<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 June 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 June 30, 1997 and December 31, 1996 3
Statements of Operations
For the three months and six months ended
June 30, 1997 and 1996 4
Statements of Cash Flows
For the three months and six months ended
June 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>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES PLUS LTD.
------------------------
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
-----------------------------------------------
As of As of
June 30, 1997 December 31, 1996*
ASSETS ------------- -------------------
<S> <C> <C>
Cash and equivalents $ 7,768 $ 42,944
Cash and equivalents - restricted 65,506 24,540
Accounts receivable 31,772 50,408
Land, buildings and amenities, net 1,058,278 1,121,097
Asset held for sale 96,949 96,949
Deferred leasing commissions 143,464 153,380
Organizational and start-up costs, net 859 1,025
Other assets 88,457 80,945
----------- -----------
$ 1,493,053 $ 1,571,288
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 3,651,713 $ 3,770,347
Accounts payable - operations 337,748 268,688
Accounts payable - construction 1,273 4,106
Security deposits 13,649 12,030
Other liabilities 57,258 15,421
----------- -----------
4,061,641 4,070,592
Commitments and Contingencies
Partners' equity (2,568,588) (2,499,304)
----------- -----------
$ 1,493,053 $ 1,571,288
=========== ===========
</TABLE>
<TABLE>
Limited General
Partners Partner Total
----------- --------- -----------
PARTNERS' EQUITY
<S> <C> <C> <C>
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 (56,636) (572) (57,208)
Cash distributions declared
to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited
partnership Units (20,478) -- (20,478)
------------ ------------ ------------
Balances at June 30, 1997 $ (2,425,360) $ (143,228) $ (2,568,588)
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 31, 1997.
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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 200,385 $ 209,883 $ 389,797 $ 414,513
Interest and other income 432 871 1,055 1,159
--------- --------- --------- ---------
200,817 210,754 390,852 415,672
EXPENSES:
Operating expenses 37,233 27,798 72,946 57,412
Operating expenses - affiliated 13,335 12,661 28,353 25,163
Interest expense 76,877 93,029 153,820 186,840
Management fees 12,758 13,190 24,691 26,451
Real estate taxes 18,803 19,753 38,566 39,631
Professional and administrative
expense 12,486 10,966 23,942 21,983
Professional and administrative
expenses - affiliated 13,048 25,309 26,181 53,646
Depreciation and amortization 39,509 41,541 79,561 82,345
--------- --------- --------- ---------
224,049 244,247 448,060 493,471
--------- --------- --------- ---------
Net loss $ (23,232) $ (33,493) $ (57,208) $ (77,799)
========= ========= ========= =========
Net loss allocated to the limited
partners $ (23,000) $ (33,158) $ (56,636) $ (77,021)
========= ========= ========= =========
Net loss per limited partnership
unit $ (0.03) $ (0.05) $ (0.08) $ (0.11)
========= ========= ========= =========
Weighted average number of units 663,902 685,647 669,311 685,647
========= ========= ========= =========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (23,232) $ (33,493) $ (57,208) $ (77,799)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 39,509 41,541 79,561 82,345
Changes in assets and liabilities:
Cash and equivalents - restricted (20,541) (21,877) (40,966) (43,500)
Accounts receivable 21,847 13,268 18,636 27,204
Deferred leasing commissions 6,739 3,779 9,916 5,935
Other assets 6,476 1,099 (10,892) (21,770)
Accounts payable - operations 4,926 49,483 69,060 102,170
Security deposits -- (444) 1,618 201
Other liabilities 21,220 19,094 41,838 40,545
--------- --------- --------- ---------
Net cash provided by operating
activities 56,944 72,450 111,563 115,331
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (10,246) (1,447) (16,029) (23,179)
Decrease in cash and equivalents -
restricted -- -- -- 1,725
--------- --------- --------- ---------
Net cash used in investing activities (10,246) (1,447) (16,029) (21,454)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and
notes payable (59,932) (42,408) (118,634) (84,213)
Additions to loan costs -- (24,219) -- (29,294)
Repurchase of limited partnership Units -- -- (12,076) --
--------- --------- --------- ---------
Net cash used in financing activities (59,932) (66,627) (130,710) (113,507)
--------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents (13,234) 4,376 (35,176) (19,630)
CASH AND EQUIVALENTS, beginning of
period 21,002 12,263 42,944 36,269
--------- --------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 7,768 $ 16,639 $ 7,768 $ 16,639
========= ========= ========= =========
Interest paid on a cash basis $ 76,877 $ 93,883 $ 154,987 $ 188,159
========= ========= ========= =========
</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 six months ended June 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 will be able to repurchase 35,714 Units at a
price of $0.70 per unit. Through June 30, 1997, the Partnership has
repurchased a total of 21,995 Units for $15,397. 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:
June 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 $ 1,557,494 $ 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 725,154 744,727
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 695,064 713,826
(Continued next page)
- 6 -
<PAGE>
4. Mortgages Payable - Continued
------------------------------
June 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 $ 674,001 $ 692,194
---------- ----------
$ 3,651,713 $ 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 $24,691 and $26,451 were paid to NTS
Development Company, an affiliate of the general partner of the
Partnership, during the six months ended June 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 $1,334 and $479 as a repair and
maintenance fee during the six months ended June 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 six months ended
June 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 $ 31,073 $ 58,395
Leasing 9,954 10,108
Property manager 18,501 14,775
Other 83 882
-------- -------
$ 59,611 $ 84,160
======== =======
Accounts payable - operations includes approximately $277,000 and $233,000
due NTS Development Company at June 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 June
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 June 30, 1996 financial
statements to conform with the June 30, 1997 classifications. These
reclassifications have no effect on previously reported operations.
