UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 0-18952
NTS-PROPERTIES PLUS LTD.
(Exact name of a registrant as specified in its charter)
Florida 61-1126478
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10172 Linn Station Road
Louisville, Kentucky 40223
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 426-4800
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Exhibit Index: See page 50
Total Pages: 54
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TABLE OF CONTENTS
Pages
PART I
Items 1 and 2 Business and Properties 3-16
Item 3 Legal Proceedings 16
Item 4 Submission of Matters to a Vote of Security
Holders 16
PART II
Item 5 Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 17
Item 6 Selected Financial Data 18
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 19-30
Item 8 Financial Statements and Supplementary Data 31-46
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 47
PART III
Item 10 Directors and Executive Officers of the
Registrant 47-48
Item 11 Management Remuneration and Transactions 48
Item 12 Security Ownership of Certain Beneficial
Owners and Management 48
Item 13 Certain Relationships and Related
Transactions 48-49
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 50-53
Signatures 54
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PART I
Items 1. and 2. Business and Properties
-----------------------
General
- -------
Some of the statements included in Items 1. and 2., Business and Properties, may
be considered to be "forward-looking statements" since such statements relate to
matters which have not yet occurred. For example, phrases such as "the
Partnership anticipates", "believes" or "expects" indicate that it is possible
that the event anticipated, believed or expected may not occur. Should such
event not occur, then the result which the Partnership expected also may not
occur or occur in a different manner, which may be more or less favorable to the
Partnership. The Partnership does not undertake any obligations to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect any future events or circumstances.
NTS-Properties Plus Ltd. (the "Partnership") is a limited partnership which was
organized under the laws of the State of Florida on April 30, 1987. The General
Partner is NTS-Properties Plus Associates (a Kentucky limited partnership). As
of December 31, 1997 the Partnership owned the following properties:
- A joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground floor
square feet and approximately 50,000 net rentable mezzanine square
feet located in Louisville, Kentucky. NTS-Properties Plus Ltd.
contributed the completed building to the joint venture between the
Partnership and NTS-Properties VII, Ltd., an affiliate of the General
Partner of the Partnership. It had previously acquired the completed
building from an affiliate of the Partnership. In 1994, NTS-
Properties IV., Ltd. ("NTS-Properties IV"), an affiliate of the
General Partner of the Partnership, was admitted as a partner to the
joint venture. The Partnership's percentage interest in the joint
venture was 39% at December 31, 1997.
- A joint venture interest in the Lakeshore/University II Joint Venture
(L/U II Joint Venture). The L/U II Joint Venture was formed on January
23, 1995 among the Partnership and NTS-Properties IV, NTS- Properties
V and NTS/Ft. Lauderdale, Ltd., affiliates of the General Partner of
the Partnership. The Partnership's percentage interest in the joint
venture was 12% at December 31, 1997. A description of the properties
owned by the L/U II Joint Venture appears below:
- Lakeshore Business Center Phase I - a business center with
approximately 103,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- Lakeshore Business Center Phase II - a business center with
approximately 97,000 net rentable square feet located in Fort
Lauderdale, Florida, acquired complete by the joint venture.
- University Business Center Phase II - a business center with
approximately 78,000 net rentable first floor (office and service)
and second floor (office) square feet and approximately 10,000 net
rentable mezzanine square feet located in Orlando, Florida,
acquired complete by the joint venture.
- Outparcel Building Sites - approximately 6.2 acres of undeveloped
land adjacent to the Lakeshore Business Center development, which
is zoned for commercial development.
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General - Continued
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The joint ventures in which the Partnership is a partner has a fee title
interest in the above properties. The General Partner believes that the
Partnership's properties are adequately covered by insurance.
Blankenbaker Business Center 1A, a joint venture between the Partnership,
NTS-Properties VII, Ltd. and NTS-Properties IV, is encumbered by a mortgage
payable to an insurance company. The outstanding balance at December 31, 1997
was $3,869,108. The mortgage is recorded as a liability of the Joint Venture.
The Partnership's proportionate interest in the mortgage at December 31, 1997 is
$1,492,702. The mortgage bears interest at a fixed rate of 8.5% and is due
November 15, 2005. Currently 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.
The properties owned by the L/U II Joint Venture, a joint venture between the
Partnership, NTS-Properties IV, NTS-Properties V and NTS/Fort Lauderdale, Ltd.,
are encumbered by mortgages payable to an insurance company as follows:
Loan Balance
at 12/31/97 Encumbered Property
----------- -------------------
$5,606,774 Lakeshore Business Center Phase II
$5,374,127 University Business Center Phase II
$5,211,275 Lakeshore Business Center Phase I
The loans are recorded as a liability of the Joint Venture. The Partnership's
proportionate interest in the loans at December 31, 1997 was $704,771, $675,528
and $655,057, respectively. 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.
For a further discussion regarding the terms of the debt financings, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7).
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations. Changes to current tenant finish improvements
are a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of the improvements
are determined by the size of the space being leased and whether the
improvements are for a new tenant or incurred because of a lease renewal. The
tenant finish improvements will be funded by cash flow from operations and/or
cash reserves.
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
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General - Continued
- -------------------
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 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 .
The Joint Venture is currently 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.
The Partnership had no material commitments for renovations or capital
improvements at December 31, 1997.
Subsequent to December 31, 1997, the Partnership obtained a $350,000 loan from a
bank. 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,
- 5 -
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General - Continued
- -------------------
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 Partnership is engaged solely in the business of developing, constructing,
owning and operating commercial real estate, although the Partnership may also
develop apartment complexes and retail centers. A presentation of information
concerning industry segments is not applicable.
The current business of the Partnership is consistent with the original purpose
of the Partnership which was to acquire, directly or by joint venture,
unimproved or partially improved land, to construct and develop thereon business
and commercial centers, business parks, industrial and office buildings,
apartment complexes and/or retail centers, and to own and operate the completed
properties. The original purpose of the Partnership also includes the ability by
the Partnership to invest in fully improved properties, either directly or by
joint venture. The Partnership's properties are in a condition suitable for
their intended use.
The Partnership intends to hold the Joint Venture interests until such time as
sale or other disposition appears to be advantageous with a view to achieving
the Partnership's investment objectives, or it appears that such objectives will
not be met. In deciding whether to sell a Joint Venture interest, the
Partnership will consider factors such as potential capital appreciation, cash
flow and federal income tax considerations, including possible adverse federal
income tax consequences to the Limited Partners.
The General Partner of the Partnership is currently exploring the marketability
of certain of its properties, and has not yet determined if any of the
properties might be sold in the next 12 months. Additionally, the outparcel
building sites owned by the L/U II Joint Venture are being marketed for sale.
See below for a further discussion regarding the possible sale of University
Business Center Phase II.
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, an affiliate of the General Partner of the Partnership, to
purchase University Business Center Phase 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 University Business Center Phase 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 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 these 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 the
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.
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Blankenbaker Business Center 1A
- -------------------------------
Prudential Service Bureau, Inc. has leased 100% of Blankenbaker Business Center
1A. The annual base rent, which excludes the cost of utilities, is $7.89 per
square foot for ground floor office space and $7.10 per square foot for second
floor office space. The average base annual rental for all space leased as of
December 31, 1997 was $7.48. The lease term is for 11 years and expires in July
2005. The lease provides for the tenant to contribute toward the payment of
common area expenses, insurance and real estate taxes. Prudential Service
Bureau, Inc. is a professional service- oriented organization which deals in
insurance claim processing. The occupancy level at the business center as of
December 31, 1997, 1996, 1995, 1994 and 1993 was 100%.
The following table contains approximate data concerning the lease in effect on
December 31, 1997:
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(1) Rental Options
---- ---------- ------- ------ -------
Prudential Service
Bureau, Inc. 2005 48,463 (100%) $752,787 (100%) None
(1) Rentable area includes only ground floor square feet.
Lakeshore Business Center Phase I
- ---------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$9.78 to $12.47 per square foot for first floor office space, $6.18 to $10.58
per square foot for first floor service space and $8.93 to $11.75 per square
foot for second floor office space. The average base annual rental for all space
leased as of December 31, 1997 was $10.23. Space is ordinarily leased for
between one and eight years with the majority of current square footage being
leased for a term of five years. Current leases expire between 1998 and 2002.
All leases provide for tenants to contribute toward the payment of common area
expenses, insurance and real estate taxes. As of December 31, 1997, there were
34 tenants leasing office space (first and second floor) and service space
aggregating approximately 99,268 square feet of rentable area. The tenants who
occupy Lakeshore Business Center Phase I are professional service oriented
organizations. The principal occupations/professions practiced include health
care services, telemarketing services and management offices for both a cellular
communications chain and a soft drink company. One tenant leases more than 10%
of Lakeshore Business Center Phase I's rentable area: U. S. Homecare Infusion
Therapy Products of Florida (11.7%). The occupancy levels at the business center
as of December 31 were 96% (1997), 92% (1996 and 1995), 80% (1994)and 58%
(1993). The Partnership acquired an interest in this property as a result of its
capital contribution to the L/U II Joint Venture as discussed below.
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Lakeshore Business Center Phase I - Continued
- ---------------------------------------------
The following table contains approximate data concerning the leases in effect on
December 31, 1997.
Major Tenant:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area Rental Options
---- ---------- ---- ------ -------
U.S. Homecare
Infusion Therapy
Products of
Florida 1998 12,081 (11.7%) $135,912 (13.4%) (1)
(1) Tenant has option to renew its lease for an unspecified period of time.
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area Rental Options
------- ---------- ---- ------ -------
12 1998 23,293 (22.8%) $229,916 (22.6%) None
7 1999 31,162 (30.1%) $303,516 (29.9%) 5 Three-Year
9 2000 22,932 (22.2%) $236,435 (23.3%) 2 Three-Year
1 2001 1,495 (1.4%) $ 17,568 (1.7%) 1 Three-Year
4 2002 8,305 (8.0%) $ 92,592 (9.1%) 2 Three-Year
Lakeshore Business Center Phase II
- ----------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$10.00 to $12.54 per square foot for first floor office space and $9.80 to
$14.95 per square foot for second floor office space. The average base rental
for all space leased as of December 31, 1997 was $11.33. Space is ordinarily
leased for between one and six years with the majority of current square footage
being leased for a term of five years. Current leases expire between 1998 and
2003. Five leases provide for renewal options at rates which are based upon
increases in the consumer price index and/or are negotiated between lessor and
lessee. All leases provide for tenants to contribute toward the payment of
common area expenses, insurance and real estate taxes. As of December 31, 1997,
there were 22 tenants leasing office space (first and second floor) and service
space aggregating approximately 95,981 square feet of rentable area (2). The
tenants who occupy Lakeshore Business Center Phase II are professional service
oriented organizations. The principal occupations/professions practiced include
health care services, insurance services and management offices for the Florida
state lottery. Three tenants lease more than 10% of Lakeshore Business Center
Phase II's rentable area: Northwest Medical Center, Inc. (10.4%), Progressive
American Insurance (10.9%) and Lambda Physik (13.0%). The occupancy levels at
the business center as of December 31 were 100% (1997), 89% (1996), 72% (1995),
78% (1994) and 75% (1993).
(2) Excludes approximately 1,218 square feet which is occupied by the business
center's property management and leasing staff.
