<PAGE>
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
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 426-4800
-------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(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
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 35
Total Pages: 38
<PAGE>
TABLE OF CONTENTS
-----------------
Pages
-----
PART I
Items 1 and 2 Business and Properties 3-9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote
of Security Holders 9
PART II
Item 5 Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-19
Item 8 Financial Statements and Supplementary
Data 20-31
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 32
PART III
Item 10 Directors and Executive Officers of
the Registrant 32
Item 11 Management Remuneration and Transactions 33
Item 12 Security Ownership of Certain Beneficial
Owners and Management 33
Item 13 Certain Relationships and Related
Transactions 33-34
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 35-37
Signatures 38
- 2 -
<PAGE>
PART I
Items 1. and 2. Business and Properties
General
- -------
NTS-Properties VII, Ltd., a Florida limited partnership (the "Partnership"), was
formed in 1987. The general partner is NTS-Properties Associates VII, a Kentucky
limited partnership. As of December 31, 1995 the Partnership owned the following
properties:
- The Park at the Willows, a 48-unit luxury apartment complex located on a
2.8 acre tract in Louisville, Kentucky, acquired complete by the
Partnership.
- Park Place Apartments Phase II, a 132-unit luxury apartment complex
located on an 11 acre tract in Lexington, Kentucky, constructed by the
Partnership.
- A joint venture interest in Blankenbaker Business Center 1A, a business
center with approximately 50,000 net rentable ground floor square feet
and approximately 50,000 net rentable mezzanine square feet located in
Louisville, Kentucky, acquired complete by the joint venture between the
Partnership and NTS-Properties Plus Ltd., an affiliate of the general
partner of the Partnership, The Joint Venture Agreement was amended to
admit NTS-Properties IV., Ltd., an affiliate of the general partner of
the Partnership, ("NTS- Properties IV") during 1994. The Partnership's
percentage interest in the joint venture was 31% at December 31, 1995.
The Partnership or the joint venture in which the Partnership is a partner has a
fee title interest in the above properties. In the opinion of the Partnership's
management, the properties are adequately covered by insurance.
The Park at the Willows is not encumbered by any outstanding mortgages at
December 31, 1995.
Park Place Apartments Phase II is encumbered by permanent mortgages with two
insurance companies. Both loans are secured by a first mortgage on the property.
The outstanding balance of the mortgages at December 31, 1995 was $4,099,104
($3,134,609 and $964,495). Both mortgages currently bear a fixed interest rate
of 8.375% and are due October 5, 2002. 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).
Blankenbaker Business Center 1A, a joint venture between the Partnership,
NTS-Properties IV and NTS-Properties Plus Ltd., publicly registered limited
partnerships sponsored by an affiliate of the General Partner, is encumbered by
a mortgage payable to an insurance company. The outstanding balance at December
31, 1995 was $4,500,239. The mortgage is recorded as a liability of the Joint
Venture. The Partnership's proportionate interest in the mortgage at December
31, 1995 is $1,410,375. The mortgage bears interest at a fixed rate of 8.5% and
is due November 15, 2005. Currently, 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.
For a further discussion regarding the terms of the financings, see Management's
Discussion and Analysis of Financial Condition and Results of Operations (Item
7).
As of December 31, 1995, the Partnership had no material commitments for
renovations or capital improvements.
- 3 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
General - Continued
- -------------------
The Partnership is presently engaged solely in the business of developing,
constructing, owning and operating residential apartments and commercial real
estate. A presentation of information concerning industry segments is not
applicable.
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to acquire, directly or by joint venture,
unimproved or partially improved land, to construct and otherwise develop
thereon apartment complexes or commercial properties, and to own and operate the
completed properties. The original purpose also includes the ability of the
Partnership to invest in fully improved properties, either directly or by joint
venture. 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. The General Partner of the Partnership is currently
exploring the marketability of certain of its properties, and has not yet
determined if any of the properties might be sold in the next 12 months.
The Park at the Willows
- -----------------------
All units in The Park at the Willows are loft, studio or deluxe one-bedroom
apartments. All units have wall-to-wall carpeting, individually controlled
heating and air conditioning, dishwashers, ranges, refrigerators with ice
makers, garbage disposals and microwave ovens. Loft and deluxe units have
washer/dryer hook-ups. In addition, pursuant to an agreement with the Willows of
Plainview apartment community which was developed adjacent to The Park at the
Willows and is owned by NTS-Properties IV and NTS-Properties V, two publicly
registered limited partnerships sponsored by an affiliate of the General
Partner, tenants of The Park at the Willows have access to and use of the
coin-operated washer/dryer facilities, clubhouse, management offices, swimming
pool, whirlpool and tennis courts at The Willows of Plainview. The Partnership
shares proportionately in the cost of maintaining and operating these
facilities.
Monthly rental rates at The Park at the Willows start at $429 for studio
apartments, $589 for deluxe units and $669 for lofts, 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 96% (1995), 83% (1994), 92% (1993), 92% (1992) and 71% (1991).
Park Place Apartments Phase II
- ------------------------------
Units at Park Place Apartments Phase II include one-bedroom and two-bedroom
apartments and two-bedroom townhomes. All units have wall-to-wall carpeting,
individually controlled heating and air conditioning, dishwashers, ranges,
refrigerators with ice makers, garbage disposals and microwave ovens. Each unit
has either a washer/dryer hook-up or access to coin-operated washers and dryers.
Amenities include the clubhouse with a party room, swimming pool, tennis courts,
racquetball courts, exercise
- 4 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Park Place Apartments Phase II - Continued
- ------------------------------------------
facility and management offices. The amenities are shared with Phase I of the
Park Place development which was developed and constructed by NTS- Properties
VI, an affiliate of the General Partner. The cost to construct and operate the
common amenities is shared proportionately by each phase.
Monthly rental rates at Park Place Apartments Phase II start at $709 for
one-bedroom apartments, $939 for two-bedroom apartments and $1,099 for
two-bedroom townhomes, 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 91% (1995), 92%
(1994), 86% (1993), 94% (1992) and 88% (1991).
Blankenbaker Business Center 1A
- -------------------------------
Prudential Service Bureau, Inc. has leased 100% of Blankenbaker Business Center
1A. The annual base rent, which does not include the cost of utilities, is $7.89
per square foot for ground floor office space and $7.10 per square foot for
second floor office space. The average base annual rental for all types of space
leased as of December 31, 1995 was $7.48. The lease term is for 11 years and
expires in July 2005. Prudential Service Bureau, Inc. is a professional service
oriented organization which deals in insurance claim processing. The lease
provides for the tenant to contribute toward the payment of common area
expenses, insurance and real estate taxes. The occupancy level at the business
center as of December 31, 1995, 1994, 1993, 1992 and 1991 was 100%.
The following table contains approximate data concerning the lease in effect on
December 31, 1995:
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(1) Rental Options
---- ---------- ------- ------ -------
Prudential Service
Bureau, Inc. 2005 48,463 (100%) $752,787 (100%) None
(1) Rentable area includes only ground floor square feet.
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Wholly-Owned Properties
- -----------------------
The Park at the Willows $2,559,768 $.011410 $18,161
Park Place Apartments
Phase II 9,348,562 .009905 64,436
Property Owned in Joint
Venture with NTS-
Properties IV and NTS-
Properties Plus Ltd.
