<PAGE>
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 September 30, 1997
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 0-18952
NTS-PROPERTIES PLUS LTD.
(Exact name of registrant as specified in its charter)
Florida 61-1126478
(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 17
Total Pages: 18
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of September 30, 1997 and December 31, 1996 3
Statements of Operations
For the three months and nine months ended
September 30, 1997 and 1996 4
Statements of Cash Flows
For the three months and nine months ended
September 30, 1997 and 1996 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
PART II
1. Legal Proceedings 17
2. Changes in Securities 17
3. Defaults upon Senior Securities 17
4. Submission of Matters to a Vote of Security Holders 17
5. Other Information 17
6. Exhibits and Reports on Form 8-K 17
Signatures 18
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
September 30, 1997 December 31, 1996*
------------------ ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 8,282 $ 42,944
Cash and equivalents - restricted 85,816 24,540
Accounts receivable 24,200 50,408
Land, buildings and amenities, net 1,035,009 1,121,097
Asset held for sale 96,949 96,949
Deferred leasing commissions 138,545 153,380
Organizational and start-up costs, net 776 1,025
Other assets 80,128 80,945
----------- -----------
$ 1,469,705 $ 1,571,288
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 3,590,527 $ 3,770,347
Accounts payable - operations 369,276 268,688
Accounts payable - construction 12,938 4,106
Security deposits 14,716 12,030
Other liabilities 76,203 15,421
----------- -----------
4,063,660 4,070,592
Commitments and Contingencies
Partners' equity (2,593,955) (2,499,304)
----------- -----------
$ 1,469,705 $ 1,571,288
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- ------- -----
<S> <C> <C> <C>
PARTNERS' EQUITY
Capital contributions, net of
offering costs $ 11,784,521 $ 100 $ 11,784,621
Net loss - prior years (12,094,247) (122,164) (12,216,411)
Net loss - current year (81,576) (824) (82,400)
Cash distributions declared
to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited
partnership Units (20,653) -- (20,653)
------------ ------------ ------------
Balances at September 30, 1997 $ (2,450,475) $ (143,480) $ (2,593,955)
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 31, 1997.
- 3 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 202,896 $ 209,294 $ 592,693 $ 623,807
Interest and other income 449 1,006 1,504 2,164
--------- --------- --------- ---------
203,345 210,300 594,197 625,971
EXPENSES:
Operating expenses 40,941 34,987 113,886 92,400
Operating expenses - affiliated 14,774 11,400 43,127 36,563
Write-off of unamortized loan
costs -- 9,082 -- 9,082
Interest expense 75,619 83,490 229,439 270,329
Management fees 12,630 13,513 37,320 39,964
Real estate taxes 19,283 20,506 57,851 60,137
Professional and administrative
expenses 12,104 9,861 36,045 31,844
Professional and administrative
expenses - affiliated 13,696 25,927 39,878 79,573
Depreciation and amortization 39,490 39,875 119,051 122,220
--------- --------- --------- ---------
228,537 248,641 676,597 742,112
--------- --------- --------- ---------
Net loss $ (25,192) $ (38,341) $ (82,400) $(116,141)
========= ========= ========= =========
Net loss allocated to the limited
partners $ (24,940) $ (37,958) $ (81,576) $(114,979)
========= ========= ========= =========
Net loss per limited partnership
unit $ (0.04) $ (0.06) $ (0.12) $ (0.17)
========= ========= ========= =========
Weighted average number of units 663,402 685,647 667,207 685,647
========= ========= ========= =========
</TABLE>
- 4 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------- --- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (25,192) $ (38,341) $ (82,400) $ (116,141)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Write-off of unamortized loan costs -- 9,082 -- 9,082
Depreciation and amortization 39,490 39,875 119,051 122,220
Changes in assets and liabilities:
Cash and equivalents - restricted (20,310) (21,299) (61,276) (64,799)
Accounts receivable 7,572 9,432 26,208 36,636
Deferred leasing commissions 4,919 3,779 14,835 9,714
Other assets 6,650 6,976 (4,225) (14,791)
Accounts payable - operations 31,528 (2,390) 100,588 99,780
Security deposits 1,067 265 2,685 466
Other liabilities 18,945 23,049 60,783 63,592
----------- ----------- ----------- -----------
Net cash provided by operating
activities 64,669 30,428 176,249 145,759
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (2,794) (1,699) (18,840) (24,879)
Decrease in cash and equivalents -
restricted -- -- -- 1,725
----------- ----------- ----------- -----------
Net cash used in investing activities (2,794) (1,699) (18,840) (23,154)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable -- 2,187,180 -- 2,187,180
Principal payments on mortgages and
notes payable (61,186) (2,146,497) (179,820) (2,230,710)
Additions to loan costs -- (16,981) -- (46,274)
Repurchase of limited partnership Units (175) -- (12,251) --
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities (61,361) 23,702 (192,071) (89,804)
----------- ----------- ----------- -----------
Net increase (decrease) in cash and
equivalents 514 52,431 (34,662) 32,801
CASH AND EQUIVALENTS, beginning of
period 7,768 16,639 42,944 36,269
----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, end of period $ 8,282 $ 69,070 $ 8,282 $ 69,070
=========== =========== =========== ===========
Interest paid on a cash basis $ 75,619 $ 87,560 $ 230,606 $ 275,719
=========== =========== =========== ===========
</TABLE>
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<PAGE>
NTS PROPERTIES PLUS LTD.