- 7 -
<PAGE>
7. Commitments and Contingencies
-----------------------------
Philip Crosby Associates, Inc. ("Crosby") has 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
Recorder's 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. 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 Note
8 for a further discussion regarding the current status 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 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.
8. Subsequent Event
----------------
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.
Subsequent to June 30, 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.
- 8 -
<PAGE>
8. Subsequent Event - Continued
-----------------------------
The amount of any settlement will be 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.
- 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 June 30 were as
follows:
1997 1996
---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at June 30, 1997)
- -----------------------------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at June 30, 1997)
- ---------------------------------------------
Lakeshore Business Center Phase I (12%) 97% 99%
Lakeshore Business Center Phase II (12%) 94% 80%
University Business Center Phase II (12%) 99% 99%
The rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1997 and 1996 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
-------- -------- -------- ------
Property owned in Joint
Venture with NTS-Properties IV
and NTS-Properties VII, Ltd.
(Ownership % at June 30, 1997)
- ------------------------------
Blankenbaker Business Center
1A (39%) $ 91,589 $ 91,554 $183,143 $183,057
Properties owned through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
(Ownership % at June 30, 1997)
- ------------------------------
Lakeshore Business Center
Phase I (12%) $ 43,870 $ 44,490 $ 88,338 $ 87,547
Lakeshore Business Center
Phase II (12%) $ 44,921 $ 35,900 $ 86,656 $ 68,890
University Business Center
Phase II (12%) $ 20,209 $ 38,278 $ 32,047 $ 75,510
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 six months ended June
30, 1997 as compared to the same periods in 1996 was not significant.
The 2% decrease in occupancy at Lakeshore Business Center Phase I from June 30,
1996 to June 30, 1997 can be attributed to five tenant move-outs totalling
approximately 10,300 square feet. The five move-outs consist of one tenant
vacating at the end of the lease term (1,800 square feet), one tenant exercising
a termination option (1,600 square feet - no termination fee was required) and
three tenants vacating prior to the end of the lease term - one due to a
business decision to consolidate its office space at another location (700
square feet tenant paid rent through end of lease), 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%) 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. The move-outs are partially offset by five new leases totalling
approximately 6,400 square feet and an expansion by a current tenant of its
existing space totalling approximately 2,100 square feet. Average occupancy at
Lakeshore Business Center Phase I decreased from 98% (1996) to 96% (1997) for
the three months ended June 30 and decreased from 98% (1996) to 95% (1997) for
the six month period. The change in rental and other income at Lakeshore
Business Center Phase I for the three months and six months ended June 30, 1997
as compared to the same periods in 1996 was not significant.
The 14% increase in occupancy at Lakeshore Business Center Phase II from June
30, 1996 to June 30, 1997 can be attributed to six new leases totalling
approximately 17,400 square feet which includes approximately 7,000 square feet
in expansions by two current tenants. One tenant, Lambda Physik, accounts for
nearly 11,000 square feet of the total new leases and has become the largest
tenant in the building; occupying approximately 11% of the total building
rentable square feet. Partially offsetting the new leases is a downsizing by a
current tenant of its existing space of approximately 3,600 square feet. The
downsizing was the result of a decision by the tenant's management to centralize
its warehouse operation with another location. The downsizing was done in
conjunction with a lease renewal; therefore, there was no write-off of accrued
income. Average occupancy at Lakeshore Business Center Phase II increased from
80% (1996) to 94% (1997) for the three months ended June 30 and increased from
76% (1996) to 92% (1997) for the six month period. The increase in rental and
other income at Lakeshore Business Center Phase II for the three months and six
months ended June 30, 1997 as compared to the same periods in 1996 is due
primarily to the increase in average occupancy.
