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, 1998
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 0-18952
NTS-PROPERTIES PLUS LTD.
- --------------------------------------------------------------------------------
(Exact name of 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 40
Total Pages: 44
<PAGE>
TABLE OF CONTENTS
Pages
-----
PART I
Items 1 and 2 Business and Properties 3-12
Item 3 Legal Proceedings 12
Item 4 Submission of Matters to a Vote of Security
Holders 12
PART II
Item 5 Market for the Registrant's Limited Partnership
Interests and Related Partner Matters 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 15-22
Item 8 Financial Statements and Supplementary Data 23-37
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 38
PART III
Item 10 Directors and Executive Officers of the
Registrant 38
Item 11 Management Remuneration and Transactions 38
Item 12 Security Ownership of Certain Beneficial
Owners and Management 39
Item 13 Certain Relationships and Related
Transactions 39
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 40-43
Signatures 44
2
<PAGE>
PART I
Items 1. and 2. Business and Properties
-----------------------
Development of Business
- -----------------------
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, 1998 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, 1998.
- 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, 1998. 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.
- Outparcel Building Sites - approximately 6.2 acres of undeveloped
-------------------------
land adjacent to the Lakeshore Business Center development, which
is zoned for commercial development.
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.
3
<PAGE>
As of December 31, 1998, the Partnership's properties were encumbered by
mortgages as shown in the table below:
Interest Maturity Balance
Property Rate Date at 12/31/98
-------- ---- ---- -----------
Blankenbaker Business Center 1A .. 8.5% 11/15/05 (1) $1,352,832 (2)
Lakeshore Business Center Phase I 8.125 08/01/08 (3) $ 614,788 (4)
Lakeshore Business Center Phase II 8.125 08/01/08 (3) $ 661,446 (4)
(1) Current 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.
(2) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1998. The outstanding balance of the
mortgage at December 31, 1998 was $3,511,112.
(3) Current monthly principal payments are based upon a 12-year
amortization schedule. At maturity, the mortgage will have been repaid
based on the current rate of amortization.
(4) This amount represents the Partnership's proportionate interest in the
mortgage payable at December 31, 1998. The outstanding balance of the
mortgage at December 31, 1998 was $4,890,913 for Phase I and
$5,262,099 for Phase II.
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.
As of December 31, 1998 the L/U II Joint Venture intends to use 3.8 acres of the
6.2 acres of 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. The Partnership and
NTS-Properties IV, which currently have a 12% and 18% interest respectively, in
the L/U II Joint Venture are 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 has agreed that NTS-Properties V
will make a capital contribution to the L/U II Joint Venture with the knowledge
that their Joint Venture interest will, as a result, decrease.
The Partnership had no material commitments for renovations or capital
improvements at December 31, 1998.
Financial Information About Industry Segments
- ---------------------------------------------
The Partnership has been engaged solely in the business of developing,
constructing, owning and operating commercial real estate. The Partnership may
also develop apartment complexes and retail centers. A presentation of
information concerning industry segments is not applicable. See Note 11 in Item
8 for information regarding the Partnerships' operating segments.
4
<PAGE>
Narrative Description of Business
- ---------------------------------
General
- -------
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. As of December 31, 1998, the
L/U II Joint Venture has a contract for the sale of approximately 2.4 acres of
land it owns at the Lakeshore Business Center development. See below for the
details of this contract. As of December 31, 1998 the L/U II Joint Venture
intends to use the remaining 3.8 acres of the land to construct Lakeshore
Business Center Phase III. See below for details. See below for information
regarding the sale of University Business Center Phase II.
Blankenbaker Business Center 1A
- -------------------------------
Sykes Health Plan Services Bureau, Inc. (formerly known as 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,
1998 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. Sykes Health Plan Services 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,
1998, 1997, 1996, 1995 and 1994 was 100%. See Item 7 for average occupancy
levels for the periods ending December 31, 1998, 1997 and 1996.
The following table contains approximate data concerning the lease in effect on
December 31, 1998:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
Name Expiration Area(1) Rental Options
---- ---------- ------- ------ -------
Sykes Health Plan
Services Bureau, Inc. 2005 48,463 (100%) $752,787 (100%) None
(1) Rentable area includes only ground floor square feet.
Subsequent to December 31, 1998, 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, July 2005. The Partnership's proportionate
share of the rental income from this property accounted for approximately 42% of
the Partnership's rent revenues during 1998. 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.
5
<PAGE>
Lakeshore Business Center Phase I
- ---------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$9.78 to $12.25 per square foot for first floor office space, $6.18 to $10.65
per square foot for first floor service space and $9.00 to $12.25 per square
foot for second floor office space. The average base annual rental for all space
leased as of December 31, 1998 was $10.85. Space is ordinarily leased for
between three and five years with the majority of current square footage being
leased for a term of five years. Current leases expire between 1999 and 2004.
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, 1998, there were
32 tenants leasing office space (first and second floor) and service space
aggregating approximately 88,155 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
telemarketing services and management offices for two cellular communications
chains and a soft drink company. There are no tenants that lease more than 10%
of Lakeshore Business Center Phase I's rentable area. The occupancy levels at
the business center as of December 31 were 85% (1998), 96% (1997), 92% (1996 and
1995) and 80% (1994). See Item 7 for average occupancy levels for the periods
ending December 31, 1998, 1997 and 1996.
The following table contains approximate data concerning the leases in effect on
December 31, 1998:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
No. Of Tenants Expiration Area Rental Options
- -------------- ---------- ---- ------ -------
Major tenants (1):
None
Other tenants:
10 1999 36,305 (35.1%) $369,636 (38.6%) 2 Three-Year
11 2000 26,453 (25.6%) $280,764 (29.5%) 2 Three-Year
5 2001 9,037 (8.8%) $105,209 (11.0%) 2 Three-Year
4 2002 8,305 (8.0%) $92,592 (9.8%) 2 Three-Year
1 2003 1,728 (1.7%) $21,168 (2.2%) None
1 2004 6,327 (6.1%) $87,234 (9.1%) None
(1) Major tenants are those that individually occupy 10 percent or more of the
rentable square footage.