NOTES TO FINANCIAL STATEMENTS
The financial statements and schedules included herein should be read in
conjunction with the Partnership's 1996 Annual Report. In the opinion of the
general partner, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation have been made to the accompanying financial
statements for the three months and nine months ended September 30, 1997 and
1996.
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. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds escrowed with mortgage
companies for property taxes in accordance with the loan agreements.
3. Interest Repurchase Reserve
---------------------------
On November 6, 1996, the Partnership established an Interest Repurchase
Reserve in the amount of $25,000 pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited Partnership. With
these funds, the Partnership would be able to repurchase 35,714 Units at a
price of $0.70 per unit. Through September 30, 1997, the Partnership has
repurchased a total of 22,245 Units for $15,572. Repurchased Units are
retired by the Partnership, thus increasing the share of ownership of each
remaining investor. On February 17, 1997, the Partnership indefinitely
suspended the Interest Repurchase Program.
4. Mortgages Payable
-----------------
Mortgages payable consist of the following:
September 30, December 31,
1997 1996
---- ----
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building $ 1,525,441 $ 1,619,600
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 715,066 744,727
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 685,395 713,826
(Continued next page)
- 6 -
<PAGE>
4. Mortgages Payable - Continued
-----------------------------
September 30, December 31,
1997 1996
---- ----
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building $ 664,625 $ 692,194
---------- ----------
$ 3,590,527 $ 3,770,347
========== ==========
Based on the borrowing rates currently available to the Partnership for
loans with similar terms and average maturities, the fair value of long
term debt approximates carry value.
5. Related Party Transactions
--------------------------
Property management fees of $37,320 and $39,964 were paid to NTS
Development Company, an affiliate of the general partner of the
Partnership, during the nine months ended September 30, 1997 and 1996,
respectively. The fee is equal to 6% of all revenues from commercial
properties pursuant to an agreement with the Partnership. Also pursuant to
an agreement, NTS Development Company will receive a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital
improvements. The Partnership has incurred $2,116 and $931 as a repair and
maintenance fee during the nine months ended September 30, 1997 and 1996,
respectively, and has capitalized this cost as part of land, buildings and
amenities.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the nine months ended
September 30, 1997 and 1996. These charges include items which have been
expensed as operating expenses - affiliated or professional and
administrative expenses affiliated and items which have been capitalized
as deferred leasing commissions, other assets or as land, buildings and
amenities.
1997 1996
--------- ---------
Administrative $ 45,791 $ 84,897
Leasing 15,699 14,520
Property manager 28,616 21,857
Other 1,538 4,124
-------- --------
$ 91,644 $ 125,398
======== ========
Accounts payable - operations includes approximately $303,000 and $233,000
due NTS Development Company at September 30, 1997 and December 31, 1996,
respectively. NTS Development Company has indicated to the Partnership
that they will not demand repayment of the amounts outstanding as of
September 30, 1997 during 1997. Payments to this affiliate will be made
during 1997 as cash flows permit.
6. Reclassification of 1996 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the September 30, 1996
financial statements to conform with the September 30, 1997
classifications. These reclassifications have no effect on previously
reported operations.
