<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, 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 0-18952
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 18
Total Pages: 19
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of September 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and nine months ended
September 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and nine months ended
September 30, 1998 and 1997 5
Notes To Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-17
PART II
Item 3. Defaults Upon Senior Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
- 2 -
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
September 30, 1998 December 31, 1997*
------------------- -----------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 51,231 $ 39,940
Cash and equivalents - restricted 87,802 19,228
Accounts receivable 15,308 28,678
Land, buildings and amenities, net
(Note 8) 939,213 996,049
Asset held for sale 96,949 96,949
Deferred leasing commissions, net 117,067 129,946
Loan costs, net 57,871 62,897
Other assets 15,458 14,234
----------- -----------
$ 1,380,899 $ 1,387,921
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $ 3,681,970 $ 3,528,058
Accounts payable 123,296 390,774
Security deposits 17,719 13,536
Other liabilities 105,407 44,542
----------- -----------
3,928,392 3,976,910
Commitments and Contingencies
Partners' equity (2,547,493) (2,588,989)
----------- -----------
$ 1,380,899 $ 1,387,921
=========== ===========
</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 (12,170,907) (122,938) (12,293,845)
Net income - current year 46,031 465 46,496
Cash distributions to partners
to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited
partnership Units (25,653) -- (25,653)
------------ ------------ ------------
Balances at September 30, 1998 $ (2,404,528) $ (142,965) $ (2,547,493)
============ ============ ============
</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 PLUS LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 211,293 $ 202,896 $ 675,062 $ 592,693
Interest and other income 553 449 2,429 1,504
--------- --------- --------- ---------
211,846 203,345 677,491 594,197
EXPENSES:
Operating expenses 33,198 40,941 97,557 113,886
Operating expenses - affiliated 16,140 14,774 48,243 43,127
Interest expense 77,726 75,619 236,281 229,439
Management fees 12,909 12,630 41,698 37,320
Real estate taxes 18,803 19,283 57,149 57,851
Professional and administrative
expenses 11,670 12,104 36,668 36,045
Professional and administrative
expenses - affiliated 7,276 13,696 35,796 39,878
Depreciation and amortization 22,600 39,490 77,603 119,051
--------- --------- --------- ---------
200,322 228,537 630,995 676,597
--------- --------- --------- ---------
Net income (loss) $ 11,524 $ (25,192) $ 46,496 $ (82,400)
========= ========= ========= =========
Net income (loss) allocated to the
limited partners $ 11,409 $ (24,940) $ 46,031 $ (81,576)
========= ========= ========= =========
Net income (loss) per limited
partnership unit $ 0.02 $ (0.04) $ 0.07 $ (0.12)
========= ========= ========= =========
Weighted average number of units 658,402 663,402 661,113 667,207
========= ========= ========= =========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 11,524 $ (25,192) $ 46,496 $ (82,400)
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 22,600 39,490 77,603 119,051
Changes in assets and liabilities:
Cash and equivalents - restricted (22,846) (20,310) (68,574) (61,276)
Accounts receivable 4,236 7,572 20,258 26,208
Deferred leasing commissions 3,879 4,919 12,879 14,835
Other assets 4,451 6,650 (3,132)
Accounts payable 4,490 31,528 (272,722) 100,588
Security deposits (1,485) 1,067 4,183 2,685
Other liabilities 15,010 18,945 60,864 60,783
--------- --------- --------- ---------
Net cash provided by (used
in)operating activities 41,859 64,669 (122,145) 176,249
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (8,164) (2,794) (15,476) (18,840)
--------- --------- --------- ---------
Net cash used in investing activities (8,164) (2,794) (15,476) (18,840)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and
note payable (67,198) (61,186) (196,088) (179,820)
Increase in note payable -- -- 350,000 --
Repurchase of limited partnership Units -- (175) (5,000) (12,251)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (67,198) (61,361) 148,912 (192,071)
--------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents (33,503) 514 11,291 (34,662)
CASH AND EQUIVALENTS, beginning of
period 84,734 7,768 39,940 42,944
--------- --------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 51,231 $ 8,282 $ 51,231 $ 8,282
========= ========= ========= =========
Interest paid on a cash basis $ 77,728 $ 75,619 $ 237,264 $ 230,606
========= ========= ========= =========
</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 1997 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, 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. 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 March 25, 1998, the Partnership elected to resume the Interest
Repurchase Reserve Program and to fund an additional $5,000 to its
Interest Repurchase Reserve, which was established in 1996 pursuant to
Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership. With these funds, the Partnership repurchased 5,000
Units at a price of $1.00 per Unit. The above offering price per Unit was
established by the General Partner and does not purport to represent the
fair market value or liquidation value of the Unit. From November 1996 to
September 30, 1998, the Partnership has repurchased a total of 27,245
Units for $20,572. The balance in the Reserve at September 30, 1998 was
$0. Repurchased Units are retired by the Partnership, thus increasing the
percentage of ownership of each remaining limited partner investor.
