Item 3 - Legal Proceedings
None.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5
Item 5 - Market for the Registrant's Limited Partnership Interests and Related Partner
Matters
There is no established trading market for the limited partnership Interests. We had 598 limited partners as of January 31, 2002. Cash distributions and allocations of income and loss are made as described in Note 1H to our 2001 Financial Statements in Item 8.
No distributions were paid during 2001, 2000 or 1999. Quarterly distributions are determined based on current cash balances, cash flow being generated by operations and cash reserves needed for future leasing costs, tenant finish costs and capital improvements.
Due to the fact that no distributions were made during 2001, 2000 or 1999, the table which presents that portion of the distributions that represents a return of capital in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") basis has been omitted.
Item 6
Item 6 - Selected Financial Data
Years ended December 31, 2001, 2000, 1999, 1998 and 1997.
2001 2000 1999 1998 1997 --------------- --------------- ---------------- --------------- ---------------- Interest and other income $ 1,081 $ 563 $ 2,037 $ 2,629 $ 547 Income (loss) from investment in joint ventures 127,082 116,283 111,395 2,155,141 44,323 Total expenses (97,042) (102,242) (127,495) (131,255) (122,304) --------------- --------------- ---------------- --------------- ----------------
Net income (loss) $ 31,121 $ 14,604 $ (14,063)$ 2,026,515 $ (77,434) =============== =============== ================ =============== ================
Net income (loss) allocated to: General Partner $ 311 $ 146 $ (141)$ 20,265 $ (774) Limited partners $ 30,810 $ 14,458 $ (13,922)$ 2,006,250 $ (76,660)
Net income (loss) per limited partnership Interest $ 0.05 $ 0.02 $ (0.02) $ 3.04 $ (0.12)
Weighted average number of limited partnership Interests 643,645 643,645 650,531 660,429 666,248
Cumulative loss allocated to: General Partner $ (102,357) $ (102,668)$ (102,814)$ (102,673)$ (122,938) Limited partners $ (10,133,311) $ (10,164,121)$ (10,178,579)$ (10,164,657)$ (12,170,907)
Cumulative tax loss allocated to: General Partner $ (16,914) $ (17,282)$ (17,709)$ (17,861)$ (42,692) Limited partners $ (3,782,880) $ (3,826,021)$ (3,879,335)$ (3,904,694)$ (6,283,963)
Cumulative distributions declared: General Partner $ 20,592 $ 20,592 $ 20,592 $ 20,592 $ 20,592 Limited partners $ 2,038,520 $ 2,038,520 $ 2,038,520 $ 2,038,520 $ 2,038,520
At year end: Equipment, net $ 1,495 $ 2,093 $ 2,691 $ 1,466 $ 496,748
Total assets $ 27,658 $ 86,658 $ (310,906)$ (401,653)$ (2,277,937)
Note payable $ 325,500 $ 232,000 $ 165,000 $ 110,000 $ --
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.
The Emerging Issues Tasks Force ("EITF") of the Financial Accounting Standards Board ("FASB") reached a consensus on Issue No. 00-1, "Applicability of the Pro Rata Method of Consolidation to Investments in Certain Partnerships and Other Unincorporated Joint Ventures." The EITF reached a consensus that a proportionate gross financial statement presentation (referred to as "proportionate consolidation" in the Notes to Financial Statements) is not appropriate for an investment in an unincorporated legal entity accounted for by the equity method of accounting, unless the investee is in either the construction industry or an extractive industry where there is a longstanding practice of its use.
The consensus is applicable to financial statements for annual periods ending after June 15, 2000. We have applied the consensus to all comparative financial statements, restating them to conform with the consensus for all periods presented. The application of this consensus did not result in a restatement of previously reported partners' equity or results of operations, but did result in a recharacterization or reclassification of certain financial statements' captions and amounts. The affected data in the table above has been restated to provide comparable information for all periods presented.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of
Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Financial Statements in Item 8 and the Cautionary Statements below.
We currently own minority interests in two joint ventures owning a total of four properties and thus cannot effect decisions made by NTS affiliate partnerships holding a majority position in these properties. We do not possess the resources to contribute to improvements of any significant amount and have seen our minority interest further decline as a result of the contributions made by the financially stronger majority interest affiliated partnerships.
At the end of 1999, NTS Financial Partnership, an affiliate of ours that prior to December 31, 1999 had provided security for one of our loans, informed us that as of December 31, 1999, it would no longer provide this security. As of January 1, 2000, NTS Development Company and NTS Corporation, which had previously deferred amounts owed by us to them and advanced funds to us to enable us to make payments to non-affiliates, informed us that they would no longer defer payments due from us or advance funds to us.
While we, the General Partner and our affiliates considered alternatives to help us reduce our administrative costs and increase our net profits, including this merger, NTS Development Company and NTS Corporation continued to defer payments owed to them and continued to advance funds to us. Additionally, NTS Financial Partnership continues to provide security for one of our loans. These concessions were made by NTS Corporation, NTS Development Company and NTS Financial Partnership in anticipation of our taking an action which would substantially reduce our administrative expenses by an amount sufficient to allow us to operate profitably and to enable us
to make capital contributions to our joint ventures in a timely fashion, make the deferred payments and repay the advances. Our impending merger into ORIG, LLC, which is discussed in Part I, Items 1 and 2 above, is designed, among other things, to address these financial issues. Unless this merger, or a similar transaction, is completed, we may not be able to meet our obligations as they come due in the ordinary course of business. We are presently projecting a cash flow deficit for fiscal 2002.
