<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 March 31, 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 17
Total Pages: 18
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TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of March 31, 1998 and December 31, 1997 3
Statements of Operations
For the three months ended March 31, 1998 and 1997 4
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997 5
Notes to Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
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
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<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
March 31, 1998 December 31, 1997*
-------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 68,786 $ 39,940
Cash and equivalents - restricted 47,092 19,228
Accounts receivable 4,662 11,531
Land, buildings and amenities, net 967,570 996,049
Asset held for development, net 96,949 96,949
Deferred leasing commissions 124,404 129,946
Loan costs, net 61,226 63,217
Other assets 26,762 13,914
----------- -----------
$ 1,397,451 $ 1,370,774
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $ 3,814,281 $ 3,528,058
Accounts payable 96,863 390,774
Security deposits 12,800 13,536
Other liabilities 54,960 27,395
----------- -----------
3,978,904 3,959,763
Commitments and Contingencies
Partners' equity (2,581,453) (2,588,989)
----------- -----------
$ 1,397,451 $ 1,370,774
=========== ===========
</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 income (loss)- prior years (12,170,907) (122,938) (12,293,845)
Net income - current year 7,461 75 7,536
Cash distributions to partners
to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited
partnership units (20,653) -- (20,653)
------------ ------------ ------------
Balances at March 31, 1998 $ (2,438,098) $ (143,355) $ (2,581,453)
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on March 30, 1998.
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<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Rental income $ 227,528 $ 189,412
Interest and other income 957 623
--------- ---------
228,485 190,035
Expenses:
Operating expenses 34,182 35,715
Operating expenses - affiliated 15,147 15,018
Interest expense 80,444 76,943
Management fees 13,993 11,932
Real estate taxes 21,856 19,763
Professional and administrative
expenses 10,846 11,456
Professional and administrative
expenses - affiliated 12,416 13,133
Depreciation and amortization 32,065 40,052
--------- ---------
220,949 224,012
--------- ---------
Net income (loss) $ 7,536 $ (33,977)
========= =========
Net income (loss) allocated to the limited
partners $ 7,461 $ (33,637)
========= =========
Net income (loss) per limited partnership
unit $ .01 $ (.05)
========= =========
Weighted average number of limited
partnership units 663,402 674,780
========= =========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 7,536 $ (33,977)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 32,065 40,052
Changes in assets and liabilities:
Cash and equivalents - restricted (22,864) (20,425)
Accounts receivable 6,869 (3,211)
Deferred leasing commissions 5,542 3,177
Other assets (13,169) (17,366)
Accounts payable (293,363) 64,134
Security deposits (736) 1,619
Other liabilities 27,563 20,616
--------- ---------
Net cash provided by (used in) operating activities (250,557) 54,619
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, amenities (1,820) (5,783)
--------- ---------
Net cash used in investing activities (1,820) (5,783)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in note payable 350,000 --
Principal payments on mortgages and note
payable (63,777) (58,702)
Repurchase of limited partnership Units -- (12,076)
Cash and equivalents - restricted (5,000) --
--------- ---------
Net cash provided by (used in) financing activities 281,223 (70,778)
--------- ---------
Net increase (decrease) in cash and equivalents 28,846 (21,942)
CASH AND EQUIVALENTS, beginning of period 39,940 42,944
--------- ---------
CASH AND EQUIVALENTS, end of period $ 68,786 $ 21,002
========= =========
Interest paid on a cash basis $ 73,006 $ 78,110
========= =========
</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 (only consisting of normal recurring accruals)
necessary for a fair presentation have been made to the accompanying financial
statements for the three months ended March 31, 1998 and 1997.
1. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds escrowed with mortgage
companies for property taxes in accordance with the loan agreements. Cash
and equivalents - restricted at March 31, 1998, also represents funds
which the Partnership has reserved for the repurchase of limited
partnership Units.
2. 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 will be able to
repurchase up to 5,000 additional Units at a price of $1.00 per unit. If
the number of Units submitted for repurchase exceeds that which can be
repurchased by the Partnership with the current funding, those additional
Units may be repurchased in subsequent quarters. 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. As of
March 31, 1998, the Partnership has repurchased a total of 22,245 Units
for $15,572. Repurchased Units are retired by the Partnership, thus
increasing the share of ownership of each remaining investor. The balance
in the repurchase reserve at March 31, 1998 was $5,000.
