UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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, (502) 426-4800
including area code
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 March 31, 1995 and December 31, 1994 2
Statements of Operations
For the three months ended March 31, 1995 and 1994 3
Statements of Cash Flows
For the three months ended March 31, 1995 and 1994 4
Notes To Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
PART II
1. Legal Proceedings 12
2. Changes in Securities 12
3. Defaults upon Senior Securities 12
4. Submission of Matters to a Vote of Security Holders 12
5. Other Information 12
6. Exhibits and Reports on Form 8-K 12
Signatures 13
<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
March 31, 1995 December 31, 1994*
<S> <C> <C>
ASSETS
Cash and equivalents $ 554,314 $ 568,595
Accounts receivable 19,386 22,575
Land, buildings and amenities, net 11,765,638 11,902,498
Other assets 193,623 184,211
----------- -----------
$12,532,961 $12,677,879
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 5,614,852 $ 5,648,524
Accounts payable - operations 57,354 67,815
Accounts payable - construction 35,741 52,499
Distributions payable 64,471 64,471
Security deposits 36,365 37,342
Other liabilities 26,147 --
----------- ----------
5,834,930 5,870,651
Partners' equity 6,698,031 6,807,228
----------- -----------
$12,532,961 $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 (44,280) (447) (44,727)
Cash distributions
declared to date (1,701,390) (17,186) (1,718,576)
----------- ----------- -----------
Balances at March 31,
1995 $ 6,740,308 $ (42,277) $ 6,698,031
=========== =========== ===========
<FN>
* Reference is made to the audited financial statements in the Form 10-K
as filed with the Commission on March 31, 1995.
</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $ 466,289 $ 441,450
Interest and other income 3,212 6,024
---------- ----------
469,501 447,474
Expenses:
Operating expenses 89,529 74,080
Operating expenses - affiliated 62,193 60,009
Amortization of initial leasing
costs 2,507 5,435
Interest expense 118,335 113,175
Management fees 24,268 23,008
Real estate taxes 26,568 26,554
Professional and administrative
expenses 14,250 12,101
Professional and administrative
expenses - affiliated 24,618 22,215
Depreciation and amortization 151,960 169,479
---------- ----------
514,228 506,056
---------- ----------
Net loss $ (44,727) $ (58,582)
========== ==========
Net loss allocated to the limited
partners $ (44,280) $ (57,996)
========== ==========
Net loss per limited partnership unit $ (.07) $ (.09)
========== ==========
Weighted average number of units 638,265 638,265
========== ==========
</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (44,727) $ (58,582)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Amortization of initial leasing
costs 2,507 5,435
Depreciation and amortization 151,960 169,479
Changes in assets and liabilities:
Accounts receivable 3,189 (12,557)
Other assets (14,054) (11,027)
Accounts payable - operations (10,461) 1,730
Security deposits (977) (2,436)
Other liabilities 26,147 25,053
---------- ----------
Net cash provided by operating
activities 113,584 117,095
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to land, buildings,
amenities (12,964) (2,082)
Decrease in accounts payable -
construction (16,758) --
---------- ---------
Net cash used in investing activities (29,722) (2,082)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and
note payable (33,672) (17,748)
Cash distributions (64,471) (64,471)
Additions to loan costs -- (1,946)
---------- ---------
Net cash used in financing
activities (98,143) (84,165)
---------- ---------
Net (decrease) increase in cash
and equivalents (14,281) 30,848
CASH AND EQUIVALENTS, beginning of
period 568,595 852,906
---------- ----------
CASH AND EQUIVALENTS, end of period $ 554,314 $ 883,754
========== ==========
Interest paid on a cash basis $ 118,498 $ 113,579
========== ==========
</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 ended March 31, 1995 and 1994.
1. Mortgages Payable
Mortgages payable consist of the following:
March 31, 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 $ 1,476,326 $ 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 3,164,755 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 973,771 976,736
----------- -----------
$ 5,614,852 $ 5,648,524
=========== ===========
2. Related Party Transactions
Property management fees of $24,268 and $23,008 were paid to NTS
Development Company, an affiliate of the general partner, during the
three months ended March 31, 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 permitted
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 $706 as a repair
and maintenance fee during the three months ended March 31, 1995, and
has capitalized this cost as part of land, buildings and amenities.