Critical Accounting Policies
A critical accounting policy, for our business, is the assumption that our properties' occupancy will remain at a level which provides for debt payments and adequate working capital, currently and in the future. If occupancy were to fall below that level and remain at or below that level for a significant period of time, then our ability to make payments due under our debt agreements and to continue paying daily operational costs would be greatly affected. This would result in the impairment of the respective properties' assets in accordance with 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," which has been superseded by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001.
Occupancy Levels
The occupancy levels at our joint ventures as of December 31 were as follows:
2001 2000 1999 ------------ ------------ ------------
Property Owned in Joint Venture with NTS- Properties IV and NTS-Properties VII, Ltd. (Ownership % at December 31, 2001) Blankenbaker Business Center 1A (39.05%) (1) 100% 100% 100%
Properties Owned Through Lakeshore/University II Joint Venture Lakeshore Business Center Phase I (1)(2) 89% 85% 73% Lakeshore Business Center Phase II (2)(3) 82% 86% 72% Lakeshore Business Center Phase III (4) 28% 12% N/A
Current occupancy levels are considered adequate to continue operation of our properties.
Ownership percentage was 8.40% as of December 31, 1999, and 7.69% as of December 31, 2000 and 2001.
In our opinion, the decrease in year-ending occupancy is only a temporary fluctuation and does not represent a permanent downward occupancy trend.
Ownership percentage was 7.69% at December 31, 2000 and 2001. We expect occupancy levels to stabilize near those of Phases I and II over the next two years.
The average occupancy levels at our joint ventures as of December 31 were as follows:
2001 2000 1999 ------------ ------------ ------------ Property Owned in Joint Venture with NTS- Properties IV and NTS-Properties VII, Ltd. (Ownership % at December 31, 2001) Blankenbaker Business Center 1A (39.05%) 100% 100% 100%
Properties Owned Through Lakeshore/University II Joint Venture Lakeshore Business Center Phase I (1) 85% 78% 74% Lakeshore Business Center Phase II (1)(2) 82% 86% 85% Lakeshore Business Center Phase III (3) 26% 12% N/A
Ownership percentage was 8.40% as of December 31, 1999, and 7.69% as of December 31, 2000 and 2001.
In our opinion, the decrease in average occupancy is only a temporary fluctuation and does not represent a permanent downward trend.
Ownership percentage was 7.69% as of December 31, 2000 and 2001. We expect occupancy levels to stabilize near those of Phases I and II over the next two years.
Results of Operations for 1999, 2000 and 2001
If there has not been a material change in an item from one year to the next, we have omitted any discussion concerning that item.
Income From Investment in Joint Ventures
Income from investment in joint ventures increased approximately $11,000, or 9%, from 2000 to 2001. The combined Blankenbaker Business Center and the Lakeshore/University II Joint Ventures decreased their net losses from 2000 to 2001 by approximately $34,000.
Interest Expense
Interest expense increased approximately $6,000, or 30%, in 2001, as a result of an increase in the note payable balance since 2000. Interest expense increased approximately $6,000, or 47%, in 2000. The increase is due to a 0.25% increase in the interest rate on the note payable held by us on January 29, 2000. The increase is also due to an increase in the balance of the note payable.
Professional and Administrative Expenses
Professional and administrative expenses decreased approximately $15,000, or 25%, from 2000 to 2001, primarily as a result a decrease in legal and professional fees in 2001. Professional and administrative expenses decreased approximately $7,000, or 10%, from 1999 to 2000. The decrease is primarily the result of decreased legal fees and information processing services.
Professional and Administrative Expenses - Affiliated
Professional and administrative expenses - affiliated decreased approximately $24,000, from 1999 to 2000, primarily as a result of decreased personnel costs. Professional and administrative expenses - affiliated are for services performed by employees of NTS Development Company, an affiliate of our General Partner. These employee services include legal, financial and others necessary to manage and operate the Partnership.
Consolidated Cash Flows and Financial Condition
The following table illustrates our cash flows provided by or used in operating activities, investing activities and financing activities:
2001 2000 1999 -------------- -------------- ------------- Operating activities $ 10,852 $ (74,301) $ (72,814) Investing activities (84,444) 8,552 17,943 Financing activities 93,500 67,000 40,243 -------------- -------------- -------------
Net increase (decrease) in cash and equivalents $ 19,908 $ 1,251 $ (14,628) ============== ============== =============
Net cash provided by operating activities increased approximately $85,000 in 2001. This increase was primarily driven by collections of receivables.
Net cash used in investing activities increased approximately $93,000 in 2001, as a result of increased investments in or advances to joint ventures.
Net cash provided by investing activities decreased approximately $9,000 in 2000, primarily as a result of decreased investments in or advances to joint ventures.
Net cash provided by financing activities increased approximately $27,000 in 2001 and approximately $27,000 in 2000, primarily as a result of an increase in the note payable.