(Continued next page)
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Lakeshore Business Center Phase II - Continued
- ----------------------------------------------
The following table contains approximate data concerning the leases in effect on
December 31, 1997:
Major Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(1) Rental Options
------- ---------- --------------- ---------------- ----------
Northwest Medical
Center, Inc. 2000 10,132 (10.4%) $130,584 (11.9%) None
Progressive American
Insurance 1999 10,580 (10.9%) $127,176 (11.5%) 1 Three-Year
Lambda Physik 2002 12,644 (13.0%) $139,080 (12.6%) 1 Five-Year
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area (1) Rental Options
------- ---------- --------------- ---------------- ----------
4 1998 18,028 (18.5%) $213,575 (19.4%) (2)
4 1999 11,566 (11.9%) $128,970 (11.6%) 1 Three-Year
7 2000 15,677 (16.2%) $176,050 (16.1%) None
2 2001 8,361 (8.6%) $ 84,912 (7.7%) None
1 2002 4,805 (4.9%) $ 53,444 (4.8%) 1 Three-Year
1 2003 4,188 (4.3%) $ 48,156 (4.4%) None
(1) Excludes approximately 1,218 square feet which is occupied by the business
center's property management and leasing staff.
(2) 1 Two-Year and 1 Three-Year.
University Business Center Phase II
- -----------------------------------
Philip Crosby Associates, Inc. ("Crosby") had leased 100% of University Business
Center Phase II. (See above for a further discussion regarding Crosby and its
lease with the Joint Venture). The original lease term was for seven years and
the tenant took occupancy in April 1991. During 1997, Crosby abandoned its
business, sold all or most of its assets and informed the Joint Venture that it
may be insolvent. During the fourth quarter of 1997, the L/U II Joint Venture
accepted $300,000 from Crosby's parent company in full satisfaction of all
claims (Partnership's proportionate share is $36,000 or 12%). As of December 31,
1997, approximately 85,000 square feet of the business center (including
approximately 10,000 square feet of mezzanine space) is occupied by four tenants
who previously had sub-leases with Crosby. Sub-lease base annual rents, which
exclude the cost of utilities, currently range from $8.89 to $11.70 per square
foot for first floor office space, first floor service space, second floor
office space and mezzanine space. The average base annual rental for all types
of space sublet as of December 31, 1997 was $10.24. The sub-tenants occupying
University Business Center Phase II are professional service oriented
organizations. The principal occupations/professions practiced include an
audio/video school and studio and home building. Two tenants have sublet more
than 10% of University Business Center II's rentable area (3): U.S. Home
Corporation (11.7%) and Full Sail Recorders, Inc.(80.9%). The occupancy levels
at the business center as of December 31 were 99% (1997 and 1996), 95% (1995)
and 100% (1994 and 1993).
(3) Rentable area includes only first floor (office and service) square feet and
second floor office square feet and excludes 1,791 square feet of
maintenance space.
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University Business Center Phase II - Continued
- -----------------------------------------------
The following table contains approximate data concerning the sub-leases in
effect as of December 31, 1997:
Major Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area (1) Rental Options
---- ---------- -------------- ---------------- ---------
U.S. Home Corporation 1998 9,132 (11.7%) $105,744 (12.2%) None
Full Sail Recorders, Inc. 1998 62,912 (80.9%) $735,984 (84.6%) (2)
Other Tenants:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
No. of Year of Rentable Base Annual Renewal
Tenants Expiration Area (1) Rental Options
------- ---------- --------------- ---------------- ----------
2 1998 2,602 ( 3.3%) $ 29,056 ( 3.2%) None
(1) Rentable area includes only first floor (office and service)square feet and
second floor office square feet and excludes 1,791 square feet of
maintenance space.
(2) Full Sail Recorders, Inc. has signed a lease for 48,667 square feet
beginning April 1998 through July 2004 at a rate of $11.76 per square foot.
Full Sail has also signed a lease for an additional 20,696 square feet
beginning April 1998 through July 2002 at a rate of $12.73 per square foot.
General
- -------
Additional operating data regarding the Partnership's properties is furnished in
the following table.
Federal Realty Annual
Tax Basis Tax Rate Realty Taxes
--------- -------- ------------
Property Owned in Joint
Venture with NTS-
Properties IV and NTS-
Properties VII, Ltd.
- -----------------------
Blankenbaker Business
Center 1A $ 7,356,545 $.010980 $ 56,914
Properties Owned through
Lakeshore/University II
Joint Venture (L/U II
Joint Venture)
- -----------------------
Lakeshore Business Center
Phase I 10,133,167 .026789 176,642
Lakeshore Business Center
Phase II 12,204,414 .026789 140,432
University Business
Center Phase II 7,104,723 .020011 107,161
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
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<PAGE>
General - Continued
- -------------------
Depreciation for book purposes 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 estimated realty taxes on planned renovations,
primarily tenant improvements, is not material.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations (Item 7.) for explanations regarding the fluctuations of
income and occupancy at the Partnership's properties.
Investment in Joint Ventures
- ----------------------------
Blankenbaker Business Center Joint Venture - On December 28, 1990, the
Partnership entered into a joint venture agreement with NTS-Properties VII, Ltd.
to own and operate Blankenbaker Business Center 1A and to acquire an
approximately 2.49 acre parking lot that was being leased by the business center
from an affiliate of the General Partner. The use of the parking lot is a
provision of the tenant's lease agreement with the business center. On August
16, 1994, the Blankenbaker Business Center Joint Venture agreement was amended
to admit NTS-Properties IV to the Joint Venture. The terms of the Joint Venture
shall continue until dissolved. Dissolution shall occur upon, but not before,
the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the assets of the Real Property and Parking
Lot and the sale and/or collection of any evidences of
indebtedness received in connection therewith;
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
In 1990 when the Joint Venture was originally formed, NTS-Properties VII, Ltd.
contributed $450,000 for additional tenant improvements to the business center
and $325,000 for the purchase of the 2.49 acre parking lot. The additional
tenant improvements were made to the business center and the parking lot was
purchased in 1991. The Partnership contributed Blankenbaker Business Center 1A
together with improvements and personal property subject to mortgage
indebtedness of $4,715,000. During November 1994, this note payable was replaced
with permanent financing in the amount of $4,800,000. The mortgage bears
interest at a fixed rate of 8.5% and is due November 15, 2005. Currently 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.
On April 28, 1994, the Joint Venture obtained $1,100,000 in debt financing to
fund a portion of the tenant finish and leasing costs which were associated with
the Prudential lease renewal and expansion. The $1,100,000 note bore interest at
the Prime Rate + 1 1/2%. In order for the Joint Venture to obtain the $4,800,000
of permanent financing discussed above, it was necessary for the Joint Venture
to seek an additional Joint Venture partner to provide the funds necessary for
the tenant finish and leasing costs instead of debt financing. See the following
paragraph for information regarding the new joint venture partner. The
$1,100,000 note was retired in August 1994. This resulted in the Joint Venture's
debt being at a level where permanent financing could be obtained and serviced.
- 11 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
On August 16, 1994, NTS-Properties VII, Ltd. contributed $500,000 and NTS-
Properties IV contributed $1,100,000 in accordance with the agreement to amend
the Joint Venture. The need for additional capital by the Joint Venture was a
result of the lease renewal and expansion which was signed April 28, 1994
between the Joint Venture and Prudential. The lease expanded Prudential's leased
space by approximately 15,000 square feet and extended its current lease term
through July 2005. Approximately 12,000 square feet of the expansion was into
new space which had to be constructed on the second level of the existing
business center. With this expansion, Prudential occupied 100% of the business
center. The Partnership was not in a position to contribute additional capital,
nor was NTS-Properties VII, Ltd. in a position to contribute all of the capital
required for the project. NTS-Properties IV was willing to participate in the
Joint Venture and to contribute, together with NTS-Properties VII, Ltd., the
capital necessary with respect to the project. The Partnership agreed to the
admission of NTS-Properties IV to the Joint Venture, and to the capital
contributions by NTS-Properties IV and NTS-Properties VII, Ltd. with the
knowledge that its joint venture interest would, as a result, decrease. See the
following paragraph for a discussion of how the revised interests in the Joint
Venture were calculated with the admission of NTS-Properties IV. No future
contributions are anticipated as of December 31, 1997.
In order to calculate the revised joint venture percentage interests, the assets
of the Joint Venture were revalued in connection with the admission of
NTS-Properties IV as a joint venture partner and the additional capital
contributions. The value of the Joint Venture's assets immediately prior to the
additional capital contributions was $6,764,322 and its outstanding debt was
$4,650,042, with net equity being $2,114,280. The difference between the value
of the Joint Venture's assets and the value at which they were carried on the
books of the Joint Venture was allocated to the Partnership and NTS-Properties
VII, Ltd. in determining each Joint Venture partner's percentage interest.
The Partnership's interest in the Joint Venture decreased from 69% to 39% as a
result of the capital contributions by NTS-Properties IV and NTS- Properties
VII, Ltd. The respective percentage interests of NTS-Properties IV and
NTS-Properties VII, Ltd. in the Joint Venture subsequent to these capital
contributions are 30% and 31%.
The Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interests. The term Net Cash Flow
for any period shall mean the excess, if any, of (A) the sum of (i) the gross
receipts of the Joint Venture Property for such period, other than capital
contributions, plus (ii) any funds released by the Partners from previously
established reserves (referred to in clause (B)(iv) below), over (B) the sum of
(i) all cash operating expenses paid by the Joint Venture Property during such
period in the course of business, (ii) capital expenditures paid in cash during
such period, (iii) payments during such period on account of amortization of the
principal of any debts or liabilities of the Joint Venture Property and (iv)
reserves for contingent liabilities and future expenses of the Joint Venture
Property as established by the Partners; provided, however, that the amounts
referred to in (B)(i), (ii) and (iii) above shall only be taken into account to
the extent not funded by capital contributions or paid out of previously
established reserves. Percentage Interest means that percentage which the
capital contributions of a Partner bears to the aggregate capital contributions
of all the Partners.
Net income or net loss is allocated between the Partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 39%
at December 31, 1997.
The Partnership has no liability for funding losses of the joint venture as of
December 31, 1997.
- 12 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
NTS University Boulevard Joint Venture - On January 3, 1989, the Partnership
entered into a joint venture agreement with NTS-Properties V to develop,
construct, own and operate Phase II of the University Business Center
development in Orlando, Florida. NTS-Properties V contributed land valued at
$1,460,000 and the Partnership contributed development and carrying costs of
approximately $8,000,000. In connection with the construction of University
Business Center Phase I, NTS-Properties V incurred the cost of developing
certain common areas which are used by both University Business Center Phase I
and Phase II. In 1989, the Partnership paid approximately $747,000 to
NTS-Properties V for Phase II's share of the common area costs. During the
second quarter of 1994, NTS-Properties V made an approximately $79,000 capital
contribution to the Joint Venture. The capital contribution raised
NTS-Properties V's ownership interest percentage from 16% to 17% and reduced the
Partnership's ownership percentage from 84% to 83%. The contribution was made to
fund a portion of the Joint Venture's operating costs. On January 23, 1995, the
partners of the NTS University Boulevard Joint Venture contributed University
Business Center Phase II to the newly formed L/U II Joint Venture. See below for
a discussion of the L/U II Joint Venture.
Lakeshore/University II Joint Venture - On January 23, 1995, a new joint venture
known as the Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties IV, NTS- Properties V and
NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of the Partnership,
for purposes of owning Lakeshore Business Center Phases I and II, University
Business Center Phase II and certain undeveloped tracts of land adjacent to the
Lakeshore Business Center development.
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres)
University Business Center Phase II NTS-Properties V and NTS-
Properties Plus Ltd.
