-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MgHxo1VJhZqEXJisccyXEjpA9dsp+mjU5u1fhaDAFTYXn1LEYFkEolqBHZ/PbY+S sB7hMcZTMQoQelV3CODauQ== 0000765232-97-000002.txt : 19970401 0000765232-97-000002.hdr.sgml : 19970401 ACCESSION NUMBER: 0000765232-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTS PROPERTIES VI/MD CENTRAL INDEX KEY: 0000765232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 611066060 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14695 FILM NUMBER: 97568868 BUSINESS ADDRESS: STREET 1: 10172 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 BUSINESS PHONE: 5024264800 MAIL ADDRESS: STREET 1: 10172 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 10-K 1 FORM 10-K FOR THE YEAR ENDED 12/31/96 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 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to ___________ Commission file number 0-14695 NTS-PROPERTIES VI, a Maryland Limited Partnership (Exact name of registrant as specified in its charter) Maryland 61-1066060 (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 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 15-23 Item 8 Financial Statements and Supplementary Data 24-37 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 38-39 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 - PART I Items 1. and 2. Business and Properties General - ------- Some of the statements included in Items 1 and 2, Business and Properties, may be considered to be "forward-looking statements" since such statements relate to matters which have not yet occurred. For example, phrases such as "the Partnership anticipates", "believes" or "expects" indicate that it is possible that the event anticipated, believed or expected may not occur. Should such event not occur, then the result which the Partnership expected also may not occur or occur in a different manner, which may be more or less favorable to the Partnership. The Partnership does not undertake any obligations to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The registrant, NTS-Properties VI, a Maryland Limited Partnership (the "Partnership"), is a limited partnership formed in December 1984 under the laws of the State of Maryland. The general partner is NTS-Properties Associates VI, a Kentucky limited partnership. As of December 31, 1996, the Partnership owned the following properties: - Sabal Park Apartments, a 162-unit luxury apartment complex located on a 13 acre tract in Orlando, Florida, constructed by the Partnership. - Park Place Apartments Phase I, a 180-unit luxury apartment complex located on an 18 acre tract in Lexington, Kentucky, constructed by the Partnership. - Willow Lake Apartments, a 207-unit luxury apartment complex located on an 18 acre tract in Indianapolis, Indiana, constructed by the Partnership. - A joint venture interest in Golf Brook Apartments, a 195-unit luxury apartment complex located on a 16 acre tract in Orlando, Florida, constructed by the joint venture between the Partnership and NTS- Properties IV., Ltd. ("NTS-Properties IV"), an affiliate of the general partner of the Partnership. The Partnership's percentage interest in the joint venture was 96% at December 31, 1996. - A joint venture interest in Plainview Point III Office Center, an office center with approximately 62,000 net rentable square feet, located in Louisville, Kentucky, constructed by the joint venture between the Partnership and NTS-Properties IV. The Partnership's percentage interest in the joint venture was 95% at December 31, 1996. The Partnership also owns approximately 15 acres of land in Lexington, Kentucky which is zoned for 163 apartment units (Park Place Apartments Phase III). The Partnership continues to evaluate whether to sell or develop the tract of land. At this time, no final decision has been made. The Partnership or Joint Venture in which the Partnership is a partner has a fee title interest in the above listed properties. In the opinion of the Partnership's management, the properties are adequately covered by insurance. Sabal Park Apartments is encumbered by permanent mortgages with two insurance companies. Both loans are secured by a first mortgage on the property. The outstanding balance of the mortgages at December 31, 1996 was $4,729,104 ($2,837,462 and $1,891,642). Both mortgages currently bear a fixed interest rate of 7.25% for the first 60 months and are due January 5, - 3 - Items 1. and 2. Business and Properties - Continued General - Continued - ------------------- 2003. Current monthly principal payments on both mortgages are based upon a 27-year amortization schedule. The outstanding balance at maturity based on the current rate of amortization would be $4,122,326 ($2,473,396 and $1,648,930). Park Place Apartments Phase I is encumbered by permanent mortgages with two insurance companies. Both loans are secured by a first mortgage on the property. The outstanding balance of the mortgages at December 31, 1996 was $4,946,181 ($3,994,992 and $951,189). Both mortgages currently bear a fixed interest rate of 8.375% for the first 60 months and are due October 5, 2002. Current monthly principal payments on both mortgages are based upon a 27- year amortization schedule. The outstanding principal balance at maturity based on the current rate of amortization would be $4,413,955 ($3,565,118 and $848,837). Willow Lake Apartments is encumbered by a permanent mortgage with an insurance company. The outstanding balance at December 31, 1996 was $8,527,771. The mortgage currently bears interest at a fixed rate of 9.20%. Monthly principal payments are based upon a 25-year amortization schedule. The mortgage is due November 1, 1997. The outstanding balance at maturity based on the current rate of amortization will be $8,433,356. Subsequent to December 31, 1996, the Partnership submitted an application with an insurance company for $8,500,000 of debt financing. The proceeds from the new financing will be used to pay off the Partnership's current $8,527,771 mortgage payable discussed above. Based upon discussions with the insurance company, the Partnership anticipates that the financing will be completed during the fourth quarter of 1997. Golf Brook Apartments, a joint venture between the Partnership and NTS- Properties IV, is encumbered by a mortgage payable to an insurance company. The mortgage replaced the loan which the Partnership had obtained to fund a portion of its capital contribution to the Joint Venture. The mortgage is recorded as a liability by the Partnership in accordance with the Joint Venture Agreement. The outstanding balance at December 31, 1996 was $9,200,000. The mortgage bears a fixed interest rate of 8.625% and the unpaid balance of $9,200,000 is due August 1, 1997. As of December 31, 1996, the Partnership has obtained a commitment from an insurance company for $9,000,000 of debt financing. The proceeds from the new financing along with cash reserves will be used to pay off the Partnership's current $9,200,000 mortgage payable discussed above. The mortgage will bear interest at a fixed rate of 7.43% and will be fully amortized over a 12 year period. Based upon the terms of the commitment, the Partnership anticipates that the financing will be completed in April 1997. Plainview Point III Office Center and the 15 acres of land in Lexington, Kentucky are not encumbered by any outstanding mortgages at December 31, 1996. For a further discussion regarding the terms of the debt financings see Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7). Currently, the Partnership's plans for renovations and other major capital expenditures include tenant finish improvements at the Partnership's commercial property 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 - 4 - Items 1. and 2. Business and Properties - Continued General - Continued - ------------------- 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. The Partnership had no material commitments for renovations or capital improvements at December 31, 1996. The Partnership is presently engaged solely in the business of developing, constructing, owning and operating residential apartments and commercial real estate. A presentation of information concerning industry segments is not applicable. The current business of the Partnership is consistent with the original purpose of the Partnership which was to purchase and develop parcels of unimproved or partially improved land, directly or by joint venture, in order to construct and otherwise develop thereon apartment complexes, business parks and/or retail, industrial and office buildings and to own and operate the completed properties. The Partnership's properties are in a condition suitable for their intended use. The Partnership intends to hold the Properties 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 Property, the Partnership will consider factors such as potential capital appreciation, cash flow and federal income tax considerations, including possible adverse federal income tax consequences to the Limited Partners. The General Partner of the Partnership is currently exploring the marketability of certain of its properties, and has not yet determined if any of the properties might be sold in the next 12 months, and there are no contracts for sale under negotiation at the present time. Sabal Park Apartments - --------------------- Units at Sabal Park Apartments include two and three-bedroom units. All units have wall-to-wall carpeting, individually controlled heating and air conditioning, ovens, dishwashers, ranges, refrigerators, garbage disposals and washer/dryer hook-ups. Tenants have access to and use of clubhouse, management offices, swimming pool and tennis courts. Monthly rental rates at Sabal Park Apartments start at $879 for two-bedroom apartments and $1,199 for three-bedroom apartments, with additional monthly rental amounts for special features and locations. Tenants pay all costs of heating, air conditioning and electricity. Most leases are for a period of one year. Units will be rented in some cases, however, on a shorter term basis at an additional charge. The occupancy levels at the apartment complex as of December 31 were 90% (1996), 98% (1995), 91% (1994), 94% (1993), and 93% (1992). Park Place Apartments Phase I - ----------------------------- Units at Park Place Apartments Phase I include one and two-bedroom apartments and two-bedroom townhomes. All units have wall-to-wall carpeting, individually controlled heating and air conditioning, dishwashers, ranges, refrigerators with ice makers, garbage disposals and microwave ovens. All units have access to coin-operated washers and dryers and some units have a washer/dryer hook-up. Amenities include the clubhouse with a party room, swimming pool, tennis courts, racquetball courts, exercise facility and management offices. The amenities are shared with - 5 - Items 1. and 2. Business and Properties - Continued Park Place Apartments Phase I - Continued - ----------------------------------------- Phase II of the Park Place development. Park Place Apartments Phase II is owned by NTS-Properties VII, Ltd., an affiliate of the general partner of the Partnership. The cost to construct and operate the common amenities is shared proportionately by each phase. Monthly rental rates at Park Place Apartments Phase I start at $699 for one-bedroom apartments, $889 for two-bedroom apartments and $1,089 for two-bedroom townhomes, with additional monthly rental amounts for special features and locations. Tenants pay all costs of heating, air conditioning and electricity. Most leases are for a period of one year. Units will be rented in some cases, however, on a shorter term basis at an additional charge. The occupancy levels at the apartment complex as of December 31 were 90% (1996), 92% (1995), 93% (1994), $93% (1993), and 96% (1992). Willow Lake Apartments - ---------------------- Units at Willow Lake Apartments include one and two-bedroom apartments and two-bedroom townhomes. All units have wall-to-wall carpeting, individually controlled heating and air conditioning, dishwashers, ranges, refrigerators with ice makers, garbage disposals and microwave ovens. All units have access to coin-operated washers and dryers and some units have a washer/dryer hook-up. Amenities include the clubhouse with a party room, swimming pool, tennis courts, racquetball courts, exercise facility and management offices. Monthly rental rates at Willow Lake Apartments start at $740 for one-bedroom apartments, $955 for two-bedroom apartments and $1,145 for two-bedroom townhomes, with additional monthly rental amounts for special features and locations. Tenants pay all costs of heating, air conditioning and electricity. Most leases are for a period of one year. Units will be rented in some cases, however, on a shorter term basis at an additional charge. The occupancy levels at the apartment complex as of December 31 were 91% ( 1996), 93% (1995), 92% (1994), 84% (1993), and 87% (1992). Golf Brook Apartments - --------------------- Units at Golf Brook Apartments include two and three-bedroom units. All units have wall-to-wall carpeting, individually controlled heating and air conditioning, dishwashers, ranges, refrigerators, garbage disposals and washer/dryer hook-ups. Tenants have access to and use of clubhouse, management offices, pool and tennis courts. Monthly rental rates at Golf Brook Apartments start at $1,120 for two-bedroom apartments and $1,350 for three-bedroom apartments, with additional monthly rental amounts for special features and locations. Tenants pay all costs of heating, air conditioning and electricity. Most leases are for a period of one year. Units will be rented in some cases, however, on a shorter term basis at an additional charge. The occupancy levels at the apartment complex as of December 31 were 97% (1996), 91% (1995), 93% (1994), 91% (1993), 94% (1992). Plainview Point III Office Center - --------------------------------- Base annual rents, which include the cost of utilities, range from $13.90 to $15.00 per square foot for first and second floor office space and $13.00 per square foot for lower level office space. The average base annual rental for all types of space leased as of December 31, 1996 was $14.16 per square foot. Office space is ordinarily leased for between two and six years with the majority of current square footage being leased for a term of five years. Current leases terminate between 1997 and 2001. Some leases - 6 - Items 1. and 2. Business and Properties - Continued Plainview Point III Office Center - Continued - --------------------------------------------- provide for renewal options of between two and five years 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 increases in common area maintenance expenses, insurance, utilities and real estate taxes. As of December 31, 1996, there were six tenants leasing space aggregating approximately 56,882 square feet of rentable area. The tenants who occupy Plainview Point III Office Center are professional service oriented organizations. The principal occupations/professions practiced include real estate and insurance. Four tenants lease more than 10% of the office center's rentable area: The Prudential Company of America (10.4%), Underwriters Safety & Claims, Inc. (18.4%), Re/max Properties East, Inc. (24.5%) and Univa Health Network (26.8%). The occupancy levels at the office center as of December 31 were 91% (1996), 91% (1995), 91% (1994), 87% (1993) and 95% (1992). The following table contains approximate data concerning the leases in effect on December 31, 1996. Major Tenants Current Base Sq. Ft. and Annual Rental % of Net and % of Gross Year of Rentable Base Annual Renewal Name Expiration Area Rental Options ---- ---------- ---- ------ ------- The Prudential Company of America 1997 6,474 (10.4%) $ 95,964 (11.9%) 1 Five-Year Underwriters Safety & Claims, Inc. 2001 11,535 (18.4%) $149,952 (18.6%) None Re/max Properties East, Inc. 1999 15,300 (24.5%) $225,600 (28.0%) 1 Two-Year Univa Health Network 2000 16,727 (26.8%) $232,500 (28.9%) 1 Five-Year Other Tenants: Current Base Sq. Ft. and Annual Rental % of Net and % of Gross No. of Year of Rentable Base Annual Renewal Tenants Expiration Area Rental Options ------- ---------- ---- ------ ------- None 1997-1999 -- -- -- 2 2000 6,846 (10.9%) $101,604 (12.6%) 1 Three-Year Additional operating data regarding the Partnership's properties is furnished in the following table. Federal Realty Annual Tax Basis Tax Rate Realty Taxes --------- -------- ------------ Wholly-Owned Properties - ----------------------- Sabal Park Apartments $11,213,438 $.01894 $151,108 Park Place Apartments Phase I 11,221,275 .00991 111,375 Willow Lake Apartments 15,530,469 .09037 226,700 (Table continued next page) - 7 - Federal Realty Annual Tax Basis Tax Rate Realty Taxes --------- -------- ------------ Properties Owned in Joint Venture with NTS- Properties IV - ------------- Golf Brook Apartments $16,100,810 $ .01894 $ 259,816 Plainview Point III Office Center 4,189,222 .01120 34,911 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 3 - 30 years for amenities. The estimated realty taxes on all other planned renovations, primarily tenant improvements, would not be material. See Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) for explanations regarding the fluctuations of income and occupancy at the Partnership's properties. Investment in Joint Ventures - ---------------------------- NTS Sabal Golf Villas Joint Venture - On September 1, 1985, the Partnership entered into a joint venture agreement with NTS-Properties IV, an affiliate of the general partner of the Partnership, to develop, construct, own and operate a 158-unit luxury apartment complex on a 13.15-acre site in Orlando, Florida known as Golf Brook Apartments Phase I. On January 1, 1987, the joint venture agreement was amended to include Golf Brook Apartments Phase II, a 37-unit luxury apartment complex located on a 3.069-acre site adjacent to Golf Brook Apartments Phase I. 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 assets of the Partnership, other than its cash and cash-equivalent assets; (c) the vote or consent of each of the Partners to dissolve the Partnership; or (d) September 30, 2025. The Partnership contributed approximately $15.8 million, the cost of constructing and leasing the apartments. NTS-Properties IV contributed land valued at $1,900,000 with a related note payable to a bank of $1,200,000. The Partnership also contributed funds to retire the $1,200,000 note payable to a bank. No future contributions are anticipated as of December 31, 1996. - 8 - Items 1. and 2. Business and Properties - Continued Investment in Joint Venture - Continued - --------------------------------------- Golf Brook Apartments is encumbered by a mortgage payable to an insurance company. This mortgage payable replaced the Contribution Loan which the Partnership had obtained to fund a portion of its capital contribution to the Joint Venture. The $9,200,000 mortgage payable is recorded as a liability by the Partnership in accordance with the Joint Venture Agreement. The mortgage bears a fixed interest rate of 8.625%. The unpaid balance of the loan ($9,200,000) is due August 1, 1997. See above for information regarding the refinancing of this mortgage. 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 means 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 from previously established reserves (referred to in clause (b) (iv) below), over (b) the sum of (i) all cash expenses paid by the Joint Venture Property during such period, (ii) all 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 (i), (ii) and (iii) above shall be taken in to account only 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 96% at December 31, 1996. The Partnership has no liability for funding losses of the joint venture as of December 31, 1996. Plainview Point III Joint Venture - On March 1, 1987, the Partnership entered into a joint venture agreement with NTS-Properties IV, an affiliate of the general partner, to develop, construct, own and operate an office building in Louisville, Kentucky known as Plainview Point III Office Center. 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, unless such disposition is, in whole or in part, represented by a promissory note of the purchaser; (c) the vote or consent of each of the Partners to dissolve the Partnership; or (d) December 30, 2026. The Partnership contributed approximately $4.1 million, the cost to construct and lease the building. NTS-Properties IV contributed land valued at $790,000 with an outstanding note of $550,000 which was secured by the land. The Partnership also contributed the funds to retire the $550,000 note payable to the bank. No future contributions are anticipated as of December 31, 1996. - 9 - Items 1. and 2. Business and Properties - Continued Investment Joint Ventures - Continued - ------------------------------------- As of December 31, 1996, Plainview Point III Office Center is not encumbered by any mortgage indebtedness. 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 means 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 from previously established reserves (referred to in clause (b) (iv) below), over (b) the sum of (i) all cash expenses paid by the Joint Venture Property during such period, (ii) all 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 (i), (ii) and (iii) above shall be taken in to account only 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 95% at December 31, 1996. The Partnership has no liability for funding losses of the joint venture as of December 31, 1996. 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, amenities 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, 1996, there are no properties under construction in the respective vicinities in which the properties are located except for the following: In close proximity to Sabal Park Apartments and Golf Brook Apartments, there are 150 apartment units currently under construction which are scheduled to be completed during the first quarter of 1997. In the vicinity near Park Place Apartments, there are currently 738 apartment units currently under construction which are scheduled to be completed during the second and third quarters of 1997. Also, in the vicinity of Willow Lake Apartments, there are currently 1,200 apartment units under construction. It is anticipated that construction of these units will be completed during the second quarter of 1997. At this time it is unknown the effect these new units will have on occupancy at the Partnership's properties. 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. - 10 - Items 1. and 2. Business and Properties - Continued Management of Properties - ------------------------ NTS Development Company, an affiliate of NTS-Properties Associates VI, 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 Associates VI. 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 a total of $485,250 for the year ended December 31, 1996. $45,443 was received from the commercial property and $439,807 was received from residential properties. The fee is equal to 6% of gross revenues from the commercial property and 5% of gross revenues from residential 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 cancelled. The Agreement is subject to cancellation by either party upon sixty days written notice. As of December 31, 1996, the Management Agreement is still in effect. Conflict of Interest - -------------------- Because the principals of the General Partner and/or its affiliates own and/or operate real estate properties other than those owned by the Partnership that are or could be in competition with the Partnership, potential conflicts of interest exist. Because the Partnership was organized by and is operated by the General Partner, these conflicts are not resolved through arms-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 judgement or certain acts or omissions. With respect to these potential conflicts of interest, 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 - 11 - Items 1. and 2. Business and Properties - Continued Conflict of Interest - Continued - -------------------------------- 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 other than those previously described. Employees - --------- The Partnership has no employees; however, employees of an affiliate of the general partner are available to perform services for the Partnership. The Partnership reimburses this affiliate for the actual costs of providing such services. Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders None. - 12 - 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 4,136 limited partners as of February 28, 1997. Cash distributions and allocations of net income (loss) are made as described in Note 1C to the Partnership's 1996 financial statements. Annual distributions totalling $20.00, $20.00 and $18.75 per limited partnership unit were paid during the years ended December 31, 1996, 1995 and 1994, respectively. 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. Distributions were paid quarterly as follows: 1996 1995 1994 ---------- ---------- -------- First quarter $ 5.00 $ 5.00 $ 3.75 Second quarter 5.00 5.00 5.00 Third quarter 5.00 5.00 5.00 Fourth quarter 5.00 5.00 5.00 ------ ------ ------ $20.00 $20.00 $18.75 ====== ====== ===== The table below presents that portion of the distributions that represent a return of capital on a Generally Accepted Accounting Principle basis for the years ended December 31, 1996, 1995 and 1994. Net Income Cash (Loss) Distributions Return of Allocated Declared Capital --------- -------- ------- Limited Partners: 1996 $ 224,783 $ 886,000 $ 661,217 1995 (324,417) 948,700 948,700 1994 (803,780) 889,380 889,380 General Partners: 1996 $ 2,271 $ 8,950 $ 6,679 1995 (3,277) 9,583 9,583 1994 (8,119) 8,984 8,984 - 13 - Item 6. Selected Financial Data Years ended December 31, 1996, 1995, 1994, 1993 and 1992.