- --------------------
Blankenbaker Business
Center 1A 7,356,545 .011410 66,685
- 5 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Blankenbaker Business Center 1A - Continued
- -------------------------------------------
Percentage ownership has not been applied to the Blankenbaker Business Center 1A
information in the table on page 5.
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
5 - 30 for amenities. There are currently no planned renovations which would
have an impact on realty taxes.
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 Venture
- ---------------------------
Blankenbaker Business Center Joint Venture - On December 28, 1990, the
Partnership entered into a joint venture agreement with NTS-Properties Plus Ltd.
to own and operate Blankenbaker Business Center 1A and to acquire an
approximately 2.49 acre parking lot that was being leased by the business center
from an affiliate of the General Partner. The use of the parking lot is a
provision of the tenants' lease agreements with the business center.
On August 16, 1994, the Blankenbaker Business Center Joint Venture agreement was
amended to admit NTS-Properties IV to the Joint Venture. 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 and Parking
Lot and the sale and/or collection of any evidences of
indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
In 1990 when the Joint Venture was originally formed, the Partnership
contributed $450,000 which was used for additional tenant improvements to the
business center and made a capital contribution to the Joint Venture of $325,000
to purchase the 2.49 acre parking lot. The additional tenant improvements were
made to the business center and the parking lot was purchased in 1991.
NTS-Properties Plus Ltd. contributed Blankenbaker Business Center 1A together
with improvements and personal property subject to mortgage indebtedness of
$4,715,000. During November 1994, this note payable was replaced with permanent
financing in the amount of $4,800,000. For a further discussion regarding the
permanent financing, see Management's Discussion and Analysis of Financial
Condition and Results of Operations (Item 7).
On April 28, 1994, the Joint Venture obtained $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which were associated with
the Prudential lease renewal and expansion. For a further discussion of the
lease renewal and expansion, see Management's Discussion and Analysis of
Financial Condition and Results of Operations (Item 7). The $1,100,000 note bore
interest at the Prime Rate + 1 1/2%. In order for the
- 6 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Venture - Continued
- ---------------------------------------
Joint Venture to obtain the $4,800,000 of permanent financing discussed on page
6, it was necessary for the Joint Venture to seek an additional Joint Venture
partner to provide the funds necessary for the tenant finish and leasing costs
instead of debt financing. See the following paragraph for information regarding
the new Joint Venture Partner. The $1,100,000 note was retired in August 1994.
This resulted in the Joint Venture's debt being at a level where permanent
financing could be obtained and serviced.
On August 16, 1994, NTS-Properties VII, Ltd. contributed $500,000 and NTS-
Properties IV contributed $1,100,000 in accordance with the agreement to amend
the Joint Venture. The need for additional capital by the Joint Venture was a
result of the lease renewal and expansion which was signed April 28, 1994
between the Joint Venture and Prudential. NTS-Properties Plus Ltd. was not in a
position to contribute additional capital, nor was NTS-Properties VII, Ltd. in a
position to contribute all of the capital required for the project.
NTS-Properties IV was willing to participate in the Joint Venture and to
contribute, together with NTS-Properties VII, Ltd., the capital necessary with
respect to the project. NTS-Properties Plus Ltd. agreed to the admission of
NTS-Properties IV to the Joint Venture, and to the capital contributions by
NTS-Properties IV and NTS-Properties VII, Ltd. with the knowledge that its joint
venture interest would, as a result, decrease. See the following paragraph for a
discussion of how the revised interests in the Joint Venture were calculated
with the admission of NTS- Properties IV. With this expansion, Prudential now
occupies 100% of the business center. No future contributions are anticipated as
of December 31, 1995.
In order to calculate the revised joint venture percentage interests, the assets
of the Joint Venture were revalued in connection with the admission of
NTS-Properties IV as a joint venture partner and the additional of capital
contributions. The value of the Joint Venture's assets immediately prior to the
additional capital contributions was $6,764,322 and its outstanding debt was
$4,650,042, with net equity being $2,114,280. The difference between the value
of the Joint Venture's assets and the value at which they were carried on the
books of the Joint Venture was allocated to the Partnership and NTS-Properties
Plus Ltd. in determining each Joint Venture partners's percentage interest.
The Partnership's interest in the Joint Venture remained at 31%. NTS- Properties
Plus Ltd.'s interest in the Joint Venture decreased from 69% to 39% as a result
of the capital contributions by NTS-Properties IV and the Partnership.
NTS-Properties IV obtained a 30% interest in the Joint Venture as a result of
its capital contribution.
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
for any period shall mean 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 released by the Partners from previously
established reserves (referred to in clause (B) (iv) below), over (B) the sum of
(i) all cash operating expenses paid by the Joint Venture Property during such
period in the course of business, (ii) 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 (B)(i), (ii) and (iii) above shall only be taken into account 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.
- 7 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Investment in Joint Venture - Continued
- ---------------------------------------
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 31%
at December 31, 1995.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1995.
Competition
- -----------
The Partnership's residential 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 services provided to tenants. Competition is
expected to increase in the future as a result of the construction of additional
properties. As of December 31, 1995, there are no properties under construction
in the respective vicinities in which the properties are located except for the
following: In the vicinity near Park Place Apartments Phase II, there are 330
apartment units currently under construction which are scheduled to be completed
during the third quarter of 1996. At this time it is unknown the effect these
new units will have on occupancy at Park Place Apartments. 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
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Associates VII, 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 VII. 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 $101,312
for the year ended December 31, 1995. $17,844 was received from the
Partnership's commercial property and $83,468 was received from residential
properties. The fee is equal to 6% of gross revenues from commercial properties
and 5% of gross revenues from residential properties.
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 cancelled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1995, the
Management Agreement is still in effect.
- 8 -
<PAGE>
Items 1. and 2. Business and Properties - Continued
Conflict of Interest
- --------------------
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 than those previously described.
Employees
- ---------
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.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
- 9 -
<PAGE>
PART II
Item 5. Market for the Registrant's Limited Partnership Interests and
Partner Matters
There is no established trading market for the limited partnership interests.
The Partnership had 1,393 limited partners as of February 29, 1996. Cash
distributions and allocations of net income (loss) are made as described in Note
1C to the Partnership's 1995 financial statements.
Annual distributions totalling $.40 were paid per limited partnership unit
during the years ended December 31, 1995, 1994 and 1993. 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:
1995 1994 1993
---------- ---------- ---------
First quarter $ .10 $ .10 $ .10
Second quarter .10 .10 .10
Third quarter .10 .10 .10
Fourth quarter .10 .10 .10
---- ---- ----
$ .40 $ .40 $ .40
==== ==== ====
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, 1995, 1994 and 1993.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $(103,976) $ 255,306 $ 255,306
1994 (390,560) 255,306 255,306
1993 (309,892) 255,306 255,306
General Partner:
1995 $ (1,050) $ 2,579 $ 2,579
1994 (3,945) 2,579 2,579
1993 (3,130) 2,579 2,579
- 10 -
<PAGE>
<TABLE>
Item 6. Selected Financial Data
For the years ended December 31, 1995, 1994, 1993, 1992 and 1991.