- 7 -
<PAGE>
7. Commitments and Contingencies
-----------------------------
Philip Crosby Associates, Inc. ("Crosby") leased 100% of University
Business Center Phase II. The business center is owned by the
Lakeshore/University II (L/U II) Joint Venture in which the Partnership
has a 12% interest. The original lease term was for seven years, and the
tenant took occupancy in April 1991. During 1994, 1995 and 1996, Crosby
sub-leased a portion of the business center. Currently, Crosby has
sub-leased, through the end of their lease term, approximately 85,000
square feet(including approximately 10,000 square feet of mezzanine space)
of University Business Center Phase II's approximately 88,000 square feet
of net rentable area (or 96%). Of the total being sub-leased,
approximately 73,000 square feet (or 86%) is being leased by Full Sail
Recorders Inc. ("Full Sail"), a major tenant at University Business Center
Phase I, a neighboring property owned by an affiliate of the General
Partner of the Partnership. Through December 1996, Crosby continued to
make rent payments pursuant to the original lease terms. During 1996, the
Joint Venture received notice that Crosby did not intend to pay full
rental due under the original lease agreement from and after January 1997.
The rental income from this property accounted for approximately 18% of
the Partnership's total revenues during 1996. The Joint Venture instituted
legal action against Crosby to seek resolution of this situation. See
below for a further discussion regarding the current status of the
litigation. Although the Joint Venture does not presently have lease
agreements (except as noted below) with the sub-lessees noted above,
beginning February 1997 rent payments from these sub-lessees have been
made directly to the Joint Venture. The Joint Venture is currently
negotiating directly with the sub-lessees to enter into lease agreements
for the space presently sublet. At this time, the future leasing and
tenant finish costs which will be required to release this space are
unknown except as noted below for the negotiations with Full Sail.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet of the space it currently
sub-leases from Crosby. In November 1996, Full Sail signed a lease
amendment which increased the square footage from 41,000 square feet to
48,000 square feet and extended the lease term from 33 months to 76
months. In November 1996, Full Sail also signed a 52 month lease for an
additional approximately 21,000 square feet it presently sub-leases from
Crosby. Both lease terms commence April 1998 when the Crosby lease ends.
As part of the lease negotiations, Full Sail will receive a total of
$450,000 in special tenant allowances ($200,000 resulting from the
original lease signed December 1995 and $250,000 resulting from the lease
amendment signed November 1996). Approximately $92,000 of the total
allowance is to be reimbursed by Full Sail to the L/U II Joint Venture.
The Partnership's proportionate share of the net commitment ($450,000 less
$92,000) is approximately $43,000 or 12%. The tenant allowance will be due
and payable to Full Sail pursuant to the previously mentioned lease
agreements as appropriate invoices for tenant finish costs incurred by
Full Sail are submitted to the L/U II Joint Venture. The source of funds
for this commitment is expected to be cash flows from operations and/or
cash reserves.
Crosby has abandoned its business and sold all or most of its operating
assets and has informed the Joint Venture that Crosby may be insolvent.
During the third quarter of 1997, a conditional settlement was reached at
a mediation conference with Crosby and its corporate parent, whereby,
subject to the Joint Venture's acceptance of the settlement terms, the
corporate parent has agreed to pay a portion of Crosby's liability to the
Joint Venture in full satisfaction of all claims against Crosby and any of
its affiliates. The amount of the proposed settlement is substantially
less than the aggregate liability of Crosby to the Joint Venture resulting
from Crosby's
- 8 -
<PAGE>
7. Commitments and Contingencies - Continued
-----------------------------------------
default under its lease. As a result, the Joint Venture may be forced to
seek out additional sources of capital to fund ongoing operations,
including, without limitation, from loans, the sale of assets, additional
capital contributions of its partners and/or the admission of a new
partner or partners, or from other sources. There is no present assurance
that any such needed capital will be available.
8. Subsequent Event
----------------
Subsequent to September 30, 1997, the L/U II Joint Venture informed Crosby
and its corporate parent that it accepted the terms of the conditional
settlement, whereby Crosby's parent paid to the L/U II Joint Venture the
sum of $300,000 in full satisfaction of all claims. These funds were
received by the L/U II Joint Venture on October 23, 1997.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
- ---------------------
The occupancy levels at the Partnership properties as of September 30 were as
follows:
1997 1996
---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at September 30, 1997)
- ---------------------------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at September 30, 1997)
- --------------------------------------------
Lakeshore Business Center Phase I (12%) 99% 97%
Lakeshore Business Center Phase II (12%) 96% 83%
University Business Center Phase II (12%) 99% 99%
The rental and other income generated by the Partnership's properties for the
three months and nine months ended September 30, 1997 and 1996 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------- -------- -------- -------
Property owned in Joint
Venture with NTS-Properties IV
and NTS-Properties VII, Ltd.