1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Total revenues $ 9,670,261 $ 8,939,055 $ 8,796,072 $ 8,515,951 $ 7,831,434 Total expenses (9,443,207) (9,266,749) (9,607,971) (9,549,251) (9,794,478) ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 227,054 $ (327,694) $ (811,899) $ (1,033,300) $ (1,963,044) ============ ============ ============ ============ ============ Net income (loss) allocated to: General partner $ 2,271 $ (3,277) $ (8,119) $ (10,333) $ (19,630) Limited partners $ 224,783 $ (324,417) $ (803,780) $ (1,022,967) $ (1,943,414) Net income (loss) per limited partnership unit $ 4.97 $ (6.84) $ (16.94) $ (21.57) $ (40.97) Weighted average number of limited partnership units 45,243 47,435 47,435 47,435 47,435 Cumulative net income (loss) allocated to: General partner $ (75,936) $ (78,207) $ (74,930) $ (66,811) $ (56,478) Limited partners $(12,308,341) $(12,533,124) $(12,208,707) $(11,404,927) $(10,381,960) Cumulative net taxable income (loss) allocated to: General partner $ 1,192,830 $ 78,617 $ 64,858 $ 55,986 $ 46,533 Limited partners $(16,357,888) $(15,401,294) $(14,859,402) $(13,885,668) $(12,769,887) Distributions declared: General partner $ 8,950 $ 9,583 $ 8,984 $ 7,187 $ 5,390 Limited partners $ 886,000 $ 948,700 $ 889,380 $ 711,525 $ 533,643 Cumulative distributions declared: General partner $ 103,444 $ 94,494 $ 84,911 $ 75,927 $ 68,740 Limited partners $ 10,240,906 $ 9,354,906 $ 8,406,206 $ 7,516,826 $ 6,805,301 At year end: Cash and equivalents $ 640,541 $ 393,552 $ 1,617,604 $ 1,394,905 $ 1,530,572 Investment securities $ 1,085,267 $ 1,151,355 $ -- $ -- $ -- Land, buildings and amenities, net $ 40,436,784 $ 42,196,272 $ 43,872,072 $ 45,799,467 $ 47,621,659 Total assets $ 44,771,802 $ 46,813,791 $ 48,267,884 $ 50,221,728 $ 52,751,897 Mortgages payable $ 27,403,056 $ 27,653,044 $ 27,883,025 $ 28,101,474 $ 28,900,767
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. - 14 - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- The occupancy levels at the Partnership's properties as of December 31 were as follows: Percentage Ownership at 12/31/96 1996 1995 1994 ----------- -------- -------- ------ Wholly-Owned Properties Sabal Park Apartments 100% 90% 98% 91% Park Place Apartments Phase I 100% 90% 92% 93% Willow Lake Apartments 100% 91% 93% 92% Properties Owned in Joint Venture with NTS- Properties IV Golf Brook Apartments 96% 97% 91% 93% Plainview Point III Office Center 95% 91% 91% 91% Rental and other income generated by the Partnership's properties for the years ended December 31, 1996, 1995 and 1994 were as follows: Percentage Ownership at 12/31/96 1996 1995 1994 ----------- -------- -------- ------ Wholly-Owned Properties Sabal Park Apartments 100% $1,765,302 $1,675,795 $1,650,135 Park Place Apartments Phase I 100% $1,843,808 $1,739,626 $1,694,519 Willow Lake Apartments 100% $2,434,696 $2,287,408 $2,101,194 Properties Owned in Joint Venture with NTS- Properties IV Golf Brook Apartments 96% $2,801,744 $2,722,451 $2,631,630 Plainview Point III Office Center 95% $ 729,647 $ 428,269 $ 670,057 Revenues shown in the table above for properties owned through a joint venture represent only the Partnership's percentage interest in those revenues. - 15 - Results of Operations -Continued - -------------------------------- Sabal Park Apartments' year-ending occupancy decreased 8% from 1995 to 1996 and average occupancy increased from 92% in 1995 to 94% in 1996. Occupancy at residential properties fluctuate on a continuous basis. Year-ending occupancy percentages represent occupancy only on a specific date; therefore, it is more meaningful to consider average occupancy percentages which are more representative of the entire year's results. In the opinion of the General Partner of the Partnership, the decrease in 1996 year-ending occupancy was only a temporary fluctuation and did not represent a downward occupancy trend. Rental and other income at Sabal Park Apartments increased from 1995 to 1996 as a result of the increase in average occupancy, increased rental rates, increased fees collected upon early lease terminations and increased fees collected for short term and month-to-month leases. Sabal Park Apartments' year-ending occupancy increased from 91% in 1994 to 98% in 1995; however, average occupancy decreased from 93% in 1994 to 92% in 1995. Rental and other income at Sabal Park Apartments increased from 1994 to 1995 due to increased rental rates and increased charges to applicants for credit checks. Year-ending occupancy at Park Place Apartments I decreased from 92% in 1995 to 90% in 1996 and average occupancy decreased from 94% in 1995 to 93% in 1996. Rental and other income at Park Place Apartments Phase I increased from 1995 to 1996 as a result of increased income collected from the rental of fully furnished units, increased income collected for short term and month-to-month leases and increased rental rates. Fully furnished units are apartments which rent at an additional premium above base rent. Therefore, it is possible for occupancy to decrease and revenues to increase when the number of fully furnished units has increased. Park Place Apartments Phase I's year-ending occupancy decreased from 93% in 1994 to 92% in 1995; however average occupancy remained constant (94%) from 1994 to 1995. Rental and other income at Park Place Apartments Phase I increased from 1994 to 1995 as a result of increased rental rates, increased charges to applicants for credit checks and decreased rental concessions. The increases in rental and other income at Park Place Apartments Phase I from 1994 to 1995 are partially offset by decreased income from fully furnished units. . Willow Lake Apartments' year-ending occupancy decreased 2% from 1995 to 1996; however, average occupancy increased 2% from 1995 to 1996. Rental and other income increased as a result of the increase in average occupancy, increased rental rates, increased income collected from fully furnished units and increased fees collected for short term and month-to-month leases. Willow Lake Apartments' year-ending occupancy increased from 92% in 1994 to 93% in 1995 and average occupancy increased from 87% in 1994 to 92% in 1995. Rental income increased from 1994 to 1995 as a result of the 5% increase in average occupancy, increased rental rates, decreased rental concessions, increased charges to applicants for credit checks and increased charges to residents for the cable TV service which is provided to residents. The increases in rental income from 1994 to 1995 are partially offset by decreased other income. 1994 other income included a $23,000 settlement received from the insurance company of the manufacturer of the pipe fittings which were used in construction of Willow Lake Apartments. The reimbursement was for certain repair expenses the Partnership incurred from 1987 to 1991. The repair costs were expensed at the time they were incurred due to the length of time it has taken to negotiate the settlement. - 16 - Results of Operations - Continued - --------------------------------- Year-ending occupancy at Golf Brook Apartments increased from 91% in 1995 to 97% in 1996 while average occupancy remained constant at 94% in 1995 and 1996. Rental and other income increased as a result of increased rental rates, increased non-refundable pet fees and increased pet rent collected. Golf Brook Apartments' year-ending occupancy decreased 2% from 1994 to 1995 while average occupancy remained constant at 94% in 1994 and 1995. Rental and other income at Golf Brook Apartments increased from 1994 to 1995 as a result of increased rental rates, decreased rental concessions and increased charges to applicants for credit checks. Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and 1996 as a result of expansions by two current tenants of existing space totalling approximately 2,500 square feet offset by one tenant move-out at the end of the lease term totalling approximately 2,500 square feet. Average occupancy increased from 55% in 1995 to 93% in 1996. Rental and other income increased at Plainview Point III Office Center from 1995 to 1996 as a result of the increase in average occupancy. Year-ending occupancy at Plainview Point III Office Center was 91% for 1995 and 1994 as a result of the following new leases and tenant move-outs. New leases during 1995 consist of a 10,343 square foot 63 month lease (took occupancy September 1, 1995) and a 16,727 square foot five-year lease (took occupancy December 27, 1995). The leases are offset by two tenant move-outs totalling approximately 26,000 square feet. Of this total, 16,400 square feet represents a tenant who vacated the office center at the end of the lease term due to the company's decision to consolidate its Louisville processing center with one located in another city. The tenant occupied 27% of the office center's rentable area. Approximately 9,600 square feet of the total move-outs represents a tenant who vacated the premises January 31, 1995. The tenant's lease was on a month-to-month basis at the time of move- out. The tenant's original lease term was for a period of four years. The tenant occupied approximately 16% of the office center's rentable area. Average occupancy for the 12 month period ended December 31 decreased from 92% (1994) to 55% (1995). Rental and other income decreased at Plainview Point III Office Center from 1994 to 1995 as a result of the decrease in average occupancy during 1995. If present trends continue, the Partnership will be able to continue at its current level of operations without the need of any additional financing. Current occupancy levels are considered adequate to continue the operation of the Partnership's properties. Interest and other income includes interest income from investments made by the Partnership with cash reserves. The increase in interest and other income from 1995 to 1996 can be attributed to increased miscellaneous income collected by the Partnership partially offset by decreased interest income resulting from decreased cash reserves being available for investment and decreased other income at the Partnership's residential properties. The increase in interest income from 1994 to 1995 is the result of increased cash reserves being available for investment. Operating expenses increased from 1995 to 1996 as a result of increased general building costs at all the Partnership's properties, increased furniture rental costs associated with fully furnished units at Willow Lake and Park Place Apartments, increased replacement costs at Golf Brook, Willow Lake and Park Place Apartments, increased utility costs at Park Place Apartments, Willow Lake Apartments and Plainview Point III Office Center, - 17 - Results of Operations - Continued - ---------------------------------- increased exterior maintenance costs at Golf Brook Apartments, increased advertising costs at Golf Brook, Park Place and Willow Lake Apartments and increased amortization of prepaid leasing commissions at Plainview Point III Officer Center . These increases are partially offset by decreased exterior painting costs at Willow