Lakeshore Business Center Phase II
- ----------------------------------
Base annual rents, which exclude the cost of utilities, currently range from
$10.00 to $12.39 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, 1998 was $11.21. Space is ordinarily
leased for between three and five years with the majority of current square
footage being leased for a term of three years. Current leases expire between
1999 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, 1998,
there were 17 tenants leasing office space (first and second floor) and service
space aggregating approximately 75,458 square feet of rentable area (1). The
tenants who occupy Lakeshore Business Center Phase II are professional service
oriented organizations. The principal occupations/professions practiced include
medical equipment leasing, insurance services and management offices for the
Florida state lottery. Two tenants individually lease more than 10% of Lakeshore
Business Center Phase II's rentable area. The occupancy levels at the business
center as of December 31 were 79% (1998), 100% (1997), 89% (1996), 72% (1995)
and 78% (1994). See Item 7 for average occupancy levels for the periods ending
December 31, 1998, 1997 and 1996.
6
<PAGE>
The following table contains approximate data concerning the leases in effect on
December 31, 1998:
Current Base
Sq. Ft. and Annual Rental
% of Net and % of Gross
Year of Rentable Base Annual Renewal
No. of tenants Expiration Area(1) Rental Options
- -------------- ---------- ------- ------ -------
Major tenants (2):
1 1999 10,580 (10.9%) $127,176 (14.8%) 1 Three-Year
1 2002 14,665 (15.1%) $166,212 (19.3%) 1 Five-Year
Other Tenants:
5 1999 16,241 (16.7%) $184,098 (21.4%) 1 Three-Year
4 2000 11,124 (11.5%) $125,642 (14.6%) None
3 2001 9,985 (10.3%) $106,788 (12.4%) 1 Five-Year
2 2002 8,675 (8.9%) $101,384 (11.8%) (3)
1 2003 4,188 (4.3%) $ 48,156 (5.6%) None
(1) Excludes approximately 1,218 square feet which is occupied by the business
center's property management and leasing staff.
(2) Major tenants are those that individually occupy 10 percent or more of
these rentable square footage.
(3) 1 Three-Year and 1 Five-Year.
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 $ .90910 $ 56,480
Properties Owned through
- ------------------------
Lakeshore/University II Joint
- -----------------------------
Venture (L/U II Joint Venture)
- ------------------------------
Lakeshore Business Center Phase I 10,260,812 .026214 126,826
Lakeshore Business Center Phase II 12,227,459 .026214 144,702
Percentage ownership has not been applied to the information in the above table
for properties owned through a joint venture.
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.
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,
7
<PAGE>
Investment in Joint Ventures - continued
- ----------------------------------------
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.
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, 1998.
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
8
<PAGE>
Investment in Joint Ventures - continued
- ----------------------------------------
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, 1998.
Lakeshore/University II Joint Venture - On January 23, 1995, a 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 (property sold during 1998 - see below for details
regarding the transaction) 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.
9
<PAGE>
Investment in Joint Ventures - continued
- ----------------------------------------
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;
(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
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 and on Lakeshore Business Center Phase I in
the amount of $5,500,000 subsequent to the formation of the L/U II 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 12/31/98 Encumbered Property
----------- -------------------
$5,262,099 Lakeshore Business Center Phase II
$4,890,913 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, 1998 is $1,276,234
($661,446, and $614,788). 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.
On October 6, 1998 pursuant to a contract executed on September 8, 1998, the
Lakeshore/University II Joint Venture ("L/U II") sold University Business Center
Phase II office building to Silver City Properties, Ltd. ("the Purchaser") for
$8,975,000. University Business Center Phase II was owned by the L/U II Joint
Venture of which the Partnership owns a 12% interest. Portions of the proceeds
from this sale were immediately used to pay the remainder of the outstanding
debt of approximately $5,933,382 on University Business Center Phase II
(including interest and prepayment penalties). NTS-Properties Plus, Ltd.
reflects again of approximately $2,080,000 associated with this sale in the
fourth quarter of 1998. Net cash proceeds received by the Partnership from the
L/U II Joint Venture as a result of a cash distribution of the proceeds from the
sale was approximately $308,000. NTS-Properties Plus, Ltd. used a portion of the
cash distribution to make a $240,000 payment on the $350,000 loan obtained in
January 1998. A portion of the distribution was also used to repay approximately
$27,000 owed to NTS Development Company, an affiliate of the General Partner for
operating expenses.
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
10
<PAGE>
Investment in Joint Ventures - continued
- ----------------------------------------
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, 1998.
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, 1998, 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 $52,271 for the
year ended December 31, 1998. 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, 1998, the
Management Agreement is still in effect.
Working Capital Practices
- -------------------------
Information about the Partnership's working capital practices is included in
Management Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7.
11
<PAGE>
Seasonal Operations
- -------------------
The Partnership does not consider its operations to be seasonal to any material
degree.
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 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. (See Item 8 and 9 for further discussion of related party
transactions).
Governmental Contracts and Regulations
- --------------------------------------
No portion of the Partnership's business is subject to renegotiation of profits
or termination of contracts or sub-contracts at the election of the United
States Government.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None.
12
<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 1,054 limited partners as of
March 1, 1999. Cash distributions and allocations of net income (loss) are made
as described in Note 1C to the Partnership's 1998 financial statements.
No distributions were paid during 1998, 1997 or 1996. 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 1998, 1997 or 1996, 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.
13
<PAGE>
<TABLE>
Item 6. Selected Financial Data
-----------------------
For the years ended December 31, 1998, 1997, 1996, 1995 and 1994.