Subsequent to December 31, 2001, the NTS-Properties Plus note was amended in order to extend the maturity date from January 31, 2002 to January 31, 2003. On March 15, 2002, we increased this note to $360,000.
We have not made any cash distributions since the quarter ended June 30, 1991. Cash reserves (which are unrestricted cash and equivalents as shown on our balance sheet as of December 31) were $21,301, $1,393 and $142 at December 31, 2001, 2000 and 1999, respectively. See Item 8 - Note 1D to the Financial Statements for a discussion of our plans relative to continuing operations.
Due to the fact that no distributions were made during 2001, 2000 or 1999, the table which presents that portion of the distribution that represents a return of capital in accordance with GAAP basis has been omitted.
As of December 31, 2001, the L/U II Joint Venture has a commitment for approximately $161,000 at Lakeshore Business Center Phase I for tenant improvements on approximately 15,500 square feet and a commitment for approximately $268,000 at Lakeshore Business Center Phase II for tenant improvements on approximately 32,900 square feet.
The L/U II Joint Venture also has a commitment for approximately $105,600 at Lakeshore Business Center Phase III for tenant improvements on approximately 3,800 square feet. This commitment will be funded from existing debt financing. The Joint Venture has incurred approximately $72,000 of this cost as of December 31, 2001.
The L/U Joint Venture anticipates replacing the roofs in 2002 at Lakeshore Business Center Phase I for a cost of approximately $200,000. Management reassessed the useful lives of the existing roofs and adjusted them accordingly.
The L/U II Joint Venture's partners, NTS-Properties IV, NTS-Properties V and NTS-Properties Plus will be called upon to make capital contributions to provide the funds necessary for working capital tenant improvements and roof replacements.
The following describes the efforts being taken by us to increase the occupancy levels at our properties. At Lakeshore Business Center Phases I, II and III, we have an on-site leasing agent, an employee of NTS Development Company, an affiliate of our General Partner, who makes calls to potential tenants, negotiates lease renewals with current tenants and manages local advertising with the assistance of NTS Development Company's marketing staff.
Leases at our properties provide for tenants to contribute toward the payment of common area maintenance expenses, insurance, utilities and real estate taxes. These lease provisions should protect our operations from the impact of inflation and changing prices.
Pursuant to Section 16.4 of our Amended and Restated Agreement of Limited Partnership, we established an Interest Repurchase Reserve in 1996. During the years ended December 31, 1999, 1998 and 1997, we funded $14,757, $5,000 and $12,251, respectively, to the reserve. On February 17, 1997, the repurchase of Interests was temporarily suspended in order to conserve cash. This step was taken until it was clear that, in our General Partner's opinion, we had the necessary cash reserves to meet future leasing and tenant finish costs and had rebuilt cash reserves to meet our ongoing needs. Through December 31, 2000, we repurchased 42,002 Interests for $35,329, at a price ranging from $0.70 to $1.00 per Interest. The offering price per Interest was established by the General Partner in its sole discretion and does not purport to represent the fair market value or liquidation value of the Interests. Repurchased Interests were retired by us, thus increasing the percentage of ownership of each remaining limited partner investor. The Interest Repurchase Reserve was funded from cash reserves.
On November 30, 2000, ORIG, LLC ("ORIG"), an affiliate of ours, commenced a tender offer to purchase up to 611,266 limited partnership interests ("Interests"), representing all Interests not owned by ORIG, or other entities affiliated with it and us, in a going-private transaction. The offering price of $1.15 per Interest was subsequently raised to $1.30 per Interest on March 6, 2001. On March 23, 2001, the expiration date of the tender offer was changed from March 30, 2001 to April 30, 2001. ORIG purchased 211,214.25 Interests in the tender offer, which ended on April 30, 2001.
On March 15, 2002, we filed a Schedule 14C with the Securities and Exchange Commission giving notice of our merger with and into ORIG, LLC. The merger was approved on February 28, 2002, by the written consent of the holders of a majority of our outstanding Interests, in lieu of a meeting of limited partners. The effective date of the merger is unknown at this time.
We will merge with and into ORIG, LLC ("ORIG"), an affiliate of ours, with ORIG being the entity which survives the merger. Upon consummation of the merger, all Interests in us will be canceled and no securities in ORIG will be issued in place of our canceled Interests. Following the merger, ORIG will own our joint venture interests in certain commercial real estate properties and will assume all of our liabilities.
ORIG will pay limited partners who are not affiliated with us or ORIG $1.30 per Interest in cash. Limited partners who are affiliates of ours or ORIG will be paid for their Interests and will not have any ownership in ORIG following the merger.
The merger is considered a going-private transaction because once it is completed all Interests in us will be canceled, the registration of Interests will be terminated and we will no longer be required to make filings with the Securities and Exchange Commission or to comply with securities laws and the Securities and Exchange Commission's regulations governing publicly-held entities. Further information about the merger may be found in the Schedule 14C we filed with the Securities and Exchange Commission.
Contractual Obligations and Commercial Commitments
Accounting standards require disclosure concerning our obligations and commitments to make future payments under contracts, such as debt and lease agreements, and under contingent commitments, such as debt guarantees.