(Ownership % at September 30,
1997)
- ------------------------------
Blankenbaker Business Center
1A (39%)
$ 91,554 $ 91,554 $274,697 $274,611
Properties owned through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
(Ownership % at September 30,
1997)
- ------------------------------
Lakeshore Business Center
Phase I (12%) $ 45,780 $ 43,189 $134,118 $130,736
Lakeshore Business Center
Phase II (12%) $ 43,921 $ 36,553 $130,577 $105,442
University Business Center
Phase II (12%) $ 21,770 $ 38,268 $ 53,816 $113,777
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
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. The change in rental and other income at
Blankenbaker Business Center 1A for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 was not significant.
The 2% increase in occupancy at Lakeshore Business Center Phase I from September
30, 1996 to September 30, 1997 can be attributed to five new leases totalling
approximately 7,500 square feet and an expansion by a current tenant of its
existing space totalling approximately 2,100 square feet. Partially offsetting
the new leases are three tenants vacating prior to the end of the lease term one
due to a downsizing decision by the tenant's parent company (1,200 square feet -
tenant paid the L/U II Joint Venture a lease termination fee [recorded as rental
income] of approximately $7,000 of which the Partnership's proportionate share
is $840 or 12%), one due to a decision by management to allow a tenant to
terminate its lease early to accommodate a new long term tenant (1,900 square
feet - tenant paid the L/U II Joint Venture a lease termination fee [recorded as
rental income] of approximately $5,000 of which the Partnership's proportionate
share is $629 or 12%) and one due to bankruptcy (5,000 square feet - tenant
ceased rental payments). The write-off of accrued income connected with these
leases was not significant. Average occupancy at Lakeshore Business Center Phase
I increased from 97% (1996) to 98%(1997) for the three months ended September 30
and decreased from 98% (1996) to 96% (1997) for the nine month period. The
change in rental and other income at Lakeshore Business Center Phase I for the
three months and nine months ended September 30, 1997 as compared to the same
periods in 1996 was not significant.
The 13% increase in occupancy at Lakeshore Business Center Phase II from
September 30, 1996 to September 30, 1997 can be attributed to five new leases
totalling approximately 17,000 square feet which includes approximately 5,700
square feet in expansions by Lambda Physik, a current tenant. Lambda Physik
leases nearly 12,700 square feet and has become the largest tenant in the
building occupying approximately 13% of the building's total rentable square
feet. Partially offsetting the new leases is one tenant move-out, at the end of
the lease term, of approximately 4,800 square feet. Average occupancy at
Lakeshore Business Center Phase II increased from 81% (1996) to 95% (1997) for
the three months ended September 30 and increased from 78% (1996) to 93% (1997)
for the nine month period. The increase in rental and other income at Lakeshore
Business Center Phase II for the three months and nine months ended September
30, 1997 as compared to the same periods in 1996 is due primarily to the
increase in average occupancy.
As of September 30, 1997, Lakeshore Business Center Phase II has approximately
4,200 square feet of additional space leased by a tenant who currently occupies
approximately 1,300 square feet in Lakeshore Business Center Phase I. The lease
is for six years and the tenant is expected to take occupancy during the fourth
quarter of 1997. With the new lease, the business center's occupancy should
improve to 100%.
Philip Crosby Associates, Inc. ("Crosby") leased 100% of University Business
Center Phase II. The original lease term was for seven years, and the tenant
took occupancy in April 1991. As a result of Crosby downsizing and sub-leasing a
portion of its leased space, occupancy has decreased to 99% at September 30,
1997 and 1996. During January 1997, Crosby vacated the remaining space it
occupied at the business center. See below for a further discussion of Crosby
and its leased space.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The decrease in rental and other income at University Business Center Phase II
for the three months and nine months ended September 30, 1997 as compared to the
same periods in 1996 is due to the following. Through the end of 1996, Crosby
continued to make rent payments pursuant to the original lease term. During
1996, the Joint Venture received notice that Crosby did not intend to pay full
rental due under the lease agreement from and after January 1997. Although the
Joint Venture does not presently have lease agreements (except as noted below)
with Crosby's sub-tenants, beginning February 1997, rent payments from Crosby's
sub-tenants (see discussion below) have been made directly to the Joint Venture,
which are substantially less than what Crosby owed. Currently, the Joint Venture
is recognizing income to the extent of what is being collected from the
subtenants. The decrease in rental and other income for the nine month period is
also due to the fact that approximately $70,000 of accrued income connected with
the Crosby lease was written-off during the first quarter of 1997, of which the
Partnership's proportionate share is approximately $8,400 or 12%.
