UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-17589
NTS-PROPERTIES VII, LTD.
(Exact name of registrant as specified in its charter)
Florida 61-1119232
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10172 Linn Station Rd.
Louisville, Kentucky 40223
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of June 30, 1995 and December 31, 1994 3
Statements of Operations
For the three months and six months ended
June 30, 1995 and 1994 4
Statements of Cash Flows
For the three months and six months ended
June 30, 1995 and 1994 5
Notes To Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
PART II
1. Legal Proceedings 13
2. Changes in Securities 13
3. Defaults upon Senior Securities 13
4. Submission of Matters to a Vote of Security Holders 13
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES VII, LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
June 30, 1995 December 31, 1994*
<S> <C> <C>
ASSETS
Cash and equivalents $ 459,237 $ 568,595
Investment securities 101,186 --
Accounts receivable 19,819 22,575
Land, buildings and amenities, net 11,662,389 11,902,498
Other assets 181,444 184,211
------------ ------------
$ 12,424,075 $ 12,677,879
============ ============
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 5,580,465 $ 5,648,524
Accounts payable - operations 65,556 67,815
Accounts payable - construction 27,421 52,499
Distributions payable 64,471 64,471
Security deposits 36,490 37,342
Other liabilities 52,298 --
------------ ------------
5,826,701 5,870,651
Partners' equity 6,597,374 6,807,228
------------ ------------
$ 12,424,075 $ 12,677,879
============ ============
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
PARTNERS' EQUITY
Capital contributions,
net of offering costs
(638,265 units) $10,935,700 $ 100 $10,935,800
Net income (loss) - prior
years (2,449,722) (24,744) (2,474,466)
Net loss - current year (80,104) (809) (80,913)
Cash distributions
declared to date (1,765,216) (17,831) (1,783,047)
----------- ----------- -----------
Balances at June 30,
1995 $ 6,640,658 $ (43,284) $ 6,597,374
=========== =========== ===========
<FN>
* Reference is made to the audited financial statements in the Form 10-K
as filed with the Commission on March 25, 1995.
</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 488,963 $ 461,940 $ 955,251 $ 903,389
Interest and other income 3,885 5,928 7,100 11,952
---------- ---------- ---------- ----------
492,848 467,868 962,351 915,341
Expenses:
Operating expenses 123,657 125,012 213,188 199,094
Operating expenses - affiliated 60,380 63,368 122,573 123,377
Amortization of initial leasing
costs 1,932 5,436 4,440 10,871
Interest expense 117,615 116,381 235,950 229,556
Management fees 25,285 24,215 49,553 47,221
Real estate taxes 26,148 25,799 52,717 52,352
Professional and administrative
expenses 13,452 15,750 27,702 27,852
Professional and administrative
expenses - affiliated 24,838 21,993 49,456 44,207
Depreciation and amortization 135,724 169,880 287,685 339,359
---------- ---------- ---------- ----------
529,031 567,834 1,043,264 1,073,889
---------- ---------- ---------- ----------
Net loss $ (36,183) $ (99,966) $ (80,913) $ (158,548)
========== ========== ========== ==========
Net loss allocated to the limited
partners $ (35,821) $ (98,966) $ (80,104) $ (156,963)
========== ========== ========== ==========
Net loss per limited partnership
unit $ (.05) $ (.16) $ (.12) $ (.25)
========== ========== ========== ==========
Weighted average number of units 638,265 638,265 638,265 638,265
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (36,183) $ (99,966) $ (80,913) $ (158,548)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Accrued interest on investment
securities (1,323) -- (1,323) --
Amortization of initial leasing
costs 1,932 5,436 4,440 10,871
Depreciation and amortization 135,724 169,880 287,685 339,359
Changes in assets and liabilities:
Accounts receivable (433) (48,626) 2,756 (61,183)
Other assets 8,110 (31,329) (5,944) (42,355)
Accounts payable - operations 8,202 16,129 (2,259) 17,859
Security deposits 125 (830) (852) (3,266)
Other liabilities 26,150 25,810 52,298 50,862
---------- ---------- ---------- ----------
Net cash provided by operating
activities 142,304 36,504 255,888 153,599
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings
and amenities (30,340) (39,741) (43,304) (41,823)
(Decrease in) additions to accounts
payable - construction (8,320) 37,774 (25,078) 37,774
Purchase of investment securities (99,863) -- (99,863) --
---------- ---------- ---------- ----------
Net cash used in investing
activities (138,523) (1,967) (168,245) (4,049)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages
and note payable (34,387) (17,366) (68,059) (35,114)
Cash distributions (64,471) (64,471) (128,942) (128,942)
Additions to loan costs -- (6,760) -- (8,706)
Increase of note payable -- 5,634 -- 5,634
---------- ---------- ---------- ----------
Net cash used in financing
activities (98,858) (82,963) (197,001) (167,128)
---------- ---------- ---------- ----------
Net decrease in cash and
equivalents (95,077) (48,426) (109,358) (17,578)
CASH AND EQUIVALENTS, beginning of
period 554,314 883,754 568,595 852,906
---------- ---------- ---------- ----------
CASH AND EQUIVALENTS, end of period $ 459,237 $ 835,328 $ 459,237 $ 835,328
========== ========== ========== ==========
Interest paid on a cash basis $ 117,781 $ 114,931 $ 236,279 $ 228,510
========== ========== ========== ==========
</TABLE>
<PAGE>
NTS-PROPERTIES VII, LTD.
