<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
- --------------------------------------------------------------------------------
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
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NTS-PROPERTIES PLUS LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 61-1126478
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10172 Linn Station Road
Louisville, Kentucky 40223
- --------------------------------------------------------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (502) 426-4800
- --------------------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -----
Exhibit Index: See page 18
Total Pages: 19
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TABLE OF CONTENTS
- -----------------
Pages
-----
PART I
Item 1. Financial Statements
Balance Sheets and Statement of Partners' Equity
As of June 30, 1999 and December 31, 1998 3
Statements of Operations
For the three months and six months ended
June 30, 1999 and 1998 4
Statements of Cash Flows
For the six months ended June 30, 1999 and 1998 5
Notes to Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
PART II
1. Legal Proceedings 18
2. Changes in Securities 18
3. Defaults upon Senior Securities 18
4. Submission of Matters to a Vote of Security Holders 18
5. Other Information 18
6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
<CAPTION>
As of As of
June 30, 1999 December 31, 1998*
------------- -----------------
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 36,145 $ 53,634
Cash and equivalents - restricted 56,752 24,258
Accounts receivable 16,359 14,857
Land, buildings and amenities, net 1,904,190 1,943,150
Asset held for sale and development 96,949 96,949
Deferred leasing commissions 105,211 105,802
Other assets 75,935 58,243
---------- ----------
$ 2,291,541 $ 2,296,893
========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages and note payable $ 2,677,040 $ 2,739,066
Accounts payable 92,860 74,664
Security deposits 21,299 15,231
Other liabilities 66,847 35,406
--------- ----------
2,858,046 2,864,367
Commitments and Contingencies
Partners' equity (566,505) (567,474)
---------- ---------
$ 2,291,541 $ 2,296,893
========== =========
</TABLE>
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------- -------- -----
PARTNERS' EQUITY
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 11,797,091 $ 100 $ 11,797,091
Net income (loss)- prior years (10,164,657) (102,673) (10,267,330)
Net loss - current year (1,600) (16) (1,616)
Cash distributions to partners
to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited
partnership units (35,638) -- (35,638)
----------- --------- -----------
Balances at June 30, 1999 $ (443,324) $ (123,181) $ (566,505)
=========== ========= ===========
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on April 1, 1999.
3
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<TABLE>
NTS-PROPERTIES PLUS LTD.
------------------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Rental income $ 182,465 $ 236,241 $ 361,072 $ 463,769
Interest and other income (2,980) 885 245 1,876
-------- -------- -------- --------
179,485 237,126 361,317 465,645
EXPENSES:
Operating expenses 24,933 30,136 50,837 64,351
Operating expenses - affiliated 12,880 16,956 31,338 32,103
Interest expense 56,718 78,111 113,106 158,555
Management fees 11,037 14,797 21,226 28,790
Real estate taxes 16,801 16,490 33,596 38,346
Professional and administrative
expenses 17,971 14,158 33,221 24,999
Professional and administrative
affiliated 9,229 16,104 20,290 28,520
Depreciation and amortization 29,535 22,938 59,319 55,009
-------- -------- -------- --------
179,104 209,690 362,933 430,673
-------- -------- -------- --------
Net income (loss) $ 381 $ 27,436 $ (1,616) $ 34,972
======== ======== ======== ========
Net income (loss) allocated to the
limited partners $ 377 $ 27,162 $ (1,600) $ 34,622
======== ========= ========= ========
Net income (loss) per limited
partnership unit $ 0.00 $ 0.04 $ (0.00) $ 0.05
======== ========= ========= ========
Weighted average number of units 654,999 661,589 656,691 662,490
======== ========= ========= ========
</TABLE>
4
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<TABLE>
NTS-PROPERTIES PLUS LTD.