There was no similar fee incurred during the three months ended March
31, 1994. The Partnership also was charged the following amounts from
NTS Development Company for the three months ended March 31, 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.
<PAGE>
2. Related Party Transactions - Continued
The charges were as follows:
1995 1994
Leasing $ 16,058 $ 9,719
Administrative 30,787 28,377
Property manager 39,699 43,619
Other 267 509
--------- ---------
$ 86,811 $ 82,224
========= =========
3. Commitment
As of March 31, 1995, Blankenbaker Business Center 1A, a joint venture
between the Partnership, NTS-Properties IV and NTS-Properties Plus
Ltd., has a commitment for approximately $160,000 of tenant finish
improvements. The commitment is the result of a lease renewal and
expansion signed on April 28, 1994 with its major tenant Prudential
Service Bureau, Inc. ("Prudential"). The lease expands Prudential's
leased space by approximately 15,000 square feet and extends their
lease through July 2005. The Partnership had no other material
commitments for renovations or capital improvements at March 31, 1995.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The occupancy levels at the Partnership's properties as of March 31 were as
follows:
1995 1994
Wholly-Owned Properties
The Park at the Willows 88% 90%
Park Place Apartments Phase II 89% 83%
Property Owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (ownership %
at March 31, 1995)
Blankenbaker Business Center 1A (31%) 100% 100%
Rental and other income generated by the Partnership's properties for the
three months ended March 31, 1995 and 1994 was as follows:
1995 1994
Wholly-Owned Properties
The Park at the Willows $ 73,363 $ 80,721
Park Place Apartments Phase II $323,173 $295,170
Property Owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (ownership %
at March 31, 1995)
Blankenbaker Business Center 1A (31%) $ 70,961 $ 66,927
The Park at the Willows' occupancy decreased from 90% at March 31, 1994 to
88% at March 31, 1995. Average occupancy for the three month period ended
March 31 decreased from 90% in 1994 to 83% in 1995. The decrease in rental
and other income at The Park at the Willows for the three months ended March
31, 1995 as compared to the same period in 1994 was due to the 7% decrease
in average occupancy and as a result of decreased income from fully
furnished units.
Park Place Apartments Phase II's occupancy increased from 83% at March 31,
1994 to 89% at March 31, 1995. Average occupancy for the three month period
at Park Place Apartments Phase II increased from 85% in 1994 to 89% in 1995.
Rental and other income at Park Place Apartments Phase II increased as a
result of the increased average occupancy, increased rental rates and
increased non-refundable pet fees collected.
As of March 31, 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,
<PAGE>
Results of Operations - Continued
Inc. signed a lease renewal and expansion. The lease expands Prudential's
leased space by approximately 15,000 square feet and extends their 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 ended March 31, 1995 as compared to the three months ended
March 31, 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 disclosure regarding
the cash requirements of the Partnership's current debt financings and a
discussion of potential tenant improvement costs connected with the
Prudential Service Bureau, Inc. lease renewal and expansion.
Interest and other income includes interest income from short-term
investments made by the Partnership with excess cash. The decrease in
interest income for the three months ended March 31, 1995 as compared to the
same period 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 have increased for the three months ended March 31, 1995
as compared to the three months ended March 31, 1994 due to increased
building repair costs, increased replacement 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 utility costs at Park Place
Apartments Phase II, decreased exterior painting costs at Blankenbaker
Business Center 1A and decreased costs associated with fully furnished units
at The Park at the Willows.
Operating expenses - affiliated remained fairly constant for the three
months ended March 31, 1995 as compared to the same period 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 ended March 31, 1995 as
compared to the same period in 1994 as a result of a portion of the costs
capitalized during start-up having become fully amortized.
The increase in interest expense for the three months ended March 31, 1995
as compared to the same period in 1994 is the result of the higher interest
rate on the permanent financing obtained 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 6.25% during
the first quarter of 1994. See Note 1 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.
