding the Tender Offer.
Professional and administrative expenses - affiliated decreased approximately
$48,000 or 16% in 1998 primarily 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 General
Partner of the Partnership.
Depreciation and amortization expense increased approximately $79,700 or 4% in
1999 primarily as a result of the capitalization of a portion of Park Place
Apartments Phase III's construction costs (approximately $4,317,000), tenant
finish at Plainview Point III Office Center, computers and software for the
Partnership and signage projects at Sabal Park Apartments and Golf Brook
Apartments, net of retirements. The increase is partially offset by original
land and building improvements at the Partnership's underlying properties
becoming fully depreciated.
- 19 -
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------------
Operations - Continued
- ----------------------
Depreciation and amortization expense decreased approximately $108,000 or 6% in
1998 as a result of original land improvements at Park Place Apartments Phase I,
Willow Lake Apartments and Golf Brook Apartments becoming fully depreciated and
as a result of decreased loan cost amortization.
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 3-30 years for amenities. The
aggregate cost of the Partnership's properties for Federal tax purposes is
approximately $62,358,000.
Consolidated Cash Flows and Financial Conditions
- ------------------------------------------------
The majority of the Partnership's cash flow is typically derived from operating
activities. Cash flows used in investing activities are for tenant finish
improvements, other capital improvements at the Partnership's properties and
construction of Park Place Apartments Phase III. Changes to current tenant
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 have
been funded by cash flow from operations. Park Place Apartments Phase III
construction costs have been funded by debt financing, cash reserves and 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 had periodically 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 held the
securities until maturity. 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 used in financing
activities also include cash which has been reserved by the Partnership for the
repurchase of limited partnership Units through the Interest Repurchase Program
or the Tender Offers (1999 and 1998). Cash flows provided by financing
activities represent the utilization of cash which has been reserved by the
Partnership for the repurchase of limited partnership Units and proceeds from
mortgage loans.
Cash flows provided by (used in):
1999 1998 1997
---- ---- ----
Operating activities $ 2,352,042 $ 2,336,661 $ 2,131,543
Investing activities (8,091,884) (1,147,264) (588,096)
Financing activities 5,377,020 (1,103,466) (1,907,097)
----------- ----------- -----------
Net increase (decrease) in
cash and equivalents $ (362,822) $ 85,931 $ (363,650)
=========== =========== ===========
Net cash provided by operating activities increased approximately $15,300 or 1%
in 1999 primarily due to an increase in accounts payable - operations partially
offset by decreased net income.
Net cash provided by operating activities increased approximately $205,000 or
10% to $2,336,661 in 1998. This increase was driven by an increase in net
income.
- 20 -
<PAGE>
Consolidated Cash Flows and Financial Conditions - Continued
- ------------------------------------------------------------
The increase in net cash used in investing activities in 1999 was primarily due
to increased capital expenditures (construction of Park Place Apartments Phase
III continued in 1999). The increase in net cash used in investing activities in
1998 was primarily due to increased capital expenditures (began construction of
Park Place Apartments Phase III in 1998) partially offset by the maturity of
investment securities exceeding the purchase of investment securities.
The increase in net cash provided by financing activities in 1999 was primarily
due to increased proceeds from mortgage loans (draws on the Park Place Phase III
loan and a new loan secured by Plainview Point III Office Center) and decreased
cash distributions.
The decrease in net cash used in financing activities in 1998 was primarily due
to a decrease in principal payments made on mortgages payable as a result of
debt refinancing done in 1997. The decrease was also a result of decreased
distributions paid and decreased loan costs. The decrease is partially offset by
increased repurchases of limited partnership Units.
During the year ended December 31, 1999, the Partnership used cash flow from
operations and cash on hand to make a 1.00% (annualized) distribution of
$400,519. During the year ended December 31, 1998, the Partnership used cash
flow from operations and cash on hand to make a 1.25% (annualized) distribution
of $520,545. During the year ended December 31, 1997, the Partnership used cash
flow from operations and cash on hand to make a 2% (annualized) distribution of
$862,000. 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 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 these 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. It is anticipated that the cash flow
from operations, cash reserves and the remaining funds available on the
$12,200,000 mortgage payable (balance is $11,186,637 at December 31, 1999) will
be sufficient to meet the needs of the Partnership. Cash reserves (which are
unrestricted cash and equivalents and investment securities as shown on the
Partnership's balance sheet as of December 31) were $0, $362,822 and $1,839,704
at December 31, 1999, 1998 and 1997, respectively.
The Partnership does not expect any material changes in the mix and relative
cost of capital resources from those in 1999 except for the completion of Park
Place Apartments Phase III, as discussed below.
- 21 -
<PAGE>
Consolidated Cash Flows and Financial Conditions - 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
years ended December 31, 1999, 1998 and 1997.
Cash
Net Income Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1999 $ (185,285) $ 396,514 $ 396,514
1998 453,154 515,339 62,185
1997 106,042 853,625 747,583
General Partner:
1999 $ (1,872) $ 4,005 $ 4,005
1998 4,577 5,206 629
1997 1,071 8,622 7,551
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 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 the
Partnership owns which is adjacent to the existing Park Place Apartments in
Lexington, Kentucky. Construction began in 1998 and is expected to be completed
in May 2000. It is currently estimated that the total cost of the project will
be $11,000,000. Construction costs are being funded by $7,200,000 of loan
proceeds from the Park Place Apartments Phase I and III loan, a portion of the
$2,500,000 loan proceeds from the Plainview Point III Office Center loan, cash
from operations and cash reserves. As of December 31, 1999, $1,013,363 is
available on the mortgage payable for construction costs. Through December 31,
1999, approximately $9,769,000 of cost had been incurred.
Construction in progress included in land, buildings and amenities on the
December 31, 1999 Balance Sheet relates primarily to Park Place Apartments Phase
III. Included in the cost of approximately $5,194,000 is approximately
$5,100,000 related directly to Phase III construction. The remaining costs of
$94,000 relate to clubhouse costs at Park Place Apartments Phase I and III and
tenant finish costs at Plainview Point III Office Center.
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.
The Partnership has also started renovations of the community clubhouse at Park
Place, Golf Brook and Sabal Park Apartments during 1999. It is currently
estimated the aggregate cost for all three renovations will be approximately
$630,000. The Partnership is funding the renovations partly from cash flow from
operations and partly from financing in the amount of $2,500,000 which is
secured by Plainview Point III Office Center. The remaining proceeds are being
used to fund a portion of the capital expenditures at Park Place Apartments
Phase III and Plainview Point III Office Center.
- 22 -
<PAGE>
Consolidated Cash Flows and Financial Conditions - Continued
- ------------------------------------------------------------
The demand on future liquidity will also increase as a result of the replacement
of the roofs at both the Willow Lake Apartments (26 buildings) and Park Place
Phase I apartments (24 buildings) all of which were installed using shingles
produced by a single manufacturer. The shingles appear to contain defects which
may cause 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.