------------------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,616) $ 34,972
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 59,319 55,009
Changes in assets and liabilities:
Cash and equivalents - restricted (32,494) (45,728)
Accounts receivable (1,502) 16,022
Deferred leasing commissions 591 9,000
Other assets (21,189) (7,589)
Accounts payable - operations 18,196 (277,212)
Security deposits 6,068 5,668
Other liabilities 31,441 45,854
-------- --------
Net cash provided by (used in)
operating activities 58,814 (164,004)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (16,859) (7,312)
-------- --------
Net cash used in investing activities (16,859) (7,312)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and notes
payable (116,553) (128,890)
Increase in note payable 54,527 350,000
Repurchase of limited partnership Units (9,988) (5,000)
Contributions to Partnership 12,570 --
-------- --------
Net cash provided by (used in)
financing activities (59,444) 216,110
-------- --------
Net increase (decrease) in cash and
equivalents (17,489) 44,794
CASH AND EQUIVALENTS, beginning of
equivalents 53,634 39,940
-------- --------
CASH AND EQUIVALENTS, end of period $ 36,145 $ 84,734
======== ========
Interest paid on a cash basis $ 108,812 $ 159,536
======== ========
</TABLE>
5
<PAGE>
NTS-PROPERTIES PLUS LTD.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The financial statements and schedules included herein should be read in
conjunction with the Partnership's 1998 Form 10-K as filed with the Commission
on April 1, 1999. In the opinion of the General Partner, all adjustments (only
consisting of normal recurring accruals) necessary for a fair presentation have
been made to the accompanying financial statements for the three months and six
months ended June 30, 1999 and 1998.
1. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Concentration of Credit Risk
----------------------------
NTS-Properties Plus Ltd. has joint venture investments in commercial
properties in Kentucky (Louisville) and Florida (Ft. Lauderdale).
Substantially all of the tenants are local businesses or are businesses
which have operations in the location in which they lease space.
During the first quarter of 1999, SHPS, Inc., formerly known as Sykes
Health Plan Services, Inc., announced its intentions to consolidate its
operations and to build its corporate headquarters in Jefferson County,
Kentucky. One of SHPS, Inc's operations, Sykes, is already based in
Louisville, Kentucky. Sykes occupies 100% of Blankenbaker Business Center
1A. Due to the expansion of SHPS, Inc's headquarters, it is the
Partnership's understanding that SHPS, Inc. does not intend to continue
to occupy the space at Blankenbaker Business Center 1A through the
duration of its lease term, which expires in July 2005.
3. Cash and Equivalents - Restricted
---------------------------------
Cash and equivalents - restricted represents funds escrowed with mortgage
companies for property taxes in accordance with the loan agreements and
funds which the Partnership has reserved for the repurchase of limited
partnership Units.
4. Interest Repurchase Reserve
---------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated
Agreement of Limited Partnership, the Partnership established an Interest
Repurchase Reserve in 1996. During the years ended December 31, 1998, 1997
and 1996, the Partnership funded $5,000, $0 and $15,572, respectively, to
the reserve. During the six months ended June 30, 1999, the Partnership
funded an additional $10,000 to the reserve. On February 17, 1997, the
repurchase of partnership Units was temporarily suspended in order to
conserve cash. This step was taken until it was clear that, in the General
Partner's opinion, the Partnership had the necessary cash reserves to meet
6
<PAGE>
future leasing and tenant finish costs and had rebuilt cash reserves to
meet the ongoing needs of the Partnership. Through June 30, 1999, the
Partnership has repurchased 37,233 Units for $30,560 at prices ranging
from $.70 to $1.00 per Unit. The 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 Units. The
balance in the Reserve at June 30, 1999 is $0. Repurchased Units are
retired by the Partnership, thus increasing the percentage of ownership of
each remaining investor. The Interest Repurchase Reserve was funded from
cash reserves.
5. Mortgages and Note Payable
--------------------------
Mortgage and note payable consist of the following:
June 30, December 31,
1999 1998
------------- -----------------
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.5%,
due November 15, 2005, secured by land and
building $ 1,280,685 $ 1,352,832
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%,
due August 1, 2008, secured by land and
building 638,431 661,446
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%,
due August 1, 2008, secured by land and
building 593,397 614,788
Note payable to a bank, bearing interest
at a fixed rate of 8.5%, due January 29,
2000, collateral provided by NTS Financial
Partnership, an affiliate of NTS
Development Company $ 164,527 $ 110,000
---------- ----------
$ 2,677,040 $ 2,739,066
========== ==========
Based on the borrowing rates currently available to the Partnership for
loans with similar terms and average maturities, the fair value of long
term debt approximates carrying value.
7
<PAGE>
6. Basis of Property
-----------------
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 market
value. Application of this standard during the three months and six months
ended June 30, 1999 and 1998 did not result in an impairment loss.
7. Related Party Transactions
--------------------------
Property management fees of $11,037 and $21,226 (1999) and $14,797 and
$28,790 (1998) were paid to NTS Development Company, an affiliate of the
General Partner of the Partnership, during the three months and six months
ended June 30. 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 $164 and $479 as repair and maintenance fees
during the three months and six months ended June 30, 1999 and has
capitalized this cost as part of land, buildings and amenities. No such
expenses were incurred for the three months and six months ended June 30,
1998.
