UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-17589
NTS-PROPERTIES VII, LTD.
(Exact name of registrant as specified in its charter)
Florida 61-1119232
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10172 Linn Station Road
Louisville, Kentucky 40223
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (502) 426-4800
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO ______
Exhibit Index: See page 13
Total Pages: 14
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
as of June 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and six months ended
June 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and six months ended
June 30, 1998 and 1997
Notes To Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
PART II
Item 3. Defaults Upon Senior Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES VII, LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
June 30, 1998 December 31, 1997*
------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 492,221 $ 164,714
Cash and equivalents - restricted 55,493 176,636
Investment securities -- 338,129
Accounts receivable 3,460 858
Land, buildings and amenities, net 10,202,762 10,361,786
Other assets 139,759 137,022
----------- -----------
$10,893,695 $11,179,145
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 5,197,810 $ 5,303,947
Accounts payable 75,027 38,815
Distributions payable 29,078 60,426
Security deposits 32,150 36,325
Other liabilities 57,440 6,787
----------- -----------
5,391,505 5,446,300
Partners' equity 5,502,190 5,732,845
----------- -----------
$10,893,695 $11,179,145
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
<S> <C> <C> <C>
PARTNERS' EQUITY
Capital contributions, net of
offering costs $ 10,935,700 $ 100 $ 10,935,800
Net income (loss) - prior years (2,615,475) (26,418) (2,641,893)
Net loss - current year (8,080) (82) (8,162)
Cash distributions declared to
date (2,463,590) (24,885) (2,488,475)
Repurchase of limited
partnership Units (295,080) -- (295,080)
------------ ------------ ------------
Balances at June 30, 1998 $ 5,553,475 $ (51,285) $ 5,502,190
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 30, 1998.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 493,870 $ 502,542 $ 956,060 $ 986,773
Interest and other income 6,418 5,474 13,201 9,427
--------- --------- --------- ---------
500,288 508,016 969,261 996,200
EXPENSES:
Operating expenses 141,709 118,135 225,897 230,173
Operating expenses - affiliated 63,949 52,823 125,162 114,381
Write-off of unamortized
land improvements and amenities 10,743 -- 10,743 --
Interest expense 99,364 111,472 198,242 223,373
Management fees 25,792 25,995 49,992 51,047
Real estate taxes 25,150 24,894 50,928 49,788
Professional and administrative
expenses 19,851 15,083 31,386 28,917
Professional and administrative
expenses - affiliated 21,098 20,549 43,380 40,863
Depreciation and amortization 119,788 128,828 241,693 257,977
--------- --------- --------- ---------
527,444 497,779 977,423 996,519
--------- --------- --------- ---------
Net income (loss) $ (27,156) $ 10,237 $ (8,162) $ (319)
========= ========= ========= =========
Net income (loss) allocated to
the limited partners $ (26,884) $ 10,135 $ (8,080) $ (316)
========= ========= ========= =========
Net income (loss) per limited
partnership unit $ (0.05) $ 0.02 $ (0.01) $ 0.00
========= ========= ========= =========
Weighted average number of units 576,483 598,221 586,433 598,840
========= ========= ========= =========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (27,156) $ 10,237 $ (8,162) $ (319)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Accrued interest on investment
securities 388 -- 1,737 --
Write-off of unamortized land
improvements and amenities 10,743 -- 10,743 --
Depreciation and amortization 119,788 128,828 241,693 257,977
Changes in assets and liabilities
Cash and equivalents - restricted (4,941) (22,226) (6,507) (44,441)
Accounts receivable (2,161) 8,654 (2,602) 11,811
Other assets 9,370 9,299 (480) (8,079)
Accounts payable 34,049 (16,389) 36,212 (16,053)
Security deposits (400) 825 (4,175) 1,640
Other liabilities 24,875 24,894 50,653 49,788
--------- --------- --------- ---------
Net cash provided by operating
activities 164,555 144,122 319,112 252,324
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (63,024) (3,708) (90,496) (5,588)
Purchase of investment securities -- -- (200,000) --
Maturity of investment securities 100,000 -- 536,392 --
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities 36,976 (3,708) 245,896 (5,588)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash and equivalents - restricted 102,480 40 127,650 8,688
Principal payments on mortgages
payable (52,784) (40,697) (106,137) (80,547)
Cash distributions (58,524) (121,072))
Repurchase of limited partnership
Units (109,722) (40) (134,892) (8,688)
Payment of loan costs -- -- (5,172) --
--------- --------- --------- ---------
Net cash used in financing
activities (118,550) (101,124) (237,501) (201,619)
--------- --------- --------- ---------
Net increase in cash and equivalents 82,981 39,290 327,507 45,117
CASH AND EQUIVALENTS, beginning of
period 409,240 284,447 164,714 278,620
--------- --------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 492,221 $ 323,737 $ 492,221 $ 323,737
========= ========= ========= =========
Interest paid on a cash basis $ 100,356 $ 111,472 $ 200,145 $ 223,791
========= ========= ========= =========
</TABLE>
- 5 -
<PAGE>
NTS-PROPERTIES VII, LTD.