4. Mortgages and Note Payable
--------------------------
Mortgages and note payable consist of the following:
September 30, December 31,
1998 1997
---- ----
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building $ 1,389,499 $ 1,492,702
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 672,608 704,771
(Continued next page)
- 6 -
<PAGE>
4. Mortgages and Note Payable - Continued
--------------------------------------
September 30, December 31,
1998 1997
---- ----
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building (University
Business Center Phase II - see Note 8) $ 644,699 $ 675,528
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 625,164 655,057
Note payable to a bank, bearing
interest at a fixed rate of 8.5%, due
January 29, 1999, collateral provided
by NTS Financial Partnership, an
affiliate of NTS Development Company 350,000 --
---------- ----------
$ 3,681,970 $ 3,528,058
========== ==========
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 carrying value.
5. Related Party Transactions
--------------------------
Property management fees of $41,698 and $37,320 were paid to NTS
Development Company, an affiliate of the general partner of the
Partnership, during the nine months ended September 30, 1998 and 1997,
respectively. The fee is equal to 6% of all revenues from commercial
properties pursuant to an agreement with the Partnership.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the nine months ended
September 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 deferred leasing commissions, other assets or as land, buildings and
amenities.
1998 1997
-------- --------
Administrative $ 42,575 $ 45,791
Leasing 15,449 15,699
Property manager 31,658 28,616
Other 1,989 1,538
-------- --------
$ 91,671 $ 91,644
======== ========
Accounts payable includes approximately $49,000 and $336,000 due NTS
Development Company at September 30, 1998 and December 31, 1997,
respectively. NTS Development Company has indicated to the Partnership
that they will not demand repayment of the amounts outstanding as of
September 30, 1998 during 1998. Payments to this affiliate will be made
during 1998 as cash flows permit. See below for further information on
payments to this affiliate.
6. Reclassification of 1997 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the December 31, 1997
financial statements to conform with the September 30, 1998
classifications. These reclassifications have no effect on previously
reported operations.
- 7 -
<PAGE>
7. Commitments and Contingencies
-----------------------------
On September 8, 1998, NTS-Properties V and the Lakeshore/University II
("L/U II") Joint Venture, affiliates of the General Partner of the
Partnership, entered into a contract with Silver City Properties, Ltd.
("the Purchaser"), an affiliate of Full Sail Recorders, Inc. ("Full
Sail"), for the sale of University Business Center Phases I and II office
buildings and Phase III vacant land for an aggregate purchase price of
$18,751,000 (specifically the prices for each property were $9,776,000 for
Phase I and Phase III, and $8,975,000 for Phase II). University Business
Center Phase I and Phase III are owned by NTS-Properties V. University
Business Center Phase II is owned by the L/U II Joint Venture. The
Partnership owns a 12% interest in this joint venture. Full Sail currently
occupies 28% and 83% of the net rentable area of University Business
Center Phases I and II, respectively. Concurrent with the signing of the
contracts, the Purchaser deposited $50,000 into an escrow account. This
deposit will be applied to the purchase price at closing. The Purchaser is
to close on the properties on or before November 7, 1998. See Note 8
Subsequent Events. The contract permits the Purchaser to defer the closing
of the purchase of the Phase III vacant land until the 18-month
anniversary of the closing on Phase I and II.