The Partnership had no other material commitments for renovations or capital
expenditures at December 31, 1999.
Pursuant to Section 61.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in December 1995. During the years ended December 31, 1998, 1997 and 1996, the
Partnership has funded $400,000, $300,000 and $705,380, respectively, to the
reserve. Through October 25, 1998 (the commencement of the First Tender Offer),
the Partnership had repurchased a total of 6,846 Units for $1,861,200 at a price
ranging from $250 to $350 per unit. The 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 units. Repurchased Units have
been 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 funds remaining in the Interest Repurchase
Reserve at the commencement of the First Tender Offer (discussed below) were
returned to unrestricted cash for utilization in the Partnership's operations.
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a tender offer (the "First Tender Offer")
to purchase up to 1,250 of the Partnership's limited Partnership Units at a
price of $350 per Unit. The initial expiration date of the First Tender Offer
was January 18, 1999, and this expiration date was subsequently extended through
March 31, 1999. A total of 2,103 Units were tendered and the bidders accepted
all Units tendered. The Partnership repurchased 750 Units at a cost of $262,500
and ORIG, LLC purchased 1,353 Units at a total cost of $473,550. The expenses
associated with the First Tender Offer were approximately $52,000. Units that
were acquired by the Partnership were retired. Units that were acquired by ORIG,
LLC were held by it. The General Partner, NTS-Properties Associates VI, did not
participate in the First Tender Offer.
On June 25, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a second tender offer (the "Second Tender
Offer") to purchase up to 1,000 of the Partnership's limited partnership Units
at a price of $350 per Unit as of the date of the Second Tender Offer. The
initial expiration date of the Second Tender Offer was August 31, 1999. On
August 23, 1999, the price was increased to $370 per Unit and the expiration
date was extended to September 30, 1999.
- 23 -
<PAGE>
Consolidated Cash Flows and Financial Conditions - Continued
- ------------------------------------------------------------
Under the terms of the Second Tender Offer, the Second Tender Offer expired on
September 30, 1999. As of that date, 2,801 Units were tendered, pursuant to the
Second Tender Offer, and the bidders accepted all Units tendered. The
Partnership purchased 500 Units at a cost of $185,000 and ORIG, LLC purchased
2,301 Units at a cost of $851,370. The expenses associated with administering
the Second Tender Offer were approximately $38,000. The General Partner, NTS-
Properties Associates VI, did not participate in the Second Tender Offer.
On November 9, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a third tender offer (the "Third Tender
Offer") to purchase up to 500 of the Partnership's limited partnership Units at
a price of $380 per Unit as of the date of the Third Tender Offer. The Third
Tender Offer stated that the Partnership would purchase the first 250 Units
tendered and would fund its purchases and its portions of the expenses from cash
flow from operations. If more than 250 Units were tendered, ORIG, LLC would
purchase up to an additional 250 Units. If more than 500 Units were tendered,
the bidders could choose to acquire the additional Units on a pro rata basis.
On December 23, 1999, the Third Tender Offer expired. As of that date a total of
1,085 Units were tendered, pursuant to the Third Tender Offer, and the bidders
accepted all Units tendered. The Partnership purchased 250 Units at a cost of
$95,000 and ORIG, LLC purchased 835 Units at a cost of $317,300. The expenses
associated with administering the Third Tender Offer were approximately $13,500.
Units that were acquired by the Partnership have been retired. Units that were
acquired by ORIG, LLC are being held by it. The General Partner, NTS-Properties
Associates VI, did not participate in the Third Tender Offer.
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, 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. 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.
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 advance 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.
- 24 -
<PAGE>
Year 2000 - Continued
- ---------------------
This system is fully implemented and operational as of December 31, 1999. NTS'
system for multi-family 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.
Cautionary Statements
- ---------------------
Some of the statements included in Items 1 and 2, Business and Properties and
Item 7, 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.
Any forward-looking statements included in Managements's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to 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 commercial
office buildings and apartment complexes. If a major commercial tenant or a
large number of apartment leases defaults 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, other operating expenses and acts of God.
The Partnership plans to replace the roofs at both the Willow Lake Apartments
(26 buildings) and Park Place Phase I apartments (24 buildings) all of which
were installed using shingles produced by a single manufacturer. The shingles
appear to contain defects which may cause 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.
- 25 -
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market 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 points and the $52,500 note payable that bears
interest at the Prime Rate + 1%. At December 31, 1999, a hypothetical 100 basis
point increase in interest rates would result in an approximately $904,300
decrease in the fair value of debt and an approximately $23,500 increase in
interest expense.
- 26 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties VI, a Maryland Limited Partnership:
We have audited the accompanying balance sheets of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1999 and 1998, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties VI, a Maryland
Limited Partnership, as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 49
through 52 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 24, 2000
- 27 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and equivalents $ -- $ 362,822
Cash and equivalents - restricted 206,697 446,097
Accounts receivable 195,399 125,474
Land, buildings and amenities, net 48,357,129 41,751,683
Other assets 451,425 493,329
----------- -----------
$49,210,650 $43,179,405
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $33,312,443 $27,119,180
Accounts payable-operations 573,834 245,279
Accounts payable-construction 831,677 319,757
Retainage payable 245,164 141,280
Distributions payable -- 102,497
Security deposits 214,523 222,794
Other liabilities 221,597 87,030
----------- -----------
35,399,238 28,237,817
Commitments and contingencies (Note 10)
Partners' equity 13,811,412 14,941,588
----------- -----------
$49,210,650 $43,179,405
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 28 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
1999 1998 1997
---- ---- ----
Revenues:
- ---------
<S> <C> <C> <C>
Rental income $ 9,532,786 $ 9,695,585 $ 9,493,634
Interest and other income 44,190 139,911 114,639
----------- ----------- -----------
9,576,976 9,835,496 9,608,273
Expenses:
- ---------
Operating expenses 2,465,394 2,580,618 2,495,455
Operating expenses - affiliated 1,296,779 1,219,445 1,091,454
Write-off of unamortized land
improvements and amenities 255,006 65,060 --
Interest expense 1,986,488 1,962,133 2,194,368
Management fees 497,764 494,494 480,335
Real estate taxes 884,921 815,422 779,214
Professional and administrative
expenses 252,152 186,533 150,846
Professional and administrative
expenses - affiliated 243,615 251,719 300,159
Depreciation and amortization 1,882,014 1,802,341 1,910,785
----------- ----------- -----------
9,764,133 9,377,765 9,402,616
----------- ----------- -----------
Income(loss) before extraordinary item (187,157) 457,731 205,657
Extraordinary item:
Write-off unamortized loan costs -- -- (98,544)
----------- ----------- -----------
Net income(loss) $ (187,157) $ 457,731 $ 107,113
=========== =========== ===========
Net income(loss) allocated to the limited partners:
Income(loss) before extraordinary $ (185,285) $ 453,154 $ 203,600
item
Extraordinary item -- -- (97,558)
----------- ----------- -----------
Net income(loss) $ (185,285) $ 453,154 $ 106,042
=========== =========== ===========
Net income(loss) per limited partnership Unit:
Income(loss) before extraordinary $ (4.66) $ 10.96 $ 4.76
item
Extraordinary item -- -- (2.28)
----------- ----------- -----------
Net income(loss) $ (4.66) $ 10.96 $ 2.48
=========== =========== ===========
Weighted average number of limited
partnership units 39,751 41,334 42,817
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 29 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF PARTNERS' EQUITY (1)
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balances at December 31, 1996 $ 16,679,266 $ (179,280) $ 16,499,986
Net income 106,042 1,071 107,113
Distributions declared (853,625) (8,622) (862,247)
Repurchase of limited partnership
Units (41,500) -- (41,500)
------------ ------------ ------------
Balances at December 31, 1997 15,890,183 (186,831) 15,703,352
Net income 453,154 4,577 457,731
Distributions declared (515,339) (5,206) (520,545)
Repurchase of limited partnership
Units (698,950) -- (698,950)
------------ ------------ ------------
Balances at December 31, 1998 15,129,048 (187,460) 14,941,588
Net (loss) (185,285) (1,872) (187,157)
Distribution declared (396,514) (4,005) (400,519)
Repurchase of limited partnership
Units (542,500) -- (542,500)
------------ ------------ ------------
Balances at December 31, 1999 $ 14,004,749 $ (193,337) $ 13,811,412
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented, there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board,Statement
of Financial Accounting Standards Statement No. 130, Reporting
---------
Comprehensive Income.