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein should be read in conjunction with the
Partnership's 1997 Annual Report. In the opinion of the General Partner, all
adjustments (only consisting of normal recurring accruals) necessary for a fair
presentation have been made to the accompanying financial statements for the
three months and six months ended June 30, 1998 and 1997.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
Actual results could differ from those estimates.
2. 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. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds received for residential
security deposits, funds which have been escrowed with mortgage companies
for property taxes in accordance with the loan agreements, and funds
reserved by the partnership for the repurchase of limited partnership
Units.
4. 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 Partnership intends to hold the securities until
maturity. During 1997 and 1998, the Partnership sold no investment
securities. At June 30, 1998 the Partnership held no investment securities
with initial maturities greater than three months.
The following provides details regarding the investments held at December
31, 1997:
Amortized Maturity Value at
Type Cost Date Maturity
------ ---------- -------- --------
Certificate of Deposit $ 112,348 02/04/98 $ 112,908
Certificate of Deposit 100,543 03/05/98 101,492
Certificate of Deposit 125,238 03/30/98 127,336
---------- ---------
$ 338,129 $ 341,736
========== =========
- 6 -
<PAGE>
5. Mortgages Payable
-----------------
Mortgages payable consist of the following:
June 30, December 31,
1998 1997
-------- ------------
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 7.37%, due October 15, 2012,
secured by land and buildings $ 4,040,142 $ 4,091,369
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building 1,157,668 1,212,578
---------- ----------
$ 5,197,810 $ 5,303,947
========== ==========
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 $6,200,000.
6. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership has established an
Interest Repurchase Reserve. On May 26, 1998, the Partnership elected to
fund $6,000 to its Interest Repurchase Reserve and on June 2, 1998, the
Partnership funded an additional $1,242 to the reserve. With these
fundings, the Partnership repurchased 1,207 Units at a price of $6 per
Unit. From December 31, 1995 to June 30, 1998 the Partnership has
repurchased a total of 62,529 Units for $295,080. The above offering price
per Unit was established by the General Partner in its sole discretion and
does not purport to represent the fair market value or liquidation value of
the Units. Repurchased Units will be retired by the Partnership, thus
increasing the percentage of ownership of each remaining limited partner
investor. The Interest Repurchase Reserve was funded from cash reserves.
The balance in the reserve at June 30, 1998 was $3.
7. Related Party Transactions
--------------------------
Property management fees of $49,992 and $51,047 were paid to NTS
Development Company, an affiliate of the General Partner, during the six
months ended June 30, 1998 and 1997, respectively. The fee is paid monthly
in an amount equal to 5% of the gross revenues from the residential
properties and 6% of the gross revenues from the commercial property
pursuant to an agreement with the Partnership. The Partnership also was
charged the following amounts from NTS Development Company for the six
months ended June 30, 1998 and 1997. These charges include items which have
been expensed as operating expenses affiliated or professional and
administrative expenses - affiliated and items which have been capitalized
as other assets or as land, buildings and amenities.
1998 1997
--------- ---------
Leasing $ 17,023 $ 20,273
Administrative 55,243 54,332
Property manager 95,677 80,525
Other 1,568 113
--------- ---------
$ 169,511 $ 155,243
========= =========
- 7 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
The management's discussion and analysis of financial condition and results of
operations included herein should be read in conjunction with the Partnership's
1997 Annual Report.
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of June 30 were as
follows:
1998 1997
---- ----
Wholly-owned Properties
- -----------------------
The Park at the Willows 90% 94%
Park Place Apartments Phase II 84% 94%
Property Owned in Joint Venture with
NTS-Properties IV and NTS-Properties
Plus Ltd. (Ownership % at June 30,
1998)
- -------------------------------------
Blankenbaker Business Center 1A (31%) 100% 100%
Rental and other income generated by the Partnership's properties for the three
months and six months ended June 30, 1998 and 1997 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ -------
Wholly-owned Properties
- -----------------------
The Park at the Willows $ 97,990 $ 79,945 $ 183,023 $ 154,995
Park Place Apartments Phase II $ 328,519 $ 350,648 $ 632,098 $ 687,106
Property owned in Joint Venture
with NTS-Properties IV and NTS-
Properties Plus Ltd. (Ownership %
at June 30, 1998)
- ---------------------------------
Blankenbaker Business Center 1A $ 69,093 $ 73,506 $ 143,529 $ 146,984
(31%)(1)
(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 the six months
ended June 30, 1998 and 1997.