As of September 30, 1998, the L/U II Joint Venture had a contract for the
sale of approximately 2.4 acres of land adjacent to the Lakeshore Business
Center development for a purchase price of $528,405. Concurrent with the
signing of the contract, the purchaser deposited into an escrow account
$10,000. This deposit will be applied to the purchase price at closing.
The purchaser has until November 17, 1998 to determine if the land is
satisfactory for their use. If the purchaser determines that the land is
satisfactory, the contract requires that they proceed, at their cost, to
have the property re-zoned to allow for a self-storage facility. If the
purchaser is unable to obtain the re-zoning, they may cancel the contract.
The General Partner of the Partnership has met with city officials who
seem interested in the project and have voiced a willingness to consider
the re-zoning request. If the re-zoning is granted, the purchaser is to
close on the property by February 1, 1999 or deposit an additional $10,000
with the escrow agent for a 30-day delay. The contract also allows for an
additional deposit of $10,000 for one more delay in closing to April 3,
1999. The Partnership has a 12% interest in the Joint Venture. The
Partnership has not yet determined what the use of net proceeds would be
from the sale of the land.
As of September 30, 1998, Lakeshore Business Center Phase I had a
commitment for approximately $98,000 of tenant finish improvements
resulting from a 3,049 square foot expansion by a current tenant. The
Partnership's proportionate share of the commitment is approximately
$12,000 or 12%. The project is expected to be completed during the fourth
quarter of 1998. The source of funds for this project is expected to be
cash flow from operations and/or cash reserves.
8. Subsequent Events
-----------------
On October 6, 1998 pursuant to the contact executed on September 8, 1998,
the Lakeshore/University II Joint Venture ("L/U II") and NTS Properties V,
affiliates of the General Partner of the Partnership, sold University
Business Center Phases I and II office buildings to Silver City
Properties, Ltd. ("the Purchaser"), an affiliate of Full Sail Recorders,
Inc. ("Full Sail"), for an aggregate purchase price of $17,950,000
($8,975,000 for Phase I and $8,975,000 for Phase II). University Business
Center Phase II was owned by the L/U II Joint Venture of which the
Partnership owns a 12% interest. As of September 30, 1998, the carrying
value of University Business Center Phase II land and building was
approximately $7,300,000 and was encumbered by a mortgage payable of
$5,128,872 ($910,000 and $644,699, respectively, are recorded on the
accompanying balance sheet). Other net assets and liabilities associated
with this property included on the accompanying balance sheet at September
30, 1998 were not significant. The gain associated with this sale will be
reflected in the fourth quarter of 1998. Portions of the proceeds from
this sale were immediately used to pay the remainder of the outstanding
debt (including interest and prepayment penalties) of $10,468,000
($4,633,000 for Phase I and $5,835,000 for Phase
- 8 -
<PAGE>
8. Subsequent Events - Continued
-----------------------------
II) on these properties. The Partnership will use its share of the
proceeds from this sale for the repayment of Partnership debt and
operating expenses. As permitted by the contract, the Purchaser has
deferred the closing of the Phase III vacant land for a period of up to
18-months after the closing date of Phase I and II.
During October 1998, the Partnership has used a portion of its
distribution from the sale of University Business Center Phase II to repay
$240,000 of the $350,000 loan obtained by the Partnership in January 1998.
A portion of the distribution was also used to repay approximately $27,000
owed to NTS Development Company, an affiliate of the General Partner for
operating expenses (See Note 5 Related Party Transactions).
- 9 -
<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 properties as of September 30 were as
follows:
1998 1997
---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at September 30, 1998)
- ---------------------------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at September 30, 1998)
- -----------------------------------
Lakeshore Business Center Phase I (12%) 82% 99%
Lakeshore Business Center Phase II (12%) 86% 96%
University Business Center Phase II (12%) 88% 99%
The rental and other income generated by the Partnership's properties for the
three months and nine months ended September 30, 1998 and 1997 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -----------------
1998 1997 1998 1997
--------- -------- -------- -------
Property owned in Joint
Venture with NTS-Properties IV
and NTS-Properties VII, Ltd.