Payments Due by Period ------------------------------------------------------------------------- Within One Two - Three Four - Five After 5 Contractual Obligations Total Year Years Years Years -------------------------------- ------------ ------------- ------------- ------------- ------------- Long-term debt $ 325,500 $ 325,500 $ -- $ -- $ --
Capital lease obligations $ -- $ -- $ -- $ -- $ --
Operating leases (1) $ -- $ -- $ -- $ -- $ --
Other long-term obligations (2) $ -- $ -- $ -- $ -- $ -- ------------ ------------- ------------- ------------- -------------
Total contractual cash obligations $ 325,500 $ 325,500 $ -- $ -- $ -- ============ ============= ============= ============= =============
We are party to numerous small operating leases for office equipment such as copiers, postage machines and fax machines, which represent an insignificant obligation.
We are party to several annual maintenance agreements with vendors for such items as outdoor maintenance and security systems, which represent an insignificant obligation.
Amount of Commitment Expiration Per Period ----------------------------------------------------------- Total Other Commercial Amounts Within One Two - Three Four - Five Over 5 Commitments Committed Year Years Years Years ------------------------------- -------------- ------------- ------------- ------------- ------------- Line of credit $ -- $ -- $ -- $ -- $ --
Standby letters of credit and guarantees (1) $ 11,758,330 $ 1,454,185 $ 4,907,970 $ 3,034,962 $ 2,361,213
Other commercial commitments (2) $ -- $ -- $ -- $ -- $ -- -------------- ------------- ------------- ------------- -------------
Total commercial commitments $ 11,758,330 $ 1,454,185 $ 4,907,970 $ 3,034,962 $ 2,361,213 ============== ============= ============= ============= =============
As an investor in numerous joint ventures, we are jointly and severally liable for certain of their debts that are not reflected on our financial statements.
We do not, as a practice, enter into long term purchase commitments for commodities or services. We may from time to time agree to "fee for service arrangements" which are for a term of greater than one year.
Significant Accounting Pronouncements Which Affect Us
The Emerging Issues Tasks Force ("EITF") of the Financial Accounting Standards Board ("FASB") reached a consensus on Issue No. 00-1, "Applicability of the Pro Rata Method of Consolidation to Investments in Certain Partnerships and Other Unincorporated Joint Ventures." The EITF determined that a proportionate gross financial statement presentation, which is referred to as "proportionate consolidation" in the Notes to Financial Statements, is not appropriate for an investment in an unincorporated legal entity accounted for by the equity method of accounting, unless the entity invested in is in either the construction industry or an extractive industry where there is a longstanding practice of its use.
The EITF consensus is applicable to financial statements for annual periods ending after June 15, 2000. We now use the equity method to account for our joint venture investment. We have applied the consensus to all comparative financial statements, restating them to conform with the consensus for all periods presented. The application of this consensus did not result in a restatement of previously reported partners' equity or net results of operations, but did result in a recharacterization or reclassification of some of the financial statements' captions and amounts.
Cautionary Statements
Our liquidity, capital resources and results of operations are subject to a number of risks and uncertainties including, but not limited to the following:
our ability to achieve planned revenues;
our ability to make payments due under our debt agreements;
our ability to negotiate and maintain terms with vendors and service providers for operating expenses;
competitive pressures from other real estate companies, including large commercial and residential real estate companies, which may affect the nature and viability of our business strategy;
trends in the economy as a whole which may affect consumer confidence and demand for the types of rental property held by us;
our ability to predict the demand for specific rental properties;
our ability to attract and retain tenants;
availability and costs of management and labor employed;
real estate occupancy and development costs, including the substantial fixed investment costs associated with renovations necessary to obtain new tenants and retain existing tenants;
the risk of a major commercial tenant defaulting on its lease due to risks generally associated with real estate, many of which are beyond our control, including general or local economic conditions, competition, interest rates, real estate tax rates, other operating expenses and acts of God; and
the risk of revised zoning laws, taxes and utilities regulations as well as municipal mergers of local governmental entities.
Item 7A
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure with regard to financial instruments is changes in interest rates. All of our debt bears interest at a fixed rate. At December 31, 2001, a hypothetical 100 basis point increase in interest rates would not result in a significant change in the fair value of debt.
Item 8
Item 8 - Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NTS-Properties Plus Ltd.:
We have audited the accompanying balance sheets of NTS-Properties Plus Ltd. as of December 31, 2001 and 2000, and the related statements of operations, partners' deficit and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NTS-Properties Plus Ltd. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that NTS-Properties Plus Ltd. will continue as a going concern. As discussed in Note 1D to the financial statements, NTS- Properties Plus Ltd. has historically suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1D. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 21, 2002
NTS-PROPERTIES PLUS LTD.
BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND 2000
2001 2000 ---------------- ----------------
ASSETS ------ Cash and equivalents $ 21,301 $ 1,393 Accounts receivable -- 78,100 Equipment, net 1,495 2,093 Other assets 4,862 5,072 ---------------- ----------------
TOTAL ASSETS $ 27,658 $ 86,658 ================ ================
LIABILITIES AND PARTNERS' DEFICIT --------------------------------- Note payable $ 325,500 $ 232,000 Accounts payable 161,787 133,882 Investment in and advances to joint ventures 78,116 289,642 Other liabilities 12,824 12,824 ---------------- ----------------
TOTAL LIABILITIES 578,227 668,348
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' DEFICIT (550,569) (581,690) ---------------- ----------------
TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 27,658 $ 86,658 ================ ================
The accompanying notes to financial statements are an integral part of these statements.
