UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 the 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, KY 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
with since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by the Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES __X___ NO _____
Exhibit Index: See page 18
Total Pages: 19
<PAGE>
TABLE OF CONTENTS
-----------------
PART I
Item 1. Financial Statements Pages
-----
Balance Sheets and Statement of Partners' Equity
as of September 30, 1999 and December 31, 1998 3
Statements of Operations
For the three months and nine months ended
September 30, 1999 and 1998 4
Statements of Cash Flows
For the nine months ended September 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
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
<TABLE>
NTS-PROPERTIES PLUS, LTD.
-------------------------
BALANCE SHEETS AND STATEMENTS OF PARTNERS' EQUITY
-------------------------------------------------
<CAPTION>
As of As of
ASSETS
- ------
<S> <C> <C>
Cash and equivalents $ 186,263 $ 53,634
Cash and equivalents - restricted 58,286 24,258
Accounts receivable 6,020 14,857
Land, buildings and amenities, net 1,421,043 2,040,099
Deferred leasing commissions 91,748 105,802
Other assets 44,031 58,243
----------- -----------
Total assets $ 1,807,391 $ 2,296,893
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages and notes payable $ 2,215,137 $ 2,739,066
Accounts payable 95,799 74,664
Security deposits 11,873 15,231
Other liabilities 74,185 35,406
----------- -----------
2,396,994 2,864,367
Partners' equity (589,603) (567,474)
----------- -----------
$ 1,807,391 $ 2,296,893
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Limited General
------- -------
PARTNERS' EQUITY
- ----------------
<S> <C> <C> <C>
Capital contributions, net of
offering costs $ 11,784,521 $ 100 $ 11,784,621
Net income (loss) - prior years (10,164,657) (102,673) (10,267,330)
Net loss - current year (7,302) (74) (7,376)
Cash distributions to partners to date (2,038,520) (20,592) (2,059,112)
Repurchase of limited partnership Units (40,406) -- (40,406)
------------ ------------ ------------
Balances at September 30, 1999 $ (466,364) $ (123,239) $ (589,603)
============ ============ ============
</TABLE>
* Reference is made to the audited financial statements in the Form 10-K as
filed with the Commission on April 1, 1999.
3
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS, LTD.
-------------------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
REVENUES:
- ---------
<S> <C> <C> <C> <C>
Rental income $ 143,233 $ 211,293 $ 501,888 $ 675,062
Gain on sale of assets 7,925 -- 7,925 --
Interest and other income 4,189 553 6,851 2,429
--------- --------- --------- ---------
155,347 211,846 516,664 677,491
EXPENSES:
- ---------
Operating expenses 23,315 33,198 74,154 97,557
Operating expenses - affiliated 11,532 16,140 42,870 48,243
Interest expense 47,088 77,726 160,194 236,281
Management fees 8,701 12,909 29,927 41,698
Real estate taxes 12,895 18,803 46,490 57,149
Professional and administrative
expenses 20,108 11,670 53,329 36,668
Professional and administrative
expenses - affiliated 13,405 7,276 33,695 35,796
Depreciation and amortization 24,062 22,600 83,381 77,603
--------- --------- --------- ---------
161,106 200,322 524,040 630,995
--------- --------- --------- ---------
Net income (loss) $ (5,759) $ 11,524 $ (7,376) $ 46,496
========= ========= ========= =========
Net income (loss) allocated to
the limited partners $ (5,701) $ 11,409 $ (7,302) $ 46,031
========= ========= ========= =========
Net income (loss) per limited
partnership Unit $ (0.01) $ 0.02 $ (0.01) $ 0.07
========= ========= ========= =========
Weighted average number of units 646,600 658,402 652,851 661,113
========= ========= ========= =========
</TABLE>
4
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS, LTD.