In cases of tenants who cease making rental payments or abandon the premises in
breach of their lease, the Partnership pursues collection through the use of
collection agencies and other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it was thought there could be a possible collection. There
have been no funds recovered as a result of these actions during the nine months
ended September 30, 1997 or 1996.
The change in interest and other income for the three months and nine months
ended September 30, 1997 as compared to the same periods in 1996 was not
significant.
The increase in operating expense for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 is due primarily to
increased exterior building renovations at Blankenbaker Business Center 1A.
Fluctuations in operating expenses at Lakeshore Business Center Phases I and II
and University Business Center Phase II were not significant in either period.
The increase in operating expense - affiliated for the three months and nine
months ended September 30, 1997 as compared to the same periods in 1996 is
primarily the result of increased property management costs at all of the
Partnership's properties. Operating expenses - affiliated are expenses for
services performed by employees of NTS Development Company, an affiliate of the
General Partner of the Partnership.
The 1996 write-off of unamortized loan costs relates to loan costs associated
with the Lakeshore/University II Joint Venture's notes payable. The unamortized
loan costs were expensed due to the fact that the notes were retired in 1996
prior to their maturity (January 31, 1998) as a result of permanent financing
obtained by the Joint Venture in July 1996.
Interest expense has decreased for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 primarily as a result
of the lower interest rate on the permanent financings the L/U II Joint Venture
obtained in July 1996 (8.125% compared to 10.6% on the previous debt). The
decrease is also due to continued principal payments on the L/U II Joint
Venture's and Blankenbaker Business Center 1A's debt. 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 recorded on the accrual basis. As a result,
the fluctuations of revenue between periods will differ from the fluctuations of
management fee expense.
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The change in real estate taxes for the three months and nine months ended
September 30, 1997 as compared to the same periods in 1996 was not significant.
Professional and administrative expenses have increased for the three months and
nine months ended September 30, 1997 as compared to the same periods in 1996 as
a result of increased outside accounting expenses.
The decrease in professional and administrative expenses - affiliated for the
three months and nine months ended September 30, 1997 as compared to the same
periods in 1996 is due primarily to decreased salary costs. Professional and
administrative expenses - affiliated are expenses for services preformed by
employees of NTS Development Company, an affiliate of the General Partner.
The change in depreciation and amortization expense for the three months and
nine months ended September 30, 1997 as compared to the same periods in 1996 was
not significant. Depreciation 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 years for amenities. The aggregate cost of the Partnership's properties
for Federal tax purposes approximately $6,800,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $176,249 and $145,759 for the nine months ended
September 30, 1997 and 1996, respectively. The Partnership has not made any cash
distributions since the quarter ended June 30, 1991. Distributions will be
resumed once the Partnership has established adequate cash reserves and is
generating cash from operations which, in management's opinion, is sufficient to
warrant future 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 and other capital improvements. Cash reserves (which are
unrestricted cash and equivalents as shown on the Partnership's balance sheet as
of September 30) were $8,282 and $69,070 as of September 30, 1997 and 1996,
respectively.
As of September 30, 1997, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $3,953,968. 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 September 30, 1997 is $1,525,441. The mortgage bears interest at a
fixed rate of 8.5% and is due November 15, 2005. 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.
As of September 30, 1997 the L/U II Joint Venture had three mortgage loans with
an insurance company. The outstanding balances of the loans at September 30,
1997 were $5,688,669, $5,452,624 and $5,287,393 for a total of $16,428,686. The
loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at September 30, 1997 was $715,066, $685,395
and $664,625, respectively, for a total of $2,065,086. The mortgages bear
interest at a fixed rate of 8.125%, are due August 1, 2008, and are secured by
the assets of the Joint Venture. Monthly principal payments are based upon a
12-year amortization schedule. At maturity, the loans will have been repaid
based on the current rate of amortization.