<CAPTION>
1995 1994 1993 1992 1991
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Total revenues $ 1,972,169 $ 1,871,478 $ 1,830,587 $ 1,761,507 $ 1,656,661
Total expenses (2,077,195) (2,265,983) (2,143,609) (2,121,701) (2,144,616)
------------ ------------ ------------ ------------ ------------
Net loss $ (105,026) $ (394,505) $ (313,022) $ (360,194) $ (487,955)
============ ============ ============ ============ ============
Net loss allocated to:
General partner $ (1,050) $ (3,945) $ (3,130) $ (3,602) $ (4,880)
Limited partners $ (103,976) $ (390,560) $ (309,892) $ (356,592) $ (483,075)
Net loss per limited
partnership unit $ (.16) $ (.61) $ (.49) $ (.56) $ (.76)
Weighted average number
of limited partnership
units 638,265 638,265 638,265 638,265 638,265
Cumulative net (loss)
allocated to:
General partner $ (25,794) $ (24,744) $ (20,799) $ (17,669) $ (14,067)
Limited partners $ (2,553,698) $ (2,449,722) $ (2,059,162) $ (1,749,270) $ (1,392,678)
Cumulative taxable
income (loss) allocated
to:
General partner $ 14,381 $ (33,877) $ (30,239) $ (25,441) $ (22,863)
Limited partners $ (2,965,106) $ (2,840,798) $ (2,554,247) $ (2,192,373) $ (2,019,611)
Distributions declared:
General partner $ 2,579 $ 2,579 $ 2,579 $ 2,579 $ 2,579
Limited partners $ 255,306 $ 255,306 $ 255,306 $ 255,306 $ 255,306
Cumulative distributions
declared:
General partner $ 19,121 $ 16,542 $ 13,963 $ 11,384 $ 8,805
Limited partner $ 1,892,870 $ 1,637,564 $ 1,382,258 $ 1,126,952 $ 871,646
At year end:
Cash and equivalents $ 377,212 $ 515,376 $ 798,256 $ 718,089 $ 601,142
Investment securities $ 103,908 $ -- $ -- $ -- $ --
Land, buildings and
amenities, net $ 11,405,597 $ 11,902,498 $ 12,332,771 $ 12,992,460 $ 13,637,198
Total assets $ 12,108,948 $ 12,677,879 $ 13,311,220 $ 13,930,525 $ 14,478,261
Mortgages and notes
payable $ 5,509,479 $ 5,648,524 $ 5,674,674 $ 5,722,109 $ 5,630,074
</TABLE>
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.
- 11 -
<PAGE>
Item 7. 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 December 31 were as
follows:
Percentage
Ownership at
12/31/95 1995 1994 1993
------------ ---- ---- ----
Wholly-owned Properties
- -----------------------
The Park at the Willows 100% 96% 83% 92%
Park Place Apartments
Phase II 100% 91% 92% 86%
Property owned in Joint
Venture with NTS-Properties
IV and NTS-Properties Plus Ltd.
- -------------------------------
Blankenbaker Business
Center 1A 31% 100% 100% 100%
Rental and other income generated by the Partnership's properties for the years
ended December 31, 1995, 1994 and 1993 were as follows:
Percentage
Ownership
at 12/31/95 1995 1994 1993
----------- -------- ---------- ----------
Wholly-owned Properties
- -----------------------
The Park at the Willows 100% $ 316,949 $ 319,487 $ 330,642
Park Place Apartments
Phase II 100% $1,352,427 $1,269,494 $1,223,996
Property owned in Joint
Venture with NTS-
Properties IV and NTS-
Properties Plus Ltd.
- --------------------
Blankenbaker Business
Center 1A 31%(1) $ 291,468 $ 266,941 $ 257,735
(1) Revenues shown in this table represent the Partnership's share of
revenues generated by Blankenbaker Business Center 1A. The Partnership's
percentage interest in the joint venture was 31% during 1995, 1994 and 1993.
The Park at the Willows' year-ending occupancy increased from 83% in 1994 to 96%
in 1995 and average occupancy increased from 90% in 1994 to 93% in 1995. The
Park at the Willows' year-ending occupancy decreased from 92% in 1993 to 83% in
1994; however average occupancy increased from 88% in 1993 to 90% in 1994.
Occupancy at residential properties fluctuate on a continuous basis. Year-ending
occupancy percentages represent occupancy only on a specific date; therefore, it
is more meaningful to look at average occupancy percentages which are more
representative of the entire year's
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
results. There were no significant changes in average occupancy from 1994 to
1995 and from 1993 to 1994. In the opinion of the General Partner of the
Partnership, the decrease in 1994 year-ending occupancy was only a temporary
fluctuation and does not represent a downward occupancy trend. Large changes in
occupancy at The Park at the Willows are due to the fact that the complex has
only 48 units. One vacant apartment in this complex equates to a 2% decrease in
occupancy; therefore, occupancy percentage changes may appear distorted on a
percentage basis when compared to other residential properties. In residential
properties it is not uncommon for multiple residents to vacate at month-end with
new residents taking occupancy within a few days. When this occurs at The Park
at the Willows, the change in occupancy will be much greater than at other
residential properties because of its small size. Rental and other income at The
Park at the Willows decreased from 1994 to 1995 and from 1993 to 1994 as a
result of decreased income from the rental of fully furnished units. Fully
furnished units are apartments which rent at an additional premium above base
rent. Therefore, it is possible for occupancy to increase and revenues to
decrease when the number of fully furnished units has decreased.
Park Place Apartments Phase II's year-ending occupancy decreased from 92% in
1994 to 91% in 1995; however, average occupancy increased from 88% in 1994 to
91% in 1995. Rental and other income at Park Place Apartments Phase II increased
from 1994 to 1995 as a result of the increase in average occupancy, increased
rental rates and increased income from fully furnished units as a result of an
increased number of fully furnished units being leased.
Park Place Apartments Phase II's year-ending occupancy increased from 86% in
1993 to 92% in 1994; however, average occupancy decreased from 90% in 1993 to
88% in 1994. Rental and other income at Park Place Apartments Phase II increased
from 1993 to 1994 as a result of an increase in income from fully furnished
units (increased number of fully furnished units were leased) and an increase in
income collected upon early lease terminations and from short term leases. The
increases in rental and other income are partially offset by the decrease in
average occupancy from 1993 to 1994.
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 renewal extends 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 from 1994 to 1995 as a result of the lease renewal and
expansion with Prudential Service Bureau, Inc. Blankenbaker Business Center 1A's
rental and other income increased from 1993 to 1994 as a result of a rent
escalation which is based on changes in the consumer price index.
If present trends continue, the Partnership will be able to continue at its
current level of operations without the need of any additional financing.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
Item 7 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 from 1994 to 1995
and from 1993 to 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.
- 13 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
Operating expenses have increased from 1994 to 1995 due to increased replacement
costs (carpet, vinyl and wallcovering) and increased building maintenance costs
(roof and patio repairs) at Park Place Apartments Phase II. Also contributing to
the increase in operating expenses from 1994 to 1995 is increased deferred
leasing commission amortization at Blankenbaker Business Center 1A. The
commission was a result of Prudential Service Bureau, Inc.'s lease renewal and
expansion. Leasing commissions are amortized over the term of the lease to which
they apply. These increases are partially offset by decreased replacement costs
at The Park at the Willows and decreased snow removal costs at all the
Partnership's properties.