-------------------------
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES*
- -------------------------------------
<S> <C> <C>
Net income (loss) $ (7,376) $ 46,496
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 83,381 77,603
Loss on sale of assets 56 --
Changes in assets and liabilities:
Cash and equivalents - restricted (34,028) (68,574)
Accounts receivable 8,837 20,258
Deferred leasing commissions 14,054 12,879
Other assets 14,211 (3,132)
Accounts payable - operations 21,135 (272,722)
Security deposits (3,358) 4,183
Other liabilities 32,242 60,864
--------- ---------
Net cash provided by (used in)
operating activities 129,154 (122,145)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Additions to land, buildings and
amenities (34,451) (15,476)
Sale of land, buildings and amenities 31,323 --
Change in ownership of Joint Venture
(Note 8) 138,194 --
--------- ---------
Net cash provided by (used in)
investing activities 135,066 (15,476)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal payments on mortgages and
notes payable (171,361) (196,088)
Increase in notes payable 54,527 350,000
Repurchase of limited partnership
Units (14,757) (5,000)
--------- ---------
Net cash provided by (used in)
financing activities (131,591) 148,912
--------- ---------
Net increase in cash and equivalents 132,629 11,291
--------- ---------
CASH AND EQUIVALENTS, beginning of
period 53,634 39,940
--------- ---------
CASH AND EQUIVALENTS, end of period $ 186,263 $ 51,231
========= =========
Interest paid on a cash basis $ 151,965 $ 237,264
========= =========
</TABLE>
*Cash flows from Operating Activities excludes the effects of the change in the
Partnership's percentage ownership in the L/U II Joint Venture (Note 8).
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 nine
months ended September 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 principals 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 with
such mortgage companies 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 nine months ending September 30, 1999 the
Partnership funded an additional $15,000 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 future leasing and tenant finish costs and had rebuilt cash
reserves to meet the ongoing needs of the Partnership. Through September
30, 1999, the Partnership has repurchased 42,002 Units for $35,329 at
prices ranging from $0.70 to $1.00 per Unit. The offering price per Unit
was established by the General Partner in its sole discretion and
6
<PAGE>
4. Interest Repurchase Reserve - Continued
---------------------------------------
does not purport to represent the fair market value or liquidation value of
the Units. The balance in the reserve at September 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 Notes Payable
---------------------------
Mortgages and notes payable consist of the following:
September 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
buildings. $1,242,725 $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
buildings. 418,710 661,446
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%,
due August 1, 2008, secured by land and
buildings. 389,175 614,788
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
---------- ----------
$2,215,137 $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 is $2,121,018.
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 periods ended September 30, 1999
and 1998 did not result in an impairment loss.
7
<PAGE>
7. Related Party Transactions
--------------------------
Property management fees of $8,701 and $29,927 (1999) and $12,909 and
$41,698 (1998) were paid to NTS Development Company, an affiliate of the
General Partner of the Partnership, during the three months and nine months
ended September 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 $644 and $1,123 as repair and maintenance fees
during the three months and nine months ended September 30, 1999, and $405
and $590 during the three months and nine months ended September 30, 1998,
and has capitalized these costs 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 three months and
nine months ended September 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.
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Administrative $ 16,694 $ 9,508 $ 42,562 $ 42,575
Leasing 5,462 4,525 20,358 15,449
Property Manager 7,916 10,621 23,182 31,658
Other (1,904) 996 611 1,989
-------- -------- -------- -------
$ 28,168 $ 25,650 $ 86,713 $ 91,671
======== ======== ======== =======
Accounts payable - operations includes approximately $47,534 and $16,600
due to NTS Development Company on September 30, 1999 and December 31, 1998,
respectively. NTS Development Company (the Company) has agreed to defer
amounts owed to it by the Partnership as of December 31, 1998 and those
amounts that will accrue during the fiscal year 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. Transactions Affecting the Investment in Lakeshore/University II Joint
---------------------------------------------------------------------------
Venture
-------
On July 1, 1999, NTS-Properties V contributed $1,737,000 to the
Lakeshore/University II Joint Venture (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 other partners in the Joint Venture decreased. Effective July 1,
1999, NTS-Properties Plus' percentage of ownership in the Joint Venture is
8.40%, as compared to 12.57% prior to July 1, 1999.