The majority of the Partnership's cash flows were derived from operating
activities. Cash flows used in investing activities include tenant finish
improvements. Changes to current tenant finish improvements are a typical part
of any lease negotiation. Improvements generally include a revision of the
current floor plan to accommodate a tenant's needs, new carpeting and paint
and/or wallcovering. The extent and cost of these improvements are determined by
the size of the space and whether the improvements are for a new tenant or
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
incurred because of a lease renewal. Cash flows provided by investing activities
in 1996 were the result of a release of funds escrowed for capital expenditures,
leasing commissions and tenant improvements at the properties owned by the L/U
II Joint Venture as required by a 1995 loan agreement. Cash flows used in
investing activities were funded by cash flow from operating activities. Cash
flows used in financing activities are for loan costs, principal payments on
mortgages and notes payable and the repurchase of limited partnership Units.
Cash flows provided by financing activities in 1996 are from the L/U II Joint
Venture debt refinancings. The Partnership does not expect any material changes
in the mix and relative cost of capital resources except for renovations and
other major capital expenditures, including tenant finish, which may be required
to be funded from cash reserves if they exceed cash flow from operating
activities.
Due to the fact that no distributions were made during the nine months ended
September 30, 1997 or 1996, the table which presents that portion of the
distribution that represents a return of capital on a Generally Accepted
Accounting Principle basis has been omitted.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations. Changes to current tenant finish improvements
are a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of the improvements
are determined by the size of the space being leased and whether the
improvements are for a new tenant or incurred because of a lease renewal. The
tenant finish improvements will be funded by cash flow from operations and cash
reserves.
Philip Crosby Associates, Inc. ("Crosby") leased 100% of University Business
Center Phase II. The original lease term was for seven years, and the tenant
took occupancy in April 1991. During 1994, 1995 and 1996, Crosby sub-leased a
portion of the business center. Currently, Crosby has sub-leased, through the
end of their lease term, approximately 85,000 square feet (including
approximately 10,000 square feet of mezzanine space) of University Business
Center Phase II's approximately 88,000 square feet of net rentable area (or
96%). Of the total being sub-leased, approximately 73,000 square feet (or 86%)
is being leased by Full Sail Recorders, Inc. ("Full Sail"), a major tenant at
University Business Center Phase I, a neighboring property owned by an affiliate
of the General Partner of the Partnership. Through December 1996, Crosby
continued to make rent payments pursuant to the original lease terms. During
1996, the Joint Venture received notice that Crosby did not intend to pay full
rental due under the original lease agreement from and after January 1997. The
rental income from this property accounted for approximately 18% of the
Partnership's total revenues during 1996. The Joint Venture instituted legal
action against Crosby to seek resolution of this situation. Although the Joint
Venture does not presently have lease agreements (except as noted below) with
the sub-lessees noted above, beginning February 1997 rent payments from the
sub-lessees have been made directly to the Joint Venture. The Joint Venture is
currently negotiating directly with the sub-lessees to enter into lease
agreements for the space presently sublet. At this time, the future leasing and
tenant finish costs which will be required to release this space are unknown
except as noted below for the negotiations with Full Sail.
Crosby has abandoned its business and sold all or most of its operating assets
and has informed the Joint Venture that Crosby may be insolvent. During the
third quarter of 1997, a conditional settlement was reached at a mediation
conference with Crosby and its corporate parent, whereby, subject to the Joint
Venture's acceptance of the settlement terms, the corporate parent has agreed to
pay a portion of Crosby's liability to the Joint Venture in full satisfaction of
all claims against Crosby and any of its affiliates. The amount of the proposed
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
settlement is substantially less than the aggregate liability of Crosby to the
Joint Venture resulting from Crosby's default under its lease. As a result, the
Joint Venture may be forced to seek out additional sources of capital to fund
ongoing operations, including, without limitation, from loans, the sale of
assets, additional capital contributions of its partners and/or the admission of
a new partner or partners, or from other sources. There is no present assurance
that any such needed capital will be available.