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 860,034 $ 827,978 $ 833,162 $ 955,654 $ 2,722,728
Gain on sale of 2,083,049 -- -- -- --
property
Total expenses (808,138) (905,412) (978,219) (1,341,884) (4,525,894)
-------- -------- -------- ---------- ----------
Income (loss) before
extraordinary item 2,134,945 (77,434) (145,057) (386,230) (1,803,166)
Extraordinary item (108,430) -- -- -- --
-------- -------- -------- ---------- ----------
Net income (loss) $ 2,026,515 $ (77,434) $ (145,057) $ (386,230) $ (1,803,166)
============ ============ ============ ============ ============
Net income (loss)
allocated to:
General Partner $ 20,265 $ (744) $ (1,451) $ (3,862) $ (18,032)
Limited partners $ 2,006,250 $ (76,660) $ (143,606) $ (382,368) $ (1,785,134)
Net income (loss) per
limited partnership $ 3.04 $ (0.12) $ (0.21) $ (0.56) $ (2.60)
unit
Weighted average number
of limited partnership
units 660,429 666,248 685,634 685,647 685,647
Cumulative net loss
allocated to:
General Partner $ (102,673) $ (122,938) $ (122,164) $ (120,713) $ (116,851)
Limited partners $(10,164,657) $(12,170,907) $(12,094,247) $(11,950,641) $(11,568,273)
Cumulative taxable loss
allocated to:
General Partner $ (17,861) $ (42,692) $ (42,315) $ (51,054) $ (48,829)
Limited partners $ (3,904,694) $ (6,283,963) $ (6,241,493) $ (6,244,619) $ (6,088,037)
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 $ 2,038,520 $ 966,049 $ 1,121,097 $ 1,254,828 $ 14,902,218
Total assets $ 2,296,893 $ 1,370,774 $ 1,571,288 $ 1,720,292 $ 17,507,720
Mortgages and notes
payable $ 2,739,066 $ 3,528,058 $ 3,770,347 $ 3,871,374 $ 18,612,183
</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.
(1) See Item 8 Note 10 for details of the sale of University Business Center
Phase II to Silver City Properties, Ltd. on October 6, 1998.
(2) Increase of approximately $977,000 is primarily due to negative book
basis in University Business Center Phase II retired on the fourth
quarter of 1998 as a result of the sale of the property to Silver City
Properties, Ltd.
14
<PAGE>
Item 7. 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 and our cautionary
statements also follow. Management's analysis should be read in conjunction with
the financial statements in Item 8 and the cautionary statements below.
The occupancy levels at the Partnership properties as of December 31 were as
follows:
Percentage
Ownership
at
12/31/98 1998(1) 1997 1996
-------- ------- ---- ----
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 (2)(3) 12% 85% 96% 92%
Lakeshore Business Center Phase II (2)(4) 12% 79% 100% 89%
University Business Center Phase II N/A(5) N/A(5) 99% 99%
(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 year ending occupancy is only a temporary fluctuation and does not
represent a permanent downward occupancy trend.
(3) Subsequent to December 31, 1998, two new five-year leases totaling 6,880
square feet were signed at Lakeshore Business Center Phase I. Both tenants
are expected to take occupancy during the first quarter of 1999.With these
new leases, the business center's occupancy should improve to 89%.
(4) As of December 31, 1998, Lakeshore Business Center Phase II has an
additional 5,668 square feet leased to two new tenants. Both tenants took
occupancy during the first quarter of 1999 and the business center's
occupancy has increased to 85%.
(5) On October 6, 1998, University Business Center Phase II was sold. See
below for the details of this transaction.
15
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations - continued
-------------------------
Average occupancy levels at the Partnership properties as of December 31 were as
follows:
Percentage
Ownership
at
12/31/98 1998 1997 1996
-------- ---- ---- ----
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% 88%(1) 96% 97%
Lakeshore Business Center Phase II 12% 91%(1) 94% 80%
University Business Center Phase II N/A(2) 91%(3) 99% 99%
(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) On October 6, 1998, University Business Center Phase II was sold. See
below for details of this transaction.
(3) Represents average occupancy through October 6, 1998.
Rental and Other Income
- -----------------------
The rental and other income generated by the Partnership's properties for the
years ended December 31, 1998, 1997 and 1996 were as follows:
Percentage
Ownership at
12/31/98 1998 1997 1996
-------- ---- ---- ----
Property owned in Joint
- ------------------------
Venture with NTS-Properties
- ----------------------------
IV and NTS-Properties VII,
- ---------------------------
Ltd.
- ----
Blankenbaker Business Center 1A 39% $364,750 $366,251 $366,073
Properties owned through
- ------------------------
Lakeshore/University II
- ------------------------
Joint Venture
- -------------
(L/U II Joint Venture)
- ----------------------
Lakeshore Business Center Phase I 12% $187,827 $178,745 $167,160
Lakeshore Business Center Phase II 12% $205,984 $177,396 $146,021
University Business Center Phase II 12% $ 98,039(1)$104,600 $152,052
Revenues shown in the table above for properties owned through a joint venture
represent only the Partnership's percentage interest in those revenues.
(1) On October 6, 1998, University Business Center Phase II was sold. See
below for the details of this transaction. Revenues shown here represent
1998 income through the date of disposition.
16
<PAGE>
Rental and Other Income - continued
- -----------------------------------
The following is an analysis of material changes in results of operations for
the periods ending December 31, 1998, 1997 and 1996. 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 increased approximately $28,000 or 3% in 1998. The
increase was primarily a result of increased common area maintenance income and
increased lease buyout income at Lakeshore Business Center Phase I and II in
1998 compared to 1997. These increases are partially offset by decreased average
occupancy at Lakeshore Business Center Phases I and II and decreased rental
income at University Business Center Phase II as a result of the sale of the
property in October 1998 (see below for a further discussion of the sale).
Year ending occupancy percentages represent occupancy only on a specific date;
therefore, the above analysis considers average occupancy percentages which are
representative of the entire year's results.
The gain on sale of assets is the result of selling University Business Center
Phase II. On October 6, 1998 pursuant to a contract executed on September 8,
1998, the Lakeshore/University II Joint Venture ("L/U II") sold University
Business Center Phase II office building to Silver City Properties, Ltd. ("the
Purchaser") for $8,975,000. University Business Center Phase II was owned by the
L/U II Joint Venture of which the Partnership owns a 12% interest. Portions of
the proceeds from this sale were immediately used to pay outstanding debt of
approximately $5,933,382 on University Business Center Phase II (including
interest and prepayment penalties). Net cash proceeds received by the
Partnership from the L/U II Joint Venture as a result of a cash distribution of
the proceeds from sale was approximately $308,000. NTS Properties Plus, Ltd.