The term of the Joint Venture shall continue until dissolved. Dissolution shall
occur upon, but not before, the first to occur of the following:
(a) the withdrawal, bankruptcy or dissolution of a Partner or the
execution by a Partner of an assignment for the benefit of its
creditors;
(b) the sale, condemnation or taking by eminent domain of all or
substantially all of the Real Property and the sale and/or
collection of any evidences of indebtedness received in connection
therewith;
- 13 -
<PAGE>
Investment in Joint Ventures - Continued
- ----------------------------------------
(c) the vote or consent of each of the Partners to dissolve the
Partnership; or
(d) December 31, 2030.
Each of the properties was contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
Lakeshore Business Center Phase I in the amount of $5,500,000, and on University
Business Center Phase II in the amount of $3,000,000, in favor of the banks
which held the indebtedness on University Business Center Phase II, Lakeshore
Business Center Phase II and the undeveloped tracts of land prior to the
formation of the joint venture. In addition to the above, NTS-Properties IV
contributed $750,000 to the L/U II Joint Venture. As a result of the valuation
of the properties contributed to the L/U II Joint Venture, the Partnership
obtained a 12% partnership interest in the joint venture.
The properties of the L/U II Joint Venture are encumbered by mortgages payable
to an insurance company as follows:
Loan Balance
at 12/31/97 Encumbered Property
----------- -------------------
$5,606,774 Lakeshore Business Center Phase II
$5,374,127 University Business Center Phase II
$5,211,275 Lakeshore Business Center Phase I
The loans are recorded as liabilities of the Joint Venture. The Partnership's
proportionate interest in the loans at December 31, 1997 is $2,035,356
($704,771, $675,528, $655,057). The mortgages bear interest at a fixed rate of
8.125% and are due August 1, 2008. 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 Net Cash Flow for each calendar quarter is distributed to the Partners in
accordance with their respective Percentage Interest. The term Net Cash Flow
means the excess, if any, of (A) the sum of (i) the gross receipts of the Joint
Venture Properties for such period (including loan proceeds), other than capital
contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B)(iv) below), over (B) the sum of (i) all cash
operating expenses paid by the Joint Venture during such period in the course of
business, (ii) capital expenditures paid in cash during such period, (iii)
payments during such period on account of amortization of the principal of any
debts or liabilities of the Joint Venture and (iv) reserves for contingent
liabilities and future expenses of the Joint Venture, as established by the
Partners; provided, however, that the amounts referred to in (B)(i), (ii) and
(iii) above shall only be taken into account to the extent not funded by capital
contributions or paid out of previously established reserves. Percentage
Interest means that percentage which the capital contributions of a Partner
bears to the aggregate capital contributions of all the Partners.
Net income or net loss is allocated between the partners in accordance with
their respective Percentage Interests. The Partnership's ownership share was 12%
at December 31, 1997.
The Partnership had no liability for funding losses of the joint venture as of
December 31, 1997.
- 14 -
<PAGE>
Competition
- -----------
The Partnership's properties are subject to competition from similar types of
properties (including, in certain areas, properties owned or managed by
affiliates of the General Partner) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing tenants
or for new tenants when vacancies occur. The Partnership maintains the
suitability and competitiveness of its properties primarily on the basis of
effective rents and service provided to tenants. Competition is expected to
increase in the future as a result of the construction of additional properties.
As of December 31, 1997, there are no properties under construction in the
respective vicinities in which the properties are located. The Partnership has
not commissioned a formal market analysis of competitive conditions in any
market in which it owns properties, but relies upon the market condition
knowledge of the employees of NTS Development Company who manage and supervise
leasing for each property.
Management of Properties
- ------------------------
NTS Development Company, an affiliate of NTS-Properties Plus Associates, the
General Partner of the Partnership, directs the management of the Partnership's
properties pursuant to a written agreement. NTS Development Company is a
wholly-owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling
interest in NTS Corporation and is a General Partner of NTS-Properties Plus
Associates. Under the agreement, the Property Manager establishes rental
policies and rates and directs the marketing activity of leasing personnel. It
also coordinates the purchase of equipment and supplies, maintenance activity
and the selection of all vendors, suppliers and independent contractors. As
compensation for its services, the Property Manager received $52,430 for the
year ended December 31, 1997. The fee is equal to 6% of gross revenues from the
Partnership's properties.
In addition, the management agreement requires the Partnership to purchase all
insurance relating to the managed properties, to pay the direct out-of-pocket
expenses of the Property Manager in connection with the operation of the
properties, including the cost of goods and materials used for and on behalf of
the Partnership, and to reimburse the Property Manager for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The term of the Management Agreement between NTS Development Company and the
Partnership was for an initial term of five years, and thereafter for succeeding
one-year periods, unless canceled. The Agreement is subject to cancellation by
either party upon sixty days written notice. As of December 31, 1997, the
Management Agreement is still in effect.
Conflict of Interest
- --------------------
Because the principals of the General Partner and/or its affiliates own and/or
operate real estate properties other than those owned by the Partnership that
are or could be in competition with the Partnership, potential conflicts of
interest exist. Because the Partnership was organized by and is operated by the
General Partner, these conflicts are not resolved through arm's length
negotiations but through the exercise of the General Partner's good judgment
consistent with its fiduciary responsibility to the Limited Partners and the
Partnership's investment objectives and policies. The General Partner is
accountable to the Limited Partners as a fiduciary and consequently must
exercise good faith and integrity in handling the Partnership's affairs. A
provision has been made in the Partnership Agreement that the General Partner
will not be liable to the Partnership except for acts or omissions performed or
omitted fraudulently, in bad faith or with negligence. In addition, the
Partnership Agreement provides for indemnification of the General Partner by the
Partnership for
- 15 -
<PAGE>
Conflict of Interest - Continued
- --------------------------------
liability resulting from errors in judgment or certain acts or omissions. The
General Partner and its affiliates retain a free right to compete with the
Partnership's properties including the right to develop competing properties now
and in the future, in addition to those existing properties which may compete
directly or indirectly.
NTS Development Company, the Property Manager and an affiliate of the General
Partner, acts in a similar capacity for other affiliated entities in the same
geographic region where the Partnership has property interests. The agreement
with the Property Manager is on terms no less favorable to the Partnership than
those which could be obtained from a third party for similar services in the
same geographical region in which the properties are located. The contract is
terminable by either party without penalty upon 60 days written notice.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
Employees
- ---------
The Partnership has no employees; however, employees of an affiliate of the
General Partner are available to perform services for the Partnership. The
Partnership reimburses this affiliate for the actual costs of providing such
services.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None.
- 16 -
<PAGE>
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
-----------------------------------------------------------------
Partner Matters
---------------
There is no established trading market for the limited partnership interests,
nor is one likely to develop. The Partnership had 1,075 limited partners as of
March 6, 1998. Cash distributions and allocations of net income (loss) are made
as described in Note 1C to the Partnership's 1997 financial statements.
No distributions were paid during 1997, 1996 or 1995. Quarterly distributions
are determined based on current cash balances, cash flow being generated by
operations and cash reserves needed for future leasing costs, tenant finish
costs, and capital improvements.
Due to the fact that no distributions were made during 1997, 1996 or 1995, the
table which presents that portion of the distributions that represent a return
of capital on a Generally Accepted Accounting Principle basis has been omitted.
- 17 -
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
For the years ended December 31, 1997, 1996, 1995, 1994 and 1993.
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total revenue $ 827,978 $ 833,162 $ 955,654 $ 2,722,728 $ 2,756,319
Total expenses 905,412 (978,219) (1,341,884) (4,525,894) (4,510,386)
------------ ------------ ------------ ------------ ------------
Net loss $ (77,434) $ (145,057) $ (386,230) $ (1,803,166) $ (1,754,067)
============ ============ ============ ============ ============
Net loss allocated to:
General Partner $ (774) $ (1,451) $ (3,862) $ (18,032) $ (17,541)
Limited partners $ (76,660) $ (143,606) $ (382,368) $ (1,785,134) $ (1,736,526)
Net loss per limited
partnership unit $ (0.12) $ (0.21) $ (0.56) $ (2.60) $ (2.53)
Weighted average number
of limited partnership
units 666,248 685,634 685,647 685,647 685,647
Cumulative net loss
allocated to:
General Partner $ (122,938) $ (122,164) $ (120,713) $ (116,851) $ (98,819)
Limited partners $(12,170,907) $(12,094,247) $(11,950,641) $(11,568,273) $ (9,783,139)
Cumulative taxable loss allocated to:
General Partner $ (42,692) $ (42,315) $ (51,054) $ (48,829) $ (45,647)
Limited partners $ (6,283,963) $ (6,241,493) $ (6,244,619) $ (6,088,037) $ (5,487,478)
Distributions declared:
General Partner $ -- $ -- $ -- $ -- $ --
Limited partners $ -- $ -- $ -- $ -- $ --
Cumulative distributions
declared:
General Partner $ 20,592 $ 20,592 $ 20,592 $ 20,592 $ 20,592
Limited partners $ 2,038,520 $ 2,038,520 $ 2,038,520 $ 2,038,520 $ 2,038,520
At year end:
Land, buildings and
amenities $ 996,049 $ 1,121,097 $ 1,254,828 $ 14,902,218 $ 18,078,427
Total assets $ 1,370,774 $ 1,571,288 $ 1,720,292 $ 17,507,720 $ 20,972,344
Mortgages and notes
payable $ 3,528,058 $ 3,770,347 $ 3,871,374 $ 18,612,183 $ 20,511,450
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-K
report.
- 18 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
The occupancy levels at the Partnership properties as of December 31 were as
follows:
Percentage
Ownership
at
12/31/97 1997 1996 1995
-------- ---- ---- ----
Wholly-owned Property
- ---------------------
Lakeshore Business Center Phase II See
(See L/U II Joint Venture below) N/A N/A N/A below
(1)
Property owned in Joint Venture
with NTS-Properties V
- -------------------------------
University Business Center Phase II See
(See L/U II Joint Venture below) N/A N/A N/A below
(1)
Property owned in Joint Venture
with NTS-Properties IV and NTS-
Properties VII, Ltd.
- --------------------------------
Blankenbaker Business Center 1A 39% 100% 100% 100%
Properties owned through
Lakeshore/University II Joint
Venture (L/U II Joint Venture)
- ------------------------------
Lakeshore Business Center Phase I 12% 96% 92% 92%
Lakeshore Business Center Phase II 12% 100% 89% 72%
University Business Center Phase II 12% 99% 99% 95%
(1) During the first quarter of 1995, the Partnership's ownership interest in
the property changed. See below for a discussion regarding this change.
(Results of Operations - continued next page)
- 19 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1997, 1996 and 1995 were as follows:
Percentage
Ownership at
12/31/97 1997 1996 1995
------------ -------- -------- ---------
Wholly-owned Property
- ---------------------
Lakeshore Business Center
Phase II (See L/U II Joint
Venture below) N/A N/A N/A $ 98,182
(1)
Property owned in Joint
Venture with NTS-
Properties V
- -----------------------
University Business Center
Phase II (See L/U II Joint
Venture below) N/A N/A N/A $ 82,183
(1)
Property owned in Joint
Venture with NTS-
Properties IV and NTS-
Properties VII, Ltd.