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 expects to use the net proceeds from the sale of
the land to help fund the construction of Lakeshore Business Center III.
8
<PAGE>
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 ("MD&A") 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. A discussion of certain market risks also
follows. MD&A 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 this Item 2 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 MD&A, or elsewhere in this report,
which reflect management's best judgment based on factors known, involve risks
and uncertainties. Actual results could differ materially from those anticipated
in any forward-looking statements as a result of a number of factors, including
but not limited to those discussed below. Any forward-looking information
provided by the Partnership pursuant to the safe harbor established by recent
securities legislation should be evaluated in the context of these factors.
The Partnership's principal activity is the leasing and management of commercial
business centers. If a major commercial tenant defaults on its lease, the
Partnership's ability to make payments due under its debt agreements, 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>
Results of Operations
- ---------------------
The occupancy levels at the Partnership's properties as of September 30 were as
follows:
1999 (1) 1998
-------- ----
Property owned in Joint Venture with NTS-Properties
---------------------------------------------------
IV and NTS-Properties VII, Ltd. (Ownership % at
---------------------------------------------------
September 30, 1999)
-------------------
Blankenbaker Business Center 1A (39%) 100% 100%
Properties owned through Lakeshore/University II
---------------------------------------------------
Joint Venture (L/U II Joint Venture)
------------------------------------
Lakeshore Business Center Phase I (2)(3) 74% 82%
Lakeshore Business Center Phase II (3) 86% 86%
University Business Center Phase II (4) N/A 88%
(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) Ownership percentage was 12% as of September 30, 1998 and 8% as of September
30, 1999. See Note 8.
(4) Ownership percentage as of September 30, 1998 was 12%. On October 6, 1998,
University Business Center Phase II was sold.
Average occupancy levels at the Partnership's properties during the three months
and nine months ended September 30 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
Property owned in Joint Venture with NTS-Properties
---------------------------------------------------
IV and NTS-Properties VII, Ltd. (Ownership % at
---------------------------------------------------
September 30, 1999)
---------------------
<S> <C> <C> <C> <C>
Blankenbaker Business Center 1A (39%) 100% 100% 100% 100%
Properties owned through Lakeshore/University II
---------------------------------------------------
Joint Venture (L/U II Joint Venture)
------------------------------------
Lakeshore Business Center Phase I (1)(2) 73% 81% 75% 90%
Lakeshore Business Center Phase II (1)(2) 86% 90% 86% 95%
University Business Center Phase II (3) N/A 86% N/A 91%
</TABLE>
(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) Ownership percentage was 12% as of September 30, 1999 and 8% as of
September 30, 1999. See Note 8.
(3) Ownership percentage as of September 30, 1998 was 12%. On October 6, 1998,
University Business Center Phase II was sold.
11
<PAGE>
Results of Operations - Continued
- ---------------------------------
The rental and other income generated by the Partnership's properties for the
three months and nine months ended September 30, 1999 and 1998 were a follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Property owned in Joint Venture with
-------------------------------------
NTS-Properties IV and NTS-Properties
-------------------------------------
VII, Ltd. (Ownership % at September
-------------------------------------
30, 1999)
---------
Blankenbaker Business Center 1A (39%) $89,278 $92,907 $275,093 $271,746
Properties owned through Lakeshore
-------------------------------------
/University II Joint Venture (L/U II
-------------------------------------
Joint Venture)
--------------
Lakeshore Business Center Phase I (1) $25,013 $39,520 $109,279 $144,317
Lakeshore Business Center Phase II (1) $27,963 $44,297 $118,954 $164,619
University Business Center Phase II (2) N/A $35,023 N/A $ 96,242
(1) Represents ownership percentage of 12% for the nine months ended
September 30, 1998. Ownership percentage is 12% for the six months
ended June 30, 1999 and 8% for the three months ended September 30,
1999.