Lake and Park Place Apartments and decreased interior painting and carpet replacement costs at Sabal Park Apartments. Operating expenses decreased from 1994 to 1995 as a result of decreased repair and maintenance costs at Park Place Apartments Phase I, Golf Brook Apartments, Sabal Park Apartments and Plainview Point III Office Center, decreased utility costs at Willow Lake Apartments, Park Place Apartments Phase I and Plainview Point III Office Center, decreased advertising costs at Sabal Park and Golf Brook Apartments, decreased janitorial costs at Plainview Point III Office Center and decreased snow removal costs at Park Place Apartments Phase I, Willow Lake Apartments and Plainview Point III Office Center. These decreases are partially offset by increased repair and maintenance costs at Willow Lake Apartments and increased landscaping costs at Golf Brook and Sabal Park Apartments. Operating expenses - affiliated decreased from 1995 to 1996 due to decreased property management and leasing costs. Operating expenses - affiliated remained fairly constant for the 12 months ended December 31, 1995 as compared to the same period in 1994. Operating expenses - affiliated are expenses incurred for services performed by employees of NTS Development Company, an affiliate of the General Partner of the Partnership. Amortization of capitalized leasing costs has decreased from 1994 to 1995 and from 1995 to 1996 as a result of a portion of the costs capitalized during start-up having become fully amortized. Capitalized leasing costs were fully amortized during the second quarter of 1995. Interest expense decreased from 1995 to 1996 due to the Partnership's decreasing debt level as a result of principal payments made. The increase in interest expense from 1994 to 1995 is the result of an interest rate change (in accordance with the mortgage agreement) effective December 1, 1994. The interest rate on the Willow Lake Apartments permanent financing ($8,527,771 mortgage payable) increased from 8.75% to 9.20%. The increase in interest expense from 1994 to 1995 is partially offset by the Partnership's decreasing debt level as a result of principal payments made. See the Capital Resources and Liquidity section of this item for details regarding the Partnership's debt. Management fees are calculated as a percentage of cash collections; however, revenue for reporting purposes is on the accrual basis. As a result, the fluctuations of revenues between periods will differ from the fluctuations of management fee expense. Repair and maintenance fees are calculated as a percentage (5.9%) of major renovation and repair costs. The 1994 repair and maintenance fees are associated with the wood replacement costs at Sabal Park and Golf Brook Apartments. This fee was paid to NTS Development Company, an affiliate of the general partner of the Partnership, pursuant to an agreement with the Partnership. The increase in real estate taxes from 1995 to 1996 is a result of increased property assessments for Golf Brook and Sabal Park Apartments. The increase in real estate taxes is partially offset by a decreased property assessment and decreased tax rate for Willow Lake Apartments. The assessment for Park Place Apartments Phase I and Plainview Point III Office Center remained constant from 1995 to 1996. Real estate taxes have remained fairly constant from 1994 to 1995. - 18 - Results of Operations - Continued - --------------------------------- The increase in professional and administrative expenses from 1995 to 1996 is the result of increased costs associated with the Interest Repurchase Program. Professional and administrative expenses have remained fairly constant from 1994 to 1995. Professional and administrative expenses - affiliated increased from 1995 to 1996 as a result of increased salary costs. Professional and administrative expenses - affiliated have remained fairly constant from 1994 to 1995. Professional and administrative expenses - affiliated are expenses incurred for services performed by employees of NTS Development Company, an affiliate of the General Partner of the Partnership. Depreciation and amortization decreased from 1995 to 1996 due to a portion of the assets with shorter lives at the Partnership's residential properties having become fully depreciated. The decrease in depreciation and amortization from 1995 to 1996 is partially offset by depreciation of new tenant finish improvements at Plainview Point III Office Center. Depreciation and amortization decreased from 1994 to 1995 due to a portion of the assets with shorter lives at the Partnership's residential properties having become fully depreciated and as a result of a portion of the original tenant improvements at Plainview Point III Office Center becoming fully depreciated. Depreciation is computed using the straight-line method over the useful lives of the assets which are 5 - 30 years for land improvements, 30 years for buildings, 5 - 30 years for building and improvements and 5 - 30 years for amenities. The aggregate cost of the Partnership's properties for Federal tax purposes is approximately $59,300,000. Capital Resources and Liquidity - ------------------------------- Cash provided from operations was $2,257,823, $1,648,106, and $1,288,415 during the years ended December 31, 1996, 1995 and 1994, respectively. These funds in conjunction with cash on hand were used to make a 2% (annualized) cash distribution of approximately $895,000 in 1996, a 2% (annualized) cash distribution of approximately $958,000 in 1995 and a 1.875% (annualized) cash distribution of approximately $898,000 in 1994. The annualized distribution rate is calculated as a percent of the original capital contribution. The limited partners received 99% and the general partner received 1% of these 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 capital improvements. Cash reserves (which are unrestricted cash and equivalents and investment securities as shown on the Partnership's balance sheet as of December 31) were $1,725,808, $1,544,907, and $1,617,604 at December 31, 1996, 1995 and 1994, respectively. As of December 31, 1996, the Partnership had a mortgage payable to an insurance company in the amount of $9,200,000. The mortgage payable bears a fixed interest rate of 8.625% and is secured by the land, buildings and amenities of Golf Brook Apartments. The unpaid balance of the loan is due August 1, 1997. As of December 31, 1996, the Partnership had obtained a commitment from an insurance company for $9,000,000 of debt financing. The proceeds from the new financing along with cash reserves will be used to pay off the Partnership's current $9,200,000 mortgage payable discussed above. The mortgage will bear interest at a fixed rate of 7.43% and will be fully amortized over a 12 year period. Based upon the terms of the commitment, the Partnership anticipates that the financing will be complete in April 1997. - 19 - Capital Resources and Liquidity - Continued - ------------------------------------------- As of December 31, 1996, the Partnership also had a mortgage payable to an insurance company in the amount of $8,527,771. The mortgage bore a fixed interest rate of 8.75% through the first three Loan Years (note dated October 16, 1991). The interest rate was adjusted at the end of the third Loan Year (November 1, 1994) to a fixed interest rate of 9.20%; an interest rate two hundred ten (210) basis points greater than the yield on 3-year U.S. Treasury Notes as published in the Treasury Yield Curve of Moody's Bond Survey for the reference date closest to the end of the third Loan Year. The mortgage payable is due November 1, 1997 and is secured by the land, buildings and amenities of Willow Lake Apartments. Monthly principal payments through the first three Loan Years were based on a 28-year amortization schedule. Effective upon acceptance of the adjusted interest rate (November 1, 1994), monthly principal payments are now based upon a 25- year amortization schedule. The outstanding balance at maturity based on the current rate of amortization will be $8,433,356. Subsequent to December 31, 1996, the Partnership submitted an application with an insurance company for $8,500,000 of debt financing. The proceeds from the new financing will be used to pay off the Partnership's current $8,527,771 mortgage payable discussed above. Based upon discussions with the insurance company, the Partnership anticipates that the financing will be completed in the fourth quarter of 1997. As of December 31, 1996, the Partnership had two mortgage loans each with an insurance company in the amount of $3,994,992 and $951,189. The permanent financings were obtained September 8, 1992 in the amount of $4,200,000 and $1,000,000. Both mortgages payable are due October 5, 2002, bear a fixed interest rate of 8.375% for the first 60 months, and are secured by the land, buildings and amenities of Park Place Apartments Phase I. At the end of the 56th month from the date of the notes, the insurance companies will notify the Partnership of the interest rate which is their then prevailing interest rate for loans with a term of five years on properties comparable to the apartments (the "Modified Rate"). The Partnership will have 30 days to accept or reject the Modified Rate. If the Modified Rate is rejected by the Partnership, the entire unpaid principal balance is due with the 60th installment of interest. If the Partnership accepts the Modified Rate, it becomes effective the 61st month from the date of the note. Current monthly principal payments on both mortgages are based upon a 27-year amortization schedule. If the Partnership accepts the Modified Rate, the principal balance of both mortgages will be amortized using a 22-year amortization schedule beginning the 61st month. The outstanding balance at maturity based on the current rate of amortization would be $4,413,955 ($3,565,118 and $848,837). As of December 31, 1996, the Partnership also had two mortgage loans each with an insurance company in the amount of $2,837,462 and $1,891,642. The permanent financings were obtained December 21, 1992 in the amount of $3,000,000 and $2,000,000. Both mortgages payable are due January 5, 2003, bear interest at a fixed rate of 7.25% for the first 60 months and are secured by the land, buildings and amenities of Sabal Park Apartments. At the end of the 56th month from the date of the notes, the insurance companies will notify the Partnership of the interest rate which is their then prevailing interest rate for loans with a term of five years on properties comparable to the apartments (the "Modified Rate"). The Partnership will have 30 days to accept or reject the Modified Rate. If the Modified Rate is rejected by the Partnership, the entire unpaid principal balance is due with the 60th installment of interest. If the Partnership accepts the Modified Rate, it becomes effective the 61st month from the date of the note. Current monthly principal payments on both mortgages are based upon a 27-year amortization schedule. If the Partnership accepts the Modified Rate, the principal balance