Used a portion of the cash distribution to repay $240,000 of the $350,000 loan
obtained by the Partnership in January 1998. A portion of the distribution was
also used to repay approximately $27,000 owed to NTS Development Company, an
affiliate of the General Partner for operating expenses (See Note 5 Related
Party Transactions).
Operating expenses decreased approximately $23,000 or 16% in 1998 due primarily
to decreased exterior building renovations at Blankenbaker Business Center 1A
and due to the fact that University Business Center Phase II was sold October
1998.
Operating expenses increased approximately $25,000 or 20% in 1997 as a result of
increased exterior building renovations at Blankenbaker Business Center 1A.
Operating expenses - affiliated increased approximately $5,700 or 10% in 1998
and approximately $7,800 or 16% in 1997 as a result of increased property
management payroll costs. 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 $10,000 or 3% in 1998 as a result of
the reduction in debt from the sale of University Business Center Phase II (see
discussion above) and from regular principal payments. This decrease is
partially offset by interest incurred on the $350,000 note payable the
Partnership obtained January 1998. The note bears interest at 8.5%.
Interest expense decreased approximately $46,000 or 13% in 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.
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.
Real estate taxes decreased approximately $9,000 or 11% in 1998 as a result of
decreased property tax assessments for Lakeshore Business Center Phases I and II
and the sale of University Business Center Phase II in October 1998 (see
discussion above).
17
<PAGE>
Rental and Other Income - continued
- -----------------------------------
Professional and administrative expenses decreased approximately $4,000 or 8% in
1998 as a result of decreased outside accounting fees. Professional and
administrative expenses increased approximately $4,000 or 9% in 1997 primarily
as a result of increased outside accounting fees. Professional and
administrative expenses - affiliated decreased approximately $5,500 or 11% in
1998 and approximately $53,000 or 51% in 1997 primarily as a result of decreased
finance salary costs. Professional and administrative expenses - affiliated are
expenses for services performed by employees of NTS Development Company, an
affiliate of the General Partner.
Depreciation and amortization decreased approximately $51,000 or 32%. The
decrease is the result of a portion of the original assets at Blankenbaker
Business Center 1A becoming fully depreciated and the result of the sale of
University Business Center Phase II in October 1998 (see discussion above).
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.
The 1998 extraordinary item - early extinguishment of debt relates to the sale
of University Business Phase II (see discussion above). A portion of the
proceeds from the sale was used to retire the $5,128,872 mortgage payable prior
to its maturity (August 2008). As a result of the prepayment, a $763,995
penalty, of which the Partnership's proportionate share was $96,034, was
required by the insurance company who held the mortgage. Unamortized loan costs
connected with this loan were also expensed due to the fact that the mortgage
was repaid prior to its maturity.
The 1996 extraordinary item-early extinguishment of debt 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 repaid in 1996 prior to
their maturity (January 31, 1998).
Consolidated Cash Flows and Financial Condition
- -----------------------------------------------
The majority of the Partnership's cash flow in 1998 was derived from investing
activities primarily as a result of proceeds received from the sale of
University Business Center Phase II (see discussion above for details of this
transaction). The majority of the Partnership's cash flow in 1997 and 1996 was
derived from operating activities. 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 wall covering. The extent and cost of these
improvements are determined by the size of the space and whether the
improvements are for a new tenant or incurred because of a lease renewal. Cash
flows used in financing activities are for loan costs, principal payments on
mortgages and notes payable and repurchases of limited partnership Units. 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. 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, 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 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.
18
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
<TABLE>
Cash flows provided by (used in):
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Operating activities $ (131,422) $ 282,404 $ 184,907
Investing activities 1,035,142 (30,868) (28,021)
Financing activities (890,026) (254,540) (150,211)
----------- --------- ---------
Net increase (decrease)
in cash and
equivalents $ 13,694 $ (3,004) $ 6,675
=========== ========= =========
</TABLE>
Net cash provided by operating activities decreased approximately $413,000 in
1998. This decrease was driven by an overall decrease in net working capital
assets and liabilities (excluding cash) primarily due to decreased accounts
payable.
Net cash provided by operating activities increased approximately $97,000 or 53%
in 1997. The increase in net cash provided by operating activities was driven by
a decrease in net loss and an increase in accounts payable.
Net cash provided by investing activities in 1998 totaled $1,035,142. This
increase is primarily a result of the Partnership's proportionate share of
proceeds received from the sale of University Business Center Phase II in the
fourth quarter of 1998.
Net cash used in financing activities totaled $890,026, $254,540 and $150,211 in
1998, 1997 and 1996, respectively. The increase in net cash used in financing
activities in 1998 was the result of increased net payments on mortgages and
payment of the prepayment penalty on University Business Center II debt. The
increase in net cash used in financing activities in 1997 was the result of
increased net payments on mortgages partially offset by decreased loan costs
paid in 1997.
The Partnership has not made a cash distribution 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 $53,634,
$39,940 and $42,944 at December 31, 1998, 1997 and 1996, respectively.
Due to the fact that no distributions were made during 1998, 1997 or 1996, 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 December 31, 1998.
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
19
<PAGE>
Consolidated Cash Flows and Financial Condition - continued
- -----------------------------------------------------------
funded $5,000, $0 and $15,572, respectively, 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 December 31, 1998, the Partnership has
repurchased 27,245 Units for $20,572 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 the fair market value or
liquidation value of the Units. 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.
On January 15, 1999, the Partnership elected to fund an additional $10,000 to
its Interest Repurchase Reserve. With this funding, the Partnership will be able
to repurchase 10,000 Units at a price of $1.00 per Unit.