---------------------
- 30 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C> <C>
Net income(loss) $ (187,157) $ 457,731 $ 107,113
Adjustments to reconcile net income to net cash
provided by operating activities:
Accrued interest on investment securities -- 11,426 (4,048)
Amortization of capitalized leasing costs -- -- 2,244
Write-off of unamortized land improvements
and amenities 255,006 65,060 --
Write-off unamortized loan costs -- -- 98,544
Depreciation and amortization 1,882,014 1,802,341 1,910,785
Changes in assets and liabilities:
Cash and equivalents - restricted (23,100) 6,491 141,609
Accounts receivable (69,925) (14,322) 25,242
Other assets 40,353 (47,168) 2,121
Accounts payable-operations 328,555 50,114 (154,003)
Security deposits (8,271) (14,707) (13,313)
Other liabilities 134,567 19,695 15,249
------------ ------------ ------------
Net cash provided by operating activities 2,352,042 2,336,661 2,131,543
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings and amenities (8,707,688) (3,159,688) (114,598)
Account payable - construction 615,804 461,037 --
Purchase of investment securities -- (1,004,314) (3,931,387)
Maturity of investment securities -- 2,555,701 3,457,889
------------ ------------ ------------
Net cash used in investing activities (8,091,884) (1,147,264) (588,096)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal payments on mortgages payable (1,639,716) (1,010,041) (27,730,493)
Proceeds from mortgage loans and note payable 7,832,979 1,256,658 27,200,000
Cash distributions (503,017) (631,736) (865,252)
Repurchase of limited partnership Units (542,500) (698,950) (41,500)
Additions to loan costs (33,226) (74,377) (211,352)
Cash and equivalents - restricted 262,500 54,980 (258,500)
------------ ------------ ------------
Net cash provided by (used in) financing 5,377,020 (1,103,466) (1,907,097)
activities ------------ ------------ ------------
Net increase (decrease) in cash and
equivalents (362,822) 85,931 (363,650)
CASH AND EQUIVALENTS, beginning of year 362,822 276,891 640,541
------------ ------------ ------------
CASH AND EQUIVALENTS, end of year $ -- $ 362,822 $ 276,891
============ ============ ============
Interest paid on a cash basis $ 2,014,332 $ 1,965,603 $ 2,284,228
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 31 -
<PAGE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties VI, a Maryland Limited Partnership (the
"Partnership") is a limited partnership organized under the
laws of the State of Maryland on December 27, 1984. The
General Partner is NTS-Properties Associates VI (a Kentucky
limited partnership). The Partnership is in the business of
developing, constructing, owning and operating apartment
complexes and commercial real estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- Sabal Park Apartments, a 162-unit luxury apartment
complex in Orlando, Florida
- Park Place Apartments Phase I, a 180-unit luxury
apartment complex in Lexington, Kentucky
- Willow Lake Apartments, a 207-unit luxury apartment
complex in Indianapolis, Indiana
- Park Place Apartments Phase III, a 152-unit luxury
apartment complex in Lexington, Kentucky currently
under construction (68 units have been certified for
occupancy at December 31, 1999)
- A 96% joint venture interest in Golf Brook
Apartments, a 195- unit luxury apartment complex in
Orlando, Florida
- A 95% joint venture interest in Plainview Point III
Office Center, an office center with approximately
62,000 net rentable square feet located in
Louisville, Kentucky
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Pre-Termination Date Net Cash Receipts and Interim Net Cash
Receipts, as defined in the partnership agreement and which
are made available for distribution, will be distributed 99%
to the limited partners and 1% to the General Partner. Net
Cash Proceeds, as defined in the partnership agreement, will
be distributed 1) 99% to the limited partners and 1% to the
General Partner until the limited partners have received cash
distributions from all sources (except Pre-Termination Date
Net Cash Receipts) equal to their Original Capital; and 2) the
remainder, 80% to the limited partners and 20% to the General
Partner. Net operating income shall be allocated to the
limited partners and the General Partner in proportion to
their respective cash distributions.
Net Operating Income in excess of cash distributions and Net
Gains from Sales shall be allocated as follows: (1) pro rata
to all partners with a negative capital account in an amount
to restore the negative capital account to zero; (2) 99% to
the limited partners and 1% to the General Partner until the
limited partners have received an amount equal to their
Original Capital less cash distributions except distributions
of Pre-Termination Date Net Cash Receipts; (3) the balance,
80% to the limited partners and 20% to the General Partner.
Net Operating Losses shall be allocated 99% to the limited
partners and 1% to the General Partner for all periods
presented in the accompanying Financial Statements.
- 32 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
D) Tax Status
----------
The Partnership has received a ruling from the Internal
Revenue Service stating that the Partnership is classified as
a limited partnership for federal income tax purposes. As
such, the Partnership makes no provision for income taxes. The
taxable income or loss is passed through to the holders of the
partnership interests for inclusion on their individual income
tax returns.