(2) Represents ownership percentage of 12% as of September 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 September 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 $56,000 or 27% and $161,000 or
24%, respectively, for the three months and nine months ended September 30,
1999, as compared to the same periods in 1998. Contributing to the decrease is
the sale of University Business Center Phase II in October 1998. University
Business Center Phase II accounted for approximately 16% and 14% of the
Partnership's rental and other income for the three months and nine months ended
September 30, 1998, respectively. The decrease is also due to decreases in
average occupancy at Lakeshore Business Center Phases I and II, and to a
decrease in ownership of the Lakeshore/University II Joint Venture, as a result
of a capital contribution made by NTS-Properties V to the Joint Venture on July
1, 1999, (see Note 8 to the Financial Statements). Partially offsetting the
decreases in income is a gain on the sale of the Tract 12 land owned by the
Lakeshore/University II Joint Venture of approximately $94,000. NTS-Properties
Plus' share of the gain is approximately $7,900.
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.
12
<PAGE>
Results of Operations - Continued
- ---------------------------------
In cases of tenants who cease making rental payments or abandon the premises in
breach of the lease terms, the Partnership pursues collection through the use of
collection agencies or 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 nine months ended September 30, 1999 or 1998.
Operating expenses decreased approximately $10,000 or 29% and $23,000 or 23% for
the three months and nine months ended September 30, 1999, as compared to the
same periods in 1998, due primarily to the sale of University Business Center
Phase II in October 1998 and decreased walkway renovations at Blankenbaker
Business Center 1A.
Operating expenses - affiliated decreased approximately $4,600 or 29% and $5,400
or 11% for the three months and nine months ended September 30, 1999, as
compared to the same periods in 1998, due primarily to the sale of University
Business Center Phase II in October 1998. Operating expenses - affiliated are
expenses for services performed by employees of NTS Development Company, an
affiliate of the General Partner of the Partnership.
Interest expense decreased approximately $30,600 or 39% and $76,000 or 32% for
the three months and nine months ended September 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. The decrease is partially offset
by interest incurred on the loan that the Partnership obtained in January 1998,
which bears interest at 8.5%. The balance on the note payable was $164,527 and
$110,000, as of September 30, 1999 and December 31, 1998, respectively.
Management Fees are calculated as a percentage of cash collections; however,
revenue for reporting purposes is on the accrual basis. As a result, the
fluctuations of revenues between periods may differ from the fluctuations of
management fee expenses. For the three months and nine months ended September
30, 1999, as compared to the same periods in 1998, management fees decreased
approximately $4,200 or 33% and $12,000 or 28%, respectively. The decrease for
these periods is primarily the result of the sale of University Business Center
Phase II in October 1998.
Real estate taxes decreased approximately $6,000 or 31% and $11,000 or 19% for
the three months and nine months ended September 30, 1999, as compared to the
same periods in 1998, primarily as a result of the sale of University Business
Center Phase II in October 1998.
Also contributing to all of the decreases discussed above is a decrease in
ownership of the Lakeshore/University II Joint Venture effective July 1, 1999.
See Note 8 for details of a capital contribution made to the Joint Venture by
NTS-Properties V affecting the change in ownership.
Professional and administrative expenses increased approximately $8,400 or 72%
and $16,700 or 45% for the three months and nine months ended September 30,
1999, as compared to the same periods in 1998, primarily as a result of
increased legal and outside accounting fees. Partially offsetting the increase
is the decrease in ownership of the Lakeshore/University II Joint Venture
discussed above.
13
<PAGE>
Results of Operations - Continued
- ---------------------------------
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 $ 129,154 $ (122,145)
Investing activities 135,066 (15,476)
Financing activities (131,591) 148,912
----------- ----------
Net increase in cash and
equivalents $ 132,629 $ 11,291
=========== ==========
Net cash provided by operating activities increased approximately $251,000 for
the nine months ended September 30, 1999, as compared too the same period in
1998. This increase was primarily driven by changes in the level of accounts
payable, offset partially by reduced net income.