- -----------------------
Blankenbaker Business
Center 1A 39% $ 366,251 $ 366,073 $ 363,172
Properties owned through
Lakeshore/University II
Joint Venture (L/U II
Joint Venture)
- ------------------------
Lakeshore Business Center
Phase I 12% $ 178,745 $ 167,160 $ 135,055
Lakeshore Business Center
Phase II 12% $ 177,396 $ 146,021 $ 135,324
University Business Center
Phase II 12% $ 104,600 $ 152,052 $ 139,477
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
(1) During the first quarter of 1995, the Partnership's ownership interest in
the property changed. The Partnership's proportionate share of rental and
other income from January 23, 1995 to December 31, 1995 is reflected
below (see L/U II Joint Venture). See below for a discussion regarding
this change.
- 20 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
On January 23, 1995, a new joint venture known as the Lakeshore/University II
Joint Venture (L/U II Joint Venture) was formed among the Partnership and
NTS-Properties IV, NTS-Properties V and NTS/Fort Lauderdale, Ltd., affiliates of
the General Partner of the Partnership, for purposes of owning Lakeshore
Business Center Phases I and II, University Business Center Phase II and certain
undeveloped tracts of land adjacent to the Lakeshore Business Center
Development.
The table below identifies which properties were contributed to the L/U II Joint
Venture and the respective owners of such properties prior to the formation of
the joint venture.
Property Contributing Owner
-------- ------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-
Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center development
(3.8 acres)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center development
(2.4 acres)
University Business Center Phase II NTS-Properties V and NTS-
Properties Plus Ltd.
Each of the properties was contributed to the L/U II Joint Venture subject to
existing indebtedness, except for Lakeshore Business Center Phase I which was
contributed to the joint venture free and clear of any mortgage liens, and all
such indebtedness was assumed by the joint venture. Mortgages were recorded on
Lakeshore Business Center Phase I in the amount of $5,500,000, and on University
Business Center Phase II in the amount of $3,000,000, in favor of the banks
which held the indebtedness on University Business Center Phase II, Lakeshore
Business Center Phase II and the undeveloped tracts of land prior to the
formation of the joint venture. In addition to the above, NTS-Properties IV
contributed $750,000 to the L/U II Joint Venture. As a result of the valuation
of the properties contributed to the L/U II Joint Venture, the Partnership
obtained a 12% partnership interest in the joint venture.
Discussions regarding the change in occupancy levels along with a discussion
comparing the results of operations from 1996 to 1997 and from 1995 to 1996
follows.
A wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential Service Bureau, Inc.) has leased 100% of Blankenbaker Business
Center 1A. 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 changes in rental and other income at Blankenbaker Business
Center 1A from 1996 to 1997 and from 1995 to 1996 were not significant.
The 4% increase in year-ending occupancy at Lakeshore Business Center Phase I
from 1996 to 1997 can be attributed to four new leases totaling approximately
6,400 square feet and an expansion by a current tenant of its existing space
totaling approximately 2,100 square feet. Partially offsetting the new leases
are three tenants vacating prior to the end of the lease term - one due to a
downsizing decision by the tenant's parent company (1,200 square feet - tenant
paid the L/U II Joint Venture a lease
- 21 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
termination fee [recorded as rental income] of approximately $7,000 of which the
Partnership's proportionate share is $840 or 12%), one due to a decision by
management to allow a tenant to terminate its lease early to accommodate a new
long term tenant (1,900 square feet - tenant paid the L/U II Joint Venture a
lease termination fee [recorded as rental income] of approximately $5,000 of
which the Partnership's proportionate share is $629 or 12%), and one due to a
decision by management to allow a tenant to terminate its lease early at
Lakeshore Business Center Phase I (1,300 square feet) and move into increased
square footage at Lakeshore Business Center Phase II. Also partially offsetting
the new leases is a reduction of 466 square feet by a current tenant of its
existing space. Average occupancy at Lakeshore Business Center Phase I decreased
from 97% in 1996 to 96% in 1997. Rental and other income increased at Lakeshore
Business Center Phase I from 1996 to 1997 primarily as a result of 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.
Year-ending occupancy at Lakeshore Business Center Phase I remained constant
(92%) from 1995 to 1996. Six new leases totaling approximately 10,600 square
feet, including approximately 3,400 square feet in expansions by two current
tenants, are offset by five tenant move-outs totaling approximately 10,000
square feet. The five move-outs consist of two tenants (2,700 square feet)
vacating at the end of the lease term, one tenant (1,600 square feet) exercising
a termination option, and two tenants vacating prior to the end of the lease
term - one due to a business decision to consolidate its office space at another
location (700 square feet - tenant paid rent through end of lease) and one due
to bankruptcy (5,000 square feet - tenant ceased rental payments). The write-off
of accrued income connected with these leases was not significant. Average
occupancy at Lakeshore Business Center Phase I increased from 84% in 1995 to 97%
in 1996. Rental and other income increased from 1995 to 1996 primarily as a
result of the increase in average occupancy. The increase in rental and other
income is also due to the fact that the Partnership acquired an interest in
Lakeshore Business Center Phase I as a result of the formation of the L/U II
Joint Venture in January 1995. (See above for a discussion regarding the Joint
Venture).
Year-ending occupancy at Lakeshore Business Center Phase II increased from 89%
(1996) to 100% (1997) as a result of five new leases totaling approximately
16,000 square feet which includes an approximately 1,800 square foot expansion
by Lambda Physik, a current tenant. Lambda Physik leases nearly 12,700 square
feet and has become the largest tenant in the building occupying approximately
13% of the building's total rentable square feet. Partially offsetting the new
leases is one tenant move-out, at the end of the lease term, of approximately
4,800 square feet. Average occupancy at Lakeshore Business Center Phase II
increased from 80% (1996) to 94% (1997). The increase in rental and other income
at Lakeshore Business Center Phase II from 1996 to 1997 is primarily a result of
the increase in average occupancy and an increase in common area expense
reimbursements.
Year-ending occupancy at Lakeshore Business Center Phase II increased from 72%
(1995) to 89% (1996) as a result of five new leases totaling approximately
19,200 square feet which includes approximately 7,000 square feet in expansions
by two current tenants. Partially offsetting the new leases and expansions is
one tenant move-out, totaling 2,800 square feet, vacating prior to the end of
the lease term but continuing to pay rent through the end of the lease term
(August 1997). Average occupancy at Lakeshore Business Center Phase II increased
from 76% (1995) to 80% (1996). Overall, rental and other income at Lakeshore
Business Center Phase II remained fairly constant from 1995 to 1996 despite a 4%
increase in average occupancy. This is primarily a result of a decrease in
rental rates on lease renewals. As discussed in previous filings, prior to the
Ft. Lauderdale area experiencing an economic downturn, the property was able to
negotiate higher net effective rental rates than 1995 and 1996 market rental
rates. As a result, the leases that were renewed at the end of 1995 and the
- 22 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
beginning of 1996 renewed at a lower net effective rental rate. The
Partnership's proportionate share of the rental and other income at Lakeshore
Business Center Phase II, however, decreased in 1996 as compared to 1995. This
is due to the fact that the Partnership's ownership interest in Lakeshore
Business Center Phase II, decreased as a result of the formation of the L/U II
Joint Venture on January 23, 1995. (See above for a discussion regarding the
Joint Venture).
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of University
Business Center Phase II. The original lease term was for seven years and the
tenant took occupancy in April 1991. As a result of Crosby downsizing and
sub-leasing the majority of its leased space, occupancy has decreased to 99% at
December 31, 1997, 1996 and 95% at December 31, 1995. During January 1997,
Crosby vacated the remaining space it occupied at the business center. See below
for further discussion of Crosby and its leased space. Rental and other income
at University Business Center Phase II decreased from 1996 to 1997 due to the
following. Through the end of 1996, Crosby continued to make rent payments
pursuant to the original lease term. During 1996, the Joint Venture received
notice that Crosby did not intend to pay full rental due under the lease
agreement including and subsequent to January 1997. Although the Joint Venture
does not presently have lease agreements(except as noted below) with Crosby's
sub-tenants, beginning February 1997, rent payments from Crosby's sub-tenants
have been made directly to the Joint Venture, which are substantially less than
what Crosby owed. During 1997, the Joint Venture recognized income to the extent
of what was collected from the sub-tenants. The decrease in rental and other
income is also due to the fact that approximately $70,000 of accrued income
connected with the Crosby lease was written-off during the first quarter of
1997, of which the Partnership's proportionate share was approximately $8,400 or
12%.
The Partnership's proportionate share of the rental and other income at
University Business Center Phase II decreased from 1995 to 1996. The decrease is
due to the fact that the partnership's ownership interest in University Business
Center Phase II decreased as a result of the formation of the L/U II Joint
Venture in January 1995. (See above for a discussion of the Joint Venture).
Overall, rental and other income at University Business Center Phase II remained
fairly constant from 1995 to 1996.
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 has thought there could be a possible collection. There
have been no funds recovered as a result of these actions during 1996 or 1995.
During 1997, $300,000 was collected from Philip Crosby Associates, Inc., a
former tenant at University Business Center Phase II. The Partnership's share
was $43,000 or 12%. See below for a further discussion of this matter.
The change in interest and other income from 1996 to 1997 was not significant.
The decrease in interest and other income from 1995 to 1996 is primarily due to
the fact that the 1995 balance includes proceeds from the sale of furniture from
a defaulted tenant's suite at Lakeshore Business Center Phase II (recorded as
other income). There was no similar income during 1996.
The increase in operating expenses from 1996 to 1997 is due primarily to
increased exterior building renovations at Blankenbaker Business Center 1A.
Fluctuations in operating expenses at Lakeshore Business Center Phases I and II
and University Business Center Phase II are not significant.
The decrease in operating expenses from 1995 to 1996 is primarily a result of
the Partnership's decrease in ownership of certain properties which were
contributed to the L/U II Joint Venture in January 1995. (See above for further
discussion regarding the Joint Venture). There were no significant fluctuations
in operating expenses at Blankenbaker Business Center 1A.
- 23 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The increase in operating expenses - affiliated from 1996 to 1997 is primarily
the result of increased property management costs at all of the Partnership's
properties. Operating expenses - affiliated are expenses for services performed
by employees of NTS Development Company, an affiliate of the General Partner of
the Partnership.
Operating expenses - affiliated decreased from 1995 to 1996 due to the decrease
in ownership of certain properties which were contributed to the L/U II Joint
Venture in 1995. (See above for a discussion regarding the Joint Venture).
The 1996 write-off of unamortized loan costs relates to loan costs associated
with the L/U II Joint Venture's notes payable. The unamortized loan costs were
expensed due to the fact that the notes were retired in 1996 prior to their
maturity (January 31, 1998). See the Liquidity and Capital Resources section of
this item for further discussion.
The change in the amortization of capitalized leasing costs from 1996 to 1997
was not significant. Amortization of capitalized leasing costs decreased in 1996
as compared to 1995 as a result of costs capitalized during initial lease-up at
University Business Center Phase II becoming fully amortized in 1995.
Interest expense decreased from 1996 to 1997 primarily as a result of a lower
interest rate on the permanent financing the L/U II Joint Venture obtained in
July 1996 (8.125% compared to 10.6% on the previous debt). The decrease is also
due to continued principal payments on the L/U II Joint Venture's and
Blankenbaker Business Center 1A's debt. See the Liquidity and Capital Resources
section of this item for details regarding the Partnership's debt.
Interest expense decreased from 1995 to 1996 primarily as a result of the
Partnership's decrease in ownership of certain properties which were contributed
to the L/U II Joint Venture in January 1995. (See above for further discussion
regarding the Joint Venture.) Debt totaling approximately $16.7 million was
contributed by the Partnership to the Joint Venture. The decrease in interest
expense can also be attributed to continued principal payments and a lower
interest rate on the permanent financings the L/U II Joint Venture obtained July
23, 1996.