Operating expenses have increased from 1993 to 1994 primarily as a result of
increased operating expenses at Park Place Apartments Phase II. Increased
expenses at Park Place Apartments Phase II include increased building
maintenance costs (pest control, interior/exterior painting and roof repairs),
landscaping costs (irrigation repairs and replacements of shrubbery and plants
damaged by the January 1994 winter storm), utility costs (increased rates and
consumption) and costs associated with fully furnished units. Also contributing
to the increase in operating expenses from 1993 to 1994 are increased
replacement costs (replaced water main) at The Park at the Willows, increased
snow removal costs at all the Partnership's properties and increased carpet
replacement costs at the Partnership's residential properties. The increases in
operating expenses are partially offset by decreased costs associated with fully
furnished units at the Park at the Willows from 1993 to 1994.
Operating expenses - affiliated decreased from 1994 to 1995 as a result of
decreased leasing costs at Blankenbaker Business Center 1A and as a result of
decreased administrative salaries at the Partnership's residential properties.
These decreases were partially offset by increased property maintenance and
grounds maintenance salaries at Park Place Apartments Phase II. Operating
expenses - affiliated are expenses incurred for services performed by employees
of NTS Development Company, an affiliate of the General Partner.
Operating expenses - affiliated from 1993 to 1994 increased as a result of
increased leasing salaries and legal fees associated with the lease renewal and
expansion at Blankenbaker Business Center 1A. (See the discussion regarding the
lease renewal and expansion on page 17.) The increase in operating expenses
- -affiliated from 1993 to 1994 is partially offset by decreased property manager
salaries at the Partnership's residential properties.
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 from 1993 to 1994 and from 1994 to 1995 as a result of a portion
of the costs capitalized during start-up having become fully amortized.
The 1994 write-off of unamortized tenant improvements is a result of the
approximately 15,000 square foot expansion and lease renewal of Prudential
Service Bureau, Inc., the tenant which now occupies 100% of Blankenbaker
Business Center 1A. As a condition of the lease renewal and expansion, it was
agreed that the area into which the tenant expanded would be renovated. Changes
to current tenant 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. In
order to complete the renovations, it is sometimes necessary to replace
improvements which had not been fully depreciated. This results in a write-off
of unamortized tenant improvements.
- 14 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in interest expense from 1994 to 1995 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 increase in interest expense from 1993 to 1994 is a result of increases in
the Prime Rate from 6% at December 31, 1993 to 8.5% at December 31, 1994 and as
a result of the higher interest rate on the permanent financing obtained
November 8, 1994. See the Liquidity and Capital Resources section of this item
for details regarding the Partnership's debt.
Management fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods will differ from the fluctuations of
management fee expense.
Real estate taxes remained fairly constant from 1994 to 1995. Real estate taxes
increased from 1993 to 1994 as a result of an increase in the 1994 property tax
assessment for the Park at the Willows Apartments and as a result of an increase
in the tangible personal property taxes associated with Park Place Apartments
Phase II. Real estate taxes at Blankenbaker Business Center 1A from 1993 to 1994
remained constant.
The decrease in professional and administrative expenses from 1994 to 1995 is
primarily due to the fact that 1994 includes a write-off of unamortized loan
costs which were associated with the Blankenbaker Business Center Joint
Venture's $1.1 million note payable. The unamortized loan fees were expensed due
to the fact that the note was retired prior to its maturity.
There was no similar expense in 1995.
The increase in professional and administrative expenses from 1993 to 1994 is
primarily due to the write-off of unamortized loan costs in 1994, as previously
discussed. There was no similar expense in 1993. The increase in professional
and administrative expenses from 1993 to 1994 is partially offset by decreased
outside legal fees.
Professional and administrative costs - affiliated have remained fairly constant
from 1993 to 1994 and from 1994 to 1995. Professional and administrative
expenses - affiliated are expenses incurred for services performed by employees
of NTS Development Company, an affiliate of the General Partner.
Depreciation and amortization decreased from 1994 to 1995 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. The decrease in
depreciation and amortization from 1994 to 1995 is partially offset by
depreciation on the new tenant finish improvements at Blankenbaker Business
Center 1A. Depreciation remained fairly constant at the Park at the Willows from
1994 to 1995. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10 - 30 years for land
improvements, 30 years for buildings, 5 - 30 years for building improvements and
5 - 30 years for amenities. The aggregate cost of the Partnership's properties
for Federal tax purposes is approximately $13,800,000.
Depreciation and amortization decreased from 1993 to 1994 as a result of
Partnership organizational costs becoming fully amortized during the first
quarter of 1993 and as a result of assets with shorter lives at Park Place
Apartments Phase II having become fully depreciated. The decrease in
depreciation and amortization from 1993 to 1994 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 from 1993 to 1994.
- 15 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash provided from operations was $469,855, $232,423 and $410,867 for the years
ended December 31, 1995, 1994 and 1993, respectively. These funds in conjunction
with cash on hand were used to make a 2% (annualized) distribution of $257,885
(1995, 1994 and 1993). 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, renovation and tenant finish costs. Cash
reserves (which are unrestricted cash and equivalents and investment securities
as shown on the Partnership's balance sheet as of December 31) were $481,120,
$515,376 and $798,256 at December 31, 1995, 1994 and 1993, respectively.
As of December 31, 1995, the Partnership had mortgages payable in the amount of
$4,099,104 ($3,134,609 and $964,495) from two insurance companies. 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).
On November 8, 1994, the Blankenbaker Business Center Joint Venture, in which
the Partnership has a joint venture interest, obtained permanent financing with
an insurance company in the amount of $4,800,000. The loan proceeds were used by
the Joint Venture to retire its note payable to a bank in the amount of
$4,636,527, of which the Partnership's proportionate interest was $1,453,088,
and to fund loan costs. The mortgage is recorded as a liability of the Joint
Venture. The outstanding balance at December 31, 1995 was $4,500,239 of which
the Partnership's proportionate interest is $1,410,375. 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.
On April 28, 1994, Blankenbaker Business Center Joint Venture, in which the
Partnership has a joint venture interest, obtained $1,100,000 in debt financing
to fund a portion of the tenant finish and leasing costs which were associated
with the Prudential Service Bureau, Inc. ("Prudential") lease renewal and
expansion. (See page 17 for a discussion of this lease renewal and expansion.)
The note bore interest at the Prime Rate + 1 1/2%. In order for the Joint
Venture to obtain the long term permanent financing discussed above, it was
necessary for the Joint Venture to seek an additional Joint Venture partner to
provide the funds necessary for the tenant finish and leasing costs (discussed
on page 17) instead of debt financing. The $1,100,000 note was retired in August
1994. This resulted in the Joint Venture debt being at a level where permanent
financing could be obtained and serviced.