Subsequent to September 30, 1997, the L/U II Joint Venture informed Crosby and
its corporate parent that it accepted the terms of the conditional settlement,
whereby Crosby's parent paid to the L/U II Joint Venture the sum of $300,000 in
full satisfaction of all claims. These funds were received by the L/U II Joint
Venture on October 23, 1997.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet of the space it currently
sub-leases from Crosby. In November 1996, Full Sail signed a lease amendment
which increased the square footage from 41,000 square feet to 48,000 square feet
and extended the lease term from 33 months to 76 months. In November 1996, Full
Sail also signed a 52 month lease for an additional approximately 21,000 square
feet it presently sub-leases from Crosby. Both lease terms commence April 1998
when the Crosby lease ends. As part of the lease negotiations, Full Sail will
receive a total of $450,000 in special tenant allowances ($200,000 resulting
from the original lease signed December 1995 and $250,000 resulting from the
lease amendment signed November 1996). Approximately $92,000 of the total
allowance is to be reimbursed by Full Sail to the L/U II Joint Venture. The
Partnership's proportionate share of the net commitment ($450,000 less $92,000)
is approximately $43,000 or 12%. The tenant allowance will be due and payable to
Full Sail pursuant to the previously mentioned lease agreements as appropriate
invoices for tenant finish costs incurred by Full Sail are submitted to the L/U
II Joint Venture. The source of funds for this commitment is expected to be cash
flow from operations and/or cash reserves.
The Partnership had no material commitments for renovations or capital
improvements at September 30, 1997.
During 1996, the Partnership established an Interest Repurchase Reserve in the
amount of $25,000 pursuant to Section 16.4 of the Partnership's Amended and
Restated Agreement of Limited Partnership. With these funds, the Partnership
would be able to repurchase 35,714 Units at a price of $0.70 per Unit. As of
September 30, 1997, 22,245 Units have been repurchased for $15,572. Repurchased
Units are retired by the Partnership, thus increasing the share of ownership of
each remaining investor. On February 17, 1997, the repurchase of Partnership
Units was indefinitely suspended in order to conserve cash. This step is being
taken until it is clear that, in the General Partner's opinion, the Partnership
has the necessary cash reserves to meet future leasing and tenant finish costs
and has rebuilt cash reserves to meet the ongoing needs of the Partnership.
The L/U II Joint Venture owns approximately 6 acres of land adjacent to the
Lakeshore Business Center development in Ft. Lauderdale, Florida. The
Partnership's proportionate interest at September 30, 1997 in the asset held for
sale is $96,949. The Joint Venture continues to actively market the asset for
sale.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Lakeshore Business
Center Phases I and II, the Partnership has an on-site leasing agent, an
employee of NTS Development Company (an affiliate of the General Partner), who
makes calls to potential tenants, negotiates lease renewals with current tenants
and manages
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
local advertising with the assistance of NTS Development Company's marketing
staff. The leasing and renewal negotiations of University Business Center Phase
II are handled by a leasing agent, an employee of NTS Development Company,
located at the University Business Center Development.
Leases at the Partnership's properties provide for tenants to contribute toward
the payment of common area expenses, insurance and real estate taxes. Leases at
the Partnership's properties also provide for rent increases which are based
upon increases in the consumer price index. These lease provisions 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, or elsewhere in this report,
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 reflects managements's best judgement based on factors known, involve
risks and uncertainties. Actual results could differ materially from those
anticipated in any forward-looking statements as a result of a number of
factors, including but not limited to those discussed below. Any forward-looking
information provided by the Partnership pursuant to the safe harbor established
by recent securities legislation should be evaluated in the context of these
factors.
The Partnership's principal activity is the leasing and management of commercial
business centers. If a major commercial tenant defaults on its lease, the
Partnership's ability to make payments due under its debt agreements, payments
of operating costs and payment of 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.
- 16 -
<PAGE>
PART II. OTHER INFORMATION
l. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
September 30, 1997.
- 17 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties Plus Ltd. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES PLUS LTD.
(Registrant)
BY: NTS-Properties Plus Associates,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ John W. Hampton
-------------------
John W. Hampton
Senior Vice President
Date: November 12, 1997
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND FROM THE STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 94,098
<SECURITIES> 0
<RECEIVABLES> 24,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,035,009
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,469,705
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,590,527
0
0
<COMMON> 0
<OTHER-SE> (2,593,955)
<TOTAL-LIABILITY-AND-EQUITY> 1,469,705
<SALES> 592,693
<TOTAL-REVENUES> 594,197
<CGS> 0
<TOTAL-COSTS> 371,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229,439
<INCOME-PRETAX> (82,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> (82,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,400)
<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>