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 revenues between periods will differ from the fluctuations
of management fee expense.
The change in real estate taxes from 1996 to 1997 is not significant. The
decrease in real estate taxes from 1995 to 1996 is primarily a result of the
Partnership's decrease in ownership of certain properties which were contributed
to the L/U II Joint Venture in January 1995. (See above for a discussion of the
Joint Venture).
The change in professional and administrative expenses from 1996 to 1997 and
from 1995 to 1996 was not significant.
The decrease in professional and administrative expenses - affiliated from 1996
to 1997 is due primarily to decreased salary costs. Professional and
administrative expenses - affiliated are expenses for services performed by
employees of NTS Development Company, an affiliate of the General Partner.
The change in professional and administrative expenses - affiliated from 1995 to
1996 is not significant.
- 24 -
<PAGE>
Results of Operations - Continued
- ---------------------------------
The change in depreciation and amortization expense from 1996 to 1997 is not
significant. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land improvements,
30 years for buildings, 5-30 years for building improvements and 5-30 years for
amenities. The aggregate cost of the Partnership's properties for Federal tax
purposes is approximately $6,900,000.
Depreciation expense decreased from 1995 to 1996 due to a portion of the assets
at the Partnership's Joint Venture properties becoming fully depreciated. The
decrease is also a result of the Partnership's decrease in ownership of certain
properties which were contributed to the L/U II Joint Venture in January 1995.
(See above for further discussion of the Joint Venture).
Liquidity and Capital Resources
- -------------------------------
Cash provided by (used in) operations was $282,404 (1997), $184,907 (1996) and
($4,724) (1995). 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 other
capital improvements. Cash reserves (which are unrestricted cash and equivalents
as shown on the Partnership's balance sheet as of December 31) were $39,940,
$42,944 and $36,269 at December 31, 1997, 1996 and 1995, respectively.
On July 23, 1996, the L/U II Joint Venture obtained three mortgage loans from an
insurance company totaling $17,400,000 ($6,025,000, $5,775,000 and $5,600,000).
The outstanding balances of the loans at December 31, 1997 were $5,606,774,
$5,374,127 and $5,211,275, respectively, for a total of $16,192,176. The loans
are recorded as a liability of the Joint Venture. The Partnership's
proportionate share in the loans at December 31, 1997 was $704,771, $675,528 and
$655,057, respectively, for a total of $2,035,356. 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 proceeds from the loans were used to pay off
the Joint Venture's notes payable of approximately $16.8 million, which bore
interest at a fixed rate of 10.6%, and fund loan closing costs of approximately
$280,000. The Partnership's proportionate interest in the notes which were paid
off was approximately $2,000,000 or 12%. The notes which were paid off had a
maturity date of January 31, 1998. The remaining proceeds will be used to fund
Joint Venture tenant finish improvements and leasing costs.
As of December 31, 1997, the Blankenbaker Business Center Joint Venture had a
mortgage payable with an insurance company in the amount of $3,869,108. 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 December 31, 1997 is $1,492,702. 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.
Subsequent to December 31, 1997, the Partnership obtained a $350,000 loan from a
bank. 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 affiliated of NTS Development Company, has provided collateral
for the loan. The proceeds from the loan received
- 25 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 1997 and 1996 cash flows were derived from
operating activities. The majority of the Partnership's 1995 cash flow was
derived from the use of cash reserves. Cash flows used in investing activities
include tenant finish improvements. Changes to current tenant finish
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to 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 provided by investing activities in 1995 and 1996 were the result of a
release of funds escrowed for capital expenditures, leasing commissions and
tenant improvements at the properties owned by the L/U II Joint Venture as
required by a 1995 loan agreement. Cash flows provided by investing activities
in 1995 were also the result of a release from the funds escrowed for tenant
finish improvements at Lakeshore Business Center Phase II, as required by a 1993
loan extension agreement. Cash flows used in investing activities were funded by
cash flow from operating activities and capital contributions (as discussed
above). Cash flows provided by financing activities are from the debt
refinancings of the L/U II Joint Venture (1996 - discussed above). Cash flows
used in financing activities are for loan costs, principal payments on mortgages
and notes payable and repurchases of limited partnership Units. The capital
contribution by a joint venture partner represents the Partnership's interest in
the L/U II Joint Venture's (1995) increase in cash which resulted from a capital
contribution. The Partnership utilizes the proportionate consolidation method of
accounting for joint venture properties. The Partnership's interest in the joint
venture's assets, liabilities, revenues, expenses and cash flows are combined on
a line-by- line basis with the Partnership's own assets, liabilities, revenues,
expenses and cash flows. 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 Partnership expects the demand on future liquidity to
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 needs
of the Partnership.
Due to the fact that no distributions were made during 1997, 1996 or 1995, 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.
At December 31, 1997, none of the Partnership's properties were in the
construction stage.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations. Changes to current tenant finish improvements
are a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wallcovering. The extent and cost of the improvements
are determined by the size of the space being
- 26 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
leased and whether the improvements are for a new tenant or incurred because of
a lease renewal. The tenant finish improvements will be funded by cash flow from
operations and cash reserves.
Philip Crosby Associates, Inc. ("Crosby") previously leased 100% of University
Business Center Phase II. The business center is owned by the L/U II Joint
Venture in which the Partnership has a 12% interest. The original lease term was
for seven years, and the tenant took occupancy in April 1991. During 1994, 1995
and 1996, Crosby sub-leased a portion of the business center. Crosby had
sub-leased, through the end of their lease term, approximately 85,000 square
feet (including approximately 10,000 square feet of mezzanine space)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. 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 rental income from this property accounted for
approximately 18% of the Partnership's total revenues during 1996. The Joint
Venture instituted legal action against Crosby to seek resolution of this
situation. (See below for a further discussion regarding the current status of
the litigation). Although the Joint Venture does not presently have lease
agreements (except as noted below) with the sub-lessees noted above, for the
period including and subsequent to February 1997 rent payment from these
sub-lessees have been made directly to the Joint Venture. The Joint Venture is
currently negotiating directly with the sub-lessees to enter into lease
agreements for the space presently sublet. At this time, the future leasing and
tenant finish costs which will be required to release this space are unknown
except as noted below for the negotiations with Full Sail.
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 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
- 27 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
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 .
The Joint Venture is currently 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.
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 1997 was immaterial.
- 28 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The Partnership had no other material commitments for renovations or capital
improvements at December 31, 1997.
During 1996, the Partnership established an Interest Repurchase Reserve in the
amount of $25,000 pursuant to Section 16.4 of the Partnership's Amended and
Restated Agreement of Limited Partnership. Under Section 16.4, limited partners
may request the Partnership to repurchase their respective interests (Units) in
the Partnership. With these funds, the Partnership would be able to repurchase
35,714 Units at a price of $0.70 per Unit. As of December 31, 1997, 22,245 Units
have been repurchased for $15,572. Repurchased Units are being retired by the
Partnership, thus increasing the share of ownership of each remaining investor.
On February 17, 1997 the repurchase of Partnership Units was suspended in order
to conserve cash. This step was taken until it was clear that, in the General
Partner's opinion, the Partnership has the necessary cash reserves to meet
future leasing and tenant finish costs and has rebuilt cash reserves to meet the
ongoing needs of the Partnership.
Subsequent to December 31, 1997, NTS-Properties Plus Ltd. has elected to fund an
additional amount of $5,000 to its Interest Repurchase Reserve. With this
funding, 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 in its sole
discretion and does not purport to represent the fair market value or
liquidation value of the Unit. The Partnership will notify the limited partners
of this action and opportunity by mail during March 1998.
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 December 31, 1997 in the asset held for
sale is $96,949. The Joint Venture continues to actively market the asset for
sale. In management's opinion, the net book value of the asset held for sale
approximates the fair market value less cost to sell.
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 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 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 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 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 the 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.
- 29 -
<PAGE>
Liquidity and Capital Resources - Continued
- -------------------------------------------
The following describes the efforts being taken by the Partnership to increase
the occupancy levels at the Partnership's properties. At Lakeshore Business
Center Phases I and II, the Partnership has an on-site leasing agent, an
employee of NTS Development Company (an affiliate of the General Partner), who
makes calls to potential tenants, negotiates lease renewals with current tenants
and manages local advertising with the assistance of NTS Development Company's
marketing staff. The leasing and renewal negotiations of University Business
Center Phase II are handled by a leasing agent, an employee of NTS Development
Company, located at the University Business Center development.
Leases at the Partnership's properties provide for tenants to contribute toward
the payment of common area expenses, insurance and real estate taxes. Leases at
the Partnership's properties also provide for rent increases which are based
upon increases in the consumer price index. These lease provisions should
protect the Partnership's operations from the impact of inflation and changing
prices.
Some of the statements included in Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Partnership anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflects management's best judgement 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.
- 30 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NTS-Properties Plus Ltd:
We have audited the accompanying balance sheets of NTS-Properties Plus Ltd. (a
Florida limited partnership) as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements and the
schedules referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTS-Properties Plus Ltd. as of
December 31, 1997 and 1996 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included on pages 51
through 53 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 6, 1998
- 31 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<CAPTION>
1997 1996
------ ------
ASSETS
<S> <C> <C>
Cash and equivalents $ 39,940 $ 42,944
Cash and equivalents - restricted 19,228 24,540
Accounts receivable 11,531 50,408
Land, buildings and amenities, net 996,049 1,121,097
Asset held for sale 96,949 96,949
Deferred leasing commissions 129,946 153,380
Other assets 77,131 81,970
----------- -----------
$ 1,370,774 $ 1,571,288
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages payable $ 3,528,058 $ 3,770,347
Accounts payable - operations 390,774 268,688
Accounts payable - construction -- 4,106
Security deposits 13,536 12,030
Other liabilities 27,395 15,421
----------- -----------
3,959,763 4,070,592
Commitments and Contingencies
Partners' equity (2,588,989) (2,499,304)
----------- -----------
$ 1,370,774 $ 1,571,288
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 32 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental income, net of provision for
doubtful accounts of $-0- (1997 and
1996)and $3,133 (1995) $ 826,343 $ 830,387 $ 950,567
Interest and other income 1,635 2,775 5,087
----------- ----------- -----------
827,978 833,162 955,654
Expenses:
Operating expenses 147,540 122,537 143,083
Operating expenses - affiliated 57,172 49,384 59,801
Write-off of unamortized loan costs -- 9,082 --
Amortization of capitalized leasing
costs 2,485 2,233 8,938
Interest expense 303,763 349,657 507,675
Management fees 52,430 53,080 59,849
Real estate taxes 82,504 81,523 98,903
Professional and administrative
expenses 49,139 44,936 52,487
Professional and administrative
expenses - affiliated 51,513 104,103 101,544
Depreciation and amortization 158,866 161,684 309,604
----------- ----------- -----------
905,412 978,219 1,341,884
----------- ----------- -----------
Net loss $ (77,434) $ (145,057) $ (386,230)
=========== =========== ===========
Net loss allocated to the limited
partners $ (76,660) $ (143,606) $ (382,368)
=========== =========== ===========
Net loss per limited partnership
unit $ (0.12) $ (0.21) $ (0.56)
=========== =========== ===========
Weighted average number of Units 666,248 685,634 685,647
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 33 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balances at December 31, 1994 $(1,827,353) $ (137,343) $(1,964,696)
Net loss (382,368) (3,862) (386,230)
----------- ----------- -----------
Balances at December 31, 1995 (2,209,721) (141,205) (2,350,926)
Net loss (143,606) (1,451) (145,057)
Repurchase of limited partnership
Units (3,321) -- (3,321)
----------- ----------- -----------
Balances at December 31, 1996 (2,356,648) (142,656) (2,499,304)
Net loss (76,660) (774) (77,434)
Repurchase of limited partnership
Units (12,251) -- (12,251)
----------- ----------- -----------
Balances at December 31, 1997 $(2,445,559) $ (143,430) $(2,588,989)
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 34 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (77,434) $ (145,057) $ (386,230)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Provision for doubtful accounts -- -- 3,133
Write-off of unamortized loan costs -- 9,082 --
Amortization of capitalized leasing costs 2,485 2,233 8,938
Depreciation and amortization 158,866 161,684 309,604
Changes in assets and liabilities:
Cash and equivalents - restricted 5,312 (8,827) (8,383)
Accounts receivable 38,877 54,714 57,132
Deferred leasing commissions 23,434 12,691 23,719
Other assets (4,702) (12,165) 2,919
Accounts payable - operations 122,086 103,418 19,466
Security deposits 1,506 -- 1,897
Other liabilities 11,974 7,134 (36,919)
----------- ----------- -----------
Net cash provided by (used in) operating
activities 282,404 184,907 (4,724)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, building and amenities (30,868) (29,746) (154,193)
Decrease in cash and equivalents - restricted -- 1,725 10,020
----------- ----------- -----------
Net cash used in investing activities (30,868) (28,021) (144,173)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages payable -- 2,187,180 --
Principal payments on mortgages and notes
payable (242,289) (2,288,207) (135,233)
Capital contribution by a joint venture partner -- -- 94,275
Additions to loan costs -- (45,863) (18,164)
Repurchase of limited partnership Units (12,251) (3,321) --
----------- ----------- -----------
Net cash used in financing activities (254,540) (150,211) (59,122)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents (3,004) 6,675 (208,019)
CASH AND EQUIVALENTS, beginning of year 42,944 36,269 244,288
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 39,940 $ 42,944 $ 36,269
=========== =========== ===========
Interest paid on a cash basis $ 304,930 $ 355,047 $ 639,167
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
- 35 -
<PAGE>
NTS-PROPERTIES PLUS LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. Significant Accounting Policies
-------------------------------
A) Organization
------------
NTS-Properties Plus Ltd. (the "Partnership") is a limited partnership
organized under the laws of the State of Florida on April 30, 1987.