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
On August 16, 1994, Blankenbaker Business Center Joint Venture, in which the
Partnership has a joint venture interest, amended its joint venture agreement to
admit NTS-Properties IV to the Joint Venture. In accordance with the Joint
Venture Agreement Amendment, NTS-Properties IV contributed $1,100,000 and the
Partnership contributed $500,000. The general partner of the Partnership
determined that the admission of NTS-Properties IV to the Joint Venture was
consistent with the investment objectives permitted by the Partnership's
partnership agreement. See below for a discussion of how the revised interests
in the Joint Venture were calculated with the admission of NTS-Properties IV.
The need for additional capital by the Joint Venture was a result of the lease
renewal and expansion which was signed April 28, 1994 between the Joint Venture
and Prudential. The lease was a result of winning a competitive request for
proposals issued by Prudential as it approached a decision regarding where it
would locate its expanding Louisville operations following the expiration of its
lease at Blankenbaker Business Center 1A. To meet the needs of the tenant, the
lease expanded Prudential's leased space by approximately 15,000 square feet and
extended its current lease term through July 2005. Approximately 12,000 square
feet of the expansion was into new space which had to be constructed on the
second level of the existing business center. With this expansion, Prudential
now occupies 100% of the business center (approximately 101,000 square feet).
The tenant finish and leasing costs connected with the lease renewal and
expansion were approximately $1.4 million.
In order to calculate the revised joint venture percentage interests, the assets
of the Joint Venture were revalued in connection with the admission of
NTS-Properties IV as a joint venture partner and the additional capital
contributions. The value of the Joint Venture's assets immediately prior to the
additional capital contributions was $6,764,322 and its outstanding debt was
$4,650,042, with net equity being $2,114,280. The difference between the value
of the Joint Venture's assets and the value at which they were carried on the
books of the Joint Venture was allocated to the Partnership and NTS-Properties
Plus Ltd. in determining each Joint Venture partner's percentage interest.
The Partnership's interest in the Joint Venture remained at 31%. NTS- Properties
Plus Ltd.'s interest in the Joint Venture decreased from 69% to 39% as a result
of the capital contributions by NTS-Properties IV and the Partnership.
NTS-Properties IV obtained a 30% interest in the Joint Venture as a result of
its capital contribution.
The majority of the Partnership's cash flow is derived from operating
activities. The increase in other assets represents the Partnership's
proportionate interest in the commission which was paid in connection with the
lease renewal and expansion by Prudential Service Bureau, Inc. at Blankenbaker
Business Center 1A (see above). Cash flows used in investing activities are for
capital improvements at the Partnership's properties and decreases in accounts
payable - construction. These improvements are funded by cash flow from
operations and capital contributions as discussed above. Cash flows used in
investing activities are also for the purchase of investment securities. As part
of its cash management activities, the Partnership has purchased Certificates of
Deposit or securities issued by the U.S. Government with initial maturities of
greater than three months to improve the return on its excess cash. The
Partnership intends to hold the securities until maturity. Cash flows provided
by investing activities are a result of increases in accounts payable -
construction and are also derived from the maturity of investment securities.
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 mortgage payable.
The
- 17 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
net joint venture capital contribution represents the Partnership's capital
contribution to the Blankenbaker Business Center Joint Venture net the
Partnership's proportionate interest in the joint venture's increase in cash
which resulted from capital contributions. The Partnership utilizes the
proportionate consolidation method of accounting for joint venture properties.
The Partnership's interest in the joint venture's assets, liabilities, revenues
and expenses are combined on a line-by-line basis with the Partnership's own
assets, liabilities, revenues and expenses. The Partnership does not expect any
material changes in the mix and relative cost of capital resources from those in
1995 except that which is discussed in the following paragraph.
As of December 31, 1995, the Partnership established an Interest Repurchase
Reserve in the amount of $127,653 pursuant to Section 16.4 of the Partnership's
Amended and Restated Agreement of Limited Partnership. Under Section 16.4,
limited partners may request the Partnership to repurchase their respective
interests (Units) in the Partnership. With this Interest Repurchase Reserve, the
Partnership will be able to repurchase and retire up to 31,913 Units at a price
of $4.00 per Unit. The Partnership notified the limited partners by letter dated
February 1, 1996 of the establishment of the Interest Repurchase Reserve and the
opportunity to request that the Partnership repurchase Units at the established
price. Repurchased Units will be retired by the Partnership, thereby reducing
the total number of Units outstanding. The Interest Repurchase Reserve was
funded by investment securities and cash reserves.
The primary source of future liquidity and distributions is expected to be
derived from cash generated by the Partnership's operating properties after
adequate cash reserves are established for future leasing, renovations and
tenant finish costs. It is anticipated that the cash flow from operations and
cash reserves will be sufficient to meet the needs of the Partnership. The
Partnership had no material commitments for renovations or capital improvements
at December 31, 1995.
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, 1995, 1994 and 1993.
Cash
Net Loss Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1995 $(103,976) $ 255,306 $ 255,306
1994 (390,560) 255,306 255,306
1993 (309,892) 255,306 255,306
General Partner:
1995 $ (1,050) $ 2,579 $ 2,579
1994 (3,945) 2,579 2,579
1993 (3,130) 2,579 2,579
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.
- 18 -
<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.
- 19 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To NTS-Properties VII, Ltd.:
We have audited the accompanying balance sheets of NTS-Properties VII, Ltd. (a
Florida limited partnership) as of December 31, 1995 and 1994, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements and
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 generally accepted auditing
standards. 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 VII, Ltd. as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
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 36 and 37
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the 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
February 14, 1996
- 20 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
------------- -------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 377,212 $ 515,376
Cash and equivalents - restricted 55,014 53,219
Investment securities 103,908 --
Accounts receivable 8,098 22,575
Land, buildings and amenities, net 11,405,597 11,902,498
Other assets 159,119 184,211
------------ ------------
$ 12,108,948 $ 12,677,879
============ ============
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 5,509,479 $ 5,648,524
Accounts payable - operations 53,878 67,815
Accounts payable - construction -- 52,499
Distributions payable 64,471 64,471
Security deposits 33,480 37,342
Other liabilities 3,323 --
------------ ------------
5,664,631 5,870,651
Partners' equity 6,444,317 6,807,228
------------- ------------
$ 12,108,948 $ 12,677,879
============ ============
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
- 21 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental income $ 1,957,327 $ 1,852,819 $ 1,803,474
Interest and other income 14,842 18,659 27,113
----------- ----------- -----------
1,972,169 1,871,478 1,830,587
Expenses:
Operating expenses 460,491 442,566 371,562
Operating expenses - affiliated 226,010 258,110 249,259
Amortization of capitalized leasing
costs 6,266 18,362 22,569
Write-off of unamortized tenant
improvements -- 41,739 --
Interest expense 469,039 465,746 457,337
Management fees 101,312 96,658 93,439
Real estate taxes 103,496 106,110 100,173
Professional and administrative
expenses 55,388 77,768 69,143
Professional and administrative
expenses - affiliated 93,657 91,227 88,650
Depreciation and amortization 561,536 667,697 691,477
----------- ----------- -----------
2,077,195 2,265,983 2,143,609
----------- ----------- -----------
Net loss $ (105,026) $ (394,505) $ (313,022)
=========== =========== ===========
Net loss allocated to the limited