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, 1998 in the asset held for
sale is $96,949. The Joint Venture continues to actively market the asset for
sale. In management's opinion, the net book value of the asset held for sale
approximates the fair market value less cost to sell. See below for information
regarding a contract for the sale of a portion of this land.
As of December 31, 1998, the L/U II Joint Venture had a contract for the sale of
approximately 2.4 acres of land adjacent to the Lakeshore Business Center
development for a purchase price of $528,405. Concurrent with the signing of the
original contract, the purchaser deposited into an escrow account $10,000. This
deposit will be applied to the purchase price at closing. The contract requires
that the purchaser proceed, at their cost, to have the property re-zoned to
allow for a self-storage facility. If the purchaser is unable to obtain the
re-zoning, they may cancel the contract. The General Partner of the Partnership
has met with city officials who seem interested in the project and have voiced a
willingness to consider the re-zoning request. As of March 24, 1999, the
re-zoning has not been granted and per the contract, the purchaser has elected
to postpone the closing for a period of 30 days. At its option, the purchaser
may postpone the Closing Date four times for a period of 30 days each by
delivering written notice and paying to the L/U II Joint Venture $10,000 for
each 30-day postponement period. $5,000 of each payment will be applied toward
the purchase price. The Partnership has a 12% interest in the Joint Venture. The
Partnership has not yet determined what the use of net proceeds would be from
the sale of the land.
As of December 31, 1998 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. The Partnership and
NTS-Properties IV, which currently have a 12% and 18% interest respectively, in
the L/U II Joint Venture are 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 has agreed that NTS-Properties V
will make a capital contribution to the L/U II Joint Venture with the knowledge
that their Joint Venture interest will, 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.
20
<PAGE>
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.
Year 2000
- ---------
All divisions of NTS, the General Partner of the Partnership, are reviewing the
effort necessary to prepare our information systems (IT) and non-information
technology with embedded technology (ET) for the Year 2000. The information
technology solutions have been addressed separate 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, needed to be replaced
by a windows based network system both for our headquarters functions and other
locations. The real estate accounting system developed, sold, and supported by
the Yardi Company of Santa Barbara, California has been selected to supercede
PILOT. The Yardi system 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. Our 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 our 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 our 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 cost of these advances in our systems technology is not all attributable to
the Year 2000 issue since we had already identified the need to move to a
network based system regardless of the Year 2000. The costs involved will be
approximately $8,000 over 1998 and 1999. Costs incurred through December 31,
1998 are approximately $1,500. These costs primarily include hardware and
software.
NTS property management staff has been surveying our vendors to evaluate
embedded technology in our 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.
We are also currently addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our 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 our current state of readiness, the need does
not presently exist for a contingency plan. We 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 our remediation efforts as planned could have a
material adverse impact on our results of operations, financial conditions
and/or cash flows in 1999 and beyond.
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 December 31, 1998, a hypothetical 100 basis point increase in
interest rates would result in an approximately $100,000 decrease in the fair
value of debt.
21
<PAGE>
Cautionary Statements
- ---------------------
Some of the statements included in Items 1 and 2, Business and Properties, and
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.
Subsequent to December 31, 1998, 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, July 2005. The Partnership's proportionate
share of the rental income from this property accounted for approximately 42% of
the Partnership's rent revenues during 1998. 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.
22
<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, 1998 and 1997, and the related
statements of operations, partners' equity, and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 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 41
through 43 are presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations 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 12, 1999
23
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<CAPTION>
1998 1997
---- ----
ASSETS
<S> <C> <C>
Cash and equivalents $ 53,634 $ 39,940
Cash and equivalents - restricted 24,258 19,228
Accounts receivable 14,857 11,531
Land, buildings and amenities, net 1,943,150 996,049
Asset held for sale and development 96,949 96,949
Deferred leasing commissions 105,802 129,946
Other assets 58,243 77,131
------------ -----------
$ 2,296,893 $ 1,370,774
============ ===========
LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable $ 2,739,066 $ 3,528,058
Accounts payable 74,664 390,774
Security deposits 15,231 13,536
Other liabilities 35,406 27,395
------------ -----------
2,864,367 3,959,763
Commitments and Contingencies
Partners' equity (567,474) (2,588,989)
------------ -----------
$ 2,296,893 $ 1,370,774
============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
24
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
---- ---- ----
Revenues:
<S> <C> <C> <C>
Rental income $ 854,180 $ 826,343 $ 830,387
Gain on Sale of Assets 2,083,049 -- --
Interest and other income 5,854 1,635 2,775
---------- ---------- -----------
2,943,083 827,978 833,162
Expenses:
Operating expenses 124,500 147,540 122,537
Operating expenses - affiliated 62,881 57,172 49,384
Amortization of capitalized leasing
costs 2,247 2,485 2,233
Interest expense 293,936 303,763 349,657
Management fees 52,271 52,430 53,080
Real estate taxes 73,515 82,504 81,523
Professional and administrative
expenses 45,201 49,139 44,936
Professional and administrative
expenses - affiliated 46,041 51,513 104,103
Depreciation and amortization 107,546 158,866 161,684
---------- ---------- -----------
808,138 905,412 969,137
---------- ---------- -----------
Income (loss) before extraordinary item 2,134,945 (77,434) (135,975)
Extraordinary item - early
extinguishment of debt (108,430) -- (9,082)
---------- ---------- -----------
Net income (loss) $ 2,026,515 $ (77,434) $ (145,057)
=========== =========== ============
Net income (loss) allocated to the
limited partners:
Income (loss) before extraordinary item $ 2,113,596 $ (76,660) $ (134,615)
Extraordinary item (107,346) -- (8,991)
---------- ---------- -----------
Net income (loss) $ 2,006,250 $ (76,660) $ (143,606)
=========== =========== ============
Net income (loss) per limited partnership
Unit:
Income (loss) before extraordinary item $ 3.20 $ (0.12) $ (0.20)
Extraordinary item (.16) -- (0.01)
---------- ---------- -----------
Net income (loss) $ 3.04 $ (0.12) $ (0.21)
=========== =========== ===========
Weighted average number of limited
partnership Unit 660,429 666,248 685,634
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
25
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF PARTNERS' EQUITY (1)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
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)
Net income 2,006,250 20,265 2,026,515
Repurchase of limited
Partnership Units (5,000) -- (5,000)
----------- ---------- -----------
Balances at December 31, 1998 $ (444,309) $ (123,165) $ (567,474)
=========== ========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
(1) For the periods presented there are no elements of other comprehensive
income as defined by the Financial Accounting Standards Board,
Statement of Financial Accounting Standards, Standards Statement NO.