The General Partner is NTS-Properties Plus Associates (a Kentucky
limited partnership). The Partnership is in the business of
developing, constructing, owning and operating commercial real
estate.
B) Properties
----------
The Partnership owns and operates the following properties:
- A 39% joint venture interest in Blankenbaker Business Center 1A,
a business center with approximately 50,000 net rentable ground
floor square feet and approximately 50,000 net rentable
mezzanine square feet located in Louisville, Kentucky.
- A 12% joint venture interest in the Lakeshore/University II
Joint Venture. A description of the properties owned by the
Joint Venture appears below:
- Lakeshore Business Center Phase I - a business center with
approximately 103,000 net rentable square feet located in
Fort Lauderdale, Florida.
- Lakeshore Business Center Phase II - a business center with
approximately 97,000 net rentable square feet located in
Fort Lauderdale, Florida.
- University Business Center Phase II - a business center with
approximately 78,000 net rentable first floor (office and
service) and second floor office square feet and
approximately 10,000 net rentable mezzanine square feet
located in Orlando, Florida.
- Outparcel Building Sites - approximately 6.2 acres of
undeveloped land adjacent to the Lakeshore Business Center
development which is zoned for commercial development.
C) Allocation of Net Income (Loss) and Cash Distributions
------------------------------------------------------
Pre-Termination Date Net Cash Receipts and Interim Net Cash Receipts,
as defined in the partnership agreement and which are made available
for distribution, will be distributed 99% to the limited partners and
1% to the General Partner.
Net operating income shall be allocated to the limited partners and
the General Partner in proportion to their respective cash
distributions. Net operating income in excess of cash distributions
shall be allocated as follows: (1) pro rata to all partners with a
negative capital account in an amount to restore the negative capital
account to zero; (2) 99% to the limited partners and 1% to the
General Partner until the limited partners have received cash
- 36 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
C) Allocation of Net Income (Loss) and Cash Distributions - Continued
------------------------------------------------------------------
distributions from all sources equal to their original capital; (3)
the balance, 90% to the limited partners and 10% to the General
Partner. Net operating losses shall be allocated 99% to the limited
partners and 1% to the General Partner.
D) Tax Status
----------
The Partnership has received a ruling from the Internal Revenue
Service stating that the Partnership is classified as a limited
partnership for federal income tax purposes. As such, the Partnership
makes no provision for income taxes. The taxable income or loss is
passed through to the holders of the partnership interests for
inclusion on their individual income tax returns.
A reconciliation of net loss for financial statement purposes versus
that for income tax reporting is as follows:
1997 1996 1995
----------- ----------- ----------
Net loss $ (77,434) $ (145,057) $ (386,230)
Items handled
differently for tax
purposes:
Write-off of
unamortized tenant
finish improvements (4,606) -- (8,328)
Allowance for doubtful
accounts (251) (5,847) 2,015
Depreciation and
amortization (16,778) 110,789 174,563
Capitalized leasing
costs 1,284 1,283 5,065
Rental income 54,937 50,697 54,108
---------- ----------- ---------
Taxable income (loss) $ (42,848) $ 11,865 $ (158,807)
========== =========== ==========
E) 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.
F) Joint Venture Accounting
------------------------
The Partnership has adopted the proportionate consolidation method of
accounting for joint venture properties. The Partnership's
proportionate interest in the venture's assets, liabilities,
revenues, expenses and cash flows are combined on a line-by-line
basis with the Partnership's own assets, liabilities, revenues,
expenses and cash flows. All intercompany accounts and transactions
have been eliminated in consolidation.
- 37 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
F) Joint Venture Accounting - Continued
------------------------------------
Proportionate consolidation is utilized by the Partnership due to the
fact that the ownership of joint venture properties, in substance, is
not subject to joint control. The managing General Partners of the
sole General Partner of the NTS sponsored partnerships which have
formed joint ventures are substantially the same. As such, decisions
regarding financing, development, sale or operations do not require
the approval of different partners. Additionally, the joint venture
properties are in the same business/industry as their respective
joint venture partners and their asset, liability, revenue and
expense accounts correspond with the accounts of such partners. It is
the belief of the General Partner of the Partnership that the
financial statement disclosures resulting from proportionate
consolidation provides the most meaningful presentation of assets,
liabilities, revenues, expenses and cash flows for the years
presented given the commonality of the Partnership's operations.
G) Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds escrowed with
mortgage companies for property taxes in accordance with the loan
agreements.
H) Basis of Property and Depreciation
----------------------------------
Land, buildings and amenities are stated at cost to the Partnership.
Costs directly associated with the acquisition, development and
construction of a project are capitalized. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets which are 5-30 years for land improvements, 5-30 years for
building and improvements and 5-30 years for amenities.
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of, specifies circumstances in which
certain long-lived assets must be reviewed for impairment. If such
review indicates that the carrying amount of an asset exceeds the sum
of its expected future cash flows, the asset's carrying value must be
written down to fair value. Application of this standard during the
years ended December 31, 1997 and 1996, did not result in an
impairment loss.
I) Capitalized Leasing Costs
-------------------------
The Partnership has capitalized certain costs associated with the
initial leasing of the properties. These costs were amortized over a
five year period.
J) Rental Income and Deferred Leasing Commissions
----------------------------------------------
Certain of the Partnership's lease agreements are structured to
include scheduled and specified rent increases over the lease term.
For financial reporting purposes, the income from these leases is
being recognized on a straight-line basis over the lease term.
Accrued income connected with these leases is included in accounts
receivable and totaled $16,739 and $59,643 as of December 31, 1997
and 1996, respectively. All commissions paid to leasing agents are
deferred and amortized on a straight-line basis over the term of the
lease to which they apply.
- 38 -
<PAGE>
1. Significant Accounting Policies - Continued
-------------------------------------------
K) Advertising
-----------
The Partnership expenses advertising-type costs as incurred.
Advertising expense was immaterial to the Partnership during the
years ended December 31, 1997, 1996 and 1995.
L) Statements of Cash Flows
------------------------
For purposes of reporting cash flows, cash and equivalents include
cash on hand and short-term, highly liquid investments with initial
maturities of three months or less.
M) Reclassification of 1996 Financial Statements
---------------------------------------------
Certain reclassifications have been made to the December 31, 1996
financial statements to conform with December 31, 1997
classifications. These classifications have no effect on previously
reported operations.
2. Concentration of Credit Risk
----------------------------
NTS-Properties Plus Ltd. has joint venture investments in commercial
properties in Kentucky (Louisville) and Florida (Orlando and Ft.
Lauderdale). Substantially all of the tenants are local businesses or
are businesses which have operations in the location in which they
lease space.
3. Interest Repurchase Reserve
---------------------------
During 1996, the Partnership established an Interest Repurchase Reserve
in the amount of $25,000 pursuant to Section 16.4 of the Partnership's
Amended and Restated Agreement of Limited Partnership. Under Section
16.4, limited partners may request the Partnership to repurchase their
respective interests (Units) in the Partnership. With this Interest
Repurchase Reserve, the Partnership would be able to repurchase 35,714
Units at a price of $0.70 per Unit. As of December 31, 1997, 22,245 Units
have been repurchased for $15,572. Repurchased Units are being retired by
the Partnership, thus increasing the share of ownership of each remaining
investor. On February 17, 1997, the Partnership indefinitely suspended
the Interest Repurchase Program.
4. Investment in Joint Ventures
----------------------------
A) NTS University Boulevard Joint Venture
--------------------------------------
In January 1989, the Partnership entered into a joint venture
agreement with NTS-Properties V, a Maryland limited partnership, an
affiliate of the General Partner of the Partnership, to develop
University Business Center Phase II, an approximately 88,000 square
foot business center (including approximately 10,000 square feet of
mezzanine space), in Orlando, Florida. NTS-Properties V contributed
land valued at $1,460,000 and the Partnership contributed development
and carrying costs of approximately $8,000,000. During the second
quarter of 1994, NTS-Properties V made an approximately $79,000
capital contribution to the Joint Venture. The capital contribution
increased NTS-Properties V's ownership interest percentage from 16%
to 17% and reduced the Partnership's ownership percentage from 84% to
83%. The contribution was made to fund a portion of the Joint
Venture's operating costs. The net income or net loss is allocated
each calendar quarter based upon the
- 39 -
<PAGE>
4. Investment in Joint Ventures - Continued
----------------------------------------
A) NTS University Boulevard Joint Venture - Continued
--------------------------------------------------
respective partnership's contribution. The Partnership's ownership
share of University Business Center Phase II was 83% on January 23,
1995 prior to its contribution to the Lakeshore/University II Joint
Venture. The Partnership's share of the Joint Venture's net operating
income was $12,946 (1995).
On January 23, 1995, the partners of the NTS University Boulevard
Joint Venture contributed University Business Center Phase II to the
newly formed Lakeshore/University II (L/U II) Joint Venture. For a
further discussion of the L/U II Joint Venture, see Note 4C.