A reconciliation of net income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
1999 1998 1997
---- ---- ----
Net income (loss) $(187,157) $ 457,731 $ 107,113
Items handled differently
for tax purposes:
Depreciation and
amortization (198,220) (117,115) (86,287)
Retirement of fixed
assets (125,914) 15,420 --
Capitalized leasing
costs 86,459 51,951 34,898
Rental income 25,331 9,664 37,172
--------- --------- ---------
Taxable income (loss) $(399,501) $ 417,651 $ 92,896
========= ========= =========
E) 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.
F) Joint Venture Accounting
------------------------
Since inception, the Partnership has adopted the proportionate
consolidation method of accounting for joint venture
properties. The Partnership's proportionate interest in the
venture's assets, liabilities, revenues, expenses and cash
flows are combined on a line-by-line basis with the
Partnership's own assets, liabilities, revenues, expenses and
cash flows. All intercompany accounts and transactions have
been eliminated in consolidation.
Proportionate consolidation is utilized by the Partnership due
to the fact that the ownership of joint venture properties, in
substance, is not subject to joint control. The managing
General Partners of the sole General Partner of the NTS
sponsored partnerships which have formed joint ventures are
substantially the same. As such, decisions regarding
financing, development, sale or operations do not require the
approval of different partners. Additionally, the joint
venture properties are in the same business/industry as their
respective joint venture partners and their asset, liability,
revenue and expense accounts correspond with the accounts of
such partner. It is the belief of the General Partner of the
Partnership that the financial statement disclosures resulting
from the use of proportionate consolidation provides a
meaningful presentation of assets, liabilities, revenues,
expenses and cash flows given the commonality of the
Partnership's operations.
- 33 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received
for residential security deposits, funds which have been
escrowed with mortgage companies for property taxes and
insurance in accordance with the loan agreements, funds
reserved by the Partnership for the repurchase of limited
partnership Units (December 31, 1997) and funds reserved by
the Partnership for the purchase of limited partnership Units
under the Tender Offer (December 31, 1998 - see Note 6).
H) 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 held the securities until maturity.
During 1999, 1998 and 1997, the Partnership sold no investment
securities.
As of December 31, 1999 and 1998, the Partnership held no
investment securities with initial maturities greater than
three months.
I) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost 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 building and
improvements, 3-30 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 such review indicates that 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 years ended December
31, 1999, 1998 and 1997 did not result in an impairment loss.
J) Rental Income and Deferred Leasing Commissions
----------------------------------------------
Certain of the Partnership's lease agreements at Plainview
Point III Office Center are structured to include scheduled
and specified rent increases over the lease term. For
financial reporting purposes, the income from these leases is
being recognized on a straight-line basis over the lease term.
Accrued income connected with these leases is included in
accounts receivable and totaled $44,671 and $42,584 at
December 31, 1999 and 1998, respectively. All commissions paid
to commercial leasing agents are deferred and amortized over
the term of the lease to which they apply.
K) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during
the years ended December 31, 1999, 1998 and 1997.
L) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents
include cash on hand and short-term, highly liquid investments
with initial maturities of three months or less.
- 34 -
<PAGE>
2. Concentration of Credit Risk
----------------------------
The Partnership owns and operates, either wholly or through a joint
venture, residential properties in Kentucky (Louisville and Lexington),
Indiana (Indianapolis) and Florida (Orlando). The apartment unit is
generally the principal residence of the tenant. The Partnership also
owns and operates, through a joint venture, a commercial property in
Louisville, Kentucky. Substantially all of the tenants are local
businesses or are businesses which have operations in the Louisville
area.
3. Investment in Joint Ventures
----------------------------
A) NTS Sabal Golf Villas Joint Venture
In 1985, the Partnership entered into a joint venture
agreement with NTS-Properties IV to develop and construct a
158-unit luxury apartment complex on a 13.15-acre site located
in Orlando, Florida, known as Golf Brook Apartments Phase I.
NTS-Properties IV contributed land valued at $1,900,000 with
an outstanding note payable to a bank of $1,200,000 which was
secured by the land. The Partnership contributed the
construction and carrying costs of the apartment complex.
In 1987, the joint venture agreement was amended to include
Golf Brook Apartments Phase II, a 37-unit luxury apartment
complex located on a 3.069 acre site adjacent to Golf Brook
Apartments Phase I. The Partnership contributed land,
construction costs, and the cost of the initial leasing of
this second phase.
The Partnership made contributions of approximately
$15,800,000 for construction and carrying costs and retired
the $1,200,000 note payable in 1987, which increased the
Partnership's percentage interest in the joint venture.
The net income and net loss is allocated based on the
respective partnership's contribution as of the end of each
calendar quarter. The Partnership's ownership share was 96% at
December 31, 1999. The Partnership's share of the joint
venture's revenues was $2,861,714 (1999), $2,926,168 (1998)
and $2,747,335 (1997). The Partnership's share of the joint
venture's expenses was $1,992,610 (1999), $1,899,120 (1998)
and $1,781,475 (1997).
B) Plainview Point III Joint Venture
---------------------------------
In 1987, the Partnership entered into a joint venture
agreement with NTS-Properties IV to develop and construct an
approximately 62,000 square foot office building located in
Louisville, Kentucky known as Plainview Point III Office
Center.
NTS-Properties IV contributed land valued at $790,000 with an
outstanding note payable to a bank of $550,000 which was
secured by the land. The Partnership contributed the
construction and carrying costs of the complex. The
Partnership made contributions of approximately $4,100,000 for
construction and carrying costs and retired the $550,000 note
payable in 1987, which increased the Partnership's percentage
interest in the joint venture. The net income and net loss is
allocated based on the respective partnership's contribution
as of the end of each calendar quarter. The Partnership's
ownership share was 95% at December 31, 1999. The
Partnership's share of the joint venture's revenues was
$810,536 (1999), $781,388 (1998) and $737,948 (1997). The
Partnership's share of the joint venture's expenses was
$675,165 (1999), $848,332 (1998) and $805,215 (1997).
- 35 -
<PAGE>
4. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1999 1998
---- ----
Land and improvements $15,867,093 $14,899,011
Buildings, improvements and
amenities 58,454,877 51,514,528
---------- ----------
74,321,970 66,413,539
Less accumulated depreciation 25,964,841 24,661,856
---------- ----------
$48,357,129 $41,751,683
========== ==========
5. Interest Repurchase Reserve
---------------------------
Pursuant to Section 61.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an
Interest Repurchase Reserve in December 1995. During the years ended
December 31, 1998, 1997 and 1996, the Partnership has funded $400,000,
$300,000 and $705,380, respectively, to the reserve. Through October
25, 1998 (the commencement date of the First Tender Offer), the
Partnership has repurchased a total of 6,846 Units for $1,861,200 at a
price ranging from $250 to $350 per unit. The 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 units. Repurchased Units have been 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 funds remaining in the Interest Repurchase Reserve at the
commencement of the First Tender Offer (discussed below) were returned
to unrestricted cash for utilization in the Partnership's operations.