of both mortgages will be amortized - 20 - Capital Resources and Liquidity - Continued - ------------------------------------------- using a 22-year amortization schedule beginning the 61st month. The outstanding balance at maturity based on the current rate of amortization would be $4,122,326 ($2,473,396 and $1,648,930). The General Partner of the Partnership is presently exploring the possibility of refinancing the mortgages encumbering Park Place Apartments Phase I and Sabal Park Apartments. If an interest rate can be obtained which would be less than the Modified Rate, together with a favorable amortization schedule, the loans will likely be refinanced. The majority of the Partnership's cash flow is derived from operating activities. The decrease in accounts receivable during 1995 represents a settlement received from the insurance company of the manufacturer of the pipe fittings which were used in the construction of Willow Lake Apartments. Cash flows used in investing activities are for tenant finish improvements and other capital improvements at the Partnership's properties. Changes to current tenant improvements at commercial properties are a typical part of any lease negotiation. Improvements generally include a revision to the current floor plan to accommodate a tenant's needs, new carpeting and paint and/or wallcovering. The extent and cost of these improvements are determined by the size of the space and whether the improvements are for a new tenant or incurred because of a lease renewal. The tenant finish improvements and other capital additions are funded by cash flow from operations. Cash flows used in investing activities are also for the purchase of investment securities. As part of its cash management activities, the Partnership has purchased Certificates of Deposit or securities issued by the U.S. Government with initial maturities of greater than three months to improve the return on its cash reserves. The Partnership intends to hold the securities until maturity. Cash flows provided by investing activities are derived from the maturity of investment securities. Cash flows used in financing activities are for cash distributions, principal payments on mortgages payable, repurchase of limited partnership Units and payment of loan costs. Cash flows used in financing activities also include cash which has been reserved by the Partnership for the repurchase of limited partnership Units. The Partnership does not expect any material changes in the mix and relative cost of capital resources from those in 1996 except for the changes resulting from the $9,000,000 loan commitment as discussed above, other debt refinancings which the Partnership is currently exploring as discussed above and future leasing and tenant finish costs which is discussed below. In the next 12 months, the demand on future liquidity is anticipated to increase as a result of a 6,474 square feet lease expiring at Plainview Point III Office Center in 1997. At this time, the future leasing and tenant finish costs which will be required to renew the current lease or obtain new tenants are unknown. As of December 31, 1996, the Partnership had no material commitments for renovations or capital improvements. It is anticipated that the cash flow from operations and cash reserves will be sufficient to meet the needs of the Partnership. As of December 31, 1995, the Partnership established an Interest Repurchase Reserve in the amount of $474,350 pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of Limited Partnership. The Partnership elected to fund additional amounts of $455,380 on May 24, 1996 and $250,000 on October 17, 1996 to its Interest Repurchase Reserve. With these funds, the Partnership will be able to repurchase up to 4,718 Units at a price of $250 per Unit. During 1996 the Partnership has repurchased a total of 4,483 Units for $1,120,756. Repurchased Units are retired by the Partnership, thus increasing the share of ownership of each remaining investor. The Interest Repurchase Reserve was funded from cash reserves. The amount remaining in the Interest Repurchase Reserve at December 31, 1996 was $58,980. - 21 - Capital Resources and Liquidity - Continued - ------------------------------------------- The table below presents that portion of the distributions that represent a return of capital on a Generally Accepted Accounting Principle basis for the years ended December 31, 1996, 1995 and 1994. Net Cash Income(Loss) Distributions Return of Allocated Declared Capital --------- -------- ------- Limited Partners: 1996 $ 224,783 $ 886,000 $ 661,217 1995 (324,417) 948,700 948,700 1994 (803,780) 889,380 889,38 General Partner: 1996 $ 2,271 $ 8,950 $ 6,679 1995 (3,277) 9,583 9,583 1994 (8,119) 8,984 8,984 In an effort to continue to improve occupancy at the Partnership's residential properties, the Partnership has an on-site leasing staff, employees of NTS Development Company, at each of the apartment communities. The staff handles all on-site visits from potential tenants, coordinates local advertising with NTS Development Company's marketing staff, makes visits to local companies to promote fully furnished units and negotiates lease renewals with current residents. The leasing and renewal negotiations for the Partnership's commercial property are handled by leasing agents, employees of NTS Development Company, located in Louisville, Kentucky. The leasing agent's are located in the same city as the commercial property. All advertising for the commercial property is coordinated by NTS Development Company's marketing staff located in Louisville, Kentucky. Leases at Plainview Point III Office Center provide for tenants to contribute toward the payment of increases in common area maintenance expenses, insurance, utilities and real estate taxes. Leases at the office center also provide for rent increases which are based upon increases in the consumer price index. These lease provisions, along with the fact that residential leases are generally for a period of one year, should protect the Partnership's operations from the impact of inflation and changing prices. The Partnership owns approximately 15 acres of land, adjacent to the Park Place Apartments development, in Lexington, Kentucky which is zoned for 163 apartment units (Park Place Apartments Phase III). Included in the cost of approximately $1,715,000 is land cost, capitalized interest, common area costs and amenity costs. The Partnership continues to evaluate whether to sell or develop the tract of land. At this time, no decision has been made. In management's opinion, the net book value approximates the fair market value. Some of the statements included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, may be considered to be "forward-looking statements" since such statements relate to matters which have not yet occurred. For example, phrases such as " the Partnership anticipates", "believes" or "expects" indicate that it is possible that the event anticipated, believed or expected may not occur. - 22 - Capital Resources and Liquidity - Continued - ------------------------------------------- Should such event not occur, then the result which the Partnership expected also may not occur or occur in a different manner, which may be more or less favorable to the Partnership. The Partnership does not undertake any obligations to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. Any forward-looking statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations, or elsewhere in this report, which reflect management's best judgement based on factors known, involve risks and uncertainties. Actual results could differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including but not limited to those discussed below. Any forward-looking information provided by the Partnership pursuant to the safe harbor established by recent securities legislation should be evaluated in the context of these factors. The Partnership's principal activity is the leasing and management of a commercial office building and apartment complexes. If a major commercial tenant or a large number of apartment lessees default on their lease, the Partnership's ability to make payments due under its debt agreements, payment of operating costs and other partnership expenses would be directly impacted. A lessee's ability to make payments are subject to risks generally associated with real estate, many of which are beyond the control of the Partnership, including general or local economic conditions, competition, interest rates, real estate tax rates, other operating expenses and acts of God. - 23 - Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To NTS-Properties VI, a Maryland Limited Partnership: We have audited the accompanying balance sheets of NTS-Properties VI, a Maryland Limited Partnership, as of December 31, 1996 and 1995, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1996. 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 VI, a Maryland Limited Partnership, as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 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 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 February 25, 1997 - 24 - NTS-PROPERTIES VI, A Maryland Limited Partnership BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ----------- ASSETS Cash and equivalents $ 640,541 $ 393,552 Cash and equivalents - restricted 390,677 776,000 Investment securities 1,085,267 1,151,355 Accounts receivable 136,394 158,429 Land, buildings and amenities, net 40,436,784 42,196,272 Assets held for development, net 1,714,511 1,751,234 Other assets 367,628 386,949 ----------- ----------- $44,771,802 $46,813,791 =========== =========== LIABILITIES AND PARTNERS' EQUITY Mortgages payable $27,403,056 $27,653,044 Accounts payable - operations 349,168 305,779 Accounts payable - construction -- 70,456 Distributions payable 216,692 239,571 Security deposits 250,814 235,187 Other liabilities 52,086 21,122 ----------- ----------- 28,271,816 28,525,159 Partners' equity 16,499,986 18,288,632 ----------- ----------- $44,771,802 $46,813,791 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. - 25 - NTS-PROPERTIES VI, A Maryland Limited Partnership STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ----------- ----------- Revenues: Rental income $ 9,541,311 $ 8,817,265 $ 8,679,772 Interest and other income 128,950 121,790 116,300 ----------- ----------- ----------- 9,670,261 8,939,055 8,796,072 Expenses: Operating expenses 2,529,274 2,382,093 2,578,341 Operating expenses - affiliated 1,044,781 1,055,190 1,053,486 Amortization of capitalized leasing costs -- 1,091 28,783 Interest expense 2,344,531 2,365,542 2,351,670 Management fees 485,250 441,861 438,523 Repairs and maintenance fees -- -- 15,011 Real estate taxes 771,952 746,200 749,915 Professional and administrative expenses 145,734 141,948 142,593 Professional and administrative expenses - affiliated 203,818 191,677 188,131 Depreciation and amortization 1,917,867 1,941,147 2,061,518 ----------- ----------- ----------- 9,443,207 9,266,749 9,607,971 ----------- ----------- ----------- Net income (loss) $ 227,054 $ (327,694) $ (811,899) =========== =========== =========== Net income (loss) allocated to the limited partners $ 224,783 $ (324,417) $ (803,780) =========== =========== =========== Net income (loss) per limited partnership $ 4.97 $ (6.84) $ (16.94) =========== =========== =========== unit Weighted average number of limited partnership units 45,243 47,435 47,435 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. - 26 - NTS-PROPERTIES VI, A Maryland Limited Partnership STATEMENTS OF PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited General Partners Partners Total ----------- ----------- --------- Balances at December 31, 1993 $ 21,427,510 $ (142,638) $ 21,284,872 Net loss (803,780) (8,119) (811,899) Distributions declared (889,380) (8,984) (898,364) ------------ ------------ ------------ Balances at December 31, 1994 19,734,350 (159,741) 19,574,609 Net loss (324,417) (3,277) (327,694) Distributions declared (948,700) (9,583) (958,283) ------------ ------------ ------------ Balances at December 31, 1995 18,461,233 (172,601) 18,288,632 Net income 224,783 2,271 227,054 Distributions declared (886,000) (8,950) (894,950) Repurchase of limited partnership units (1,120,750) -- (1,120,750) ------------ ------------ ------------ Balances at December 31, 1996 $ 16,679,266 $ (179,280) $ 16,499,986 ============ ============ ============