partners $ (103,976) $ (390,560) $ (309,892)
=========== =========== ===========
Net loss per limited partnership
unit $ (.16) $ (.61) $ (.49)
=========== =========== ===========
Weighted average number of limited
partnership units 638,265 638,265 638,265
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
- 22 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Limited General
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992 $ 8,059,478 $ (28,953) $ 8,030,525
Net loss (309,892) (3,130) (313,022)
Distributions declared (255,306) (2,579) (257,885)
----------- ----------- -----------
Balances at December 31, 1993 7,494,280 (34,662) 7,459,618
Net loss (390,560) (3,945) (394,505)
Distributions declared (255,306) (2,579) (257,885)
----------- ----------- -----------
Balances at December 31, 1994 6,848,414 (41,186) 6,807,228
Net loss (103,976) (1,050) (105,026)
Distributions declared (255,306) (2,579) (257,885)
----------- ----------- -----------
Balances at December 31, 1995 $ 6,489,132 $ (44,815) $ 6,444,317
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
- 23 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (105,026) $ (394,505) $ (313,022)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Accrued interest on investment securities (1,408) -- --
Amortization of capitalized leasing costs 6,266 18,362 22,569
Write-off unamortized tenant improvements -- 41,739 --
Depreciation and amortization 561,536 667,697 691,477
Changes in assets and liabilities:
Cash and equivalents - restricted (1,795) 1,431 5,787
Accounts receivable 14,477 11,650 4,033
Other assets 10,281 (106,925) 986
Accounts payable - operations (13,937) (297) 7,374
Security deposits (3,862) (6,729) (8,337)
Other liabilities 3,323 -- --
----------- ----------- -----------
Net cash provided by operating activities 469,855 232,423 410,867
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (56,090) (273,096) (8,336)
(Decrease in) additions to accounts payable -
construction (52,499) 52,499 --
Purchase of investment securities (202,363) -- --
Maturity of investment securities 99,863 -- --
----------- ----------- -----------
Net cash used in investing activities (211,089) (220,597) (8,336)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Joint venture capital contribution -- 1,382 --
Increase in mortgage payable -- 1,580,629 --
Principal payments on mortgages and note
payable (139,045) (1,604,342) (47,435)
Cash distributions (257,885) (257,885) (257,885)
Additions to loan costs -- (14,490) (17,044)
----------- ----------- -----------
Net cash used in financing activities (396,930) (294,706) (322,364)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (138,164) (282,880) 80,167
CASH AND EQUIVALENTS, beginning of year 515,376 798,256 718,089
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 377,212 $ 515,376 $ 798,256
=========== =========== ===========
Interest paid on a cash basis $ 469,631 $ 469,670 $ 457,250
=========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
- 24 -
<PAGE>
NTS-PROPERTIES VII, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties VII, Ltd. (the "Partnership") is a limited
partnership organized under the laws of the State of Florida in
April 1987. The general partner is NTS-Properties Associates VII (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:
- The Park at the Willows, a 48-unit luxury apartment complex in
Louisville, Kentucky
- Park Place Apartments Phase II, a 132-unit luxury apartment
complex in Lexington, Kentucky
- A 31% joint venture interest in Blankenbaker Business Center
Phase 1A, a business center with approximately 50,000 net
rentable ground floor square feet and approximately 50,000 net
rentable mezzanine 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 Operating Income (excluding Net Gains from Sales and other
specially allocated items) 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 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.
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.
- 25 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
D) Tax Status - Continued
----------------------
A reconciliation of net loss for financial statement purposes
versus that for income tax reporting is as follows:
1995 1994 1993
---------- ---------- ----------
Net loss $(105,026) $(394,505) $(313,022)
Items handled differently
for tax purposes:
Depreciation and
amortization (5,777) 83,538 (102,073)
Capitalized leasing costs 28,219 40,266 44,381
Rental income 6,534 18,713 4,042
Write-off of unamortized
tenant improvements -- (38,428) --
Loss on disposal of
assets -- 227 --
--------- --------- ---------
Taxable loss $ (76,050) $(290,189) $(366,672)
========= ========= =========
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
------------------------
The Partnership has adopted the proportionate consolidation method
of accounting for joint venture properties. The Partnership's
proportionate interest in the joint 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.
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for
residential security deposits and funds which have been escrowed
with mortgage companies for property taxes in accordance with the
loan agreements.
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
intends to hold the securities until maturity. During 1995, the
Partnership sold no investment securities.
- 26 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
H) Investment Securities - Continued
---------------------------------
The following provides details regarding the investments held at
December 31, 1995:
Amortized Maturity Value At
Type Cost Date Maturity
---- --------- -------- --------
Certificate of Deposit $103,908 01/05/96 $103,968
======= =======
The Certificate of Deposit held at December 31, 1995 has been
designated to fund a portion of the Interest Repurchase Reserve.
See Note 4 for additional information regarding the Interest
Repurchase Reserve.
The Partnership held no investment securities with initial
maturities greater than three months in 1994 or 1993.
I) Basis of Property and Depreciation
----------------------------------
Land, building 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 30 years for land improvements, 5-30 years for
buildings and improvements and 5-7 years for amenities.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (the "Statement") on accounting for the
impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to assets to be held and used. The Statement
also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The Partnership
is required to adopt the Statement no later than January 1, 1996,
although earlier implementation is permitted. The Statement is
required to be applied prospectively for assets to be held and
used. The initial application of the Statement to assets held for
disposal is required to be reported as the cumulative effect of a
change in accounting principle.
The Partnership plans to adopt the Statement as of January 1, 1996.
Based on a preliminary review, the Partnership does not anticipate
that any material adjustments will be required.
J) Rental Income and Capitalized Leasing Costs
-------------------------------------------
The lease agreement at the commercial property is structured to
include scheduled and specified rent increases over the lease term.
For financial reporting purposes, the income from this lease is
being recognized on a straight-line basis over the lease term.
Accrued income connected with this lease is included in accounts
receivable and totalled $7,665 and $14,200 at December 31, 1995 and
1994, respectively. All commissions paid to commercial property
leasing agents are deferred and amortized on a straight-line basis
over the applicable lease term. In addition, certain other costs
associated with the initial leasing of the properties are
capitalized and amortized over a five-year period.
K) 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.
- 27 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
L) Reclassification of 1994 and 1993 Financial Statements
------------------------------------------------------
Certain reclassifications have been made to the December 31, 1994
and 1993 financial statements to conform with December 31, 1995
classifications. These reclassifications have no effect on
previously reported operations.
2. Concentration of Credit Risk
----------------------------
NTS-Properties VII, Ltd. owns and operates, through a joint venture, a
commercial property in Louisville, Kentucky. The sole tenant which
occupies 100% of the property is a business which has operations in the
Louisville area. The Partnership also owns and operates residential
properties in Louisville and Lexington, Kentucky. The apartment unit is
generally the principal residence of the tenant.
3. Investment in Blankenbaker Business Center Joint Venture
--------------------------------------------------------
On December 28, 1990, the Partnership entered into a Joint Venture
Agreement with NTS-Properties Plus Ltd., an affiliate of the general
partner of the Partnership, to complete the development of Blankenbaker
Business Center 1A, a business center located in Louisville, Kentucky.