(Ownership % at September 30,
1998)
- ------------------------------
Blankenbaker Business Center
1A (39%) $ 92,907 $ 91,554 $271,746 $274,697
Properties owned through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
(Ownership % at September 30,
1998)
- ------------------------------
Lakeshore Business Center
Phase I (12%) $ 39,520 $ 45,780 $144,317 $134,118
Lakeshore Business Center
Phase II (12%) $ 44,297 $ 43,921 $164,619 $130,577
University Business Center
Phase II (12%) $ 35,023 $ 21,770 $ 96,242 $ 53,816
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
- ---------------------------------
Sykes HealthPlan Service Bureau, Inc. (formerly known as Prudential Service
Bureau, Inc.) has leased 100% of Blankenbaker Business Center 1A through July
2005. In addition to monthly rent payments, Sykes Service Bureau, Inc. is
obligated to pay substantially all of the operating expenses attributable to its
space. Rental and other income at Blankenbaker Business Center 1A remained
fairly constant for the three months and nine months ended September 30, 1998 as
compared to the same periods in 1997.
The 17% decrease in occupancy at Lakeshore Business Center Phase I from
September 30, 1997 to September 30, 1998 can be attributed to nine tenant
move-outs totaling approximately 25,000 square feet. Two of the nine tenants
vacated prior to the end of the lease term. The write-off of accrued income
connected with these leases was not significant. The remaining seven tenants
vacated at the end of the lease term. The move-outs are partially offset by four
new leases totaling approximately 7,300 square feet. Average occupancy at
Lakeshore Business Center Phase I decreased from 98% (1997) to 81% (1998) for
the three months ended September 30 and from 96% (1997) to 90% (1998) for the
nine month period. The increase in rental and other income at Lakeshore Business
Center Phase I for the nine months ended September 30, 1998 as compared to the
same period in 1997 is due primarily to a $61,000 lease buy-out received in
February 1998 (the Partnership's proportionate share is approximately $7,300 or
12%). The lease buy-out income was received from a tenant whose lease expires
during July 1999; however, the tenant has notified the Partnership that it will
vacate the space at the end of 1998 due to the fact that it will be
consolidating several of its regional offices. The increase in rental and other
income for the nine month period is also due to an increase in common area
expense reimbursements. Tenants at the business center reimburse the Partnership
for common area expenses as part of the lease agreements. The increases in
rental and other income for the nine month period are partially offset by the
decrease in average occupancy. The decrease in rental and other income for the
three months ended September 30, 1998 as compared to the same period in 1997 is
primarily a result of the decrease in average occupancy.
As of September 30, 1998 Lakeshore Business Center Phase I has 3,049 square feet
of additional space leased to a current tenant. The tenant is expected to take
occupancy of the additional space during the fourth quarter of 1998. With this
expansion the business center's occupancy should improve to 85%. See the
Liquidity and Capital Resources Section of this item for the tenant finish
commitment related to this lease.
The 10% decrease in occupancy at Lakeshore Business Center Phase II from
September 30, 1997 to September 30, 1998 can be attributed to five tenant move-
outs totaling approximately 19,000 square feet. The move-outs consist of three
tenants (4,500 square feet) vacating prior to the end of the lease term. One of
the three tenants (2,300 square feet) is continuing to pay rent through the end
of the lease term (February 2000). There was no write-off of accrued income
connected with the other two leases. One tenant (4,500 square feet) vacated at
the end of the lease term and one tenant negotiated a lease termination (10,000
square feet - the tenant paid the L/U II Joint Venture a lease termination fee
{recorded as rental income} of $185,000 of which the Partnership's proportionate
share is approximately $23,000 or 12%). Partially offsetting the move-outs are
three new leases totaling approximately 10,000 square feet which includes an
expansion of approximately 2,000 square feet by the largest tenant in the
building which occupies approximately 15% of the building's total rentable
square feet. Average occupancy at Lakeshore Business Center Phase II decreased
from 95% (1997) to 90% (1998) for the three months ended September 30 and
increased from 93% (1997) to 95% (1998) for the nine month period. The increase
in rental and other income at Lakeshore Business Center Phase II for the nine
months ended September 30, 1998 as compared to the same period in 1997 is due
primarily to the termination fee paid to the L/U II Joint Venture, as discussed
above. Also contributing to the increase in rental and other income is an
increase in average occupancy and an increase in common area expense
reimbursements. Rental and other income at Lakeshore Business Center Phase II
for the three months ended September 30, 1998 as compared to the same period in
1997 remained fairly constant.
