<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
<PAGE>
TABLE OF CONTENTS
Pages
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of June 30, 1998 and December 31, 1997 3
Statements of Operations
For the three months and six months ended
June 30, 1998 and 1997 4
Statements of Cash Flows
For the three months and six months ended
June 30, 1998 and 1997 5
Notes To Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-16
PART II
Item 3. Defaults Upon Senior Securities 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
- 2 -
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
June 30, 1998 December 31, 1997*
------------- ------------------
ASSETS
<S> <C> <C>
Cash and equivalents $ 84,734 $ 39,940
Cash and equivalents - restricted 64,956 19,228
Accounts receivable 2,401 11,531
Land, buildings and amenities, net 951,879 996,049
Asset held for sale 96,949 96,949
Deferred leasing commissions, net 120,946 129,946
Loan costs, net 59,554 62,897
Other assets 20,561 14,234
----------- -----------
$ 1,401,980 $ 1,370,774
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $ 3,749,168 $ 3,528,058
Accounts payable 119,376 390,774
Security deposits 19,204 13,536
Other liabilities 73,249 27,395
----------- -----------
3,960,997 3,959,763
Commitments and Contingencies
Partners' equity (2,559,017) (2,588,989)
----------- -----------
$ 1,401,980 $ 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 loss - prior years (12,170,907) (122,938) (12,293,845)
Net income - current year 34,622 350 34,972
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 June 30, 1998 $ (2,415,937) $ (143,080) $ (2,559,017)
============ ============ ============
</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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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 236,241 $ 200,385 $ 463,769 $ 389,797
Interest and other income 885 432 1,876 1,055
--------- --------- --------- ---------
237,126 200,817 465,645 390,852
EXPENSES:
Operating expenses 30,136 37,233 64,351 72,946
Operating expenses - affiliated 16,956 13,335 32,103 28,353
Interest expense 78,111 76,877 158,555 153,820
Management fees 14,797 12,758 28,790 24,691
Real estate taxes 16,490 18,803 38,346 38,566
Professional and administrative
expenses 14,158 12,486 24,999 23,942
Professional and administrative
expenses - affiliated 16,104 13,048 28,520 26,181
Depreciation and amortization 22,938 39,509 55,009 79,561
--------- --------- --------- ---------
209,690 224,049 430,673 448,060
--------- --------- --------- ---------
Net income (loss) $ 27,436 $ (23,232) $ 34,972 $ (57,208)
========= ========= ========= =========
Net income (loss) allocated to the
limited partners $ 27,162 $ (23,000) $ 34,622 $ (56,636)
========= ========= ========= =========
Net income (loss) per limited
partnership unit $ 0.04 $ (0.03) $ 0.05 $ (0.08)
========= ========= ========= =========
Weighted average number of units 661,589 663,902 662,490 669,311
========= ========= ========= =========
</TABLE>
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<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 27,436 $ (23,232) $ 34,972 $ (57,208)
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 22,938 39,509 55,009 79,561
Changes in assets and liabilities:
Cash and equivalents - restricted (17,864) (20,541) (45,728) (40,966)
Accounts receivable 9,153 21,847 16,022 18,636
Deferred leasing commissions 3,458 6,739 9,000 9,916
Other assets 5,580 6,476 (7,589) (10,892)
Accounts payable 16,157 4,926 (277,212) 69,060
Security deposits 6,404 -- 5,668 1,618
Other liabilities 18,291 21,220 45,854 41,838
--------- --------- --------- ---------
Net cash provided by (used
in)operating activities 91,553 56,944 (164,004) 111,563
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and
amenities (5,492) (10,246) (7,312) (16,029)
--------- --------- --------- ---------
Net cash used in investing activities (5,492) (10,246) (7,312) (16,029)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and
note payable (65,113) (59,932) (128,890) (118,634)
Increase in note payable -- -- 350,000 --
Repurchase of limited partnership Units (5,000) -- (5,000) (12,076)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (70,113) (59,932) 216,110 (130,710)
--------- --------- --------- ---------
Net increase (decrease) in cash and
equivalents 15,948 (13,234) 44,794 (35,176)
CASH AND EQUIVALENTS, beginning of
period 68,786 21,002 39,940 42,944
--------- --------- --------- ---------
CASH AND EQUIVALENTS, end of period $ 84,734 $ 7,768 $ 84,734 $ 7,768
========= ========= ========= =========
Interest paid on a cash basis $ 86,530 $ 76,877 $ 159,536 $ 154,987
========= ========= ========= =========
</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 six months ended June 30, 1998 and 1997.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
Actual results could differ from those estimates.
2. 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 was able to
repurchase 5,000 additional 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 6, 1996 (date Interest Repurchase Reserve established)
to June 30, 1998, the Partnership has repurchased a total of 27,245 Units
for $20,572. The balance in the Reserve at June 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 Payable
-----------------
Mortgages payable consist of the following:
June 30, December 31,
1998 1997
---- ----
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building $ 1,425,107 $ 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 683,547 704,771
(Continued next page)
- 6 -
<PAGE>
4. Mortgages Payable - Continued
-----------------------------
June 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 $ 655,184 $ 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 635,330 655,057
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 --
---------- ----------
$ 3,749,168 $ 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 $3,800,000.