6. Tender Offer
------------
On October 20, 1998, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a tender offer (the "First
Tender Offer") to purchase up to 1,250 of the Partnership's limited
Partnership Units at a price of $350 per Unit as of the date of the
First Tender Offer. The initial expiration date of the First Tender
Offer was January 18, 1999, and this expiration date was subsequently
extended through March 31, 1999. A total of 2,103 Units were tendered
and the bidders accepted all Units tendered. The Partnership
repurchased 750 Units at a cost of $262,500 and ORIG, LLC purchased
1,353 Units at a cost of $473,550. The expenses associated with
administering the First Tender Offer were approximately $52,000. The
Units that were acquired by the Partnership were retired. Units that
were acquired by ORIG, LLC are being held by it. The General Partner,
NTS-Properties Associates VI, did not participate in the First Tender
Offer.
On June 25, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a second tender offer (the
"Second Tender Offer") to purchase up to 1,000 of the Partnership's
limited partnership Units at a price of $350 per Unit as of the date of
the Second Tender Offer. The initial expiration date of the Second
Tender Offer was August 31, 1999. On August 23, 1999, the price was
increased to $370 per Unit and the expiration date was extended to
September 30, 1999.
Under the terms of the Second Tender Offer, the Second Tender Offer
expired on September 30, 1999. As of that date, 2,801 Units were
tendered, pursuant to the Second Tender Offer, and the bidders accepted
all Units tendered. The Partnership purchased 500 Units at a cost of
$185,000 and ORIG, LLC purchased 2,301 Units at a cost of $851,370. The
expenses associated with administering the Second Tender Offer are
approximately $38,000. The General Partner, NTS-Properties Associates
VI, did not participate in the Second Tender Offer.
- 36 -
<PAGE>
6. Tender Offer - Continued
------------------------
On November 9, 1999, the Partnership and ORIG, LLC, an affiliate of the
Partnership, (the "bidders") commenced a third tender offer (the "Third
Tender Offer") to purchase up to 500 of the Partnership's limited
partnership Units at a price of $380 per Unit as of the date of the
Third Tender Offer. The Third Tender Offer stated that the Partnership
would purchase the first 250 Units tendered and would fund its
purchases and its portions of the expenses from cash flow from
operations. If more than 250 Units were tendered, ORIG, LLC would
purchase up to an additional 250 Units. If more than 500 Units were
tendered, the bidders could choose to acquire the additional Units on a
pro rata basis.
On December 23, 1999, the Third Tender Offer expired. As of that date a
total of 1,085 Units were tendered, pursuant to the Third Tender Offer,
and the bidders accepted all Units tendered. The Partnership purchased
250 Units at a cost of $95,000 and ORIG, LLC purchased 835 Units at a
cost of $317,300. The expenses associated with administering the Third
Tender Offer were approximately $13,500. Units that were acquired by
the Partnership have been retired. Units that were acquired by ORIG,
LLC are being held by it. The General Partner, NTS-Properties
Associates VI, did not participate in the Third Tender Offer. See Note
12 for further discussion on Tender Offers.
7. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1999 1998
---- ----
Mortgage payable with an insurance
company bearing interest at 7.74%,
due October 15, 2012 secured by certain
land, buildings and amenities $11,186,637 $ 6,151,658
Mortgage payable with an insurance company
bearing interest at 7.32%, due October 15,
2012 secured by certain land, buildings and
amenities 7,767,882 8,120,331
Mortgage payable with an insurance company
bearing interest at 7.43%, due May 15, 2009
secured by certain land, buildings and
amenities 7,677,179 8,220,270
Mortgage payable with an insurance company
bearing interest at 7.38%, due December 5,
2012 secured by certain land, buildings and
amenities 2,598,146 2,713,152
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 December
31, 1999, the interest rate was
approximately 8.75%. 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. 1,732,098 1,808,769
Note payable to a bank, bearing interest at
the Prime Rate + 1%, due June 14, 2001
secured by certain land, buildings and
amenities 52,500 105,000
---------- ----------
$33,312,443 $27,119,180
========== ==========
- 37 -
<PAGE>
7. Mortgages Payable - Continued
-----------------------------
The mortgages and note are payable in aggregate monthly installments of
approximately $346,100 which includes principal, interest, property
taxes and insurance.
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 1,481,650
2001 1,698,917
2002 3,628,418
2003 1,701,251
2004 1,806,978
Thereafter 22,995,229
----------
$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 $32,705,000.
The mortgage payable with an outstanding balance of $11,186,637 as of
December 31, 1999 has an additional availability of $1,013,363. The
proceeds will be used to fund the construction of Park Place Apartments
Phase III. See Note 10. Commitments and Contingencies for further
information.
8. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1999:
For the Years Ended December 31, Amount
-------------------------------- ------
2000 $ 675,301
2001 513,914
2002 224,697
2003 203,902
2004 16,992
Thereafter --
---------
$ 1,634,806
=========
9. Related Party Transactions
--------------------------
Pursuant to an agreement with the Partnership, property management fees
of $497,764 (1999), $494,494 (1998) and $480,335 (1997)were paid to NTS
Development Company, an affiliate of the General Partner. The fee is
equal to 5% and 6% of gross revenues from the residential properties
and commercial properties, respectively. 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 has incurred
$36,345 (1999), $10,902 (1998) and $252 (1997) as a repair and
maintenance fee and has capitalized these costs as part of land,
buildings and amenities. The Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31,
1999, 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.
- 38 -
<PAGE>
9. Related Party Transactions - Continued
--------------------------------------
1999 1998 1997
---- ---- ----
Administrative $ 516,077 $ 304,187 $ 359,864
Property manager 777,937 943,598 838,536
Leasing 241,148 215,328 191,370
Construction manager (1) 439,920 225,759 --
Other 21,573 67,885 66,876
--------- --------- ---------
$1,996,655 $1,756,757 $1,456,646
========= ========= =========
(1) These costs are capitalized as part of the construction costs
of building Park Place Apartments Phase III. The
capitalization of these costs is allowed per the construction
manager agreement.
10. Commitments and Contingencies
-----------------------------
The Partnership began construction of Park Place Apartments Phase III
(152 units) during 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
$11,000,000. Construction costs will be funded by loan proceeds of
$7,200,000 from a mortgage loan obtained during 1997, cash reserves and
cash flow from operations. Through December 31, 1999, approximately
$9,769,000 of the cost had been incurred.
Construction in progress included in land, buildings and amenities on
the December 31, 1999 Balance Sheet relates primarily to Park Place
Apartments Phase III. Included in the cost of approximately $5,194,000
is approximately $5,100,000 related directly to Phase III construction.