As of June 30, 1997, Lakeshore Business Center Phase II has approximately 1,800
square feet of additional space leased to a current tenant. The tenant is
expected to take occupancy during the fourth quarter of 1997.
Subsequent to June 30, 1997, a lease for approximately 4,200 square feet was
signed at Lakeshore Business Center Phase II with 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 near the
end of the third quarter of 1997. With the new leases, the business center's
occupancy should improve to 100%. See the Liquidity and Capital Resources
section of this item for the tenant finish commitment related to this lease.
Philip Crosby Associates, Inc. ("Crosby") has leased 100% of University Business
Center Phase II. The original lease term is for seven years,and the tenant took
occupancy in April 1991. As a result of Crosby downsizing and sub-leasing a
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
portion of its leased space, occupancy has decreased to 99% at June 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.
The decrease in rental and other income at University Business Center Phase II
for the three months and six months ended June 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. 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
subtenants, 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
sub-tenants. The decrease in rental and other income for the six 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 on
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 six months
ended June 30, 1997 or 1996.
The change in interest and other income for the three months and six months
ended June 30, 1997 as compared to the same periods in 1996 was not significant.
The increase in operating expense for the three months and six months ended June
30, 1997 as compared to the same periods in 1996 is due primarily to increased
exterior building renovations at Blankenbaker Business Center 1A and increased
legal expenses at Lakeshore Business Center Phase I. Fluctuations in operating
expenses at Lakeshore Business Center Phase II and University Business Center
Phase II were not significant.
The increase in operating expense - affiliated for the six months ended June 30,
1997 as compared to the same period in 1996 is primarily the result of increased
property management costs at all of the Partnership's properties. The change in
operating expense - affiliated for the three month period was not significant.
Operating expenses - affiliated are expenses for service performed by employees
of NTS Development Company, an affiliate of the General Partner of the
Partnership.
Interest expense has decreased for the three months and six months ended June
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 changes in real estate taxes and professional and administrative expenses
for the three months and six months ended June 30, 1997 as compared to the same
periods in 1996 were not significant.
The decrease in professional and administrative expenses - affiliated for the
three months and six months ended June 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 six
months ended June 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 $111,563 and $115,331 for the six months ended
June 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 June 30) were $7,768 and $16,639 as of June 30, 1997 and 1996, respectively.
As of June 30, 1997, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $4,037,051. 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, 1997 is $1,557,494. 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 June 30, 1997 the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at June 30, 1997 were
$5,768,923, $5,529,548 and $5,361,986, respectively, for a total of $16,660,457.
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at June 30, 1997 was $725,154, $695,064 and
$674,001, respectively, for a total of $2,094,219. 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 and whether the improvements are for a new tenant or
incurred because of a lease renewal. Cash flows provided by investing activities
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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. 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 six months ended June
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") has 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 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. 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. Subsequent to
June 30, 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 any settlement
will be substantially less than the aggregate liability of Crosby to the Joint
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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.
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 Crosby's 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.
As of June 30, 1997, the Blankenbaker Business Center 1A Joint Venture has a
commitment for approximately $17,000 of exterior building and courtyard
renovations. The Partnerships proportionate share of the commitment is
approximately $6,600 or 39%. The renovations are expected to be completed during
the third quarter of 1997.
The Partnership had no other material commitments for renovations or capital
improvements at June 30, 1997.
Subsequent to June 30, 1997, the L/U II Joint Venture made a commitment of
approximately $100,000 for tenant finish improvements and leasing costs at
Lakeshore Business Center Phase II. The commitment is the result of a new six
year lease for approximately 4,200 square feet. The tenant is expected to take
occupancy of the space near the end of the third quarter. The Partnership's
proportionate share of this commitment is approximately $12,000 of 12%.
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
June 30, 1997, 21,995 Units have been repurchased for $15,397. Repurchased Units
are being 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 June 30, 1997 in the asset held for sale
is $96,949. The Joint Venture continues to actively market the asset for sale.
In management's opinion, the net book value of the asset held for sale
approximates the fair market value less cost to sell.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- --------------------------------------------
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 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, 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 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
June 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: August 11, 1997
----------------
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1997 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 73,274
<SECURITIES> 0
<RECEIVABLES> 31,772
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,058,278
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,493,053
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,651,713
0
0
<COMMON> 0
<OTHER-SE> (2,568,588)
<TOTAL-LIABILITY-AND-EQUITY> 1,493,053
<SALES> 389,797
<TOTAL-REVENUES> 390,852
<CGS> 0
<TOTAL-COSTS> 244,117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,820
<INCOME-PRETAX> (57,208)
<INCOME-TAX> 0
<INCOME-CONTINUING> (57,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,208)
<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>