NTS-Properties Plus Ltd. contributed Blankenbaker Business Center 1A
together with improvements and personal property (Real Property) to the
capital of the Joint Venture, subject to mortgage indebtedness in the
amount of $4,715,000. The agreed upon net fair market value of NTS-
Properties Plus Ltd.'s capital contribution is $1,700,000, being the
appraised value of the Real Property ($6,415,000) reduced by the
$4,715,000 mortgage. The Partnership contributed $450,000 which was used
for additional tenant improvements to the Real Property and made a
capital contribution to the Joint Venture of $325,000 to purchase a 2.49
acre parking lot that was leased from an affiliate of the general partner
as described in NTS-Properties Plus Ltd.'s Prospectus. NTS- Properties
Plus Ltd. transferred to the Joint Venture its option to purchase the
parking lot, and the Joint Venture exercised the option.
The use of the parking lot is a provision of the tenant's lease agreement
with the business center. By purchasing the parking lot, the Joint
Venture's annual operating expenses were reduced approximately $35,000.
The purchase price of the parking lot was determined by an independent
appraisal.
On August 16, 1994, the Blankenbaker Business Center Joint Venture, in
which the Partnership has a joint venture interest, amended its joint
venture agreement to admit NTS-Properties IV (an affiliate of the general
partner of the Partnership) to the Joint Venture. In accordance with the
Joint Venture Agreement Amendment, NTS-Properties IV contributed
$1,100,000 and the Partnership contributed $500,000. The need for
additional capital by the Joint Venture was a result of the lease renewal
and expansion which was signed April 28, 1994 between the Joint Venture
and Prudential Service Bureau, Inc. ("Prudential"). The lease expands
Prudential's leased space by approximately 15,000 square feet and extends
its current lease term through July 2005. Approximately 12,000 square
feet of the expansion was into new space which had to be constructed on
the second level of the existing business center. With this expansion,
Prudential now occupies 100% of the business center (approximately
101,000 square feet - ground and second floor). The tenant finish and
leasing costs connected with the lease renewal and expansion were
approximately $1.4 million.
In order to calculate the revised joint venture percentage interests, the
assets of the Joint Venture were revalued in connection with the
admission of NTS-Properties IV as a joint venture partner and the
- 28 -
<PAGE>
3. Investment in Blankenbaker Business Center Joint Venture - Continued
--------------------------------------------------------------------
additional capital contributions. The value of the Joint Venture's assets
immediately prior to the additional capital contributions was $6,764,322
and its outstanding debt was $4,650,042, with net equity being
$2,114,280. The difference between the value of the Joint Venture's
assets and the value at which they were carried on the books of the Joint
Venture has been allocated to the Partnership and NTS- Properties Plus
Ltd. in determining each Joint Venture partner's percentage interest.
The Partnership's interest in the Joint Venture remained at 31%. NTS-
Properties Plus Ltd.'s interest in the Joint Venture decreased from 69%
to 39% as a result of the capital contributions by NTS-Properties IV and
the Partnership. NTS-Properties IV obtained a 30% interest in the Joint
Venture as a result of its capital contribution.
Net income or loss is to be allocated based on the respective
contribution of each partnership as of the end of each calendar quarter.
The Partnership's ownership share was 31% at December 31, 1995. The
Partnership's share of the joint venture's operating loss was $63,590
(1995), $192,782 (1994) and $117,049 (1993).
4. Interest Repurchase Reserve
---------------------------
As of December 31, 1995, the Partnership established an Interest
Repurchase Reserve in the amount of $127,653 pursuant to Section 16.4 of
the Partnership's Amended and Restated Agreement of Limited Partnership.
Under Section 16.4, limited partners may request the Partnership to
repurchase their respective interests (Units) in the Partnership. With
this Interest Repurchase Reserve, the Partnership will be able to
repurchase and retire up to 31,913 Units at a price of $4.00 per Unit.
The Partnership notified the limited partners by letter dated February 1,
1996 of the establishment of the Interest Repurchase Reserve and the
opportunity to request that the Partnership repurchase Units at the
established price. Repurchased Units will be retired by the Partnership,
thereby reducing the total number of Units outstanding. The Interest
Repurchase Reserve was funded by investment securities and cash reserves.
5. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1995 1994
----------- -----------
Land and improvements $ 3,775,739 $ 3,700,163
Buildings and improvements 11,605,948 11,622,612
Amenities 74,680 104,005
---------- ----------
15,456,367 15,426,780
Less accumulated depreciation 4,050,770 3,524,282
---------- ----------
$11,405,597 $11,902,498
========== ==========
- 29 -
<PAGE>
6. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
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 $ 1,410,375 $ 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 3,134,609 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 964,495 976,736
---------- ----------
$ 5,509,479 $ 5,648,524
========== ==========
The mortgages are payable in monthly installments of $57,824 which
includes principal, interest and property taxes.
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- -----------
1996 $ 151,264
1997 164,559
1998 179,021
1999 194,755
2000 211,871
Thereafter 4,608,009
----------
$5,509,479
=========
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 $7,200,000.
7. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1995:
For the Years Ended December 31, Amount
-------------------------------- ----------
1996 $ 232,091
1997 232,091
1998 235,924
1999 235,924
2000 235,924
Thereafter 1,081,316
---------
$2,253,270
=========
- 30 -
<PAGE>
8. Related Party Transactions
--------------------------
Property management fees of $101,312 (1995), $96,658 (1994) and $93,439
(1993) were paid to NTS Development Company, an affiliate of the general
partner. The fee is equal to 5% of gross revenues from the residential
properties and 6% of 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 relate to capital improvements.
The Partnership has incurred $3,337 (1995) and $14,357 (1994) as a repair
and maintenance fee and has capitalized this cost as a part of land,
buildings and amenities. The Partnership also was charged the following
amounts from affiliates of the general partner for the years ended
December 31, 1995, 1994 and 1993. These charges include items which have
been expensed as operating expenses affiliated or as professional and
administrative expenses - affiliated and items which have been
capitalized as other assets or as land, buildings and amenities.
These charges were as follows:
1995 1994 1993
-------- -------- --------
Administrative $117,792 $113,980 $109,782
Property manager 154,872 163,947 177,839
Leasing 45,332 68,167 44,441
Other 1,671 5,553 7,995
------- ------- -------
$319,667 $351,647 $340,057
======= ======= =======
On August 16, 1994, the Partnership contributed $500,000 to the
Blankenbaker Business Center Joint Venture. For details regarding this
transaction, refer to Note 3 Investment in Blankenbaker Business Center
Joint Venture.
- 31 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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 VII. 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 VII are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 54) is the managing general partner of NTS-Properties
Associates VII and is Chairman of the Board of NTS Corporation (since 1985) and
NTS Development Company (since 1977).
Richard L. Good
- ---------------
Mr. Good (age 56), President and Chief Operating Officer of NTS Corporation,
President of NTS Development Company and Chairman of the Board of NTS
Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he
was President of Jacques-Miller, Inc., a real estate syndication, property
management and financial planning firm in Nashville, Tennessee.
NTS Capital Corporation
- -----------------------
NTS Capital 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,
Richard L. Good and John W. Hampton.