5. Related Party Transactions
--------------------------
Property management fees of $28,790 and $24,691 were paid to NTS
Development Company, an affiliate of the general partner of the
Partnership, during the six months ended June 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 six months ended
June 30, 1998 and 1997. These charges include items which have been
expensed as operating expenses - affiliated or professional and
administrative expenses affiliated and items which have been capitalized
as deferred leasing commissions, other assets or as land, buildings and
amenities.
1998 1997
--------- -------
Administrative $ 33,067 $ 31,073
Leasing 10,924 9,954
Property manager 21,036 18,501
Other 1,178 1,417
-------- -------
$ 66,205 $ 60,945
======== =======
Accounts payable includes approximately $60,000 and $336,000 due NTS
Development Company at June 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 June 30, 1998 during
1998. Payments to this affiliate will be made during 1998 as cash flows
permit.
6. Reclassification of 1997 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the December 31, 1997
financial statements to conform with the June 30, 1998 classifications.
These reclassifications have no effect on previously reported operations.
- 7 -
<PAGE>
7. Commitments and Contingencies
-----------------------------
As of June 30, 1998, the Lakeshore/University II ("L/U II") Joint Venture
has a commitment for a $450,000 special tenant finish allowance as a
result of lease negotiations with Full Sail Recorders, Inc. ("Full Sail").
Full Sail currently occupies 83% of University Business Center Phase II's
net rentable area. 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 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.
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. 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 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.
As of June 30, 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.
As of June 30, 1998, Lakeshore Business Center Phase I had a commitment
for approximately $111,000 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 $14,000 or 12%. The
project is expected to be completed during the third quarter of 1998. The
source of funds for this project is expected to be cash flow from
operations and/or cash reserves.
8. Subsequent Event
----------------
Subsequent to June 30, 1998, the L/U II Joint Venture entered into 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 it 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.
- 8 -
<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 June 30 were as
follows:
1998 1997
---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at June 30, 1998)
- ----------------------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University
II Joint Venture (L/U II Joint Venture)
(Ownership % at June 30, 1998)
- ---------------------------------------------
Lakeshore Business Center Phase I (12%) 94% 97%
Lakeshore Business Center Phase II (12%) 92% 94%
University Business Center Phase II (12%) 90% 99%
The rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1998 and 1997 was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1998 1997 1998 1997
--------- -------- -------- --------
Property owned in Joint
Venture with NTS-Properties IV
and NTS-Properties VII, Ltd.
(Ownership % at June 30, 1998)
- ------------------------------
Blankenbaker Business Center
1A (39%) $ 86,091 $ 91,589 $178,839 $183,143
Properties owned through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
(Ownership % at June 30, 1998)
- ------------------------------
Lakeshore Business Center
Phase I (12%) $ 46,368 $ 43,870 $104,797 $ 88,338
Lakeshore Business Center
Phase II (12%) $ 68,611 $ 44,921 $120,322 $ 86,656
University Business Center
Phase II (12%) $ 35,724 $ 20,209 $ 61,220 $ 32,047
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
- 9 -
<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. Rental and other income at Blankenbaker
Business Center 1A remained fairly constant for the three months and six months
ended June 30, 1998 as compared to the same periods in 1997.
The 3% decrease in occupancy at Lakeshore Business Center Phase I from June 30,
1997 to June 30, 1998 can be attributed to six tenant move-outs totaling
approximately 6,100 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 two new leases totaling
approximately 2,600 square feet. Average occupancy at Lakeshore Business Center
Phase I decreased from 96% (1997) to 94% (1998) for the three months ended June
30 and from 95% (1997) to 94% (1998) for the six month period. The increase in
rental and other income at Lakeshore Business Center Phase I for the six months
ended June 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%). 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 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 six 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 change in rental and other income for the three months ended
June 30, 1998 as compared to the same period in 1997 was not significant.
As of June 30, 1998 Lakeshore Business Center Phase I has 3,049 square feet of
additional space leased to an existing tenant. The tenant is expected to take
occupancy of the expansion space during the third quarter of 1998. With this
expansion the Business Center's occupancy should improve to 96%. See the
Liquidity and Capital Resources Section of this item for the tenant finish
commitment related to this lease.
The 2% decrease in occupancy at Lakeshore Business Center Phase II from June 30,
1997 to June 30, 1998 can be attributed to two tenant move-outs totaling
approximately 11,000 square feet. The move-outs consist of one tenant vacating
at the end of the lease term (1,200 square feet) and one tenant negotiating a
lease termination (10,000 square feet - 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 four new leases totaling approximately 9,000 square
feet which includes three expansions of approximately 5,000 square feet by
existing tenants. 4,000 square feet of the expansions represents an increase in
the square footage leased by Lambda Physik. Lambda Physik currently leases
nearly 15,000 square feet and is the largest tenant in the building occupying
approximately 15% of the building's total rentable square feet. Average
occupancy at Lakeshore Business Center Phase II increased from 94% (1997) to 95%
(1998) for the three months ended June 30 and increased from 92% (1997) to 97%
(1998) for the six month period. The increase in rental and other income at
Lakeshore Business Center Phase II for the three months and six months ended
June 30, 1998 as compared to the same periods in 1997 is due primarily to the
$185,000 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. Tenants
at the Business Center reimburse the partnership for common area expenses as
part of the lease agreements.