3. Mortgages and Note Payable
--------------------------
Mortgage and note payable consist of the following:
March 31, 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 $ 1,459,261 $ 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 694,267 704,771
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 665,459 675,528
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 645,294 655,057
(Continued next page)
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<PAGE>
3. Mortgages and Note Payable - Continued
--------------------------------------
March 31, December 31,
1998 1997
---- ----
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 $ --
---------- ----------
$ 3,814,281 $ 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 is approximately $3,900,000.
4. Related Party Transactions
--------------------------
Property management fees of $13,993 (1998) and $11,932 (1997) were paid to
NTS Development Company, an affiliate of the General Partner of the
Partnership, during the three months ended March 31. 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 $860 as a repair and maintenance fee during the three months
ended March 31, 1997 and has capitalized this cost as part of land,
buildings and amenities. No such expense was incurred for the three months
ended March 31, 1998.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the three months ended
March 31, 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 $ 14,680 $ 15,579
Leasing 3,262 6,774
Property manager 10,249 9,357
Other 153 51
--------- -------
$ 28,344 $ 31,761
========= ========
Accounts payable - operations includes approximately $52,000 and $336,000
due NTS Development Company at March 31, 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 March
31, 1998 during 1998. Payments to this affiliate will be made during 1998
as cash flows permits.
5. Commitments and Contingencies
-----------------------------
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of
University Business Center Phase II, which is owned by the
Lakeshore/University II ("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
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<PAGE>
5. Commitments and Contingencies - Continued
-----------------------------------------
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 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. 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. The
Partnership's proportionate share of the rental income from this property
accounted for approximately 18% of the partnership's total revenues during
1996. 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 have been
made directly to the Joint Venture.
During 1997, Crosby abandoned its business, sold all or most of its
operating assets and informed the Joint Venture that Crosby may be
insolvent. During the third quarter of 1997, a conditional settlement was
reached at a mediation conference with Crosby and its corporate parent,
whereby, subject to the Joint Venture's acceptance of the settlement
terms, the corporate parent 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. During the fourth quarter of 1997, the L/U II Joint
Venture informed Crosby and its corporate parent that it accepted the
terms of the conditional settlement, whereby Crosby's parent paid to the
L/U II Joint Venture the sum of $300,000 in full satisfaction of all
claims. These funds were received by the L/U II Joint Venture on October
23, 1997. The Partnership's proportionate share of the settlement was
$36,000 or 12%. The amount of the settlement was substantially less than
the aggregate liability of Crosby to the Joint Venture resulting from
Crosby's default under its lease. This deficit is partially offset by the
rent payments received from the sub-lessees, as discussed above.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet it sub-leased 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 addition, in November 1996,
Full Sail also signed a 52 month lease for an additional approximately
21,000 square feet of space it sub-leased from Crosby. Both leases
aggregate 69,000 square feet or 78% of the business center's net rentable
area and commence April 1998 when the Crosby original lease term 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 pursuant to the
lease terms. 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 March 31, 1998, the Joint Venture was negotiating directly with the
other sub-lessees discussed above to enter into leases for the remaining
space available. The future leasing and tenant finish costs which will be
required to release this space is unknown at this time but is not expected
to be substantial.
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<PAGE>
5. Commitments and Contingencies - Continued
-----------------------------------------
On December 30, 1997, Full Sail delivered written notice to the
Partnership that Full Sail had (i) exercised its right of first refusal
under its lease with NTS-Properties V to purchase University Business
Center Phase I ("University I")office building and the Phase III vacant
land, and (ii) exercised its right of first refusal under its lease with
NTS University Boulevard Joint Venture to purchase University Business
Center II ("University II")office building, for an aggregate purchase
price for all three of $18,700,000. Full Sail exercised its right of first
refusal under the leases in response to a letter of intent to purchase
University I, University II and the Phase III vacant land which was
previously received by the Partnership from an unaffiliated buyer. Under
its right of first refusal, Full Sail must purchase the properties on the
same terms and conditions as contemplated by the letter of intent. Full
Sail agreed in its notice to the Partnership to proceed to negotiate in
good faith a definitive purchase agreement for the properties. Because no
binding agreement exists for the purchase of the properties at this time,
there can be no assurance that a mutual agreement of purchase and sale
will be reached among the parties, nor that the sale of the properties
will be consummated. As such, the Partnership has not determined the use
of net proceeds after repayment of outstanding debt from any such sale nor
has it determined the impact on its future results of operations or
financial position. The University II office building is owned by the L/U
II Joint Venture, the successor to the NTS University Boulevard Joint
Venture, in which the Partnership owns a 12% joint venture interest. Under
the terms of the right of first refusal, the closings of the sale of
University I, University II and the Phase III vacant land are to occur
simultaneously.