The accompanying notes to financial statements are an integral part of these statements. - 27 - NTS-PROPERTIES VI, A Maryland Limited Partnership STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 227,054 $ (327,694) $ (811,899) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Accrued interest on investment securities 7,498 (14,875) -- Amortization of capitalized leasing costs -- 1,091 28,783 Depreciation and amortization 1,917,867 1,941,147 2,061,518 Changes in assets and liabilities: Cash and equivalents - restricted (30,047) (71,046) 114,977 Accounts receivable 22,035 223,026 (30,079) Other assets 23,436 (94,952) 10,140 Accounts payable-operations 43,389 40,626 (72,951) Security deposits 15,627 (47,330) (9,435) Other liabilities 30,964 (1,887) (2,639) ----------- ----------- ----------- Net cash provided by operating activities 2,257,823 1,648,106 1,288,415 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to land, buildings and amenities (103,508) (73,064) (8,796) Purchase of investment securities (3,344,984) (2,642,085) -- Maturity of investment securities 3,403,575 1,505,605 -- ----------- ----------- ----------- Net cash used in investing activities (44,917) (1,209,544) (8,796) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgages payable (249,988) (229,981) (218,449) Cash distributions (917,829) (958,283) (838,471) Repurchase of limited partnership Units (1,120,750) -- -- Additions to loan costs (92,720) -- -- Cash and equivalents - restricted 415,370 (474,350) -- ----------- ----------- ----------- Net cash used in financing activities (1,965,917) (1,662,614) (1,056,920) ----------- ----------- ----------- Net increase (decrease) in cash and equivalents 246,989 (1,224,052) 222,699 CASH AND EQUIVALENTS, beginning of year 393,552 1,617,604 1,394,905 ----------- ----------- ----------- CASH AND EQUIVALENTS, end of year $ 640,541 $ 393,552 $ 1,617,604 =========== =========== =========== Interest paid on a cash basis $ 2,346,643 $ 2,367,146 $ 2,349,889 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. - 28 - NTS-PROPERTIES VI, ------------------ A Maryland Limited Partnership ------------------------------ NOTES TO FINANCIAL STATEMENTS ----------------------------- FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 ---------------------------------------------------- 1. Significant Accounting Policies ------------------------------- A) Organization ------------ NTS-Properties VI, a Maryland Limited Partnership (the "Partnership") is a limited partnership organized under the laws of the State of Maryland on December 27, 1984. The general partner is NTS-Properties Associates VI (a Kentucky limited partnership). The Partnership is in the business of developing, constructing, owning and operating apartment complexes and commercial real estate. B) Properties ---------- The Partnership owns and operates the following properties: - Sabal Park Apartments, a 162-unit luxury apartment complex in Orlando, Florida - Park Place Apartments Phase I, a 180-unit luxury apartment complex in Lexington, Kentucky - Willow Lake Apartments, a 207-unit luxury apartment complex in Indianapolis, Indiana - A 96% joint venture interest in Golf Brook Apartments, a 195- unit luxury apartment complex in Orlando, Florida - A 95% joint venture interest in Plainview Point III Office Center, an office center with approximately 62,000 net rentable square feet located in Louisville, Kentucky The Partnership also owns approximately 15 acres of land in Lexington, Kentucky which is zoned for 163 apartment units (Park Place Apartments Phase III). 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 Cash Proceeds, as defined in the partnership agreement, will be distributed 1) 99% to the limited partners and 1% to the general partner until the limited partners have received cash distributions from all sources (except Pre-Termination Date Net Cash Receipts) equal to their Original Capital; and 2) the remainder, 80% to the limited partners and 20% 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. - 29 - 1. Significant Accounting Policies - Continued ------------------------------------------- C) Allocation of Net Income (Loss) and Cash Distributions - Continued ------------------------------------------------------------------ Net Operating Income in excess of cash distributions and Net Gains from Sales 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 an amount equal to their Original Capital less cash distributions except distributions of Pre-Termination Date Net Cash Receipts; (3) the balance, 80% to the limited partners and 20% to the general partner. Net Operating Losses shall be allocated 99% to the limited partners and 1% to the general partner. D) Tax Status ---------- The Partnership has received a ruling from the Internal Revenue Service stating that the Partnership is classified as a limited partnership for federal income tax purposes. As such, the Partnership makes no provision for income taxes. The taxable income or loss is passed through to the holders of the partnership interests for inclusion on their individual income tax returns. A reconciliation of net income (loss) for financial statement purposes versus that for income tax reporting is as follows: 1996 1995 1994 ---------- ---------- -------- Net income (loss) $ 227,054 $(327,694) $(811,899) Items handled differently for tax purposes: Depreciation and amortization (139,371) (195,060) (211,507) Capitalized leasing costs 34,134 35,750 61,669 Write-off of unamortized tenant improvements (11,476) (22,832) 424 Rental income 47,278 (18,296) (3,549) --------- --------- --------- Taxable income (loss) $ 157,619 $(528,132) $(964,862) ========= ========= ========= 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, - 30 - 1. Significant Accounting Policies - Continued ------------------------------------------- F) Joint Venture Accounting - Continued ------------------------------------ expenses and cash flows. All intecompany accounts and transactiosn have been eliminated in consolidation. Proportionate consolidation is utilized by the Partnership due to the fact that the ownership of joint venture properties, in substance, is not subject to joint control. The managing general partners of the sole general partner of the NTS sponsored partnerships which have formed joint ventures are substantially the same. As such, decisions regarding financing, development, sale or operations do not require the approval of different partners. Additionally, the joint venture properties are in the same business/industry as their respective joint venture partners and their asset, liability, revenue and expense accounts correspond with the accounts of such partner. It is the belief of the general partner of the Partnership that the financial statement disclosure resulting from proportionate consolidation provides the most meaningful presentation of assets, liabilities, revenues, expenses and cash flows for the years presented given the commonality of the Partnership's operations. G) Cash and Equivalents - Restricted --------------------------------- Cash and equivalents - restricted represents funds received for residential security deposits, funds which have been escrowed with mortgage companies for property taxes and insurance in accordance with the loan agreements and funds reserved by the Partnership for the repurchase of limited partnership Units. H) Investment Securities --------------------- Investment securities represent investments in Certificates of Deposit or securities issued by the U.S. Government with initial maturities of greater than three months. The investments are carried at cost which approximates market value. The Partnership intends to hold the securities until maturity. During 1996 and 1995, the Partnership sold no investment securities. The following provides details regarding the investments held at December 31, 1996: Amortized Maturity Value At Type Costs Date Maturity ---- ------- ------ --------- FHLB Discount Note $ 204,154 01/30/97 $ 205,000 Federal Farm Credit Bank 127,338 03/03/97 128,394 FNMA Discount Note 227,601 03/18/97 230,000 Certificate of Deposit 401,174 04/01/97 406,204 Certificate of Deposit 125,000 05/01/97 127,072 ---------- ---------- $1,085,267 $1,096,670 ========== ========== - 31 - 1. Significant Accounting Policies - Continued ------------------------------------------- H) Investment Securities - Continued --------------------------------- The following provides details regarding the investments held at December 31, 1995: Amortized Maturity Value at Type Cost Date Maturity ---- ------ ------ ---------- FHLB Discount Note $ 269,271 01/18/96 $ 270,000 FNMA Discount Note 183,637 02/20/96 185,000 Certificate of Deposit 416,469 02/28/96 419,972 FNMA Discount Note 281,978 03/13/96 285,000 ---------- ---------- $1,151,355 $1,159,972 ========== ========== The Partnership held no investment securities with initial maturities greater than three months during 1994. I) 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 estimated useful lives of the assets which are 5 - 30 years for land improvements, 5-30 years for building and improvements, 5 - 30 years for amenities and the applicable lease term for tenant improvements. Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of, specifies circumstances in which certain long-lived assets must be reviewed for impairment. If such review indicates that the carrying amount of an asset exceeds the sum of its expected future cash flows, the asset's carrying value must be written down to fair value. Application of this standard during the year ended December 31, 1996 did not result in an impairment loss. J) Capitalized Leasing Costs ------------------------- The Partnership has capitalized certain costs associated with the initial leasing of the properties. These costs are being amortized over a five year period. K) Rental Income and Deferred Leasing Commissions ---------------------------------------------- Certain of the Partnership's lease agreements at Plainview Point III Office Center 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 totalled $98,024 and $112,897 at December 31, 1996 and 1995, respectively. All commissions paid to commercial leasing agents are deferred and amortized over the term of the lease to which they apply. - 32 - 1. Significant Accounting Policies - Continued ------------------------------------------- L) Advertising ----------- The Partnership expenses advertising-type costs as incurred. Advertising expense was immaterial to the Partnerhip during the years ended December 31, 1996, 1995 and 1994. M) 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. N) Reclassification of 1995 Financial Statements --------------------------------------------- Certain reclassifications have been made to the December 31, 1995 financial statements to conform with December 31, 1996 classifications. These reclassifications have no effect on previously reported operations. 2. Concentration of Credit Risk --------------------------- The Partnership owns and operates, either wholly or through a joint venture, residential properties in Kentucky (Louisville and Lexington), Indiana (Indianapolis) and Florida (Orlando). The apartment unit is generally the principal residence of the tenant. The Partnership also owns and operates, through a joint venture, a commercial property in Louisville, Kentucky. Substantially all of the tenants are local businesses or are businesses which have operations in the Louisville area. 3. Investment in Joint Ventures ---------------------------- A) NTS Sabal Golf Villas Joint Venture ------------------------------------ In 1985, the Partnership entered into a joint venture agreement with NTS-Properties IV to develop and construct a 158-unit luxury apartment complex on a 13.15-acre site located in Orlando, Florida, known as Golf Brook Apartments Phase I. NTS-Properties IV contributed land valued at $1,900,000 with an outstanding note payable to a bank of $1,200,000 which was secured by the land. The Partnership contributed the construction and carrying costs of the apartment complex. In 1987, the joint venture agreement was amended to include Golf Brook Apartments Phase II, a 37-unit luxury apartment complex located on a 3.069 acre site adjacent to Golf Brook Apartments Phase I. The Partnership contributed land, construction costs, and the cost of the initial leasing of this second phase. The Partnership made contributions of approximately $15.8 million for construction and carrying costs and retired the $1,200,000 note payable in 1987, which increased the Partnership's percentage interest in the joint venture. The net income and net loss is allocated based on the respective partnership's contribution as of the end of each calendar quarter. The Partnership's ownership share was 96% at December 31, 1996. The Partnership's share of the joint venture's net operating income was $1,023,900 (1996), $1,058,691 (1995) and $816,229 (1994). - 33 - 3. Investment in Joint Ventures - Continued ---------------------------------------- B) Plainview Point III Joint Venture --------------------------------- In 1987, the Partnership entered into a joint venture agreement with NTS-Properties IV to develop and construct an approximately 62,000 square foot office building located in Louisville, Kentucky known as Plainview Point III Office Center. NTS-Properties IV contributed land valued at $790,000 with an outstanding note payable to a bank of $550,000 which was secured by the land. The Partnership contributed the construction and carrying costs of the complex. The Partnership made contributions of approximately $4.1 million for construction and carrying costs and retired the $550,000 note payable in 1987, which increased the Partnership's percentage interest in the joint venture. The net income and net loss is allocated based on the respective partnership's contribution as of the end of each calendar quarter. The Partnership's ownership share was 95% at December 31, 1996. The Partnership's share of the joint venture's net operating income (loss) was $(31,953)(1996), $12,423 (1995) and $(59,399) (1994). 4. Land, Buildings and Amenities ----------------------------- The following schedule provides an analysis of the Partnership's investment in property held for lease as of December 31: 1996 1995 ----------- ----------- Land and improvements $14,863,110 $14,862,974 Buildings and improvements 45,120,951 45,170,635 Amenities 1,527,465 1,511,656 ----------- ----------- 61,511,526 61,545,265 Less accumulated depreciation 21,074,742 19,348,993 ----------- ----------- $40,436,784 $42,196,272 =========== =========== 5. Assets Held for Development --------------------------- The Partnership owns approximately 15 acres of land, adjacent to the Park Place Apartments development, in Lexington, Kentucky which is zoned for 163 apartment units (Park Place Apartments Phase III). Included in the cost of approximately $1,715,000 is land cost, capitalized interest, common area costs and amenity costs. The Partnership continues to evaluate whether to sell or develop the tract of land. At this time, no final decision has been made. 6. Interest Repurchase Reserve --------------------------- As of December 31, 1995, the Partnership had established an Interest Repurchase Reserve in the amount of $474,350 pursuant to Section 16.4 of the Partnership's Amended and Restated Agreement of Limited Partnership. The Partnership elected to fund additional amounts of $455,380 on May 24, 1996 and $250,000 on October 17, 1996 to its Interest Repurchase Reserve. With these funds, the Partnership will be able to repurchase up to 4,718 Units at a price of $250 per Unit. Through December 31, 1996, the Partnership has repurchased a total of 4,483 Units for $1,120,750. Repurchased Units are retired by the - 34 - 6. Interest Repurchase Reserve - Continued --------------------------------------- Partnership, thus increasing the share of ownership of each remaining investor. The Interest Repurchase Reserve was funded from cash reserves. The amount remaining in the Interest Repurchase Reserve at December 31, 1996 was $58,980. 7. Mortgages Payable ----------------- Mortgages payable as of December 31 consist of the following: 1996 1995 ----------- ---------- Mortgage payable with an insurance company bearing interest at 8.625%, due August 1, 1997 secured by certain land, buildings and amenities $ 9,200,000 $ 9,200,000 Mortgage payable with an insurance company bearing interest at 9.20%, due November 1, 1997 secured by certain land, buildings and amenities 8,527,771 8,631,951 Mortgage payable with an insurance company bearing interest at 8.375%, due October 5, 2002 secured by certain land, buildings and amenities 3,994,992 4,050,879 Mortgage payable with an insurance company bearing interest at 8.375%, due October 5, 2002 secured by certain land, buildings and amenities 951,189 964,495 Mortgage payable with an insurance company bearing interest at 7.25%, due January 5, 2003 secured by certain land, buildings and amenities 2,837,462 2,883,431 Mortgage payable to an insurance company, bearing interest at 7.25%, due January 5, 2003 secured by certain land, buildings and amenities 1,891,642 1,922,288 ---------- ---------- $27,403,056 $27,653,044 ========== ========== The mortgages are payable in monthly installments of $282,610 which includes principal, interest, property taxes and insurance. Scheduled maturities of debt are as follows: For the Years Ended December 31, Amount -------------------------------- ------ 1997 $17,885,345 1998 170,294 1999 184,046 2000 198,916 2001 214,994 Thereafter 8,749,461 ----------- $27,403,056 =========== - 35 - 7. Mortgages Payable - Continued ----------------------------- Based on the borrowing rates currently available to the Partnership for mortgages with similar terms and average maturities, the fair value of long-term debt is approximately $31,700,000. As of December 31, 1996, the Partnership had obtained a commitment from an insurance company for $9,000,000 of debt financing. The proceeds from the new financing along with cash reserves will be used to pay off the Partnership's current $9,200,000 mortgage payable which is secured by the land, buildings and amenities of Golf Brook Apartments which matures August 1, 1997. The mortgage will bear interest at a fixed rate of 7.43% and will be fully amortized over a 12 year period. Based upon the terms of the commitment, the Partnership anticipates that the financing will be completed in April 1997. Subsequent to December 31, 1996, the Partnership submitted an application with an insurance company for $8,500,000 for debt financing. The proceeds from the new financing will be used to pay off the Partnership's current $8,527,771 mortgage payable which is secured by the land, building and amenities of Willow Lake Apartments which matures November 1, 1997. Based upon discussions with the insurance company, the Partnership anticipates that the financing will be completed in the fourth quarter of 1997. 8. Rental Income Under Operating Expenses --------------------------------------- The following is a schedule of minimum future rental income on noncancellable operating leases as of December 31, 1996: For the Years Ended December 31, Amount -------------------------------- ---------- 1997 $ 581,778 1998 533,951 1999 394,401 2000 347,885 2001 126,912 Therefore -- ---------- $1,984,927 ========== 9. Related Party Transactions -------------------------- Pursuant to an agreement with the Partnership, property management fees of $485,250 (1996), $441,861 (1995), and $438,523 (1994) were paid to NTS Development Company, an affiliate of the general partner. The fee is equal to 5% and 6% of gross revenues from the residential properties and commercial properties, respectively. 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 and major repair and renovation projects. The Partnership has incurred $862 (1996) and $6,200 (1995) as a repair and maintenance fee and has capitalized these costs as part of land, buildings and amenities. The Partnership was also charged the following amounts from NTS Development Company for the years ended December 31, 1996, 1995 and 1994. 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 other assets or as land, buildings and amenities. - 36 - 9. Related Party Transactions - Continued -------------------------------------- These charges were as follows: 1996 1995 1994 ---------- ---------- ---------- Administrative $ 258,101 $ 245,369 $ 240,133 Property manager 792,366 786,667 803,635 Leasing 212,358 229,309 184,919 Other 4,471 9,285 16,024 --------- --------- --------- $1,267,296 $1,270,630 $1,244,711 ========= ========= ========= - 37 - Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure N/A 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 Associates VI. 