B) Blankenbaker Business Center Joint Venture
------------------------------------------
On December 28, 1990 the Partnership entered into a Joint Venture
agreement with NTS-Properties VII, Ltd., an affiliate of the General
Partner of the Partnership, to complete the development of
Blankenbaker Business Center 1A. The Partnership contributed
Blankenbaker Business Center 1A together with improvements and
personal property (Real Property) to the capital of the Joint
Venture, subject to mortgage indebtedness in the amount of
$4,715,000. The agreed upon net fair market value of the
Partnership's capital contribution is $1,700,000, being the appraised
value of the Real Property ($6,415,000) reduced by the $4,715,000
mortgage. NTS-Properties VII, Ltd. contributed $450,000 which was
used for additional tenant improvements to the Real Property and made
a capital contribution to the Joint Venture of $325,000 to purchase a
2.49 acre parking lot that was being leased from an affiliate of the
General Partner as described in NTS- Properties Plus Ltd.'s
Prospectus. NTS-Properties Plus Ltd. transferred to the Joint Venture
its option to purchase the parking lot, and the Joint Venture
exercised its option. The use of the parking lot is a provision of
the tenant's lease agreement with the business center. By purchasing
the parking lot, the Joint Venture's annual operating expenses were
reduced approximately $35,000. The purchase price of the parking lot
was determined by an independent appraisal.
On August 16, 1994, the Blankenbaker Business Center Joint Venture
amended its joint venture agreement to admit NTS-Properties IV (an
affiliate of the General Partner of the Partnership) to the Joint
Venture. In accordance with the Joint Venture Agreement, NTS-
Properties IV contributed $1,100,000 and NTS-Properties VII, Ltd.
contributed $500,000. Additional capital was needed by the
Blankenbaker Business Center Joint Venture to fund the tenant finish
and leasing costs connected with the project discussed in the
following paragraph. However, the Partnership was not in a position
to contribute additional capital, nor was NTS-Properties VII, Ltd. in
a position to contribute all of the capital required for the project.
NTS-Properties IV was willing to participate in the Joint Venture and
to contribute, together with NTS-Properties VII, Ltd. the capital
necessary with respect to the project. The General Partner of the
Partnership agreed to the admission of NTS-Properties IV to the Joint
Venture, and to the capital contributions by NTS- Properties IV and
NTS-Properties VII, Ltd. with the knowledge that the Partnership's
joint venture interest would, as a result, decrease.
- 40 -
<PAGE>
4. Investment in Joint Ventures - Continued
----------------------------------------
B) Blankenbaker Business Center Joint Venture - Continued
------------------------------------------------------
The need for additional capital by the Joint Venture was a result of
the lease renewal and expansion which was signed April 28, 1994
between the Joint Venture and Prudential Service Bureau, Inc.
("Prudential"). The lease expanded Prudential's leased space by
approximately 15,000 square feet and extended its current lease term
through July 2005. Approximately 12,000 square feet of the expansion
was into new space which had to be constructed on the second level of
the existing business center. With this expansion, Prudential
occupied 100% of the business center (approximately 101,000 square
feet). The tenant finish and leasing costs connected with the lease
renewal and expansion were approximately $1,400,000.
In order to calculate the revised joint venture percentage interests,
the assets of the Joint Venture were revalued in connection with the
admission of NTS-Properties IV as a joint venture partner and the
additional capital contributions. The value of the Joint Venture's
assets immediately prior to the additional capital contributions was
$6,764,322 and its outstanding debt was $4,650,042, with net equity
being $2,114,280. The difference between the value of the Joint
Venture's assets and the value at which they were carried on the
books of the Joint Venture has been allocated to the Partnership and
NTS-Properties VII, Ltd. in determining each Joint Venture partner's
percentage interest.
The Partnership's interest in the Joint Venture decreased from 69% to
39% as a result of the capital contributions by NTS-Properties IV and
NTS-Properties VII, Ltd. The respective percentage interests of
NTS-Properties IV and NTS-Properties VII, Ltd. in the Joint Venture
subsequent to these capital contributions are 30% and 31%.
Net income or loss is allocated each calendar quarter based on the
respective partnership's contribution. The Partnership's ownership
share was 39% at December 31, 1997. The Partnership's share of the
Joint Venture's net operating loss was $68,336 (1997), $61,243
(1996)and $79,234 (1995).
C) Lakeshore/University II Joint Venture
-------------------------------------
On January 23, 1995, a new joint venture known as the
Lakeshore/University II Joint Venture (L/U II Joint Venture) was
formed among the Partnership and NTS-Properties IV, NTS-Properties V
and NTS/Fort Lauderdale, Ltd., affiliates of the General Partner of
the Partnership, for purposes of owning Lakeshore Business Center
Phases I and II, University Business Center Phase II and certain
undeveloped tracts of land adjacent to the Lakeshore Business Center
development. The table below identifies which properties were
contributed to the L/U II Joint Venture and the respective owners of
such properties prior to the formation of the joint venture.
- 41 -
<PAGE>
4. Investment in Joint Ventures - Continued
----------------------------------------
C) Lakeshore/University II Joint Venture - Continued
-------------------------------------------------
Property (Net Asset Contributed) Contributing Owner
-------------------------------- ------------------
Lakeshore Business Center NTS-Properties IV and NTS-
Phase I ($6,249,667) Properties V
Lakeshore Business Center NTS-Properties Plus Ltd.
Phase II (-$1,023,535)
Undeveloped land adjacent to the NTS-Properties Plus Ltd.
Lakeshore Business Center
development (3.8 acres)(-$670,709)
Undeveloped land adjacent to the NTS/Fort Lauderdale, Ltd.
Lakeshore Business Center
development (2.4 acres) ($27,104)
University Business Center NTS-Properties V and NTS-
Phase II ($953,236) Properties Plus Ltd.
Each of the properties were contributed to the L/U II Joint Venture
subject to existing indebtedness, except for Lakeshore Business
Center Phase I which was contributed to the joint venture free and
clear of any mortgage liens, and all such indebtedness was assumed by
the L/U II Joint Venture. Mortgages were recorded on Lakeshore
Business Center Phase I in the amount of $5,500,000, and on
University Business Center Phase II in the amount of $3,000,000, in
favor of the banks which held the indebtedness on University Business
Center Phase II, Lakeshore Business Center Phase II and the
undeveloped tracts of land prior to the formation of the joint
venture. In addition to the above, NTS-Properties IV also contributed
$750,000 to the L/U II Joint Venture. The Partnership's ownership
share was 12% at December 31, 1997. The Partnership's share of the
joint ventures net operating loss was $95,567 (1997), $124,191
(1996)and $155,457 (1995).
5. Land, Buildings and Amenities
-----------------------------
The following schedule provides an analysis of the Partnership's
investment in property held for lease as of December 31:
1997 1996
------ -----
Land and improvements $1,847,061 $1,847,061
Buildings, improvements and
amenities 1,721,677 1,703,541
---------- ----------
3,568,738 3,550,602
Less accumulated depreciation 2,572,689 2,429,505
---------- ----------
$ 996,049 $1,121,097
========== ==========
- 42 -
<PAGE>
6. Asset Held for Sale
-------------------
Asset held for sale of $96,949 at December 31, 1997 represents the
Partnership's proportionate share of approximately 6.2 acres of land
owned by the L/U II Joint Venture which is adjacent to the Lakeshore
Business Center development in Ft. Lauderdale, Florida. In management's
opinion, the net book value of the asset held for sale approximates the
fair market value less cost to sell.
7. Mortgages Payable
-----------------
Mortgages payable as of December 31 consist of the following:
1997 1996
------ ------
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.5%, due November 15, 2005,
secured by land and building $ 1,492,702 $ 1,619,600
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 704,771 744,727
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 675,528 713,826
Mortgage payable to an insurance
company, bearing interest at a fixed
rate of 8.125%, due August 1, 2008,
secured by land and building 655,057 692,194
---------- ----------
$ 3,528,058 $ 3,770,347
========== ==========
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
-------------------------------- ------
1998 $ 263,238
1999 285,999
2000 310,730
2001 337,600
2002 366,796
Thereafter 1,963,695
-----------
$ 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 $3,700,000.
Subsequent to December 31, 1997, the Partnership obtained new financing
from a bank in the amount of $350,000. See Note 11 Subsequent Events for
a discussion regarding the terms of this note payable.
- 43 -
<PAGE>
8. Rental Income Under Operating Leases
------------------------------------
The following is a schedule of minimum future rental income on
noncancellable operating leases as of December 31, 1997:
For the Years Ended December 31, Amount
-------------------------------- ------
1998 $ 604,136
1999 556,241
2000 481,339
2001 440,379
2002 406,536
Thereafter 873,315
-----------
$ 3,361,946
===========
9. Related Party Transactions
--------------------------
Property management fees of $52,430 (1997), $53,080 (1996)and $59,849
(1995) were paid to NTS Development Company, an affiliate of the general
partner. The fee is equal to 6% of all revenues from commercial
properties pursuant to an agreement with the Partnership. Also pursuant
to an agreement, NTS Development Company will receive a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital
improvements. The Partnership has incurred $2,041 and $1,335 as a repair
and maintenance fee during the years ended December 31, 1997 and 1996,
respectively, and has capitalized this cost as part of land, buildings
and amenities.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the years ended
December 31, 1997, 1996 and 1995. These charges include items which have
been expensed as operating expenses - affiliated or professional and
administrative expenses - affiliated and items which have been
capitalized as deferred leasing commissions, other assets or as land,
buildings and amenities.
1997 1996 1995
-------- -------- --------
Administrative $ 59,872 $111,401 $110,191
Leasing 18,499 19,087 17,194
Property manager 38,105 30,190 38,675
Other 1,573 5,347 2,482
-------- -------- --------
$118,049 $166,025 $168,542
======== ======== ========
Accounts payable - operations includes approximately $336,000 and
$233,000 due NTS Development Company at December 31, 1997 and 1996,
respectively. NTS Development Company has indicated to the Partnership
that they will not demand repayment of the amounts outstanding at
December 31, 1997 and incurred during 1998. Subsequent to December 31,
1997, approximately $300,000 of the amount due NTS Development Company
was paid from the proceeds of a loan obtained by the Partnership. See
Note 11 Subsequent Events for a discussion regarding the terms of this
note payable.
- 44 -
<PAGE>
10. 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 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 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
- 45 -
<PAGE>
10. Commitments and Contingencies - Continued
-----------------------------------------
funds for this commitment is expected to be cash flow from operations
and/or cash reserves .
The Joint Venture is currently 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.
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 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 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 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 the 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.
11. Subsequent Events
-----------------
Subsequent to December 31, 1997, the Partnership obtained a $350,000 loan
from a bank. 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.
Subsequent to December 31, 1997, NTS-Properties Plus Ltd. has elected to
fund an additional amount of $5,000 to its Interest Repurchase Reserve.
With this funding, 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 in its sole discretion and does not
purport to represent the fair market value or liquidation value of the
Unit. The Partnership will notify the limited partners of this action and
opportunity by mail during March 1998.
- 46 -
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Because the Partnership is a limited partnership, and not a corporation, it has
no directors or officers as such. Management of the Partnership is the
responsibility of the General Partner, NTS-Properties Plus Associates. The
Partnership has entered into a management contract with NTS Development Company,
an affiliate of the General Partner, to provide property management services.
The General Partners of NTS-Properties Plus Associates are as follows:
J. D. Nichols
- -------------
Mr. Nichols (age 56) is the managing General Partner of NTS-Properties Plus
Associates and is Chairman of the Board of NTS Corporation (since 1985) and NTS
Development Company (since 1977).