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein should be read in conjunction with
the Partnership's 1994 Annual Report. In the opinion of the general
partner, all adjustments (only consisting of normal recurring accruals)
necessary for a fair presentation have been made to the accompanying
financial statements for the three months and six months ended June 30, 1995
and 1994.
1. Investment Securities
Investment securities represent investments in Certificates of Deposit
or debt securities issued by the U.S. Treasury with initial maturities
of greater than three months. The investments are carried at cost which
approximates market value. The Partnership intends to hold the
securities until maturity. The following provides details regarding the
investments held at June 30, 1995:
Amortized Maturity Value At
Type Cost Date Maturity
U.S. Treasury Bill $101,186 10/19/95 $103,000
======= =======
2. Mortgages Payable
Mortgages payable consist of the following:
June 30, December 31,
1995 1994
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.5%, due November
15, 2005, secured by land and
building $ 1,454,806 $ 1,497,396
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.375%, due October
5, 2002, secured by land and
buildings 3,154,916 3,174,392
Mortgage payable to an insurance
company, bearing interest at a
fixed rate of 8.375%, due October
5, 2002, secured by land and
buildings 970,743 976,736
----------- -----------
$ 5,580,465 $ 5,648,524
=========== ===========
3. Related Party Transactions
Property management fees of $49,553 and $47,221 were paid to NTS
Development Company, an affiliate of the general partner, during the six
months ended June 30, 1995 and 1994, respectively. The fee is paid
monthly in an amount equal to 5% of the gross revenues from the
residential properties and 6% of the gross revenues from the commercial
property pursuant to an agreement with the Partnership. Also, as permitted
<PAGE>
3. Related Party Transactions - Continued
by the partnership agreement, NTS Development Company will receive a
repair and maintenance fee equal to 5.9% of costs incurred which related
to capital improvements. The Partnership has incurred $2,570 and $2,133
as a repair and maintenance fee during the six months ended June 30,
1995 and 1994, respectively, and has capitalized this cost as part of
land, buildings and amenities. The Partnership also was charged the
following amounts from NTS Development Company for the six months ended
June 30, 1995 and 1994. 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. The
charges were as follows:
1995 1994
Leasing $ 30,128 $ 21,605
Administrative 61,856 56,282
Property manager 79,482 86,621
Other 561 3,235
-------- --------
$ 172,027 $ 167,743
======== ========
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
1995 1994
Wholly-Owned Properties
The Park at the Willows 98% 94%
Park Place Apartments Phase II 89% 85%
Property Owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (ownership
% at June 30, 1995)
Blankenbaker Business Center 1A (31%) 100% 91%
Rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1995 and 1994 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Wholly-Owned Properties
The Park at the Willows $ 82,702 $ 82,587 $156,064 $163,308
Park Place Apartments
Phase II $333,682 $313,596 $656,855 $608,766
Property Owned in Joint
Venture with NTS-Properties
IV and NTS-Properties Plus
Ltd. (ownership % at June
30, 1995)
Blankenbaker Business Center
1A (31%) $ 73,478 $ 65,963 $144,439 $132,890
The Park at the Willows' occupancy increased from 94% at June 30, 1994 to
98% at June 30, 1995. Average occupancy for the six month period ended June
30 decreased from 92% in 1994 to 91% in 1995. Average occupancy for the
three month period ended June 30 increased from 95% in 1994 to 98% in 1995.
The decrease in rental and other income at The Park at the Willows for the
six months ended June 30, 1995 as compared to the same period in 1994 was
due to a decrease in income from fully furnished units. The change in
rental and other income for the three month period was not significant.