130, Reporting Comprehensive Income.
26
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 2,026,515 $ (77,434) $ (145,057)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of assets (1) (2,083,049) -- --
Extraordinary item - early extinguishment of
debt 108,430 -- 9,082
Amortization of capitalized leasing costs 2,247 2,485 2,233
Depreciation and amortization 107,546 158,866 161,684
Changes in assets and liabilities:
Cash and equivalents - restricted (5,030) 5,312 (8,827)
Accounts receivable (3,326) 38,877 54,714
Deferred leasing commissions 24,144 23,434 12,691
Other assets (2,493) (4,702) (12,165)
Accounts payable (316,109) 122,086 103,418
Security deposits 1,695 1,506 --
Other liabilities 8,008 11,974 7,134
----------- ----------- -----------
Net cash (used in) provided by operating
activities (131,422) 282,404 184,907
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets before payment
of debt 1,054,473 -- --
Additions to land, building and amenities (29,800) (30,868) (29,746)
Decrease in cash and equivalents - restricted -- -- 1,725
Other 10,469 -- --
----------- ----------- -----------
Net cash provided by (used in) investing
activities 1,035,142 (30,868) (28,021)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages and note payable 350,000 -- 2,187,180
Principal payments on mortgages and notes
payable (1,138,992) (242,289) (2,288,207)
Early principal payment penalty (96,034) -- --
Additions to loan costs -- -- (45,863)
Repurchase of limited partnership Units (5,000) (12,251) (3,321)
----------- ----------- -----------
Net cash used in financing activities (890,026) (254,540) (150,211)
----------- ----------- -----------
Net increase (decrease) in cash and
equivalents 13,694 (3,004) 6,675
CASH AND EQUIVALENTS, beginning of year 39,940 42,944 36,269
----------- ----------- -----------
CASH AND EQUIVALENTS, end of year $ 53,634 $ 39,940 $ 42,944
=========== =========== ===========
Interest paid on a cash basis $ 299,685 $ 304,930 $ 355,047
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
(1) Gain is the result of the sale of University Business Center
Phase II to Silver City Properties, Ltd. (See Item 8 Note 10 for details
of this transaction).
27
<PAGE>
NTS-PROPERTIES PLUS LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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.
- 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
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.
28
<PAGE>
1. Significant Accounting Policies - Continued
- -- -------------------------------------------
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 income (loss) for financial statement
purposes versus that for income tax reporting is as follows:
1998 1997 1996
---- ---- ----
Net loss $ 2,026,515 $ (77,434) $ (145,057)
Items handled
differently for tax
purposes:
Gain on sale of assets 96,109 -- --
Write-off of
unamortized tenant
finish improvements (3,301) (4,606) --
Allowance for doubtful
accounts (75) (251) (5,847)
Depreciation and
amortization 277,648 (16,778) 110,789
Capitalized leasing
costs 1,088 1,284 1,283
Rental income 6,116 54,937 50,697
----------- ----------- -----------
Taxable income (loss) $ 2,404,100 $ (42,848) $ 11,865
=========== =========== ===========
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.
Proportionate consolidation is utilized by the Partnership due to
thefact 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
29
<PAGE>
1. Significant Accounting Policies - Continued
- -- -------------------------------------------
F) Joint Venture Accounting - Continued
-- ------------------------------------
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 (SAS) 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, 1998, 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 $6,133 and
$16,739 as of December 31, 1998 and 1997, 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.
K) Advertising
-- -----------
The Partnership expenses advertising-type costs as incurred. Advertising
expense was immaterial to the Partnership during the years ended December
31, 1998, 1997 and 1996.
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, 1998 classifications. These
classifications have no material effect on previously reported operations.
30
<PAGE>
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
- ------------------------------
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. 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 December 31, 1998, the
Partnership has repurchased 27,245 Units for $20,572 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 the
fair market value or liquidation value of the Units. 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.
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 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.
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 C.
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
31
<PAGE>
4. Investment in Joint Ventures - Continued
- -- ----------------------------------------
B) Blankenbaker Business Center Joint Venture - continued
-- ------------------------------------------------------
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.
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, 1998. The Partnership's share of the Joint
Venture's revenues were $364,750 (1998), $366,252 (1997)and $366,073
(1996). The Partnership's share of the joint venture's expenses were
$409,532 (1998), $434,588 (1997) and $427,316 (1996).
32
<PAGE>
4. Investment in Joint Ventures - Continued
- -- ----------------------------------------
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 (sold October 1998 - see Note 10) 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 (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 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
and on Lakeshore Business Center Phase I in the amount of $5,500,000
subsequent to the formation of the L/U II 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, 1998.
The Partnership's share of the joint ventures revenues was $639,474 (1998),
$461,180 (1997) and $466,199 (1996). The Partnership's share of the joint
venture's expenses was $584,635 (1998), $556,747 (1997) and $590,390
(1996). See Note 10 below for discussion of the University II sale.
33
<PAGE>
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:
1998 1997
---- ----
Land and improvements $ 1,572,603 $ 1,847,061
Buildings, improvements and
amenities 2,720,967 (1) 1,721,677
----------- ----------
4,293,570 3,568,738
Less accumulated depreciation 2,350,420 2,572,689
----------- -----------
$ 1,943,150 $ 996,049
=========== ===========
(1) Increase due primarily to retirement of negative book basis of
University Business Center II at the time of the sale of the property.
See Note 10 below.
6. Asset Held for Sale and Development
- --- ----------------------------------
Asset held for sale of $96,949 at December 31, 1998 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. See below for information regarding a contract for
the sale of a portion of this land.