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ------------ ------------ ------------ REVENUES -------- Interest and other income $ 1,081 $ 563 $ 2,037 Income from investment in joint ventures 127,082 116,283 111,395 ------------ ------------ ------------
TOTAL REVENUES 128,163 116,846 113,432
EXPENSES -------- Operating expenses -- 19 44 Interest expense 24,584 18,957 12,892 Professional and administrative expenses 46,650 61,901 69,162 Professional and administrative expenses - affiliated 25,210 20,767 45,098 Depreciation and amortization 598 598 299 ------------ ------------ ------------
TOTAL EXPENSES 97,042 102,242 127,495 ------------ ------------ ------------
Net income (loss) $ 31,121 $ 14,604 $ (14,063) ============ ============ ============
Net income (loss) allocated to the limited partners $ 30,810 $ 14,458 $ (13,922) ============ ============ ============
Net income (loss) per limited partnership Interest $ 0.05 $ 0.02 $ (0.02) ============ ============ ============
Weighted average number of limited partnership Interests 643,645 643,645 650,531 ============ ============ ============
The accompanying notes to financial statements are an integral part of these statements.
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF PARTNERS' DEFICIT (1)
FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000 AND 1999
Limited General Partners Partner Total ------------ ----------- ------------- PARTNERS' DEFICIT ----------------- Balances at December 31, 1998 $ (444,309) $ (123,165) $ (567,474)
Net loss (13,922) (141) (14,063)
Repurchase of limited partnership Interests (14,757) -- (14,757) ----------- ----------- ------------
Balances at December 31, 1999 (472,988) (123,306) (596,294)
Net income 14,458 146 14,604 ----------- ----------- ------------
Balances at December 31, 2000 (458,530) (123,160) (581,690)
Net income 30,810 311 31,121 ----------- ----------- ------------
Balances at December 31, 2001 $ (427,720) $ (122,849) $ (550,569) =========== =========== ============
For the periods presented, there are no elements of other comprehensive income as defined by the Financial Accounting Standards Board, Statement of Financial Accounting Standards Statement No. 130, "Reporting Comprehensive Income."
The accompanying notes to financial statements are an integral part of these statements.
NTS-PROPERTIES PLUS LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES ------------------------------------ Net income (loss) $ 31,121 $ 14,604 $ (14,063) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 598 598 299 Income from investment in joint ventures (127,082) (116,283) (111,395) Changes in assets and liabilities: Accounts receivable 78,100 3,905 -- Other assets 210 (3,443) (507) Accounts payable 27,905 26,318 52,852 ------------- ------------- -------------
Net cash provided by (used in) operating activities 10,852 (74,301) (72,814) ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES ------------------------------------ Additions to equipment, net -- -- (1,524) Investment in and advances to joint ventures (84,444) 8,552 19,467 ------------- ------------- -------------
Net cash (used in) provided by investing activities (84,444) 8,552 17,943 ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES ------------------------------------ Proceeds from note payable 93,500 67,000 55,000 Repurchase of limited partnership Interests -- -- (14,757) ------------- ------------- -------------
Net cash provided by financing activities 93,500 67,000 40,243 ------------- ------------- -------------
Net increase (decrease) in cash and equivalents 19,908 1,251 (14,628)
CASH AND EQUIVALENTS, beginning of period 1,393 142 14,770 ------------- ------------- -------------
CASH AND EQUIVALENTS, end of period $ 21,301 $ 1,393 $ 142 ============= ============= =============
Interest paid on a cash basis $ 18,876 $ 473 $ 24,527 ============= ============= ============
The accompanying notes to financial statements are an integral part of these statements.
NTS-PROPERTIES PLUS LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000 AND 1999
Note 1 - Significant Accounting Policies
A) Organization
NTS-Properties Plus Ltd. (the "Partnership") is a limited partnership which was organized under the laws of the state of Florida on April 30, 1987. The General Partner is NTS-Properties Plus Associates (a Kentucky limited partnership). The terms "we," "us" or "our," as the context requires, may refer to the Partnership or its interests in these properties and joint ventures. We are in the business of owning commercial real estate joint ventures.
B) Plus' Merger With Affiliate
On March 15, 2002, we filed a Schedule 14C with the Securities and Exchange Commission giving notice of our merger with and into ORIG, LLC. The merger was approved on February 28, 2002, by the written consent of the holders of a majority of our outstanding Interests, in lieu of a meeting of limited partners. The effective date of the merger is unknown at this time.
We will merge with and into ORIG, LLC ("ORIG"), an affiliate of ours, with ORIG being the entity which survives the merger. Upon consummation of the merger, all Interests in us will be canceled and no securities in ORIG will be issued in place of our canceled Interests. Following the merger, ORIG will own our joint venture interests in certain commercial real estate properties and will assume all of our liabilities.
ORIG will pay limited partners who are not affiliated with us or ORIG $1.30 per Interest in cash. Limited partners who are affiliates of ours or ORIG will be paid for their Interests and will not have any ownership in ORIG following the merger.