The remaining costs of $94,000 relate to clubhouse costs at Park Place
Apartments Phase I and III and tenant finish costs at Plainview Point
III Office Center.
The Partnership also started renovations of the community clubhouse at
Park Place, Golf Brook and Sabal Park Apartments during fourth quarter
1999. It is currently estimated the aggregate cost for all three
renovations will be approximately $630,000. The Partnership is funding
the renovations partly from cash flow from operations and partly from
financing in the amount of $2,500,000 which is secured by Plainview
Point III Office Center. The remaining proceeds are being used to fund
a portion of the capital expenditures at Park Place Apartments Phase
III and Plainview Point III Office Center.
The Partnership plans to replace the roofs at both the Willow Lake
Apartments (26 buildings) and Park Place Phase I apartments (24
buildings) all of which were installed using shingles produced by a
single manufacturer. The shingles appear to contain defects which may
cause 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.
The Partnership has been sued by Elder Construction & 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 & Reutlinger, a local law
firm.
- 39 -
<PAGE>
10. Commitments and Contingencies - Continued
-----------------------------------------
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 judgement 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 in the
accompanying statements regarding this matter.
11. 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, Sabal Park, Park
Place Phase III 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 have been prepared
using a management approach, which is consistent with the basis and
manner in which the Partnership's management internally disaggregates
financial information for the purposes of assisting in making internal
operating decisions. The Partnership evaluates performance based on
stand-alone operating segment net income.
<TABLE>
<CAPTION>
1999
----
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental income $ 8,723,497 $ 809,289 $ 9,532,786
Other income 23,854 1,247 25,101
---------- ---------- ----------
Total net revenues $ 8,747,351 $ 810,536 $ 9,557,887
========== ========== ==========
Operating expenses $ 3,399,964 $ 362,209 $ 3,762,173
Write-off of unamortized
building improvements 238,253 16,752 255,005
Management fees 446,741 51,023 497,764
Real estate taxes 852,601 32,320 884,921
Professional and
administrative -- 47,520 47,520
Depreciation expense 1,603,539 165,341 1,768,880
---------- ---------- ----------
Net income (loss) $ 2,206,253 $ 135,371 $ 2,341,624
========== ========== ==========
Land, buildings and
amenities, net $45,397,693 $ 2,924,453 $48,322,146
========== ========== ==========
Expenditures for land,
buildings and amenities $ 8,410,159 $ 277,718 $ 8,687,877
========== ========== ==========
Segment liabilities $ 1,609,989 $ 235,354 $ 1,845,343
========== ========== ==========
</TABLE>
- 40 -
<PAGE>
11. Segment Reporting - Continued
-----------------------------
<TABLE>
<CAPTION>
1998
----
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental income $ 8,915,533 $ 780,052 $ 9,695,585
Other income 30,307 1,336 31,643
---------- ---------- ----------
Total net revenues $ 8,945,840 $ 781,388 $ 9,727,228
========== ========== ==========
Operating expenses $ 3,471,402 $ 328,661 $ 3,800,063
Write-off of unamortized
building improvements 64,617 443 65,060
Management fees 448,081 46,413 494,494
Real estate taxes 782,331 33,091 815,422
Professional and
administrative -- 285,120 285,120
Depreciation expense 1,525,398 154,604 1,680,002
---------- ---------- ----------
Net income (loss) $ 2,654,011 $ (66,944) $ 2,587,067
========== ========== ==========
Land, buildings and
amenities, net $34,671,679 $ 2,831,890 $37,503,569
========== ========== ==========
Expenditures for
land, buildings and
amenities $ 508,775 $ 141,520 $ 650,295
========== ========== ==========
Segment liabilities $ 345,753 $ 514,576 $ 860,329
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1997
----
Residential Commercial Total
----------- ---------- -----
<S> <C> <C> <C>
Rental income $ 8,756,996 $ 736,638 $ 9,493,634
Other income 25,800 1,310 27,110
---------- ---------- ----------
Total net revenues $ 8,782,796 $ 737,948 $ 9,520,744
========== ========== ==========
Operating expenses $ 3,316,160 $ 270,749 $ 3,586,909
Management fees 434,236 46,099 480,335
Real estate taxes 746,094 33,120 779,214
Professional and
administrative -- 299,376 299,376
Depreciation expense 1,576,344 155,872 1,732,216
---------- ---------- ----------
Net income (loss) $ 2,709,962 $ (67,268) $ 2,642,694
========== ========== ==========
Land, buildings and
amenities, net $35,809,570 $ 2,851,342 $38,660,912
========== ========== ==========
Expenditures for land,
buildings and amenities $ 13,296 $ 4,519 $ 17,815
========== ========== ==========
Segment liabilities $ 310,291 $ 373,574 $ 683,865
========== ========== ==========
</TABLE>
- 41 -
<PAGE>
11. Segment Reporting - Continued
-----------------------------
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is necessary
given amounts recorded at the Partnership level and not allocated to the
operating properties for internal reporting purposes:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
NET REVENUES
- ------------
<S> <C> <C> <C>
Total revenues for reportable
segments $ 9,557,887 $ 9,727,228 $ 9,520,744
Other income at Partnership level 19,089 108,268 87,529
------------ ------------ ------------
Total consolidated net revenues $ 9,576,976 $ 9,835,496 $ 9,608,273
============ ============ ============
PROFESSIONAL AND ADMINISTRATIVE
- -------------------------------
Total professional and
administrative for reportable
segments $ 47,520 $ 285,120 $ 299,376
Professional and administrative
for Partnership level 448,247 153,132 151,629
------------ ------------ ------------
Total professional and
administrative $ 495,767 $ 438,252 $ 451,005
============ ============ ============
DEPRECIATION AND AMORTIZATION
- -----------------------------
Total depreciations and
amortization for reportable
segments $ 1,768,880 $ 1,680,002 $ 1,732,216
Depreciation and amortization for
Partnership level 113,134 122,339 178,569
------------ ------------ ------------
Total depreciation and
amortization $ 1,882,014 $ 1,802,341 $ 1,910,785
============ ============ ============
NET INCOME (LOSS)
- -----------------
Total net income (loss) for
reportable segments $ 2,341,624 $ 2,587,067 $ 2,642,694
Net income (loss) for Partnership (2,528,781) (2,129,336) (2,535,581)
------------ ------------ ------------
Total net income (loss) $ (187,157) $ 457,731 $ 107,113
============ ============ ============
LAND, BUILDINGS AND AMENITIES
- -----------------------------
Total land, buildings and
amenities for reportable
segments $ 48,322,146 $ 37,503,569 $ 38,660,912
Partnership level 34,983 4,248,114 1,774,455
------------ ------------ ------------
Total land, buildings and
amenities $ 48,357,129 $ 41,751,683 $ 40,435,367
============ ============ ============
EXPENDITURES
- ------------
Total expenditures for land,
buildings and amenities for
reportable segments $ 8,687,877 $ 650,295 $ 17,815
Expenditures for land, buildings
and amenities for Partnership
level 19,811 19,061 --
Construction in progress at
Partnership level -- 2,490,332 96,783
------------ ------------ ------------
Total expenditures $ 8,707,688 $ 3,159,688 $ 114,598
============ ============ ============
LIABILITIES
- -----------
Total liabilities for reportable
segments $ 1,845,343 $ 860,329 $ 683,865
Liabilities for Partnership (1) 33,553,895 27,377,488 26,902,391
------------ ------------ ------------
Total liabilities $ 35,399,238 $ 28,237,817 $ 27,586,256
============ ============ ============
</TABLE>
(1) These amounts primarily represent the mortgages held by the partnership
secured by the assets of the operating segments.