6. Subsequent Event
----------------
Subsequent to March 31, 1998, Lakeshore Business Center Phase II had a
commitment for approximately $37,000 for roof repairs. The Partnership's
proportionate share of the commitment is approximately $4,400 or 12%. The
source of funds for this project is expected to be cash flow from
operations and/or cash reserves.
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<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 March 31 were as
follows:
1998 1997
---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at March 31, 1998)
- -----------------------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University
II Joint Venture (L/U II Joint
Venture)(Ownership % at March 31, 1998)
- ---------------------------------------
Lakeshore Business Center Phase I (12%) 94% 95%
Lakeshore Business Center Phase II (12%) 100% 94%
University Business Center Phase II (12%) 99% 99%
The rental and other income generated by the Partnership's properties for the
three months ended March 31, 1998 and 1997 was as follows:
1998 1997
-------- -------
Property owned in Joint Venture with NTS-
Properties IV and NTS-Properties VII,
Ltd. (Ownership % at March 31, 1998)
- ------------------------------------
Blankenbaker Business Center 1A (39%)
$ 92,748 $ 91,554
Properties owned through Lakeshore/
University II Joint Venture (L/U II Joint
Venture (Ownership % at March 31, 1998)
- ---------------------------------------
Lakeshore Business Center Phase I (12%) $ 58,429 $ 44,468
Lakeshore Business Center Phase II (12%) $ 51,711 $ 41,735
University Business Center Phase II (12%) $ 25,496 $ 11,838
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
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<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 ended March 31, 1998 as
compared to the same period in 1997 was not significant.
The 1% decrease in occupancy at Lakeshore Business Center Phase I from March 31,
1997 to March 31, 1998, can be attributed to six tenant move-outs, vacating a
total of 7,000 square feet. One of the six tenants vacated prior to the end of
the lease term. The write-off of accrued income connected with this lease was
not significant. The move-outs are partially offset by three new leases totaling
approximately 5,600 square feet including an expansion by a current tenant of
2,100 square feet. Average occupancy at Lakeshore Business Center Phase I
remained constant at 94% for the three months ended March 31, 1997 and 1998. The
increase in rental and other income at Lakeshore Business Center Phase I for the
three months ended March 31, 1998 as compared to the three months ended March
31, 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%). This
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 during the summer of 1998 due to the fact that it will be consolidating
several of its regional offices. The increase in rental and other income 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 6% increase in occupancy at Lakeshore Business Center Phase II from March
31, 1997 to March 31, 1998, can be attributed to three new leases totaling
approximately 7,200 square feet which includes approximately 3,000 square feet
in expansions by two current tenants. Partially offsetting the new leases is one
tenant move-out at the end of the lease term of approximately 1,200 square feet.
Average occupancy at Lakeshore Business Center Phase II increased for the three
months ended March 31 from 91% (1997) to 100% (1998). The increase in rental and
other income at Lakeshore Business Center Phase II for the three months ended
March 31, 1998 as compared to the three months ended March 31, 1997 is primarily
a result of the increase in average occupancy and 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.
Occupancy at University Business Center Phase II was 99% at March 31, 1998 and
1997. The increase in rental and other income at University Business Center
Phase II for the three months ended March 31, 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 Philip Crosby Associates, Inc. ("Crosby")
lease was written-off during the first quarter of 1997, of which the
Partnership's proportionate share was approximately $8,400 or 12%. See a
discussion regrading the Crosby lease below.
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 three
months ended March 31, 1998 or 1997.
The change in interest and other income for the three months ended March 31,
1998 as compared to the same period in 1997 was not significant.