The merger is considered a going-private transaction because once it is completed all Interests in us will be canceled, the registration of Interests will be terminated and we will no longer be required to make filings with the Securities and Exchange Commission or to comply with securities laws and the Securities and Exchange Commission's regulations governing publicly-held entities. Further information about the merger may be found in the Schedule 14C we filed with the Securities and Exchange Commission.
C) Consolidation Policies and Joint Venture Accounting
The less than 50% owned joint ventures are accounted for under the equity method. From inception, we used the proportionate consolidation method of accounting for joint venture properties. Our proportionate interest in the joint venture's assets, liabilities, revenues, expenses and cash flows were combined on a line-by-line basis with our own assets, liabilities, revenues, expenses and cash flows. All intercompany accounts and transactions were eliminated in consolidation.
Proportionate consolidation was utilized by us due to the fact that the ownership of joint venture properties, in substance, was 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 did 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 our General Partner that the financial statement disclosures resulting from proportionate consolidation provided the most meaningful presentation of assets, liabilities, revenues, expenses and cash flows given the commonality of our operations.
The Emerging Issues Tasks Force ("EITF") of the Financial Accounting Standards Board ("FASB") reached a consensus on Issue No. 00-1, "Applicability of the Pro Rata Method of Consolidation to Investments in Certain Partnerships and Other Unincorporated Joint Ventures." The EITF reached a consensus that a proportionate gross financial statement presentation (referred to as "proportionate consolidation" in the Notes to Financial Statements) is not appropriate for an investment in an unincorporated legal entity accounted for by the equity method of accounting, unless the investee is in either the construction industry or an extractive industry where there is a longstanding practice of its use.
The consensus is applicable to financial statements for annual periods ending after June 15, 2000. We have applied the consensus to all comparative financial statements, restating them to conform with the consensus for all periods presented. The application of this consensus did not result in a restatement of previously reported partners' deficit or results of operations, but did result in a recharacterization or reclassification of certain financial statements' captions and amounts.
The investment in joint ventures reflected as a contra asset in the accompanying balance sheets is derived primarily from distributions of the joint ventures in excess of the respective minority partner's historical investment in the joint ventures used for financial reporting purposes. The contra asset will be satisfied upon the sale of the respective joint venture properties or dissolution of the respective joint venture.
Please see the accompanying Blankenbaker Business Center and Lakeshore/University II Joint Ventures' combined financial statements.
D) Our Plans Relative to Continuing Operations
We currently own minority interests in two joint ventures owning a total of four properties and thus cannot effect decisions made by NTS affiliate partnerships holding a majority position in these joint ventures. We do not possess the resources to contribute to improvements of any significant amount and have seen our minority interest further decline as a result of the contributions made by the financially stronger majority interest affiliated partnerships.
At the end of 1999, NTS Financial Partnership, an affiliate of ours that prior to December 31, 1999 had provided security for one of our loans, informed us that as of December 31, 1999, it would no longer provide this security. As of January 1, 2000, NTS Development Company and NTS Corporation, which had previously deferred amounts owed by us to them and advanced funds to us to enable us to make payments to non-affiliates, informed us that they would no longer defer payments due from us or advance funds to us.
While we, the General Partner and our affiliates considered alternatives to help us reduce our administrative costs and increase our net profits, including the merger discussed in Note 1B, NTS Development Company and NTS Corporation continued to defer payments owed to them and continued to advance funds to us. Additionally, NTS Financial Partnership continues to provide security for one of our loans. These concessions were made by NTS Corporation, NTS Development Company and NTS Financial Partnership in anticipation of our taking an action which would substantially reduce our administrative expenses by an amount sufficient to allow us to operate profitably and to enable us to make capital contributions to our joint ventures in a timely fashion, make the deferred payments and repay the advances. Our impending merger into ORIG, LLC, which is discussed in Note 1B, is designed, among other things, to address these financial issues. Unless this merger, or a similar transaction, is completed, we may not be able to meet our obligations as they come due in the ordinary course of business.
See Note 1B - Plus' Merger With Affiliate for a discussion of the merger, which will result in us no longer existing in our current form.
E) Cash and Equivalents
We have a cash management program which provides for the overnight investment of excess cash balances. Per an agreement with a bank, excess cash is invested in a repurchase agreement for U.S. Government or agency securities on a nightly basis.
F) Properties
We own the following joint venture interests:
A 39.05% joint venture interest in the Blankenbaker Business Center 1A building, a business center with approximately 50,000 net rentable ground floor square feet and approximately 50,000 net rentable mezzanine square feet located in Louisville, Kentucky.
A 7.69% joint venture interest in the Lakeshore/University II Joint Venture. A description of the properties owned by the Joint Venture appears below:
Lakeshore Business Center Phase I - a business center with approximately 104,000 rentable square feet located in
Fort Lauderdale, Florida.
Lakeshore Business Center Phase II - a business center with approximately 97,000 net rentable square feet located in
Fort Lauderdale, Florida.
Lakeshore Business Center Phase III - a business center with approximately 39,000 net rentable square feet located in
Fort Lauderdale, Florida.
G) Revenue Recognition
Our joint ventures recognize revenue in accordance with each tenant's respective lease agreement.