- 42 -
<PAGE>
12. Subsequent Events
-----------------
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).
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
from one of the investors for 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.
On March 21, 2000, the Partnership notified its limited partners that
it would be suspending distributions effective 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.
On March 24, 2000, the Partnership and ORIG, LLC, an affiliate of the
Partnership (the "bidders"), filed a fourth 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 ORIG,
LLC. will be held by it. The General Partner, NTS-Properties Associates
VII, does not intend to participate in the Fourth Tender Offer. The
Fourth Tender Offer will expire on June 27, 2000 unless extended.
- 43 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure
--------------------
None.
- 44 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Because the Partnership is a limited partnership and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Associates VI. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The General Partners of NTS-Properties Associates VI are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 58) is the managing General Partner of NTS-Properties
Associates VI and Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Brian F.
Lavin and Gregory A. Wells.
Brian F. Lavin
- --------------
Mr. Lavin (age 46) President of NTS Corporation and NTS Development Company
joined the Manager in June 1997. From November 1994 through June 1997, Mr. Lavin
served as President of the Residential Division of Paragon Group, Inc., and as a
Vice President of Paragon's Midwest Division prior to November 1994. In this
capacity, he directed the development, marketing, leasing and management
operations for the firms expanding portfolios. Mr. Lavin attended the University
of Missouri where he received his Bachelor's Degree in Business Administration.
He has served as a Director of the Louisville Apartment Association. He is a
licensed Kentucky Real Estate Broker and Certified Property Manager. Mr. Lavin
is a member of the Institute of Real Estate Management,and council member of the
Urban Land Institute. He currently serves on the University of Louisville Board
of Overseers and is on the Board of Directors of the National Multi-Housing
Council and the Louisville Science Center.
Gregory A. Wells
- ----------------
Mr. Wells (age 41), Senior Vice President and Chief Financial Officer of NTS
Corporation and NTS Development Company joined the Manager in July, 1999. From
May 1998 through July 1999, Mr. Wells served as Chief Financial Officer of
Hokanson Companies, Inc. and as Secretary and Treasurer of Hokanson Construction
Inc., Indianapolis, Indiana from January 1995 through May 1998. In these
capacities he directed financial and operational activities for commercial
rental real estate, managed property, building and suite renovations, out of
ground commercial and residential construction and third party property
management. Mr. Wells previously served as Vice President of Operations and
Treasurer of Executive Telecom Systems, Inc. a subsidiary of the Bureau of
National Affairs, Inc. (Washington, D.C.). Mr. Wells attended George Mason
University, where he received a Bachelor's Degree in Business Administration.
Mr. Wells is a Certified Public Accountant in both Virginia and Indiana and is
active in various charitable and philanthropic endeavors in the Louisville and
Indianapolis areas.
Mr. Richard L. Good who was Vice Chairman and former President of NTS Capital
Corporation and NTS Development Company, retired effective September 3, 1999.
- 45 -
<PAGE>
Item 11. Management Remuneration and Transactions
----------------------------------------
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company, an affiliate
of the General Partner. The Partnership is also required to pay to NTS
Development Company a repair and maintenance fee on costs related to specific
projects. Also, NTS Development Company provides certain other services to the
Partnership. See Note 9 to the financial statements which sets forth
transactions with NTS Development Company for the years ended December 31, 1999,
1998 and 1997.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocation and cash
distributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following provides details regarding owners of more than 5% of the total
outstanding limited partnership Units as of February 29, 2000.
ORIG, LLC 5,224 Units (13.36%)
10172 Linn Station Road
Louisville, Kentucky 40223
ORIG, LLC is a Kentucky limited liability company, the members of which are J.D.
Nichols and Brian F. Lavin, Chairman and President of NTS Capital Corporation, a
general partner of NTS-Properties Associates VI, the general partner of the
Partnership.
The General Partner is NTS-Properties Associates VI, a Kentucky limited
partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Associates VI are as follows:
J. D. Nichols 44.05%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 9.95%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 46.00% interests are owned by various limited partners of NTS-
Properties Associates VI.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Pursuant to an agreement with the Partnership, property management fees of
$497,764 (1999), $494,494 (1998) and $480,335 (1997) were paid to NTS
Development Company, an affiliate of the General Partner. The fee is equal to 5%
and 6% of gross revenues from the residential properties and commercial
properties, respectively. 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 has incurred $36,345 (1999), $10,902 (1998) and $252 (1997) as a
repair and maintenance fee and has capitalized these costs as part of land,
buildings and amenities. The Partnership was also charged the following amounts
from NTS Development Company for the years ended December 31, 1998, 1997 and
1996. These charges include items which have been expensed as operating expenses
- - affiliated or professional and administrative expenses - affiliated and items
which have been capitalized as other assets or as land, buildings and amenities.
- 46 -
<PAGE>
Item 13. Certain Relationships and Related Transactions - Continued
----------------------------------------------------------
1999 1998 1997
---- ---- ----
Administrative $ 516,077 $ 304,187 $ 359,864
Property manager 777,937 943,598 838,536
Leasing 241,148 215,328 191,370
Construction manager 439,920 225,759 --
Other 21,573 67,885 66,876
--------- --------- ---------
$1,996,655 $1,756,757 $1,456,646
========= ========= =========
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 47 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
1. Financial statements
The financial statements for the years ended December 31, 1999, 1998 and
1997 together with the report of Arthur Andersen LLP, dated March 24, 2000,
appear in Item 8. The following financial statement schedules should be
read in conjunction with such financial statements.
2. Financial statement schedules
Schedules: Page No.