As permitted by an agreement, the Partnership was also charged the
following amounts from NTS Development Company for the six months ended
June 30, 1999 and 1998. 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.
1999 1998
------------------- ------------------
Administrative $ 25,868 $ 33,067
Leasing 14,896 10,924
Property manager 15,266 21,036
Other 2,515 1,178
------- -------
$ 58,545 $ 66,205
======= =======
Accounts payable - operations includes approximately $39,095 and $16,600
due NTS Development Company at June 30, 1999 and December 31, 1998,
respectively. NTS Development Company has agreed to defer amounts owed to
it by the Partnership as of December 31, 1998 and those amounts that will
accrue during fiscal 1999 through the period ending January 1, 2000. In
addition, the Company will provide the financial support necessary for the
Partnership to pay its non-affiliated operating expenses as they come due
during the period ending January 1, 2000. Management believes the Company
has the financial resources to fulfill that commitment. There can be no
assurances that this level of support will continue past January 1, 2000.
8
<PAGE>
8. Subsequent Events
-----------------
On July 1, 1999, NTS-Properties V contributed $1,737,000 to the L/U II
Joint Venture. The other partners in the Joint Venture, including
NTS-Properties Plus, did not make capital contributions at that time.
Accordingly, the ownership percentages of the partners in the Joint
Venture changed at that time. Effective July 1, 1999, NTS-Properties Plus'
percentage of ownership in the Joint Venture is 8.40%.
On July 1, 1999, Gregory A. Wells was hired as Executive Vice President by
NTS Capital Corporation, General Partner of NTS-Properties Associates
Plus, the General Partner of NTS-Properties Plus. Mr. Wells will serve as
the senior Accounting and Finance Officer of NTS Capital Corporation.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4
acres of land adjacent to the Lakeshore Business Center for a purchase
price of $528,405. The Partnership has a 8.40% interest in the Partnership
at that date.
9. Segment Reporting
-----------------
The Partnership adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998.
SFAS No. 131 established standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued
to limited partners. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision
making group, in deciding how to allocate resources and in assessing
performance. The standard also allows entities to aggregate operating
segments into a single segment if the segments are similar in each of the
six criteria set forth in SFAS No. 131. The Partnership's chief operating
decision-maker is the General Partner. The Company's reportable operating
segments include only one segment - Commercial real estate operations.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations is structured in four major sections. The first section provides
information related to occupancy levels and rental and other income generated by
the Partnership's properties. The second analyzes results of operations on a
consolidated basis. The final sections address consolidated cash flows and
financial condition. Discussion of certain market risks also follow.
Management's analysis should be read in conjunction with the financial
statements in Item 1 and the cautionary statements below.
Cautionary Statements
- ---------------------
Some of the statements included in Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations, may be considered to be
"forward-looking statements" since such statements relate to matters which have
not yet occurred. For example, phrases such as "the Partnership anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which the Partnership expected also may not occur or occur in a different
manner, which may be more or less favorable to the Partnership. The Partnership
does not undertake any obligations to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Any forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, or elsewhere in this report,
which reflect management's best judgement based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
business centers. If a major commercial tenant defaults on its lease, the
Partnership's ability to make payments due under its debt agreements, payment 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.
10
<PAGE>
The occupancy levels at the Partnership properties as of June 30 were as
follows:
1999(1) 1998
----------------- ----------------
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at June 30, 1999)
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/
University II Joint Venture(L/U II Joint
Venture)(Ownership % at June 30, 1999)
Lakeshore Business Center Phase I (12%)(2) 71% 94%
Lakeshore Business Center Phase II (12%) 86% 92%
University Business Center Phase II (12%)(3) N/A 90%
(1) Current occupancy levels are considered adequate to continue the operation
of the Partnership's properties.
(2) In the opinion of the General Partner of the Partnership, the decrease in
period ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) Represents ownership percentage as of June 30, 1998. On October 6, 1998,
University Business Center Phase II was sold.