John W. Hampton
- ---------------
Mr. Hampton (age 46) is Senior Vice President of NTS Development Company with
responsibility for all accounting operations. Before joining the Manager in
March 1991, Mr. Hampton was Vice President - Finance and Chief Financial Officer
of the Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for
nine years. Prior to that he was with Alexander Grant & Company CPA's. Mr.
Hampton is a Certified Public Accountant and a graduate of the University of
Louisville with a Bachelor of Science degree in Commerce. He is a member of the
American Institute of CPA's and the Kentucky Society of CPA's.
- 32 -
<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. 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 8 to the
financial statements which sets forth transactions with affiliates of the
general partner for the years ended December 31, 1995 1994 and 1993.
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 allocations and cash
distributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The general partner is NTS-Properties Associates VII, 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 VII are as follows:
J. D. Nichols 31.05%
10172 Linn Station Road
Louisville, Kentucky 40223
Richard L. Good 10.00%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation 12.00%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 46.95% interests are owned by various limited partners of NTS-
Properties Associates VII.
Item 13. Certain Relationships and Related Transactions
Property management fees of $101,312 (1995), $96,658 (1994) and $93,439 (1993)
were paid to NTS Development Company, an affiliate of the general partner. The
fee is equal to 5% of gross revenues from residential properties and 6% of 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 relate to capital improvements. The Partnership has incurred
$3,337 (1995) and $14,357 (1994) as a repair and maintenance fee and has
capitalized this cost as a part of land, buildings and amenities. The
Partnership was also charged the following amounts from NTS Development Company
for the years ended December 31, 1995, 1994 and 1993. These charges include
items which have been expensed as operating expenses - affiliated or as
professional and administrative expenses affiliated and items which have been
capitalized as other assets or as land, buildings and amenities.
1995 1994 1993
-------- -------- --------
Administrative $117,792 $113,980 $109,782
Property manager 154,872 163,947 177,839
Leasing 45,332 68,167 44,441
Other 1,671 5,553 7,995
-------- -------- --------
$319,667 $351,647 $340,057
======= ======= =======
- 33 -
<PAGE>
Item 13. Certain Relationships and Related Transactions - Continued
On August 16, 1994, the Partnership contributed $500,000 to the Blankenbaker
Business Center Joint Venture. For details regarding this transaction, refer to
Note 3 of the 1995 financial statements.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously discussed.
- 34 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. Financial statements
The financial statements for the period through December 31, 1995,
together with the report of Arthur Andersen LLP dated February 14, 1996,
appear in Item 8.
2. Financial statement schedules
Schedules: Page No.
--------- --------
III-Real Estate and Accumulated Depreciation 36-37
All other schedules have been omitted because they are not applicable,
or 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 and *
Certificate of Limited Partnership of
NTS-Properties VII, Ltd., a Florida
limited partnership
10. Property Management and Construction *
Agreement between NTS Development
Company and NTS-Properties VII, Ltd.
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 May 15, 1987 (effective
October 29, 1987) under Commission File No. 33-14308.
4. Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended December 31,
1995.
- 35 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AS OF DECEMBER 31, 1995
-----------------------
<CAPTION>
Park Place Blankenbaker
The Park a Apartments Business
the Willow Phase II Center 1A Total
---------- ---------- ------------ -----
<S> <C> <C> <C> <C>
Encumbrances None (A) (B)
Initial cost to partnership:
Land $ 457,048 $ 2,616,693 $ 606,927 $ 3,680,668
Buildings and improvements 2,091,968 7,692,119 1,679,081 11,463,168
Cost capitalized subsequent to acquisition:
Improvements 10,753 (3,094) 309,098 316,757
Other (C) -- -- (4,225) (4,225)
Carrying costs -- -- -- --
Gross amount at which carried December 31, 1995 (D):
Land $ 457,048 $ 2,618,162 $ 700,529 $ 3,775,739
Buildings and improvements 2,102,721 7,687,555 1,890,352 11,680,628
------------ ------------ ------------ ------------
Total $ 2,559,769 $ 10,305,717 $ 2,590,881 $ 15,456,367
============ ============ ============ ============
Accumulated depreciation $ 703,623 $ 2,462,401 $ 884,746 $ 4,050,770
============ ============ ============ ============
Date of construction N/A 02/90 N/A
Date Acquired 05/88 N/A 12/90
Life at which depreciation in
latest income statement is
computed (E) (E) (E)
<FN>
(A) First mortgage held by two insurance companies.
(B) First mortgage held by an insurance company.
(C) Represents NTS-Properties VII, Ltd.'s decreased interest in
Blankenbaker Business Center 1A as a result of capital contributions
made by the Partnership and NTS-Properties IV to the Blankenbaker
Business Center Joint Venture in 1994.
(D) Aggregate cost of real estate for tax purposes is $13,815,548.
(E) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10 - 30 years for land
improvements, 5 - 30 years for buildings and improvements and 5 - 30
years for amenities.
</FN>
</TABLE>
- 36 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
<CAPTION>
Real Accumulated
Estate Depreciation
------------ ------------
<S> <C> <C>
Balances at December 31, 1992 $15,242,217 $ 2,249,757
Additions during period:
Improvements (a) 8,336 --
Depreciation (b) -- 668,025
----------- ----------
Balances at December 31, 1993 15,250,553 2,917,782
Additions during period:
Improvements (a) 276,080 --
Depreciation (b) -- 658,890
Deductions during period:
Retirements (94,165) (50,926)
Other (c) (5,688) (1,464)
----------- -----------
Balances at December 31, 1994 15,426,780 3,524,282
Additions during period:
Improvements (a) 62,291 --
Depreciation (b) -- 552,991
Deductions during period:
Retirements (32,704) (26,503)
----------- -----------
Balances at December 31, 1995 $15,456,367 $ 4,050,770
=========== ===========
<FN>
(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.
(c) Represents the Partnership's decreased interest in Blankenbaker Business
Center 1A as a result of a capital contribution made by NTS-Properties IV
to the Blankenbaker Business Center Joint Venture.
</FN>
</TABLE>
- 37 -
<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,
General Partner, BY: NTS Capital
Corporation, General Partner
/s/ John W. Hampton
-------------------
John W. Hampton
Senior Vice President
Date: March 29 , 1996
------------------
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
- ------------------------------
J. D. Nichols General Partner of NTS-Properties
Associates VII and Chairman of the
Board and Sole Director of NTS
Capital Corporation
/s/ Richard L. Good
- ------------------------------
Richard L. Good General Partner of NTS-Properties
Associates VII and President of
NTS Capital Corporation
/s/ John W. Hampton
- ------------------------------
John W. Hampton Senior Vice President of NTS Capital
Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 38 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF DECEMBER 31, 1995 AND FROM THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 432,226
<SECURITIES> 103,908
<RECEIVABLES> 8,098
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,456,367
<DEPRECIATION> 4,050,770
<TOTAL-ASSETS> 12,108,948
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,509,479
0
0
<COMMON> 0
<OTHER-SE> 6,444,317
<TOTAL-LIABILITY-AND-EQUITY> 12,108,948
<SALES> 1,957,327
<TOTAL-REVENUES> 1,972,169
<CGS> 0
<TOTAL-COSTS> 1,459,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469,039
<INCOME-PRETAX> (105,026)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,026)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE
IS $0.
</FN>
</TABLE>