<PAGE>
Results of Operations - Continued
Real estate taxes have remained fairly constant for the three months ended
March 31, 1995 as compared to the three months ended March 31, 1994.
Professional and administrative expenses increased for the three months
ended March 31, 1995 as compared to the same period in 1994 as a result of
increased outside accounting costs.
Professional and administrative expenses - affiliated increased for the
three months ended March 31, 1995 as compared to the three months ended
March 31, 1994 due to increased salaries.
Depreciation and amortization decreased for the three months ended March 31,
1995 as compared to the three months ended March 31, 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 March 31, 1994. The decrease in depreciation and amortization for the
three month period 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 ended March 31, 1995 as compared to the three months ended
March 31, 1994.
Liquidity and Capital Resources
Cash provided by operations was $113,584 and $117,095 for the three months
ended March 31, 1995 and 1994, respectively. These funds in conjunction
with cash on hand were used to pay a 2% (annualized) cash distribution of
$64,471 (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 March 31, 1995, the Partnership had two mortgage loans each with an
insurance company in the amount of $3,164,755 and $973,771. Both mortgages
bear a fixed interest rate of 8.375% for the first 60 months and are due
October 5, 2002. At the end of the 56th month from the date of the notes
(notes dated September 8, 1992), the insurance companies will notify the
Partnership of the interest rate which is their then prevailing interest
rate for loans with a term of five years on properties comparable to the
apartments (the "Modified Rate"). The Partnership will have 30 days to
accept or reject the Modified Rate. If the Modified Rate is rejected by the
Partnership, the entire unpaid principal balance is due with the 60th
installment of interest. If the Partnership accepts the Modified Rate, it
becomes effective the 61st month from the date of the note. Both mortgages
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. If the Partnership accepts the Modified Rate, the
principal balance of both mortgages will be amortized using a 22-year
amortization schedule beginning the 61st month. The outstanding principal
balance at maturity based on the current rate of amortization would be
$3,607,560 ($2,758,723 and $848,837).
As of March 31, 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
<PAGE>
Liquidity and Capital Resources - Continued
company (obtained November 1993) in the amount of $4,710,678. The mortgage
is recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the mortgage at March 31, 1995 is $1,476,326 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 a result of a
decrease in accounts payable - construction. Cash flows used in financing
activities are for cash distributions, principal payments on mortgages and
note payable and payment of loan costs. 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 Blankenbaker Business Center 1A'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 6.25% during the first quarter 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 three months ended March 31, 1995 and 1994.
Net Loss Cash Return of
Allocated Distributions Capital
Limited Partners:
1995 $ (44,280) $ 63,826 $ 63,826
1994 (57,996) 63,826 63,826
General Partner:
1995 $ (447) $ 645 $ 645
1994 (586) 645 645
As of March 31, 1995, Blankenbaker Business Center 1A has a commitment for
approximately $160,000 of tenant finish improvements. The commitment is the
result of a lease renewal and expansion with Prudential. For details
regarding the lease renewal and expansion see Note 3 of the Partnership's
financial statements. The Partnership had no other material commitments for
renovations or capital improvements at March 31, 1995.
In an effort to continue to improve occupancy at the Partnership's
residential properties, the Partnership has an on-site leasing staff,
employees of NTS Development Company, at each of the apartment communities.
The staff handles all on-site visits from potential tenants, coordinates
local advertising with NTS Development Company's marketing staff, makes
visits to local companies to promote fully furnished units and 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 quarter ended
March 31, 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: May 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 554,314
<SECURITIES> 0
<RECEIVABLES> 19,386
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,765,638
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 12,532,961
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,614,852
<COMMON> 0
0
0
<OTHER-SE> 6,698,031
<TOTAL-LIABILITY-AND-EQUITY> 12,532,961
<SALES> 466,289
<TOTAL-REVENUES> 469,501
<CGS> 0
<TOTAL-COSTS> 357,025
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,335
<INCOME-PRETAX> (44,727)
<INCOME-TAX> 0
<INCOME-CONTINUING> (44,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,727)
<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 10Q filing.
</FN>
</TABLE>