H) Allocation of Net Income (Loss) and Cash Distributions
Pre-termination date net cash receipts and interim net cash receipts, as defined in the Partnership Agreement and which are made available for distribution, will be distributed 99% to the limited partners and 1% to the General Partner.
Net operating income shall be allocated to the limited partners and the General Partner in proportion to their respective cash distributions. Net operating income in excess of cash distributions shall be allocated as follows: (1) pro rata to all partners with a negative capital account in an amount to restore the negative capital account to zero; (2) 99% to the limited partners and 1% to the General Partner until the limited partners have received cash distributions from all sources equal to their original capital; (3) the balance, 90% to the limited partners and 10% to the General Partner. Net operating losses shall be allocated 99% to the limited partners and 1% to the General Partner for all periods presented in the accompanying financial statements.
I) Tax Status
We have received a ruling from the Internal Revenue Service stating that we are classified as a limited partnership for federal income tax purposes. As such, we make no provision for income taxes. The taxable income or loss is passed through to the holders of 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:
2001 2000 1999 ------------- ------------- ------------- Net income (loss) $ 31,121 $ 14,604 $ (14,063) Items handled differently for tax purposes: Loss on disposal of assets -- -- (3,682) Allowance for doubtful accounts -- -- (42) Depreciation and amortization 12,287 39,059 39,453 Capitalized leasing costs -- -- 370 Rental income -- -- 3,168 Other 101 78 307 ------------- ------------- -------------
Taxable income $ 43,509 $ 53,741 $ 25,511 ============= ============= =============
J) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") 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.
K) Basis of Equipment and Depreciation
Equipment is stated at historical cost less accumulated depreciation to us. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which are 5 years for equipment.
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," specifies circumstances in which certain long-lived assets must be reviewed for impairment. If such review indicates that the carrying amount of an asset exceeds the sum of its expected future cash flows, the asset's carrying value must be written down to fair value. Application of this standard during the years ended December 31, 2001, 2000 and 1999 did not result in an impairment loss.
L) Reclassifications of 2000 and 1999 Financial Statements
Certain reclassifications have been made to the December 31, 2000 and 1999 financial statements to conform with December 31, 2001 classifications. These reclassifications have no effect on previously reported operating results or partners' deficit.
M) Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," effective for financial statements issued for fiscal years beginning after December 15, 2001. We will subject our financial statements to the standards of SFAS No. 144 when applicable.
Note 2 - Concentration of Credit Risk
We have joint venture investments in commercial properties in Louisville, Kentucky and Ft. Lauderdale, Florida. Substantially all of the tenants are local businesses or are businesses which have operations in the location in which they lease space.
Note 3 - Equipment
The following schedule provides an analysis of our investment in equipment as of December 31:
2001 2000 ------------------ ----------------- Equipment $ 2,990 $ 2,990
Less accumulated depreciation 1,495 897 ------------------ -----------------
$ 1,495 $ 2,093 ================== =================
Note 4 - Note Payable
Note payable as of December 31 consists of the following:
2001 2000 ----------------- ------------------ Note payable to a bank, bearing interest at a fixed rate of 8.75%, due January 31, 2002, collateral provided by NTS Financial Partnership, an affiliate of NTS Development Company. On January 31, 2002, we extended the maturity date from January 31, 2002 to January 31, 2003. $ 325,500 $ 232,000 ================= ==================
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount -------------------------------- --------------------------- 2003 $ 325,500 ---------------------------
$ 325,500 ===========================
Based on the borrowing rates currently available to us for mortgages with similar terms and average maturities, the fair value of long-term debt is approximately $303,600. During the year ended December 31, 2001, NTS Development Company, through an affiliate, provided collateral in the form of a certificate of deposit for our note payable.
Note 5 - Tender Offer
On November 30, 2000, ORIG, LLC ("ORIG"), an affiliate of ours, commenced a tender offer to purchase up to 611,266 limited partnership interests ("Interests"), representing all Interests not owned by ORIG, or other entities affiliated with it and us, in a going-private transaction. The offering price of $1.15 per Interest was subsequently raised to $1.30 per Interest on March 6, 2001. On March 23, 2001, the expiration date of the tender offer was changed from March 30, 2001 to April 30, 2001. ORIG purchased 211,214.25 Interests in the tender offer, which ended on April 30, 2001. See Note 1B - Plus' Merger With Affiliate for a discussion of an impending merger between us and ORIG, which will result in us no longer existing in our current form.
Note 6 - Related Party Transactions
Pursuant to an agreement, we were charged for administrative salaries by NTS Development Company. These charges, which have been expensed as professional and administrative expenses - affiliated, totaled $25,210, $20,767 and $45,098 for the years ended December 31, 2001, 2000 and 1999, respectively.
Accounts payable include approximately $105,900 and $80,700 due NTS Development Company at December 31, 2001 and 2000, respectively (see Note 1D).
Note 7 - Sale of Assets On July 23, 1999, the L/U II Joint Venture closed on the sale of approximately 2.4 acres of land adjacent to the Lakeshore Business Center for a purchase price of $528,405. The L/U II Joint Venture reflected a gain of approximately $94,000 associated with this sale for the year ended December 31, 1999. The net proceeds from the land sale were used to help fund the construction of Lakeshore Business Center Phase III.