As of December 31, 1998, the L/U II Joint Venture had a contract for the
sale of approximately 2.4 acres of land adjacent to the Lakeshore Business
Center development for a purchase price of $528,405. Concurrent with the
signing of the original contract, the purchaser deposited into an escrow
account $10,000. This deposit will be applied to the purchase price at
closing. The contract requires that the purchaser proceed, at their cost,
to have the property re-zoned to allow for a self-storage facility. If the
purchaser is unable to obtain the re-zoning, they may cancel the contract.
The General Partner of the Partnership has met with city officials who seem
interested in the project and have voiced a willingness to consider the
re-zoning request. As of March 31, 1999 the re-zoning has not been granted
and per the contract, the purchaser has elected to postpone the closing for
a period of 30 days. At its option, the purchaser may postpone the Closing
Date four times for a period of 30 days each by delivering written notice
and paying to the L/U II Joint Venture $10,000 for each 30-day postponement
period. $5,000 of each payment will be applied toward the purchase price.
The Partnership has a 12% interest in the Joint Venture. The Partnership
has not yet determined what the use of net proceeds would be from the sale
of the land.
As of December 31, 1998 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. The Partnership and NTS-Properties IV, which currently
have a 12% and 18% interest respectively, in the L/U II Joint Venture are
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 has agreed that NTS-Properties V will make
a capital contribution to the L/U II Joint Venture with the knowledge that
their Joint Ventre interest will, as a result, decrease.
34
<PAGE>
7. Mortgages Payable
- -- -----------------
Mortgages payable as of December 31 consist of the following:
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.5%,
due November 15, 2005, secured by land and
building $ 1,352,832 $ 1,492,702
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%,
due August 1, 2008, secured by land and
building 661,446 704,771
Mortgage payable to an insurance company,
bearing interest at a fixed rate of 8.125%,
due August 1, 2008, secured by land and
building 614,788 655,057
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 110,000 --
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
----------- -----------
$ 2,739,066 $ 3,528,058
=========== ===========
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount
- -------------------------------- -------
1999 $ 240,774
2000 371,689
2001 284,423
2002 309,132
2003 335,989
Thereafter 1,197,059
-----------
$ 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
approximately $2,800,000.
The 1998 extraordinary item - early extinguishment of debt relates to the sale
of University Business Phase II (see discussion above). A portion of the
proceeds from the sale was used to retire the $5,128,872 mortgage payable prior
to its maturity (August 2008). As a result of the prepayment, a $763,995
penalty, of which the Partnership's proportionate share was $96,034, was
required by the insurance company who held the mortgage. Unamortized loan costs
connected with this loan were also expensed due to the fact that the mortgage
was repaid prior to its maturity.
The 1996 extraordinary item-early extinguishment of debt 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 repaid in 1996 prior to
their maturity (January 31, 1998).
35
<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, 1998:
For the Years Ended December 31, Amount
1999 $ 480,465
2000 420,131
2001 371,851
2002 333,927
2003 306,462
Thereafter 475,945
-----------
$ 2,388,781
===========
9. Related Party Transactions
- -- --------------------------
Property management fees of $ 52,271 (1998), $52,430 (1997) and $53,080 (1996)
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
$1,170 and $2,041 as a repair and maintenance fee during the years ended
December 31, 1998 and 1997, respectively, and has capitalized this cost as part
of land, buildings and amenities.
Aspermitted by an agreement, the Partnership was also charged the following
amounts from NTS Development Company for the years ended December 31, 1998, 1997
and 1996. These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses - affiliated
and items which have been capitalized as deferred leasing commissions, other
assets or as land, buildings and amenities.
1998 1997 1996
---- ---- ----
Administrative $ 54,672 $ 59,872 $111,401
Leasing 18,877 18,499 19,087
Property manager 41,161 38,105 30,190
Other 2,916 1,573 5,347
-------- --------- ---------
$117,626 $ 118,049 $ 166,025
======== ========= =========
Accounts payable includes approximately $16,600 and $336,000 due NTS Development
Company at December 31, 1998 and 1997, respectively. 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 (balance at December 31,
1998 is $110,000). 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.
10. Sale of Asset
- --- -------------
On October 6, 1998 pursuant to a contract executed on September 8, 1998 the
Lakeshore/University II Joint Venture ("L/U II") sold University Business Center
Phase II office building to Silver City Properties, Ltd. ("the purchaser") for
$8,975,000. University Business Center Phase II was owned by the L/U II Joint
Venture, of which the Partnership owns a 12% interest. Portions of the proceeds
from this sale were immediately used to pay the remainder of the outstanding
debt of approximately $5,933,382 on University Business Center Phase II
(including interest and prepayment penalties). NTS-Properties Plus, Ltd.
reflects a gain of approximately $2,080,000 associated
36
<PAGE>
10. Sale of Asset - Continued
- -- --------------------------
with this sale in the fourth quarter of 1998. Net cash proceeds, after the
paydown of the formentioned debt received by the Partnership from the L/U II
Joint Venture as a result of a cash distribution of the proceeds from the sale
was approximately $308,000. NTS-Properties Plus, Ltd. used a portion of the cash
distribution to make a $240,000 payment on the $350,000 loan obtained in January
1998. A portion of the distribution was also used to repay approximately $27,000
owed to NTS Development Company, an affiliate of the General Partner for
operating expenses.
11. 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 and that is
Commercial real estate operations.
12. Subsequent Events
- -- -----------------
On January 15, 1999, the Partnership elected to fund an additional $10,000 to
its Interest Repurchase Reserve. With this funding, the Partnership will be able
to repurchase 10,000 Units at a price of $1.00 per Unit.
37
<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 57) 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 59), Vice Chairman of NTS Corporation and 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 and Brian F. Lavin.
Brian F. Lavin
- --------------
Mr. Lavin (age 45) President of NTS Corporation joined the Manager in June 1997.
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.
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, 1998, 1997 and 1996.