---------- --------
III-Real Estate and Accumulated Depreciation 49-52
All other schedules have been omitted because they are not applicable, are
not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated Agreement *
Certificate of Limited Partnership
of NTS-Properties VI, a Maryland
limited partnership
3a. First Amendment to Amended and **
Restated Agreement of Limited
Partnership of NTS-Properties VI,
a Maryland limited partnership
10. Property Management and *
Construction Agreement between
NTS Development Company and
NTS-Properties VI, a Maryland
limited partnership
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the Securities and
Exchange Commission in connection with the filing of the Registration
Statements on Form S-11 on March 22, 1985 (effective June 25, 1985)
under Commission File No.2-96583.
** Incorporated by reference to Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 1987
(Commission File No. 0-14695).
4. Reports on Form 8-K
None.
- 48 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Park Place
Willow Lake Apartments
Apartments Phase III
---------- ---------
<S> <C> <C>
Encumbrances (A) (A)
Initial cost to partnership:
Land $ 3,770,328 $ 927,520
Buildings and improvements 12,616,655 11,154,956
Cost capitalized subsequent to
acquisition
Improvements 261,350 --
Gross amount at which carried
December 31, 1999:(B)
Land $ 3,770,328 $ 927,520
Buildings and improvements 12,878,005 11,154,956
---------- ----------
Total $16,648,333 $12,082,476
========== ==========
Accumulated depreciation $ 6,808,938 $ 353,044
========== ==========
Date of construction 03/85 (D)
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Aggregate cost of real estate for tax purposes is $62,357,986.
(C) 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 and 3-30 years for amenities.
(D) Construction is expected to be completed by May 2000.
- 49 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Park Place
Sabal Park Apartments
Apartments Phase I
---------- -------
<S> <C> <C>
Encumbrances (A) (B)
Initial cost to partnership:
Land $ 3,063,046 $ 2,320,938
Buildings and improvements 8,417,719 9,630,935
Cost capitalized subsequent to
acquisition
Improvements, net 301,661 95,592
Gross amount at which carried
December 31, 1999:(C)
Land $ 3,113,211 $ 2,344,918
Buildings and improvements 8,669,216 9,702,547
---------- ----------
Total $11,782,427 $12,047,465
========== ==========
Accumulated depreciation $ 5,248,552 $ 5,029,615
========== ==========
Date of construction 06/84 04/84
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (D) (D)
</TABLE>
(A) First mortgages held by two insurance companies.
(B) First mortgage held by an insurance company.
(C) Aggregate cost of real estate for tax purposes is $62,357,986.
(D) 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 and 3-30 years for amenities.
- 50 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI
-----------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1999
-----------------------
<CAPTION>
Plainview
Golf Brook Point III Total
Apartments Office Center Pages 49-51
---------- ------------- -----------
<S> <C> <C> <C>
Encumbrances (A) (B)
Initial cost to partnership:
Land $ 4,384,363 $ 1,268,339 $ 15,734,534
Buildings and improvements 12,302,319 2,270,729 56,393,313
Cost capitalized subsequent to
acquisition
Improvements 314,383 1,182,264 2,155,250
Gross amount at which carried
December 31, 1999:
Land $ 4,426,156 $ 1,284,960 $ 15,867,093
Buildings and improvements 12,574,909 3,436,372 58,416,005
------------ ------------ ------------
Total $ 17,001,065 $ 4,721,332 $ 74,283,098(D)
============ ============ ============
Accumulated depreciation $ 6,723,924 $ 1,796,879 $ 25,960,952
============ ============ ============
Date of construction 05/88 01/88
Date Acquired N/A N/A
Life at which depreciation in
latest income statement is
computed (C) (C)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Note payable from a bank.
(C) 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 and 3-30 years
for amenities.
(D) Reconciliation net of accumulated depreciation to consolidated
financial statements:
Total Gross Costs at December 31, 1999 $ 74,283,098
Additions to Partnership for
computer hardware
and software in 1998 and 1999 38,872
------------
Balance at December 31, 1999 74,321,970
Less accumulated depreciation (25,960,952)
Less accumulated depreciation
for Partnership computer hardware
and software (3,889)
------------
Land, buildings and amenities,
net as of December 31, 1999 $ 48,357,129
============
- 51 -
<PAGE>
<TABLE>
NTS-PROPERTIES VI,
------------------
A Maryland Limited Partnership
------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<CAPTION>
Real Accumulated
Estate Depreciation
------ ------------
<S> <C> <C>
Balances at December 31, 1996 $63,444,714 $21,293,419
Additions during period:
Improvements (a) 116,172 --
Depreciation (b) -- 1,832,100
Deductions during period:
Retirements (7,033) (7,033)
----------- -----------
Balances at December 31, 1997 63,553,853 23,118,486
Additions during period:
Improvements (a) 3,160,317 --
Depreciation (b) -- 1,778,913
Deductions during period:
Retirements (300,631) (235,543)
----------- -----------
Balances at December 31, 1998 66,413,539 24,661,856
Additions during period:
Improvements (a) 8,709,409 --
Depreciation (b) -- 1,848,744
Deductions during period:
Retirements (800,978) (545,759)
----------- -----------
Balances at December 31, 1999 $74,321,970 $25,964,841
=========== ===========
</TABLE>
(a) The additions to real estate on this schedule will differ from
the expenditures for land, buildings and amenities on the
Statements of Cash Flows as a result of minor changes in the
Partnership's joint venture investment ownership percentages.
Changes that may occur in the ownership percentages are less
than one percent.
(b) The additions charged to accumulated depreciation on this
schedule will differ from the depreciation and amortization on
the Statements of Cash Flows due to the amortization of loan
costs.
- 52 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties VI, a Maryland Limited Partnership, 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/ Gregory A. Wells
--------------------
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: March 29, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
/s/ J.D. Nichols General Partner of NTS-Properties
- ----------------------------- Associates VI and Chairman of the
J. D. Nichols Board and Sole Director of NTS
Capital Corporation
/s/ Brian F. Lavin President and Chief Operating Officer
- ----------------------------- of NTS Capital Corporation
Brian F. Lavin
/s/ Gregory A. Wells Senior Vice President and
- ----------------------------- Chief Financial Officer of
Gregory A. Wells NTS Capital Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 53 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS
OF DECEMBER 31, 1999 AND FROM THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 206,697
<SECURITIES> 0
<RECEIVABLES> 195,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 48,357,129
<DEPRECIATION> 25,964,841
<TOTAL-ASSETS> 49,210,650
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 33,312,443
0
0
<COMMON> 0
<OTHER-SE> 13,811,412
<TOTAL-LIABILITY-AND-EQUITY> 49,210,650
<SALES> 9,532,786
<TOTAL-REVENUES> 9,576,976
<CGS> 0
<TOTAL-COSTS> 7,777,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,986,488
<INCOME-PRETAX> (187,157)
<INCOME-TAX> 0
<INCOME-CONTINUING> (187,157)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (187,157)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET,THEREFORE THE VALUE IS $0.
</FN>
</TABLE>