In the opinion of the General Partner of the Partnership, the decrease in
occupancy at Lakeshore Business Center Phases I and II is only a temporary
fluctuation and does not represent a downward occupancy trend.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The 11% decrease in occupancy at University Business Center Phase II from
September 30, 1997 to September 30, 1998 is the result of one of Philip Crosby
Associates, Inc's ("Crosby") sub-tenants (approximately 9,000 square feet)
vacating at the end of Crosby's lease term (March 31, 1998) and one tenant move-
out of approximately 3,700 square feet. The move-outs are partially offset by an
expansion of approximately 3,700 square feet by one of Crosby's former
subtenants, Full Sail Recorders, Inc.("Full Sail"). In 1995 and 1996, Full Sail
had signed leases with the Joint Venture for the approximately 73,000 square
feet it was leasing from Crosby. These leases commenced April 1, 1998. (See
below for a discussion regarding Crosby and Full Sail). Average occupancy at
University Business Center Phase II decreased from 99% (1997) to 86% (1998) for
the three months ended September 30 and decreased from 99% (1997) to 91% (1998)
for the nine month period. The increase in rental and other income at University
Business Center Phase II for the nine months ended September 30, 1998 as
compared to the same period in 1997 is primarily 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 was approximately $8,400 or 12%. The increase in rental and
other income at University Business Center Phase II for the nine month period
can also be attributed to two new leases that became effective during 1998 at a
higher rental rate than the sub-tenant rate and an increase in common area
expense reimbursements. The increase in rental and other income at University
Business Center Phase II for the three months ended September 30, 1998 as
compared to the same period in 1997 is a result of an increase in common area
expense reimbursements. Sub-tenants at the business center were not required to
reimburse the Partnership for common area expenses. However, as part of Full
Sail's lease agreement, which commenced April 1, 1998, Full Sail is required to
reimburse the Partnership for such expenses, attributing to the increase in
rental and other income beginning the second quarter of 1998.
Crosby previously leased 100% of University Business Center Phase II, which is
owned by the L/U II Joint Venture. The original lease term was for seven years,
and the tenant took occupancy in April 1991. During 1994, 1995 and 1996, Crosby
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%) was leased by 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. During this period and 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, including and
subsequent to January 1997. Although the Joint Venture did not have formal lease
agreements with the sub-lessees noted above during this period, beginning
February 1997 and through March 31, 1998 rent payments from these sub-lessees
were made directly to the Joint Venture.
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 possible collection. There have
been no funds recovered as a result of these actions during the nine months
ended September 30, 1998 or 1997.
Current occupancy levels are considered adequate to continue the operation of
the Partnership's properties. See the Liquidity and Capital Resources section of
this item for a discussion regarding the Partnership's debt financing.
The change in interest and other income for the three months and nine months
ended September 30, 1998 as compared to the same periods in 1997 was not
significant.
The decrease in operating expense for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 is due primarily to
decreased exterior building renovations at Blankenbaker Business Center 1A and
decreased legal expenses at University Business Center Phase II. Fluctuations in
- 12 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
operating expenses at Lakeshore Business Center Phases I and II for both the
three month and nine month periods were not significant.