The Park at the Willows' occupancy decreased from 94% at June 30, 1997 to 90% at
June 30, 1998. Average occupancy for the six month period ended June 30
increased from 88% in 1997 to 92% in 1998. Average occupancy for the three month
period ended June 30 increased from 90% in 1997 to 91% in 1998. Occupancy at
residential properties fluctuates on a continuous basis. Period 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 period's results. 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
- 8 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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. The increase in rental and other income at The Park
at the Willows for the three months and the six months ended June 30, 1998 as
compared to the same periods in 1997 is due to the increase in average
occupancy, an increase in rental rates and an increase in income from fully
furnished units. Fully furnished units are apartments which rent at an
additional premium above base rent.
Park Place Apartments Phase II's occupancy decreased from 94% at June 30, 1997
to 84% at June 30, 1998. Average occupancy for the six month period ended June
30 at Park Place Apartments Phase II decreased from 89% in 1997 to 84% in 1998.
Average occupancy for the three month period ended June 30 decreased from 90% in
1997 to 85% in 1998. In the opinion of the General Partner of the Partnership,
the decrease in occupancy at Park Place Apartments Phase II is only a temporary
fluctuation and does not represent a downward occupancy trend. Rental and other
income at Park Place Apartments Phase II decreased for the three months and the
six months ended June 30, 1998 as compared to the same periods in 1997 as a
result of the decrease in average occupancy.
A wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential Service Bureau, Inc.) has leased 100% of Blankenbaker Business
Center 1A through July 2005. 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 remained fairly constant for the three months and six months ended
June 30, 1998 as compared to the same periods in 1997.
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 2 for a discussion regarding the cash requirements of the Partnership's
current debt financings.
Interest and other income includes interest income from short-term investments
made by the Partnership with cash reserves. The increase in interest income for
the three months and six months ended June 30, 1998 as compared to the same
periods in 1997 is a result of increased cash reserves being available for
investment.
Operating expenses for the six months ended June 30, 1998 as compared to the
same period in 1997 overall remained fairly constant. Operating expenses for the
three month period increased as a result of increased repair and maintenance
costs at Park Place Apartments Phase II and increased expenses in connection
with fully furnished units at The Park at the Willows. The increases in
operating expenses for the three month period are partially offset by decreased
exterior renovation costs at Blankenbaker Business Center 1A.
Operating expenses - affiliated increased for the three months and the six
months ended June 30, 1998 as compared to the same periods in 1997 as a result
of increased property management costs. Operating expenses - affiliated are
expenses incurred for services performed by employees of NTS Development
Company, an affiliate of the General Partner.
The write-off of unamortized land improvements and amenities can be attributed
to Park Place Apartments Phase II. The write-off is the result of property
renovations. The write-off represents the cost of unamortized assets which were
replaced as a result of the renovations.
The decrease in interest expense for the three months and the six months ended
June 30, 1998 as compared to the same periods in 1997 is the result of a lower
interest rate on the new debt obligation obtained October 1997 (7.37% versus
8.375%) and a result of the Partnership's decreasing debt level as a result of
principal payments made. See the Liquidity and Capital Resources section of this
item for details regarding the Partnership's debt.
- 9 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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, professional and administrative expenses and professional and
administrative expenses - affiliated remained fairly constant for the three
month and six month periods ended June 30, 1998 as compared to the same periods
in 1997. Professional and administrative expenses - affiliated remained fairly
constant for the three months ended June 30, 1998 as compared to the same period
in 1997.
Depreciation and amortization decreased for the three months and six months
ended June 30, 1998 as compared to the same periods in 1997 as a result of a
portion of the assets with shorter lives at Park Place Apartments Phase II and
Blankenbaker Business Center 1A becoming fully depreciated. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets which are 10 - 30 years for land improvements, 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 $13,700,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $319,112 and $252,324 for the six months ended
June 30, 1998 and 1997, respectively. These funds in conjunction with cash on
hand were used to pay a 1.5% (annualized) cash distribution of $87,602 (1998)
and a 2% (annualized) cash distribution of $120,853 (1997). The annualized
distribution rate is calculated as a percent of the original capital
contribution. The limited partners received 99% and the General Partner received
1% of these distributions. The primary source of future liquidity and
distributions is expected to be derived from cash generated by the Partnership's
properties after adequate cash reserves are established for future leasing and
tenant finish costs. It is anticipated that the cash flow from operations and
cash reserves will be sufficient to meet the needs of the Partnership. Cash
reserves (which are unrestricted cash and equivalents as shown on the
Partnership's balance sheet as of June 30) were $492,221 and $323,737 at June
30, 1998 and 1997, respectively.
As of June 30, 1998, the Partnership had a mortgage payable with an insurance
company in the amount of $4,040,142. The mortgage bears interest at a fixed rate
of 7.37%, matures October 15, 2012 and is secured by the land, buildings and
amenities of Park Place Apartments Phase II. Current monthly payments are based
upon a 19-year amortization. The outstanding principal balance at maturity based
on the current rate of amortization will be $1,414,978.