Richard L. Good
- ---------------
Mr. Good (age 58), President and Chief Operating Officer of NTS Corporation,
President of NTS Development Company and Chairman of the Board of NTS
Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he
was Executive Vice President of Jacques-Miller, Inc., a real estate syndication,
property management and financial planning firm in Nashville, Tennessee.
NTS Capital Corporation
- -----------------------
NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation
formed in October 1979. J. D. Nichols is Chairman of the Board and the sole
director of NTS Capital Corporation.
The Manager of the Partnership's properties is NTS Development Company, the
executive officers and/or directors of which are Messrs. J. D. Nichols, Richard
L. Good, Brian F. Lavin and John W. Hampton.
Brian F. Lavin
- --------------
Mr. Lavin (age 44) serves as Executive Vice President of NTS Development Company
and President of the Company's Income Properties. As such, Mr. Lavin is
responsible for all NTS commercial real estate development, land acquisitions
and oversees the management of all commercial office buildings, business centers
and multi-family residential communities. Prior to joining NTS, Mr. Lavin served
as President of the Residential Division of Paragon Group, Inc., and as a Vice
President of Paragon's Midwest Division. In this capacity, he directed the
development, marketing, leasing and management operations for the firms
expanding portfolios. Mr. Lavin attended the University of Missouri where he
received his Bachelor's Degree in Business Administration. He has served as a
Director of the Louisville Apartment Association. He is a licensed Kentucky Real
Estate Broker and Certified Property Manager. Mr. Lavin is a member of the
Institute of Real Estate Management, and council member of the Urban Land
Institute. He currently serves on the University of Louisville Board of
Overseers and is on the Board of Directors of the National Multi-Housing Council
and the Louisville Science Center.
- 47 -
<PAGE>
Item 10. Directors and Executive Officers of the Registrant - Continued
--------------------------------------------------------------
John W. Hampton
- ---------------
Mr. Hampton (age 48) is Senior Vice President of NTS Corporation with
responsibility for all accounting operations. Before joining NTS in March 1991,
Mr. Hampton was Vice President - Finance and Chief Financial Officer of the
Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for nine
years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is
a Certified Public Accountant and a graduate of the University of Louisville
with a Bachelor of Science degree in Commerce. He is a member of the American
Institute of CPA's and the Kentucky Society of CPA's.
Item 11. Management Remuneration and Transactions
----------------------------------------
The officers and/or directors of the corporate General Partner receive no direct
remuneration in such capacities. The Partnership is required to pay a property
management fee based on gross rentals to NTS Development Company or an
affiliate. The Partnership is also required to pay to NTS Development Company a
repair and maintenance fee on costs related to specified projects. NTS
Development Company provides certain other services to the Partnerships. See
Note 9 to the financial statements which sets forth transactions with NTS
Development Company for the years ended December 31, 1997, 1996 and 1995.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1C to the financial statements
which describes the methods used to determine income allocations and cash
distributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The General Partner is NTS-Properties Plus Associates, a Kentucky Limited
Partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners
of the General Partner and their total respective interests in NTS-Properties
Plus Associates are as follows:
J. D. Nichols
10172 Linn Station Road 30.10%
Louisville, Kentucky 40223
NTS Capital Corporation
10172 Linn Station Road 9.95%
Louisville, Kentucky 40223
Richard L. Good 10.00%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 49.95% interests are owned by various limited partners of
NTS-Properties Plus Associates.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Property management fees of $52,430 (1997), $53,080 (1996) and $59,849 (1995)
were paid to NTS Development Company, an affiliate of the General Partner. 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
- 48 -
<PAGE>
Item 13. Certain Relationships and Related Transactions - Continued
----------------------------------------------------------
Partnership has incurred $2,041 and $1,335 as a repair and maintenance fee
during the years ended December 31, 1997 and 1996, respectively, and has
capitalized this cost as part of land, buildings and amenities.
As permitted by an agreement, the Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31, 1997, 1996
and 1995. These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses - affiliated
and items which have been capitalized as deferred leasing commissions, other
assets or as land, buildings and amenities.
1997 1996 1995
-------- -------- --------
Administrative $ 59,872 $111,401 $110,191
Leasing 18,499 19,087 17,194
Property manager 38,105 30,190 38,675
Other 1,573 5,347 2,482
------- ------- -------
$118,049 $166,025 $168,542
======= ======= =======
Accounts payable - operations includes approximately $336,000 and $233,000 due
NTS Development at December 31, 1997 and 1996, respectively. NTS Development
Company has indicated to the Partnership that they will not demand repayment of
the amounts outstanding at December 31, 1997 and incurred during 1998.
Subsequent to December 31, 1997, approximately $300,000 of the amount due NTS
Development Company was paid from the proceeds of a loan obtained by the
Partnership. See Note 11 Subsequent Events for a discussion regarding the terms
of this note payable.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
- 49 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
1. Financial statements
The financial statements for the years ended December 31, 1997, 1996 and
1995, together with the report of Arthur Andersen LLP dated March 6,
1998 appear in Item 8. The following financial statement schedules
should be read in conjunction with such financial statements.
2. Financial statement schedules
Schedules Page No.
--------- --------
III - Real Estate and Accumulated Depreciation 51 - 53
All other schedules have been omitted because they are not applicable,
or not required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit No. Page No.
----------- --------
3. Amended and Restated *
Agreement and Certificate
of Limited Partnership of
NTS-Properties Plus Ltd., a
Florida limited partnership
10. Property Management and *
Construction Agreement between
NTS Development Company and
NTS-Properties Plus Ltd.
27. Financial Data Schedule Included
herewith
* Incorporated by reference to documents filed with the Securities
and Exchange Commission in connection with the filing of the
Registration statements on Form S-11 on July 1, 1987 (effective
June 24, 1988) under Commission File No. 33-15475.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1997.
- 50 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<CAPTION>
Lakeshore University
Business Business Blankenbaker
Center Center Business
Phase II Phase II Center 1A
-------- -------- ---------
<S> <C> <C> <C>
Encumbrances (A) (A) (A)
Initial cost to partnership:
Land $ 3,690,531 $ 1,817,916 $ 1,613,251
Buildings and improvements 7,066,267 3,472,794 4,414,277
Cost capitalized subsequent to
acquisition
Improvements 1,248,824 1,695,478 770,481
Other (10,704,480)(B) (4,959,565)(B) (4,970,766)(C)
Gross amount at which carried December 31, 1997:
Land $ 373,900 $ 273,340 $ 862,361
Buildings and improvements 927,242 1,753,283 964,882
------------ ------------ ------------
Total $ 1,301,142 $ 2,026,623 $ 1,827,243
============ ============ ============
Accumulated depreciation $ 555,734 $ 332,368 $ 1,068,542
============ ============ ============
Date of construction N/A 12/90 N/A
Date Acquired 10/90 N/A 12/89
Life at which depreciation in
latest income statement is
computed (D) (D) (D)
<FN>
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties Plus Ltd.'s decreased interest in Lakeshore
Business Center Phase II and University Business Center Phase II as a
result of NTS-Properties Plus Ltd.'s contribution of its interest in
these properties to the Lakeshore/University II Joint Venture in 1995.
(C) Represents NTS-Properties Plus Ltd.'s decreased interest in Blankenbaker
Business Center 1A as a result of NTS-Properties Plus Ltd.'s
contribution of Blankenbaker Business Center 1A to the Blankenbaker
Business Center Joint Venture in 1990 and as a result of capital
contributions made by NTS-Properties VII, Ltd. and NTS- Properties IV to
the Blankenbaker Business Center Joint Venture in 1994.
(D) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
</FN>
</TABLE>
- 51 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<CAPTION>
Lakeshore
Business
Center Total
Phase I Pages 51-52
------- -----------
<S> <C> <C>
Encumbrances (A)
Initial cost to partnership:
Land $ 337,460 $ 7,459,158
Buildings and improvements 797,848 15,751,186
Cost capitalized subsequent to
acquisition
Improvements 14,353 3,729,136
Other -- (20,634,811)
Gross amount at which carried
December 31, 1997 (B):
Land $ 337,460 $ 1,847,061
Buildings and improvements 812,201 4,457,608
------------ ------------
Total $ 1,149,661 $ 6,304,669 (D)
============ ============
Accumulated depreciation $ 616,045 $ 2,572,689
============ =============
Date of construction N/A
Date Acquired 01/95
Life at which depreciation in
latest income statement is
computed (C)
<FN>
(A) First mortgage held by an insurance company.
(B) Aggregate cost of real estate for tax purposes is $6,863,780.
(C) Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are 10-30 years for land
improvements, 5-30 years for buildings and improvements and 5-30 years
for amenities.
(D) Total Gross Cost at December 31, 1997 $ 6,304,669
Adjust building contribution from fair
market value to cost:
University Business Center Phase II (2,735,931)
----------
Balance at December 31, 1997 $ 3,568,738
==========
</FN>
</TABLE>
- 52 -
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
Real Accumulated
Estate Depreciation
------------ ------------
<S> <C> <C>
Balances at December 31, 1994 $ 20,723,698 $ 5,821,480
Additions during period:
Improvements 98,777 --
Depreciation (a) -- 288,592
Other (b) 1,135,308 524,452
Deductions during period:
Retirements (11,766) (10,910)
Other (c) (18,399,976) (4,332,401)
------------ ------------
Balances at December 31, 1995 3,546,041 2,291,213
Additions during period:
Improvements 17,883 --
Depreciation (a) -- 151,614
Deductions during period:
Retirements (13,322) (13,322)
------------ ------------
Balances at December 31, 1996 3,550,602 2,429,505
Additions During Period:
Improvements 25,068 --
Depreciation (a) -- 150,098
Deductions during period:
Retirements (6,932) (6,914)
------------ ------------
Balances at December 31, 1997 $ 3,568,738 $ 2,572,689
============ ============
<FN>
(a) The additions charged to accumulated depreciation on this schedule will
differ from the depreciation and amortization on the Statements of Cash
Flows due to the amortization of loan costs and the amortization of
organizational and start-up costs.
(b) Represents the Partnership's share of Lakeshore Business Center I's
property and equipment under the proportionate consolidation method as a
result of the formation of the Lakeshore/University II Joint Venture.
(c) Represents the decrease in the Partnership's share of Lakeshore Business
Center Phase II's and University Business Center Phase II's property and
equipment under the proportionate consolidation method as a result of
the formation of the Lakeshore/University II Joint
Venture.
</FN>
</TABLE>
- 53 -
<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: March 26, 1998
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
registrant in their capacities and on the date indicated above.
Signature Title
/s/ J. D. Nichols General Partner of NTS-Properties Plus
J. D. Nichols Associates and Chairman of the Board and
Sole Director of NTS Capital Corporation
/s/ Richard L. Good General Partner of NTS-Properties Plus
Richard L. Good Associates and President of
NTS Capital Corporation
/s/ John W. Hampton Senior Vice President of NTS Capital
John W. Hampton Corporation
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
- 54 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1997 AND FROM THE STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 59,168
<SECURITIES> 0
<RECEIVABLES> 11,531
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 996,049
<DEPRECIATION> 2,572,689
<TOTAL-ASSETS> 1,370,774
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,528,058
0
0
<COMMON> 0
<OTHER-SE> (2,588,989)
<TOTAL-LIABILITY-AND-EQUITY> 1,370,774
<SALES> 826,343
<TOTAL-REVENUES> 827,978
<CGS> 0
<TOTAL-COSTS> 500,997
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 303,763
<INCOME-PRETAX> (77,434)
<INCOME-TAX> 0
<INCOME-CONTINUING> (77,434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77,434)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS $0.
</FN>
</TABLE>