The increase in operating expenses - affiliated for the nine months ended
September 30, 1998 as compared to the same period in 1997 is primarily the
result of increased property management costs at Blankenbaker Business Center
1A. Changes in operating expenses - affiliated at Lakeshore Business Center
Phases I and II and University Business Center Phase II for the nine month
period were not significant. Operating expenses - affiliated for the three
months ended September 30, 1998 as compared to the same period in 1997 remained
fairly constant. 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 increased for the three months and nine months ended
September 30, 1998 as compared to the same periods in 1997 primarily as a result
of the Partnership obtaining a $350,000 loan on January 30, 1998. The loan bears
interest at a fixed rate of 8.5%. The increase is partially offset by continued
principal payments on the L/U II Joint Venture and Blankenbaker Business Center
1A's debt. See the Liquidity and Capital Resources section of this item for
details regarding the Partnership's debt financing.
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.
Real estate taxes and professional and administrative expenses for the three
months and nine months ended September 30, 1998 as compared to the same periods
in 1997 remained fairly constant.
The decrease in professional and administrative expenses - affiliated for the
three months and nine months ended September 30, 1998 as compared to the same
periods in 1997 is due primarily to decreased salary costs. Professional and
administrative expenses - affiliated are expenses for services performed by
employees of NTS Development Company, an affiliate of the General Partner.
The decrease in depreciation and amortization expense for the three months and
nine months ended September 30, 1998 as compared to the same periods in 1997 is
due primarily to a portion of the assets at the Partnership's Joint Venture
properties (primarily tenant finish improvements) becoming fully depreciated.
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 is approximately $6,900,000.
Liquidity and Capital Resources
- -------------------------------
Cash (used in) provided by operations was $(122,145) and $176,249 for the nine
months ended September 30, 1998 and 1997, respectively. The Partnership has not
made any cash distributions since the quarter ended June 30, 1991. 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 $51,231 and
$8,282 as of September 30, 1998 and 1997, respectively.
As of September 30, 1998, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $3,603,474. 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, 1998 is $1,389,499. 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.
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of September 30, 1998 the L/U II Joint Venture had three mortgage loans with
an insurance company. The outstanding balances of the loans at September 30,
1998 were $5,350,902, $5,128,872 and $4,973,452, respectively, for a total of
$15,453,226. The loans are recorded as a liability of the Joint Venture. The
Partnership's proportionate share in the loans at September 30, 1998 was
$672,608, $644,699 and $625,164, respectively, for a total of $1,942,471. 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.
Subsequent to September 30, 1998, the L/U II Joint Venture used proceeds
received from the sale of University Business Center Phase II to repay in full
the $5,128,872 mortgage payable. See below for the details of this sale.
As of September 30, 1998, the Partnership had a note payable to a bank in the
amount of $350,000. The loan bears interest at a fixed rate of 8.5% with
interest payable annually and is due January 29, 1999. NTS Financial
Partnership, an affiliate of NTS Development Company, has provided collateral
for the loan. The proceeds from the loan received January 30, 1998, were used to
pay approximately $300,000 due NTS Development Company, an affiliate of the
General Partner of the Partnership, and to fund Partnership operating payables.
The remaining proceeds will be used to fund partnership expenses.
Subsequent to September 30, 1998, the Partnership used a portion of its
distribution from the sale of University Business Center Phase II to repay a
portion of this note payable. See below for the details of this sale.
The majority of the Partnership's cash flows for the nine months ended September
30, 1997 were derived from operating activities. The majority of the
Partnership's cash flows for the nine months ended September 30, 1998 were
derived from financing activities as a result of a $350,000 loan obtained from a
bank on January 30, 1998. The change in accounts payable in 1998 is attributable
primarily to the payment of operating expenses owed to NTS Development Company,
an affiliate of the General Partner of the Partnership. This payment was funded
by the $350,000 loan obtained by the Partnership during January 1998. Cash flows
used in investing activities represent 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 incurred because of a lease
renewal. Cash flows used in investing activities were funded by cash flows from
operating activities. Cash flows used in financing activities are for principal
payments on mortgages and note payable and the repurchase of limited partnership
Units. The Partnership does not expect any material change in the mix and
relative cost of capital resources except that which is discussed in the
following paragraph and the repayment of the mortgage payable which was secured
by University Business Center Phase II, as discussed below.