<PAGE>
Results of Operations - Continued
Park Place Apartments Phase II's occupancy increased from 85% at June 30,
1994 to 89% at June 30, 1995. Average occupancy for the three months and
six months ended June 30 increased from 86% in 1994 to 89% in 1995. Rental
and other income increased at Park Place Apartments Phase II for the three
months and six months ended June 30, 1995 as compared to the same periods
in 1994 as a result of the increased average occupancy and increased rental
rates.
As of June 30, 1995, a wholly-owned subsidiary of The Prudential Insurance
Company of America (Prudential Service Bureau, Inc.) has leased 100% of
Blankenbaker Business Center 1A. During 1994, Prudential Service Bureau,
Inc. signed a lease renewal and expansion. The lease expanded Prudential's
leased space by approximately 15,000 square feet and extended the current
lease through July 2005. With the expansion, the tenant occupied 100% of
the business center during the third quarter of 1994. In addition to
monthly rent payments, Prudential Service Bureau, Inc. is obligated to pay
substantially all of the operating expenses attributable to its space.
Blankenbaker Business Center 1A's rental and other income increased for the
three months and six months ended June 30, 1995 as compared to the three
months and six months ended June 30, 1994 as a result of the lease renewal
and expansion with Prudential Service Bureau, Inc.
Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties without any additional financing. See the
Liquidity and Capital Resources section of Item 2 for a discussion regarding
the cash requirements of the Partnership's current debt financings.
Interest and other income includes interest income from investments made by
the Partnership with excess cash. The decrease in interest income for the
three months and six months ended June 30, 1995 as compared to the same
periods in 1994 is a result of decreased cash being available for investment
as a result of a $500,000 capital contribution made to the Blankenbaker
Business Center Joint Venture during the third quarter of 1994.
Operating expenses increased for the six months ended June 30, 1995 as
compared to the six months ended June 30, 1994 as a result of increased
replacement costs (carpet, vinyl and wallcovering), increased building
repair costs and increased costs associated with fully furnished units at
Park Place Apartments Phase II. These increases are partially offset by
decreased snow removal costs at all the Partnership's properties, decreased
landscaping and utility costs at Park Place Apartments Phase II and
decreased replacement costs at The Park at the Willows. Operating expenses
have decreased for the three months ended June 30, 1995 as compared to the
same period in 1994 as a result of decreased landscaping costs at Park Place
Apartments Phase II, decreased replacement costs at The Park at the Willows
and decreased utility costs at Blankenbaker Business Center 1A. These
decreases are partially offset by increased building repair and replacement
costs at Park Place Apartments Phase II.
Operating expenses - affiliated remained fairly constant for the three
months and six months ended June 30, 1995 as compared to the same periods
in 1994.
Amortization of capitalized leasing costs represents the amortization of
various costs which were capitalized during the initial leasing and start-up
period of Park Place Apartments Phase II. The amortization of capitalized
leasing costs has decreased for the three months and six months ended June
30, 1995 as compared to the same periods in 1994 as a result of a portion
of the costs capitalized during start-up having become fully amortized.
<PAGE>
Results of Operations - Continued
The increase in interest expense for the three months and six months ended
June 30, 1995 as compared to the same periods in 1994 is the result of the
higher interest rate on the permanent financing obtained by Blankenbaker
Business Center Joint Venture in November 1994. The permanent financing
replaced a $4,715,000 note payable which bore interest at a variable rate
of Prime + 1%. The Prime Rate ranged from 6% to 7.25% during the first six
months of 1994. See Note 2 of the Partnership's financial statements for
details regarding the Partnership's debt.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations
of management fee expense.
Real estate taxes and professional and administrative expenses have remained
fairly constant for the three months and six months ended June 30, 1995 as
compared to the same periods in 1994.
Professional and administrative expenses - affiliated increased for the
three months and six months ended June 30, 1995 as compared to the same
periods in 1994 primarily as a result of increased salaries.
Depreciation and amortization decreased for the three months and six months
ended June 30, 1995 as compared to the three months and six months ended
June 30, 1994 as a result of assets with shorter lives at Park Place
Apartments Phase II having become fully depreciated and as a result of a
portion of the original tenant improvements at Blankenbaker Business Center
1A becoming fully depreciated since June 30, 1994. The decrease in
depreciation and amortization for the three month and six month periods is
partially offset by depreciation on the new tenant finish improvements at
Blankenbaker Business Center 1A. Depreciation and amortization remained
fairly constant at The Park at the Willows for the three months and six
months ended June 30, 1995 as compared to the same periods ended June 30,
1994.