Average occupancy levels at the Partnership properties during the three months
and six months ended June 30 were as follows:
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties VII,
Ltd.(Ownership % at June 30, 1999)
Blankenbaker Business Center 1A (39%) 100% 100% 100% 100%
Properties owned through Lakeshore/
University II Joint Venture(L/U II Joint
Venture)(Ownership % at June 30, 1999)
Lakeshore Business Center Phase I (12%)(1) 72% 94% 76% 94%
Lakeshore Business Center Phase II (12%)(1) 86% 95% 85% 97%
University Business Center Phase II (12%)(2) N/A 90% N/A 95%
(1)In the opinion of the General Partner of the Partnership, the decrease in
average occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
(2)Represents ownership percentage as of June 30, 1998. On October 6, 1998,
University Business Center Phase II was sold.
11
<PAGE>
The rental and other income generated by the Partnership's properties for the
three months and six months ended June 30, 1999 and 1998 was as follows:
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
Property owned in Joint Venture with
NTS-Properties IV and NTS-Properties
VII, Ltd. (Ownership % at June 30, 1999)
Blankenbaker Business Center 1A (39%) $92,916 $ 86,091 $185,823 $178,839
Properties owned through Lakeshore/
University II Joint Venture
(L/U II Joint Venture (Ownership %
at June 30, 1999)
Lakeshore Business Center Phase I (12%) $40,494 $ 46,368 $ 84,266 $104,797
Lakeshore Business Center Phase II (12%) $49,055 $ 68,611 $ 90,991 $120,322
University Business Center Phase II (12%)(1) N/A $ 35,724 N/A $ 61,220
(1) Represents ownership percentage as of June 30, 1998. On October 6,
1998, University Business Center Phase II was sold.
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
The following is an analysis of material changes in results of operations for
the periods ending June 30, 1999 and 1998. Items that did not have a material
impact on operations for the periods listed above have been eliminated from this
discussion.
Rental and other income decreased approximately $57,600 or 24% and $104,300 or
22%, respectively, for the three months and six months ended June 30, 1999 as
compared to the same periods in 1998. The decrease is primarily the result of
the sale of University Business Center Phase II in October 1998. University
Business Center Phase II accounted for approximately 15% and 13% of the
Partnership's rental and other income for the three months and six months ended
June 30, 1998, respectively. The decrease is also due to decreases in average
occupancy at Lakeshore Business Center Phases I and II.
Period ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
representative of the entire period's results.
In cases of tenants who cease making rental payments or abandon the premises in
breach of their lease, the Partnership pursues collection through the use of
collection agencies and other remedies available by law when practical. In cases
where tenants have vacated as a result of bankruptcy, the Partnership has taken
legal action when it was thought there could be a possible collection. There
have been no funds recovered as a result of these actions during the three
months and six months ended June 30, 1999 or 1998.
12
<PAGE>
Operating expenses decreased approximately $4,700 or 16% and $12,400 or 20% for
the three months and six months ended June 30, 1999 as compared to the same
periods in 1998 due primarily to the sale of University Business Center Phase II
in October 1998.
Interest expense decreased approximately $21,400 or 27% and $45,400 or 29% for
the three months and six months ended June 30, 1999 as compared to the same
periods in 1998 as a result of the reduction in debt from the sale of University
Business Center Phase II in October 1998 and from regular principal payments on
the remaining joint venture debt. This decrease is partially offset by interest
incurred on the note payable the Partnership obtained January 1998 which bears
interest at 8.5%. The balance on the note payable was $164,500 and $110,000, as
of June 30, 1999 and December 31, 1998, respectively.
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.
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 $5,809,884.
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
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. 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.
NTS Development Company (the Company) has agreed to defer amounts owed to it by
the Partnership as of December 31, 1998 through the period ending January 1,
2000. In addition, the Company will provide the financial support necessary for
the Partnership to pay its non-affiliated operating expenses as they come due
during the period ending January 1, 2000. Management of the Company believes the
Company has the financial resources to fulfill that commitment. There can be no
assurances this level of support from the Company will continue past January 1,
2000.
Cash flows provided by (used in):
1999 1998
Operating activities $ 58,814 $ (164,004)
Investing activities (16,859) (7,312)
Financing activities (59,444) 216,110
------- --------
Net increase (decrease)
in cash and equivalents $(17,489) $ 44,794
======= ========
13
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
Net cash provided by operating activities increased approximately $223,000 for
the six months ended June 30, 1999 as compared to the same period in 1998. This
increase was primarily driven by changes in the level of accounts payable.
Net cash used in investing activities for the six months ended June 30, 1999
and 1998 was $(16,859) and $(7,312), respectively. These funds were used
primarily for tenant finish improvements.