In the next 12 months, the demand on future liquidity will increase as a result
of future leasing activity at Lakeshore Business Center Phases I and II. At this
time, the future leasing and tenant finish costs which will be required to renew
the current leases or obtain new tenants are unknown. It is anticipated that the
cash flow from operations and cash reserves will be sufficient to meet the need
of the Partnership.
Due to the fact that no distributions were made during the nine months ended
September 30, 1998 or 1997, 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.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare our information systems (IT) and non-information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separate from the Year 2000 since the
company saw the need to move to more advanced management and accounting systems
made available by new technology and software developments during the decade of
the 1990's.
The PILOT software system, purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California has been selected to supercede
PILOT. The Yardi system is compatible with Year 2000 and beyond. This system is
being implemented with the help of third party consultants and should be fully
operational by the third quarter of 1999. Our system for multi-family apartment
locations was converted to GEAC's Power Site System earlier in 1998 and is Year
2000 compliant.
The few remaining systems not addressed by these conversions are being modified
by our in-house staff of programmers. The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network. It will be retained as long as necessary to assure smooth operations
and has been upgraded to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
The cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since we had already identified the need to move to a
network based system regardless of the Year 2000. The costs involved will be
approximately $8,000 over 1998 and 1999. These costs include hardware, software,
internal staff and outside consultants.
NTS property management staff has been surveying our vendors to evaluate
embedded technology in our alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of fiscal year 1999.
We are also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant vendors and tenants have indicated that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.
Management has determined that at our current state of readiness, the need does
not presently exist for a contingency plan. We will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, more general
public infrastructure failures or failure to successfully conclude our
remediation efforts as planned could have a material adverse impact on our
results of operations, financial conditions and/or cash flows in 1999 and
beyond.
As of September 30, 1998, Lakeshore Business Center Phase I had a commitment for
approximately $98,000 of tenant finish improvements resulting from a 3,049
square foot expansion by a current tenant. The Partnership's proportionate share
of the commitment is approximately $12,000 or 12%. The project is expected to be
completed during the fourth quarter of 1998. The source of funds for this
project is expected to be cash flow from operations and or cash reserves.
The Partnership had no other material commitments for renovations or capital
improvements at September 30, 1998.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
On March 25, 1998, the Partnership elected to resume the Interest Repurchase
Reserve Program and to fund an additional $5,000 to its Interest Repurchase
Reserve, which was established in 1996 pursuant to Section 16.4 of the
Partnership's Amended and Restated Agreement of Limited Partnership. With these
funds, the Partnership repurchased 5,000 Units at a price of $1.00 per Unit. The
above offering price per Unit was established by the General Partner and does
not purport to represent the fair market value or liquidation value of the Unit.
From November 1996 to September 30, 1998, the Partnership has repurchased a
total of 27,245 Units for $20,572. The balance in the Reserve at September 30,
1998 was $0. Repurchased Units are retired by the Partnership, thus increasing
the percentage of ownership of each remaining limited partner investor.
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, 1998 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. See below for information
regarding a contract for the sale of a portion of this land.
As of September 30, 1998, the L/U II Joint Venture had a contract for the sale
of approximately 2.4 acres of land adjacent to the Lakeshore Business Center
development for a purchase price of $528,405. Concurrent with the signing of the
contract, the purchaser deposited into an escrow account $10,000. This deposit
will be applied to the purchase price at closing. The purchaser has until
November 17, 1998 to determine if the land is satisfactory for their use. If the
purchaser determines that the land is satisfactory, the contract requires that
they proceed, at their cost, to have the property re-zoned to allow for a
self-storage facility. If the purchaser is unable to obtain the re-zoning, they
may cancel the contract. The General Partner of the Partnership has met with
city officials who seem interested in the project and have voiced a willingness
to consider the re-zoning request. If the re-zoning is granted, the purchaser is
to close on the property by February 1, 1999 or deposit an additional $10,000
with the escrow agent for a 30-day delay. The contract also allows an additional
deposit of $10,000 for one more delay in closing to April 3, 1999. The
Partnership has a 12% interest in the Joint Venture. The Partnership has not yet
determined what the use of net proceeds would be from the sale of the land.