As of June 30, 1998, Blankenbaker Business Center Joint Venture, in which the
Partnership has a joint venture interest, had a mortgage payable with an
insurance company in the amount of $3,693,900. The mortgage is recorded as a
liability of the Joint Venture and is secured by the assets of the Joint
Venture. The Partnership's proportionate interest in the mortgage at June 30,
1998 is $1,157,668. 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.
- 10 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership has established an Interest Repurchase
Reserve. On May 26, 1998, the Partnership elected to fund $6,000 to its Interest
Repurchase Reserve and on June 2, 1998, the Partnership funded an additional
$1,242 to the reserve. With these fundings, the Partnership repurchased 1,207
Units at a price of $6 per Unit. From December 31, 1995 June 30, 1998 the
Partnership has repurchased a total of 62,529 Units for $295,080. The above
offering price per Unit was established by the General Partner in its sole
discretion and does not purport to represent the fair market value or
liquidation value of the Units. Repurchased Units will be retired by the
Partnership, thus increasing the percentage of ownership of each remaining
limited partner investor. The Interest Repurchase Reserve was funded from cash
reserves. The balance in the reserve at June 30, 1998 was $3.
The majority of the Partnership's cash flow is derived from operating
activities. Cash flows used in investing activities are for capital improvements
at the Partnership's properties. These improvements are funded by cash flow from
operations. 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 cash reserves. The Partnership held the securities until
maturity. Cash flows provided by investing activities are a result of the
maturity of these investment securities. Cash flows used in financing activities
are for cash distributions, principal payments on mortgages payable loan costs,
and repurchases of limited partnership Units. Cash flows provided by financing
activities represents the utilization of cash which has been reserved by the
Partnership for the repurchase of limited partnership Units. The Partnership
does not expect any material changes in the mix and relative cost of capital
resources from those in 1997.
During the next twelve months, the Partnership anticipates a demand on future
liquidity as a result of a planned renovation to the apartment community's
clubhouse. At this time, the cost and extent of the renovation has not been
determined. The clubhouse is 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 clubhouse is
shared proportionately by each phase.
The Partnership has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the issue. The Year 2000 Issue, a
worldwide problem, is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems
failures or miscalculations. The Partnership presently believes that, with
modifications to existing software and conversions to new software, the Year
2000 problem will not pose significant operational problems for the
Partnership's computer systems. The Partnership continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material effect on its financial position or results of
operations. The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1998 was immaterial.
- 11 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The table below presents that portion of the distributions that represent a
return of capital on a Generally Accepted Accounting Principle basis for the six
months ended June 30, 1998 and 1997.
Net Income Cash
(Loss) Distributions Return of
Allocated Declared Capital
--------- -------- -------
Limited Partners:
1998 $ (8,080) $ 86,726 $ 86,726
1997 (316) 119,644 119,644
General Partner:
1998 $ (82) $ 876 $ 876
1997 (3) 1,209 1,209
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.
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.
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Partnership anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of a
commercial business center and apartment complexes. If Prudential, the tenant
that occupies 100% of the business center, or a large number of apartment
lessees default on their lease, the Partnership's ability to make payments due
under its debt agreements, payment of operating costs and other partnership
expenses would be directly impacted. A lessee's ability to make payments are
subject to risks generally associated with real estate, many of which are beyond
the control of the Partnership, including general or local economic conditions,
competition, interest rates, real estate tax rates, other operating expenses and
acts of God.
- 12 -
<PAGE>
PART II. OTHER INFORMATION
3. Defaults Upon Senior Securities
-------------------------------
None.
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated May 26, 1998 was filed to report in Item 5 that the
Partnership has elected to fund an additional amount of $6,000 to
its Interest Repurchase Reserve.
Form 8-K dated June 2, 1998 was filed to report in Item 5 that the
Partnership has elected to fund an additional amount of $1,242 to
its Interest Repurchase Reserve.
Items 1,2,4, and 5 are not applicable and have been omitted.
- 13 -
<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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: August 12, 1998
---------------
- 14 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 547,714
<SECURITIES> 0
<RECEIVABLES> 3,460
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,202,762
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 10,893,695
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,197,810
0
0
<COMMON> 0
<OTHER-SE> 5,502,190
<TOTAL-LIABILITY-AND-EQUITY> 10,893,695
<SALES> 956,060
<TOTAL-REVENUES> 969,261
<CGS> 0
<TOTAL-COSTS> 779,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,242
<INCOME-PRETAX> (8,162)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,162)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,162)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS
$0.
<F2>THIS INFORMATION IS NOT DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q FILING.
</FN>
</TABLE>