Net cash (used in) provided by financing activities totaled ($59,444), and
$216,110 for the six months ended June 30, 1999 and 1998, respectively. The net
cash provided by financing activities in 1998 was the result of a $350,000 note
payable obtained by the Partnership in January 1998 and is offset by principal
payments on mortgages payable and funds restricted for the repurchase of limited
partnership Units. The net cash used in financing activities in 1999 is the
result of principal payments on mortgages payable and funds restricted for the
repurchase of limited partnership Units. This activity is partially offset by an
increase in the note payable as a result of an extension of the due date from
January 29, 1999 to January 29, 2000. The note was increased in order to cover
interest owed as of the original maturity date.
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 June 30) were $36,145 and $84,734
at June 30, 1999 and 1998, respectively.
Due to the fact that no distributions were made during the three months ended
June 30, 1999 or 1998, the table which presents that portion of the distribution
that represents a return of capital on a Generally Accepted Accounting Principle
basis has been omitted.
Currently, the Partnership's plans for renovations and other major capital
expenditures include tenant improvements at the Partnership's properties as
required by lease negotiations. Changes to current tenant finish improvements
are a typical part of any lease negotiation. Improvements generally include a
revision to the current floor plan to accommodate a tenant's needs, new
carpeting and paint and/or wall covering. The extent and cost of the
improvements are determined by the size of the space being leased and whether
the improvements are for a new tenant or incurred because of a lease renewal.
The tenant finish improvements will be funded by cash flow from operations and
cash reserves.
The Partnership has no material commitments for renovations or capital
improvements as of June 30, 1999.
14
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
Pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of
Limited Partnership, the Partnership established an Interest Repurchase Reserve
in 1996. During the years ended December 31, 1998, 1997 and 1996, the
Partnership funded $5,000, $0 and $15,572, respectively, to the reserve.
During the six months ended June 30, 1999, the Partnership funded an additional
$10,00O to the reserve. On February 17, 1997, the repurchase of partnership
Units was temporarily suspended in order to conserve cash. This step was taken
until it was clear that, in the General Partner's opinion, the Partnership had
the necessary cash reserves to meet future leasing and tenant finish costs and
had rebuilt cash reserves to meet the ongoing needs of the Partnership. Through
June 30, 1999, the Partnership has repurchased 37,233 Units for $30,560 at a
price ranging from $7.70 to $1.00 per Unit. The 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 Units. The
balance in the Reserve at June 30, 1999 is $0. Repurchased Units retired are by
the Partnership, thus increasing the percentage of ownership of each remaining
investor. The Interest Repurchase Reserve was funded from cash reserves.
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of
land adjacent to the Lakeshore Business Center for a purchase price of $528,405.
The Partnership has a 8.40% interest in the Joint Venture at that date. The
Partnership expects to use the net proceeds from the sale of the land to help
fund the construction of Lakeshore Business Center III as described below.
As of June 30, 1999 the L/U II Joint Venture intends to use the remaining 3.8
acres of the land it owns at the Lakeshore Business Center development to
construct Lakeshore Business Center Phase III. Construction is expected to begin
during 1999. The construction cost is currently estimated to be $4,000,000 and
will be funded by a capital contribution from NTS-Properties V and debt
financing. Construction will not begin until, in the opinion of the General
partners, financing on favorable terms has been obtained. On July 1, 1999,
NTS-Properties V contributed capital of $1,737,000 to the L/U II Joint Venture
for the construction of Lakeshore Business Center Phase III. At that time, the
Partnership and NTS-Properties IV, were not in a position to contribute
additional capital required for the construction of Lakeshore Business Center
Phase III. The Partnership, together with NTS-Properties IV, agreed that
NTS-Properties V would make a capital contribution to the L/U II Joint Venture
with the knowledge that their Joint Venture interests would, as a result,
decrease.
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.
15
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
During the first quarter of 1999, SHPS, Inc., formerly known as Sykes Health
Plan Services, Inc., announced its intentions to consolidate its operations and
to build its corporate headquarters in Jefferson County, Kentucky. One of SHPS,
Inc's operations, Sykes, is already based in Louisville, Kentucky. Sykes
occupies 100% of Blankenbaker Business Center 1A. Due to the expansion of SHPS,
Inc's headquarters, it is the Partnership's understanding that SHPS, Inc. does
not intend to continue to occupy the space at Blankenbaker Business Center 1A
through the duration of its lease term, which expires in July 2005.