Net cash (used in) provided by investing activities for the nine months ended
September 30, 1999 and 1998 was $135,066 and $(15,476), respectively. The
primary reason for the increase in funds provided in 1999, as compared to 1998,
is the inclusion in this section of the positive net effect on cash flow of the
change in the Partnership's ownership percentage of the Lakeshore/University II
Joint Venture as described in Note 8 to the Financial Statements.
Net cash (used in) provided by financing activities totaled $(131,591) and
$148,912 for the nine months ended September 30, 1999 and 1998, respectively.
The net cash provided by financing activities in 1998 was the result of a
$350,000 loan 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 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 principal amount of the note was
increased in order to cover interest owed as of the original maturity date. The
Partnership also received an additional $30,000 on the note in May 1999.
14
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
The Partnership has not made any cash distributions since the quarter ended
September 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 September 30, 1999 were
$186,263.
Due to the fact that no distributions were made during the three months ended
September 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, and beginning construction on Lakeshore Business
Center Phase III as described later in this discussion. 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 costs 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 September 30, 1999.
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 has funded $5,000, $0, and $15,572, respectively, to the reserve.
During the nine months ended September 30, 1999, the Partnership funded an
additional $15,000 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 future leasing and tenant
finish costs and had rebuilt cash reserves to meet the ongoing needs of the
Partnership. Through September 30, 1999, the Partnership has repurchased 42,002
Units for $35,329 at a price ranging from $0.70 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 fair market value or liquidation value of the
Units. The balance in the reserve at September 30, 1999 was $0.
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 an 8.40% interest in the Joint Venture. 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.
15
<PAGE>
Consolidated Cash Flows and Financial Condition - Continued
- -----------------------------------------------------------
As of September 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 the fourth quarter of 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. Effective July 1, 1999, NTS-Properties Plus' percentage of
ownership in the Joint Venture is 8.40%, as compared to 12.57% prior to July 1,
1999.
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.
During the first quarter of 1999, SHPS, Inc., formerly known a 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 53% of the Partnership's rent revenues during the
nine months ended September 30, 1999. The Partnership has not yet determined the
effect, if any, on the Partnership's operations, given the fact that 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 Corporation, including NTS-Properties Plus Associates, the
General Partner of the Partnership, are reviewing the effort necessary to
prepare NTS' 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.
16
<PAGE>
Year 2000 - Continued
- ---------------------
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 as 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 fourth quarter of 1999.
NTS' in-house staff of programmers is modifying the few remaining systems not
addressed by these conversions. The Hewlett Packard 3000 system, used by 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.
The costs of these advances in NTS' systems technology are not all attributable
to the Year 2000 issue since NTS had already identified the need to move to a
network based system regardless of the Year 2000. The Partnership's share of the
costs involved will be approximately $6,500 during 1999. Costs incurred through
December 31, 1998 were approximately $1,500. These costs include primarily
purchase, lease and maintenance of 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 during the fourth 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 the 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
our 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. At September 30, 1999, a hypothetical 100 basis point increase in
interest rates would result in an approximate $130,000 increase in the fair
value of debt.
17
<PAGE>
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 5. Other Information
-----------------
Mr. Richard Good, who was the Vice Chairman and former President of NTS
Capital Corporation and NTS Development Company, retired effective
September 3, 1999.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports of 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, the Registrant 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
Senior Vice President of
NTS Capital Corporation
Date: November 12, 1999
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1999 AND FROM THE STATEMENT OF OPERATIONS FROM THE SIX
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 244,549
<SECURITIES> 0
<RECEIVABLES> 6,020
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,421,043
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,807,391
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,215,137
0
0
<COMMON> 0
<OTHER-SE> (589,603)
<TOTAL-LIABILITY-AND-EQUITY> 1,807,391
<SALES> 509,813
<TOTAL-REVENUES> 516,664
<CGS> 0
<TOTAL-COSTS> 363,846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,194
<INCOME-PRETAX> (7,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,376)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,376)
<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>