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<PAGE>
Results of Operations - Continued
- ---------------------------------
The changes in operating expenses and operating expense - affiliated for the
three months ended March 31, 1998 as compared to the same period in 1997 were
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 increased for the three months ended March 31, 1998 as
compared to the same period in 1997 primarily as a result of a $350,000 loan
obtained by the Partnership on January 30, 1998. The loan bears a fixed interest
rate of 8.5%. The increase is partially offset by continued principal payments
on the L/U II Joint Venture's and Blankenbaker Business Center 1A'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.
The changes in real estate taxes, professional and administrative expenses and
professional and administrative expenses - affiliated for the three months ended
March 31, 1998 as compared to the same period in 1997 were not significant.
Professional and administrative expenses- affiliated are expenses for services
preformed by employees of NTS Development Company, an affiliate of the General
Partner of the Partnership.
The decrease in depreciation and amortization expense for the three months ended
March 31, 1998 as compared to the same period in 1997 is due to a portion of
tenant improvements at the Partnership's Joint Venture properties 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 approximately $6,900,000.
Liquidity and Capital Resources
- -------------------------------
Cash provided by (used in) operations was ($250,557) and $54,619 for the three
months ended March 31, 1998 and 1997, 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
costs, tenant finish costs and capital improvements. Cash reserves (which are
unrestricted cash and equivalents as shown on the Partnership's balance sheet as
of March 31) were $68,786 and $21,002 as of March 31, 1998 and 1997,
respectively.
As of March 31, 1998, the Partnership had a loan payable to a bank in the amount
of $350,000. The loan bears interest at a fixed rate of 8.5% for a one year term
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.
- 12 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of March 31, 1998, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $3,782,431. 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 March 31, 1998 is $1,459,261. 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 March 31, 1998 the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at March 31, 1998 were
$5,523,204, $5,294,025 and $5,133,600, respectively, for a total of $15,950,829.
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at March 31, 1998 was $694,267, $665,459 and
$645,294, respectively, for a total of $2,005,020. 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 for the three months ended March
31, 1997 were derived from operating activities. The majority of the
Partnership's cash flows for the three months ended March 31, 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.
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 flow from operating activities. Cash flows used in financing
activities are for principal payments on mortgages and note payable, the
repurchase of limited partnership Units, and cash which has been reserved by the
Partnership for 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.
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 and
University Business Center Phase 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 three months ended
March 31, 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.
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of University
Business Center Phase II, which is owned by the Lakeshore/University II ("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
- 13 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 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. 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. The
Partnership's proportionate share of the rental income from this property
accounted for approximately 18% of the partnership's total revenues during 1996.
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 have been made directly to
the Joint Venture.
During 1997, Crosby abandoned its business, sold all or most of its operating
assets and informed the Joint Venture that Crosby may be insolvent. During the
third quarter of 1997, a conditional settlement was reached at a mediation
conference with Crosby and its corporate parent, whereby, subject to the Joint
Venture's acceptance of the settlement terms, the corporate parent 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. During the fourth quarter of
1997, the L/U II Joint Venture informed Crosby and its corporate parent that it
accepted the terms of the conditional settlement, whereby Crosby's parent paid
to the L/U II Joint Venture the sum of $300,000 in full satisfaction of all
claims. These funds were received by the L/U II Joint Venture on October 23,
1997. The Partnership's proportionate share of the settlement was $36,000 or
12%. The amount of the settlement was substantially less than the aggregate
liability of Crosby to the Joint Venture resulting from Crosby's default under
its lease. This deficit is partially offset by the rent payments received from
the sub-lessees, as discussed above.
In December 1995, Full Sail signed a 33 month lease with the L/U II Joint
Venture for approximately 41,000 square feet it sub-leased 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 addition, in November 1996, Full Sail also
signed a 52 month lease for an additional approximately 21,000 square feet of
space it sub-leased from Crosby. Both leases aggregate 69,000 square feet or 78%
of the business center's net rentable area and commence April 1998 when the
Crosby original lease term 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
pursuant to the lease terms. 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 March 31, 1998, the Joint Venture was negotiating directly with the other
sub-lessees discussed above to enter into leases for the remaining space
available. The future leasing and tenant finish costs which will be required to
release this space is unknown at this time but is not expected to be
substantial.