Liquidity and Capital Resources
Cash provided by operations was $255,888 and $153,599 for the six months
ended June 30, 1995 and 1994, respectively. These funds in conjunction with
cash on hand were used to pay a 2% (annualized) cash distribution of
$128,942 (1995 and 1994). 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 adequate
cash reserves are established for future leasing and tenant finish costs.
As of June 30, 1995, the Partnership had two mortgage loans each with an
insurance company in the amount of $3,154,916 and $970,743. Both mortgages
are due October 5, 2002, currently bear interest at a fixed rate of 8.375%
and are secured by a first mortgage on Park Place Apartments Phase II.
Current monthly principal payments on both mortgages are based upon a 27-
year amortization schedule. The outstanding principal balance at maturity
based on the current rate of amortization would be $3,607,560 ($2,758,723
and $848,837).
<PAGE>
Liquidity and Capital Resources - Continued
As of June 30, 1995, Blankenbaker Business Center 1A, a joint venture
between the Partnership, NTS-Properties IV and NTS-Properties Plus Ltd.,
affiliates of the General Partner, had a mortgage payable with an insurance
company (obtained November 1994) in the amount of $4,642,012. The mortgage
is recorded as a liability of the Joint Venture and is secured by the assets
of the Joint Venture. The Partnership's proportionate interest in the
mortgage at June 30, 1995 is $1,454,806. The mortgage bears interest at a
fixed rate of 8.5% and is due November 15, 2005. Current monthly principal
payments are based upon an 11-year amortization schedule. At maturity, the
mortgage will have been repaid based on the current rate of amortization.
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for capital
improvements at the Partnership's properties. These improvements are funded
by cash flow from operations and capital contributions as previously
discussed in the Partnership's Form 10-K for the year ended December 31,
1994. Cash flows used in investing activities are also for purchases of
investment securities. As part of its cash management activities, the
Partnership has purchased Certificates of Deposit or debt securities issued
by the U.S. Treasury with initial maturities of greater than three months
to improve the return on its excess cash. The Partnership intends to hold
the securities until maturity. Cash flows used in financing activities are
for cash distributions, principal payments on mortgages and note payable and
payment of loan costs. Cash flows provided by financing activities
represent an increase in a note payable. The Partnership does not expect
any material changes in the mix and relative cost of capital resources from
those in 1994 except that which is discussed in the following paragraph.
The demand on future liquidity is anticipated to increase in 1995 as
compared to 1994 as a result of the Blankenbaker Business Center Joint
Venture's permanent financing as discussed above. The permanent financing
replaced a $4,715,000 note payable which bore interest at a variable rate
of Prime + 1%. The Prime Rate ranged from 6% to 7.25% during the first six
months of 1994. It is anticipated that the cash flow from operations and
cash reserves will be sufficient to meet the needs of the Partnership.
The table below presents that portion of the distributions that represent
a return of capital on a Generally Accepted Accounting Principle basis for
the six months ended June 30, 1995 and 1994.
Net Loss Cash Return of
Allocated Distributions Capital
Limited Partners:
1995 $ (80,104) $ 127,652 $ 127,652
1994 (156,963) 127,652 127,652
General Partner:
1995 $ (809) $ 1,290 $ 1,290
1994 (1,585) 1,290 1,290
In an effort to continue to improve occupancy at the Partnership's
residential properties, the Partnership has an on-site leasing staff,
employees of NTS Development Company, at each of the apartment communities.
The staff handles all on-site visits from potential residents, coordinates
local advertising with NTS Development Company's marketing staff, makes
visits to local companies to promote fully furnished units and works with
current residents on lease renewals.
<PAGE>
Liquidity and Capital Resources - Continued
The lease at Blankenbaker Business Center 1A provides for the tenant to
contribute toward the payment of common area expenses, insurance and real
estate taxes. This lease provision, 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.
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the three months ended
June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, NTS-Properties VII, Ltd. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES VII, LTD.
(Registrant)
By: NTS-Properties Associates VII
By: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
John W. Hampton
Senior Vice President
Date: August 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1995 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 459,237
<SECURITIES> 101,186
<RECEIVABLES> 19,819
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,662,389
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 12,424,075
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,580,465
<COMMON> 0
0
0
<OTHER-SE> 6,597,374
<TOTAL-LIABILITY-AND-EQUITY> 12,424,075
<SALES> 955,251
<TOTAL-REVENUES> 962,351
<CGS> 0
<TOTAL-COSTS> 730,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235,950
<INCOME-PRETAX> (80,913)
<INCOME-TAX> 0
<INCOME-CONTINUING> (80,913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,193)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet; therefore, the value is $0.
<F2>This information is not disclosed in the Partnership's Form 10-Q filing.
</FN>
</TABLE>