The General Partner is entitled to receive cash distributions and allocations of
profits and losses from the Partnership. See Note 1A to the financial statements
which describes the methods used to determine income allocations and cash
distributions.
38
<PAGE>
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 $52,271 (1998), $52,430 (1997) and $53,080 (1996)
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
$1,170 and $2,041 as a repair and maintenance fee during the years ended
December 31, 1998 and 1997, 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, 1998, 1997
and 1996. 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. These charges were as follows:
1998 1997 1996
---- ---- ----
Administrative $ 54,672 $ 59,872 $111,401
Leasing 18,877 18,499 19,087
Property manager 41,161 38,105 30,190
Other 2,916 1,573 5,347
-------- -------- --------
$117,626 $118,049 $166,025
======== ======== ========
Accounts payable includes approximately $16,600 and $336,000 due NTS Development
at December 31, 1998 and 1997, respectively. 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 (balance at December 31, 1998
is $110,000). 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 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 of the Company 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.
There are no other agreements or relationships between the Partnership, the
General Partner and its affiliates than those previously described.
39
<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, 1998, 1997 and
1996, together with the report of Arthur Andersen LLC dated March 12,
1999 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 41 - 43
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
Form 8-K was filed October 5, 1998 to report in Item 5 that the recently
announced contract for the sale of the University Business Center may be
in jeopardy.
Form 8-K was filed October 9, 1998 to report in Item 2 that the
Lakeshore/University II Joint Venture had sold University Business
Center Phase II.
Form 8-K/A was filed December 8, 1998 to amend under Item 7 the Form 8-K
that was filed October 9, 1998. The filing included the September 30,
1998 Proforma Balance Sheet and Statements of Operations for the nine
months ended September 30, 1998 and for the year ended December 31,
1997.
Form 8-K/A was filed December 18, 1998 to amend the financial statements
that were filed December 8, 1998.
40
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<CAPTION>
Lakeshore
Business Blankenbaker
Center Business
Phase II Center 1A
-------- ---------
<S> <C> <C>
Encumbrances (A) (A)
Initial cost to partnership:
Land $ 3,690,531 $ 1,613,251
Buildings and improvements 7,066,267 4,414,277
Cost capitalized subsequent to acquisition:
Improvements 1,251,721 765,596
Other (10,704,480)(B) (4,970,766)(C)
Gross amount at which carried December 31, 1998:
Land $ 373,900 $ 861,243
Buildings and improvements 930,139 961,115
------------ ------------
Total $ 1,304,039 $ 1,822,358
============ ============
Accumulated depreciation $ 589,094 $ 1,111,779
============ ============
Date of construction N/A N/A
Date Acquired 10/90 12/89
Life at which depreciation in
latest income statement is
computed (D) (D)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Represents NTS-Properties Plus Ltd.'s decreased interest in Lakeshore
Business Center Phase II as a result of NTS-Properties Plus Ltd.'s
contribution of its interest in this property 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.
41
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<CAPTION>
Lakeshore Business
Center Total
Phase I Pages 41-41
------- -----------
Encumbrances (A)
Initial cost to partnership:
<S> <C> <C>
Land $ 337,460 $ 5,641,242
Buildings and improvements 797,848 12,278,392
Cost capitalized subsequent to
acquisition
Improvements 30,398 2,047,715
Other -- (15,675,246)
Gross amount at which carried December 31,
1998 (B):
Land $ 337,460 $ 1,572,603
Buildings and improvements 828,246 2,719,500
------------ -------------
Total $ 1,165,706 $ 4,292,103 (D)
============ =============
Accumulated depreciation $ 649,547 $ 2,350,420
============ =============
Date of construction N/A
Date Acquired 01/95
Life at which depreciation in
latest income statement is
computed (C)
</TABLE>
(A) First mortgage held by an insurance company.
(B) Aggregate cost of real estate for tax purposes is $5,809,884.
(C) 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.
(D) Reconciliation net of accumulated depreciation to consolidated financial
statements:
Total Gross Cost at December 31, 1998 $4,292,103
Additions to the Partnership
For computer software and
Hardware in 1998 1,467
----------
Balance at December 31, 1998 $ 4,293,570
Less Accumulated Depreciation (2,350,420)
Land, buildings and amenities, net
at December 31, 1998 1,943,150
==========
42
<PAGE>
<TABLE>
NTS-PROPERTIES PLUS LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Real Accumulated
Estate Depreciation
------ ------------
<S> <C> <C>
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
Additions During Period:
Improvements 20,430 --
Depreciation (a) -- 131,244
Deductions during period:
Retirements (b) 704,402 (353,513)
----------- -----------
Balances at December 31, 1998 $ 4,293,570 $ 2,350,420
=========== ===========
</TABLE>
(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) Increase due primarily to retirement of negative book basis of University
Business Center II at the time of the sale of the property.
43
<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/ Brian F. Lavin
-----------------------------
Brian F. Lavin
President
Date: March 31, 1999
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 Vice Chairman of
NTS Capital Corporation
/s/ Brian F. Lavin President and Chief Operating Officer
- ------------------
Brian F. Lavin of NTS Capital Corporation (acting Chief
Financial Officer)
The Partnership is a limited partnership and no proxy material has been sent to
the limited partners.
44
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheet as if December 31, 1998 and from the statement of operations for the year
ended December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 77892
<SECURITIES> 0
<RECEIVABLES> 14857
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1943150
<DEPRECIATION> 2350420
<TOTAL-ASSETS> 2296893
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2739066
0
0
<COMMON> 0
<OTHER-SE> (567474)
<TOTAL-LIABILITY-AND-EQUITY> 2296893
<SALES> 854180
<TOTAL-REVENUES> 2943083
<CGS> 0
<TOTAL-COSTS> 514202
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293936
<INCOME-PRETAX> 2134945
<INCOME-TAX> 0
<INCOME-CONTINUING> 2134945
<DISCONTINUED> 0
<EXTRAORDINARY> (108430)
<CHANGES> 0
<NET-INCOME> (2026515)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> The company has an unclassified balance sheet; therefore, the value is $0.
</FN>
</TABLE>