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The Partnership has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
developing an implementation plan to resolve the issue. The Year 2000 Issue, a
worldwide problem, is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Partnership's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in major systems
failures or miscalculations. The Partnership presently believes that, with
modifications to existing software and conversions to new software, the Year
2000 problem will not pose significant operational problems for the
Partnership's computer systems. The Partnership continues to evaluate
appropriate courses of corrective action, including replacement of certain
systems whose associated costs would be recorded as assets and amortized. The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material effect on its financial position or results of
operations. The associated costs will be funded by cash flow from operations or
cash reserves. The amount expensed in 1998 was immaterial.
Subsequent to March 31, 1998, Lakeshore Business Center Phase II had a
commitment for approximately $37,000 for roof repairs. The Partnership's
proportionate share of the commitment is $4,400 or 12%. The source of funds for
this project is expected to cash flow from operations and/or cash reserves.
The Partnership had no other material commitments for renovations or capital
improvements at March 31, 1998.
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 will be able to repurchase up to 5,000 additional Units
at a price of $1.00 per Unit. If the number of Units submitted for repurchase
exceeds that which can be repurchased by the Partnership with the current
funding, those additional Units may be repurchased in subsequent quarters. 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.
As of March 31, 1998, the Partnership has repurchased a total of 22,245 Units
for $15,572. Repurchased Units are retired by the Partnership, thus increasing
the share of ownership of each remaining investor.
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 March 31, 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.
On December 30, 1997, Full Sail delivered written notice to the Partnership that
Full Sail had (i) exercised its right of first refusal under its lease with
NTS-Properties V to purchase University Business Center Phase I ("University I")
office building and the Phase III vacant land adjacent to the University
Business Center development, and (ii) exercised its right of first refusal under
its lease with NTS University Boulevard Joint Venture to purchase the University
Business Center Phase II ("University II") office building, for an aggregate
purchase price for all three of $18,700,000. Full Sail exercised its right of
first refusal under the leases in response to a letter of intent to purchase
University I, University II and the Phase III vacant land which was previously
received by the Partnership from an unaffiliated buyer. Under its right of first
refusal, Full Sail must purchase the properties on the same terms and conditions
as contemplated by the letter of intent. Full Sail agreed in its notice to the
Partnership to proceed to negotiate in good faith a definitive purchase
agreement for the
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
properties. Because no binding agreement exists for the purchase of these
properties at this time, there can be no assurance that a mutual agreement of
purchase and sale will be reached among the parties, nor that the sale of the
properties will be consummated. As such, the Partnership has not determined the
use of net proceeds after repayment of outstanding debt from any such sale nor
has it determined the impact on its future results of operations or financial
position. The University II office building is owned by the L/U II Joint
Venture, the successor to the NTS University Boulevard Joint Venture, in which
the Partnership owns a 12% joint venture interest. Under the terms of the right
of first refusal, the closings of the sale of University I, University II and
the Phase III vacant land are to occur simultaneously.
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Lakeshore Business
Center Phase 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 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 these 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:
Form 8-K was filed on January 21, 1998, to report in Item 5 that
Full Sail Recorders, Inc., a tenant at University Boulevard
Office development in Orlando, Florida, had exercised its right
of first refusal under its lease with NTS-Properties V to
purchase University Business Center Phase I office building and
the Phase III vacant land, and exercised its right of first
refusal under its lease with NTS University Boulevard Joint
Venture to purchase University Business Center II office
building, for an aggregate purchase price for all three of
$18,700,000.
Form 8-K was filed on March 25, 1998 to report in Item 5 that the
Partnership has elected to fund an additional amount of $5,000 to
its Interest Repurchase Reserve.
- 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: May 14, 1998
------------
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 115,878
<SECURITIES> 0
<RECEIVABLES> 4,662
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 967,570
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,397,451
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (2,581,453)
<TOTAL-LIABILITY-AND-EQUITY> 1,397,451
<SALES> 227,528
<TOTAL-REVENUES> 228,485
<CGS> 0
<TOTAL-COSTS> 140,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,444
<INCOME-PRETAX> 7,536
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,536
<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 10-Q FILING.
</FN>
</TABLE>