On September 8, 1998, NTS-Properties V and the Lakeshore/University II ("L/U")
Joint Venture, affiliates of the General Partner of the Partnership, entered
into a contract with Silver City Properties, Ltd. ("the Purchaser"), an
affiliate of Full Sail Recorders, Inc. ("Full Sail"), for the sale of University
Business Center Phases I and II office buildings and Phase III vacant land for
an aggregate purchase price of $18,751,000 (specifically the prices for each
property were $9,776,000 for Phase I and Phase III, and $8,975,000 for Phase
II). University Business Center Phase I and Phase III are owned by
NTS-Properties V. University Business Center Phase II is owned by the L/U II
Joint Venture. The Partnership owns a 12% interest in this joint venture. Full
Sail currently occupies 28% and 83% of the net rentable area of University
Business Center Phases I and II, respectively. Concurrent with the signing of
the contracts, the Purchaser deposited $50,000 into an escrow account. This
deposit will be applied to the purchase price at closing. The Purchaser is to
close on the properties on or before November 7, 1998. See below for additional
information. The contract permits the Purchaser to defer the closing of the
purchase of the Phase III vacant land until the 18-month anniversary of the
closing on Phase I and II.
On October 6, 1998 pursuant to the contact executed on September 8, 1998, the
L/U II Joint Venture and NTS Properties V, affiliates of the General Partner of
the Partnership, sold University Business Center Phases I and II office
buildings to Silver City Properties, Ltd. ("the Purchaser"), an affiliate of
Full Sail Recorders, Inc. ("Full Sail"), for an aggregate purchase price of
$17,950,000 ($8,975,000 for Phase I and $8,975,000 for Phase II). University
Center Phase II was owned by the L/U II Joint Venture of which the Partnership
owns a 12% interest. As of September 30, 1998, the carrying value of University
Business Center Phase II land and building was approximately $7,300,000 and was
encumbered by a mortgage payable of $5,128,872 ($910,000 and $644,699,
respectively, are recorded on the accompanying balance sheet). Other net assets
and liabilities
- 16 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
associated with this property included on the accompanying balance sheet at
September 30, 1998 were not significant. The gain associated with this sale will
be reflected in the fourth quarter of 1998. Portions of the proceeds from this
sale were immediately used to pay the remainder of the outstanding debt
(including interest and prepayment penalties) of $10,468,000 ($4,633,000 for
Phase I and $5,835,000 for Phase II) on these properties. The Partnership will
use its share of the proceeds from this sale for the repayment of Partnership
debt and operating expenses. As permitted by the contract, the Purchaser has
deferred the closing of the Phase III vacant land for a period of up to
18-months after the closing date of Phase I and II.
During October 1998 the Partnership used a portion of its distribution from the
sale of University Business Center Phase II to repay $240,000 of the $350,000
loan obtained by the Partnership in January 1998. A portion of the distribution
was also used to pay approximately $27,000 owed to NTS Development Company, an
affiliate of the General Partner for operating expenses.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Lakeshore Business
Center, 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 related 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 judgment 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.
- 17 -
<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 was filed September 14, 1998 to report in Item 5
that NTS- Properties V and the Lakeshore/University II Joint
Venture, affiliates of the General partner of the Partnership,
entered into two contracts with Silver City Properties, Ltd.
for the sale of University Business Center Phases I and II
office buildings and the Phase III vacant land.
Items 1,2,4 and 5 are not applicable and have been omitted.
- 18 -
<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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: November 13, 1998
- 19 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 139,033
<SECURITIES> 0
<RECEIVABLES> 15,308
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 939,213
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,380,899
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,681,970
0
0
<COMMON> 0
<OTHER-SE> (2,547,493)
<TOTAL-LIABILITY-AND-EQUITY> 1,380,899
<SALES> 675,062
<TOTAL-REVENUES> 677,491
<CGS> 0
<TOTAL-COSTS> 394,714
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236,281
<INCOME-PRETAX> 46,496
<INCOME-TAX> 0
<INCOME-CONTINUING> 46,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,496
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS
$0.
<F2>THIS INFORMATION HAS NOT BEEN DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q
FILING.
</FN>
</TABLE>