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 Associates VI are as follows: J. D. Nichols - ------------- Mr. Nichols (age 55) is the managing general partner of NTS-Properties Associates VI and Chairman of the Board of NTS Corporation (since 1985) and NTS Development Company (since 1977). Richard L. Good - --------------- Mr. Good, (age 57) President and Chief Operating Officer of NTS Corporation and President of NTS Development Company and Chairman of the Board of NTS Securities, Inc., joined the Manager in January 1985. From 1981 through 1984, he was Executive Vice President of Jacques-Miller, Inc., a real estate syndication, property management and financial planning firm in Nashville, Tennessee. NTS Capital Corporation - ----------------------- NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation formed in October 1979. J. D. Nichols is Chairman of the Board and the sole director of NTS Capital Corporation. The Manager of the Partnership's properties is NTS Development Company, the executive officers and/or directors of which are Messrs. J. D. Nichols, Richard L. Good and John W. Hampton. John W. Hampton - --------------- John W. Hampton (age 47) is Senior Vice President of NTS Corporation with responsibility for all accounting operations. Before joining NTS in March 1991, Mr. Hampton was Vice President - Finance and Chief Financial Officer of the Sturgeon-Thornton-Marrett Development Company in Louisville, Kentucky for nine years. Prior to that he was with Alexander Grant & Company CPA's. Mr. Hampton is a Certified Public Accountant and a graduate of the University of Louisville with a Bachelor of Science degree in Commerce. He is a member of the American Institute of CPA's and the Kentucky Society of CPA's. Item 11. Management Remuneration and Transactions The officers and/or directors of the corporate general partner receive no direct remuneration in such capacities. The Partnership is required to pay a property management fee based on gross rentals to NTS Development Company, an affiliate of the general partner. The Partnership is also required to pay to NTS Development Company a repair and maintenance fee on costs related to specific projects. Also, NTS Development Company provides certain other - 38- Item 11. Management Renumeration and Transactions - Continued services to the Partnership. See Note 9 to the financial statements which sets forth transactions with NTS Development Company for the years ended December 31, 1996, 1995 and 1994. The general partner is entitled to receive cash distributions and allocations of profits and losses from the Partnership. See Note 1C to the financial statements which describes the methods used to determine income allocation and cash distributions. Item 12. Security Ownership of Certain Beneficial Owners and Management The general partner is NTS-Properties Associates VI, 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 Associates VI are as follows: J. D. Nichols 38.60% 10172 Linn Station Road Louisville, Kentucky 40223 NTS Capital Corporation 9.95% 10172 Linn Station Road Louisville, Kentucky 40223 Richard L. Good 10.00% 10172 Linn Station Road Louisville, Kentucky 40223 The remaining 41.45% interests are owned by various limited partners of NTS- Properties Associates VI. Item 13. Certain Relationships and Related Transactions Pursuant to an agreement with the Partnership, property management fees of $485,250 (1996), $441,861 (1995) and $438,523 (1994) were paid to NTS Development Company, an affiliate of the general partner. The fee is equal to 5% and 6% of gross revenues from the residential properties and commercial properties, respectively. 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 and major repair and renovation projects. The Partnership has incurred $862 (1996) and $6,200 (1995) as a repair and maintenance fee and has capitalized these costs as part of land, buildings and amenities. The Partnership was also charged the following amounts from NTS Development Company for the years ended December 31, 1996, 1995 and 1994. 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 other assets or as land, buildings and amenities. 1996 1995 1994 ---------- ---------- ---------- Administrative $ 258,101 $ 245,369 $ 240,133 Property manager 792,366 786,667 803,635 Leasing 212,358 229,309 184,919 Other 4,471 9,285 16,024 --------- --------- --------- $1,267,296 $1,270,630 $1,244,711 ========= ========= ========= There are no other agreements or relationships between the Partnership, the General Partner and its affiliates than those previously described. - 39 - 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, 1996, 1995 and 1994 together with the report of Arthur Andersen LLP, dated February 25, 1997, 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, are 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 * Certificate of Limited Partnership of NTS-Properties VI, a Maryland limited partnership 3a. First Amendment to Amended and ** Restated Agreement of Limited Partnership of NTS-Properties VI, a Maryland limited partnership 10. Property Management and * Construction Agreement between NTS Development Company and NTS-Properties VI, a Maryland limited partnership 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 March 22, 1985 (effective June 25, 1985) under Commission File No.2-96583. ** Incorporated by reference to Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1987 (Commission File No. 0-14695). 4. Reports on Form 8-K Form 8-K, dated October 17, 1996, was filed to report in Item 5 the fact that the Partnership has elected to fund an additional amount of $250,000 to its Interest Repurchase Reserve. - 40 - NTS-PROPERTIES VI ----------------- A Maryland Limited Partnership ------------------------------ SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ------------------------------------------------------- AS OF DECEMBER 31, 1996 -----------------------
Park Place Sabal Park Apartments Willow Lake Apartments Phase I Apartments ---------- ------- ---------- Encumbrances (A) (A) (B) Initial cost to partnership: Land $ 3,063,046 $ 2,320,938 $ 3,770,328 Buildings and improvements 8,417,719 9,630,935 12,616,655 Cost capitalized subsequent to acquisition Improvements 23,968 32,544 195,946 Carrying costs -- -- -- Gross amount at which carried December 31, 1996:(C) Land $ 3,063,046 $ 2,333,428 $ 3,770,328 Buildings and improvements 8,441,687 9,650,989 12,812,601 ----------- ----------- ----------- Total $11,504,733 $11,984,417 $16,582,929 =========== =========== =========== Accumulated depreciation $ 4,445,834 $ 4,116,881 $ 5,367,961 =========== =========== =========== Date of construction 06/84 04/84 03/85 Date Acquired N/A N/A N/A Life at which depreciation in latest income statement is computed (D) (D) (D) (A) First mortgages held by two insurance companies. (B) First mortgage held by an insurance company. (C) Aggregate cost of real estate for tax purposes is $59,252,792. (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 - NTS-PROPERTIES VI ----------------- A Maryland Limited Partnership ------------------------------ SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ------------------------------------------------------- AS OF DECEMBER 31, 1996 -----------------------
Plainview Golf Brook Point III Total Apartments Office Center Pages 42-44 ----------- ------------- ----------- Encumbrances (A) (B) Initial cost to partnership: Land $ 4,384,363 $ 1,268,339 $14,807,014 Buildings and improvements 12,302,319 2,270,729 45,238,357 Cost capitalized subsequent to acquisition Improvements 80,916 1,132,782 1,466,156 Carrying costs -- -- -- Gross amount at which carried December 31, 1996: Land $ 4,405,353 $ 1,290,955 $14,863,110 Buildings and improvements 12,362,245 3,380,894 46,648,416 ----------- ----------- ----------- Total $16,767,598 $ 4,671,849 $61,511,526 =========== =========== =========== Accumulated depreciation $ 5,480,369 $ 1,663,697 $21,074,742 =========== =========== =========== Date of construction 05/88 01/88 Date Acquired N/A N/A Life at which depreciation in latest income statement is computed (C) (C) (A) First mortgage held by an insurance company. (B) None. (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.
- 42 - NTS-PROPERTIES VI, ------------------ A Maryland Limited Partnership ------------------------------ SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 ----------------------------------------------------
Real Accumulated Estate Depreciation ------ ------------ Balances at December 31, 1993 $ 61,446,995 $ 15,647,528 Additions during period: Improvements (a) 12,539 -- Depreciation (b) -- 1,936,191 Deductions during period: Retirements (8,435) (4,692) ------------ ------------ Balances at December 31, 1994 61,451,099 17,579,027 Additions during period: Improvements (a) 141,550 -- Depreciation (b) -- 1,815,820 Deductions during period: Retirements (47,384) (45,854) ------------ ------------ Balances at December 31, 1995 61,545,265 19,348,993 Additions during period: Improvements (a) 39,297 -- Depreciation (b) -- 1,797,649 Deductions during period: Retirements (73,036) (71,900) ------------ ------------ Balances at December 31, 1996 $ 61,511,526 $ 21,074,742 ============ ============ (a) The additions to real estate on this schedule will differ from the expenditures for land, buildings and amenities on the Statements of Cash Flows as a result of minor changes in the Partnership's joint venture investment ownership percentages. Changes that may occur in the ownership percentages are less than one percent. (b) 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 depreciation of a portion of assets held for development.
- 43 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, NTS-Properties VI, a Maryland Limited Partnership, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NTS-PROPERTIES VI, a Maryland Limited ------------------------------------- Partnership ----------- (Registrant) BY: NTS-Properties Associates VI, General Partner BY: NTS Capital Corporation, General Partner /s/ John W. Hampton John W. Hampton Senior Vice President Date: March 27 , 1997 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 J. D. Nichols Associates VI and Chairman of the Board and Sole Director of NTS Capital Corporation /s/ Richard L. Good General Partner of NTS-Properties Richard L. Good Associates VI and President of NTS Capital Corporation /s/ John W. Hampton Senior Vice President of NTS Capital John W. Hampton Corporation The Partnership is a limited partnership and no proxy material has been sent to the limited partners. - 44 - EX-27 2 12/31/96 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1996 AND FROM THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1996 DEC-31-1996 1,031,218 1,085,267 136,394 0 0 0 40,436,784 21,074,742 44,771,802 0 27,403,056 0 0 0 16,499,986 44,771,802 9,541,311 9,670,261 0 6,749,124 0 0 2,344,531 227,054 0 227,054 0 0 0 227,054 0 0 THE PARTNERSHIP HAS AN UNCLASSIFIED BALANCE SHEET; THEREFORE, THE VALUE IS $0.
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