The Partnership's proportionate share of the rental income from this property
accounted for approximately 51% of the Partnership's rent revenues during the
six months ended June 30, 1999. The Partnership has not yet determined the
effect, if any, on the Partnership's operations, given the fact Sykes is under
lease until July 2005 and no official notice of termination has been received.
Leases at the Partnership's properties provide for tenants to contribute toward
the payment of increases in 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.
Year 2000
- ---------
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare its information systems (IT) and non-information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separately for the Year 2000 since the
Partnership saw the need to move to more advanced management and accounting
systems made available by new technology and software developments during the
decade of the 1990's.
The PILOT software system, purchased in the early 1990's, is being replaced by a
windows based network system both for NTS' headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California will replace PILOT. The Yardi
system has been tested and is compatible with Year 2000 and beyond. This system
is being implemented with the help of third party consultants and should be
fully operational by the third quarter of 1999. NTS' system for multi-family
apartment locations was converted to GEAC's Power Site System earlier in 1998
and is Year 2000 compliant.
The few remaining systems not addressed by these conversions are being modified
by the Company's in-house staff of programmers. The Hewlett Packard 3000 system,
used for PILOT and custom applications, was purchased in 1997 and will be part
of the new network. It will be retained as long as necessary to assure smooth
operations and has been upgraded to meet Year 2000 requirements.
All risks identified with information technology are believed to be addressed by
these plans.
16
<PAGE>
Year 2000 - continued
- ---------------------
The cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since the Partnership had already identified the need to
move to a network based system regardless of the Year 2000. The costs involved
will be approximately $6,500 during 1999. Costs incurred through December 31,
1998 were approximately $1,500. These costs primarily included hardware and
software.
NTS property management staff has been surveying its vendors to evaluate
embedded technology in its alarm systems, HVAC controls, telephone systems and
other computer associated facilities. In a few cases, equipment is being
replaced. In some cases, circuitry is being upgraded. The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions. Management anticipates that applications involving ET will be Year
2000 compliant by the third quarter of 1999.
NTS is also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on its business. All
significant vendors and tenants have indicated that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.
Management has determined that at its current state of readiness, the need does
not presently exist for a contingency plan. NTS will continue to evaluate the
need for such a plan.
Despite diligent preparation, unanticipated third-party failures, inability of
NTS' tenants to pay rent when due, more general public infrastructure failures
or failure to successfully conclude NTS' remediation efforts as planned could
have a material adverse impact on NTS' results of operations, financial
conditions and/or cash flows in 1999 and beyond.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Our primary market risk exposure with regards to financial instruments is
changes in interest rates. All of the Partnership's debt bears interest at a
fixed rate.
17
<PAGE>
PART II. OTHER INFORMATION
3. Defaults upon Senior Securities
-------------------------------
None
5. Other Information
-----------------
In anticipation of retirement, Mr. Richard Good, the Vice Chairman and
former President of NTS Capital Corporation and NTS Development Company,
has begun to decrease his responsibilities with the Partnership and its
affiliates. In conjunction with Mr. Good's decreased responsibilities, Mr.
Brian Lavin was appointed President and Chief Operating Officer of NTS
Development Company and NTS Capital Corporation in February, 1999.
6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
Items 1,2 and 4 are not applicable and have been omitted.
18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NTS-Properties Plus Ltd. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NTS-PROPERTIES PLUS LTD.
------------------------
(Registrant)
BY: NTS-Properties Plus Associates,
General Partner
BY: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
--------------------------
Gregory A. Wells
Executive Vice President
of NTS Capital Corporation
Date: August 16, 1999
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1999 AND FROM THE STATEMENT OF OPERATIONS FROM THE SIX
MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 92,897
<SECURITIES> 0
<RECEIVABLES> 16,359
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,904,190
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 2,291,541
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,677,040
0
0
<COMMON> 0
<OTHER-SE> (566,505)
<TOTAL-LIABILITY-AND-EQUITY> 2,291,541
<SALES> 361,072
<TOTAL-REVENUES> 361,317
<CGS> 0
<TOTAL-COSTS> 249,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113,106
<INCOME-PRETAX> (1,616)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,616)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,616)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS
$0.
<F2>THIS INFORMATION HAS NOT BEEN DISCLOSED IN THE PARTNERSHIP'S FORM 10-Q
FILING.
</FN>
</TABLE>