The 9% decrease in occupancy at University Business Center Phase II from June
30, 1997 to June 30, 1998 is the result of one of Philip Crosby Associates,
Inc's ("Crosby") sub-tenants (approximately 9,000 square feet) vacating its
space at the end of Crosby's lease term (March 31, 1998). The move-out is
partially offset by an expansion of approximately 1,300 square feet by one of
Crosby's former sub-tenants, Full Sail Recorders, Inc.("Full Sail"), upon the
commencement
- 10 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
(April 1, 1998) of its lease with the L/U II Joint Venture. 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 90% (1998)
for the three months ended June 30 and decreased from 99% (1997) to 95% (1998)
for the six month period. The increase in rental and other income at University
Business Center Phase II for the six months ended June 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 three months ended June 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 for the second quarter of 1998.
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 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
were been 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 a possible collection. There
have been no funds recovered as a result of these actions during the six months
ended June 30, 1998 or 1997.
Currently 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 six months
ended June 30, 1998 as compared to the same periods in 1997 was not significant.
The decrease in operating expense for the three months and six months ended June
30, 1998 as compared to the same periods in 1997 is due primarily to decreased
exterior building renovations at Blankenbaker Business Center 1A. Fluctuations
in operating expenses at Lakeshore Business Center Phases I and II and
University Business Center Phase II for both the three month and six month
periods were not significant.
- 11 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in operating expenses - affiliated for the three months and six
months ended June 30, 1998 as compared to the same periods 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 both the
three month and six month periods 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 and six months ended June
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 a
fixed interest 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, professional and administrative expenses and professional and
administrative expenses - affiliated for the three months and six months ended
June 30, 1998 as compared to the same periods in 1997 remained fairly constant.
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
six months ended June 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 $(164,004) and $111,563 for the six
months ended June 30, 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 and
tenant finish costs and other capital improvements. Cash reserves (which are
unrestricted cash and equivalents as shown on the Partnership's balance sheet as
of June 30) were $84,734 and $7,768 as of June 30, 1998 and 1997, respectively.
As of June 30, 1998, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $3,693,900. The
mortgage is recorded as a liability of the Joint Venture and is secured by the
assets of the Joint Venture. The Partnership's proportionate interest in the
mortgage at June 30, 1998 is $1,425,107. 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.
- 12 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
As of June 30, 1998 the L/U II Joint Venture had three mortgage loans with an
insurance company. The outstanding balances of the loans at June 30, 1998 were
$5,437,925, $5,212,284 and $5,054,336, respectively, for a total of $15,704,545.
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at June 30, 1998 was $683,547, $655,184 and
$635,330, respectively, for a total of $1,974,061. 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.
As of June 30, 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% 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.
The majority of the Partnership's cash flows for the six months ended March 31,
1997 were derived from operating activities. The majority of the Partnership's
cash flows for the six months ended June 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 flow 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.
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 six months ended June
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.
As of June 30, 1998, the Lakeshore/University II ("L/U II") Joint Venture has a
commitment for a $450,000 special tenant finish allowance as a result of lease
negotiations with Full Sail Recorders, Inc. ("Full Sail"). Full Sail currently
occupies 83% of University Business Center Phase II's net rentable area.
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 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.
- 13 -
<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.
As of June 30, 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 be cash flow from operations and/or cash reserves.
As of June 30, 1998, Lakeshore Business Center Phase I had a commitment for
approximately $111,000 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 $14,000 or 12%. The project is expected to be
completed during the third 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 June 30, 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 was able to repurchase 5,000 additional 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 6, 1996 (date Interest Repurchase
Reserve established) to June 30, 1998, the Partnership has repurchased a total
of 27,245 Units for $20,572. The balance in the Reserve at June 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 June 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.
Subsequent to June 30, 1998, the L/U II Joint Venture entered into 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 it 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
- 14 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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.
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. 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 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, 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.
- 15 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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
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:
No reports on Form 8-K were filed during the three months ended
June 30, 1998.
Items 1,2,4 and 5 are not applicable and have been omitted.
- 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/ Richard L. Good
-------------------
Richard L. Good
President
/s/ Lynda J. Wilbourn
---------------------
Lynda J. Wilbourn
Vice President
Principal Accounting Officer
Date: August 12, 1998
---------------
- 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998 AND FROM THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 149,690
<SECURITIES> 0
<RECEIVABLES> 2,401
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 951,879
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,401,980
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,749,168
0
0
<COMMON> 0
<OTHER-SE> (2,559,017)
<TOTAL-LIABILITY-AND-EQUITY> 1,401,980
<SALES> 463,385
<TOTAL-REVENUES> 465,645
<CGS> 0
<TOTAL-COSTS> 272,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,555
<INCOME-PRETAX> 34,972
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,972
<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>