Note 8 - Commitments and Contingencies
We, as an owner of real estate joint ventures, are subject to various environmental laws of federal, state and local governments. Compliance by us with existing laws has not had a material adverse effect on our financial condition and results of operations. However, we cannot predict the impact of new or changed laws or regulations on our current properties or on properties that we may acquire in the future.
We do not believe there is any litigation threatened against us other than routine litigation arising out of the ordinary course of business some of which is expected to be covered by insurance, none of which is expected to have a material effect on our financial position or results of operations except as discussed herein. However, due to the recent event on September 11, 2001 affecting the insurance industry, we are unable to determine at what price we will be able to renew our insurance coverage when the current policies expire in September 2002, or if the coverage available will be adequate.
Note 9 - Segment Reporting
The company's reportable operating segments include only one segment - Investments in Commercial Real Estate Joint Ventures.
Note 10 - Subsequent Event
Subsequent to December 31, 2001, the NTS Properties Plus note was amended in order to extend the maturity date from January 31, 2002 to January 31, 2003. On March 15, 2002, we increased this note to $360,000.
Note 11 - Selected Quarterly Financial Data (Unaudited)
For the Quarters Ended -------------------------------------------------------------------- 2001 March 31 June 30 September 30 December 31 ------------------------------------ --------------- ---------------- --------------- ----------------
Total revenues $ 29,397 $ 29,947 $ 29,703 $ 39,116 Total expenses 20,075 26,166 24,464 26,337 Net income 9,322 3,781 5,239 12,779 Net income allocated to the limited partners 9,229 3,743 5,187 12,651 Net income per limited partnership Interest 0.01 0.01 0.01 0.02
The information presented in the table below is based on previously filed 10-Q and 10-K reports which were prepared using the proportionate consolidation method in 2000. See Note 1C for further information regarding our change from the proportionate consolidation method to the equity method.
For the Quarters Ended -------------------------------------------------------------------- 2000 March 31 June 30 September 30 December 31 ------------------------------------ --------------- ---------------- --------------- ----------------
Total revenues $ 137,041 $ 157,394 $ 143,959 $ 146,342 Total expenses 150,685 142,274 142,445 134,728 Net income (loss) (13,644) 15,120 1,514 11,614 Net income (loss) allocated to the limited partners (13,508) 14,969 1,499 11,498 Net income (loss) per limited partnership Interest (0.02) 0.02 -- 0.02
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the NTS-Properties Plus Ltd.:
We have audited the accompanying combined balance sheets of the Blankenbaker Business Center Joint Venture and the Lakeshore/University II Joint Venture (the "Combined Joint Ventures" as defined in Note 1 to these combined financial statements) as of December 31, 2001 and 2000, and the related combined statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Combined Joint Ventures' management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 combined financial statements referred to above present fairly, in all material respects, the financial position of the Combined Joint Ventures as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 21, 2002
BLANKENBAKER BUSINESS CENTER AND
LAKESHORE/UNIVERSITY II JOINT VENTURES
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND 2000
2001 2000 ---------------------- ----------------------
ASSETS ------ Cash and equivalents $ 87,833 $ 174,294 Cash and equivalents - restricted 103,720 26,082 Accounts receivable 225,867 139,728 Land, buildings and amenities, net 19,184,771 19,708,512 Deferred leasing commissions 514,394 524,163 Other assets 291,365 378,492 ---------------------- ----------------------
TOTAL ASSETS $ 20,407,950 $ 20,951,271 ====================== ======================
LIABILITIES AND PARTNERS' EQUITY -------------------------------- Mortgages payable $ 11,758,330 $ 12,647,652 Accounts payable 538,478 539,560 Security deposits 178,775 193,528 Other liabilities 131,638 226,902 ---------------------- ----------------------
TOTAL LIABILITIES $ 12,607,221 $ 13,607,642
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' EQUITY 7,800,729 7,343,629 ---------------------- ----------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 20,407,950 $ 20,951,271 ====================== ======================
The accompanying notes to combined financial statements are an integral part of these statements.
BLANKENBAKER BUSINESS CENTER AND
LAKESHORE/UNIVERSITY II JOINT VENTURES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 --------------- --------------- --------------- REVENUES -------- Rental income $ 4,205,443 $ 3,717,623 $ 3,596,578 Gain on sale of assets -- -- 94,347 Interest and other income 12,689 45,085 74,406 --------------- --------------- ---------------
TOTAL REVENUES 4,218,132 3,762,708 3,765,331
EXPENSES -------- Operating expenses 1,094,882 771,071 739,153 Operating expenses - affiliated 348,211 312,001 356,648 Interest expense 1,035,997 928,614 1,103,501 Loss on disposal of assets 450 149,613 667 Property management fees - affiliated 245,681 222,085 217,826 Real estate tax 451,404 390,477 423,282 Professional and administrative expenses - affiliated -- 200,000 210,000 Depreciation and amortization 1,062,267 843,512 803,732 --------------- --------------- ---------------
TOTAL EXPENSES 4,238,892 3,817,373 3,854,809 --------------- --------------- ---------------
Net loss $ (20,760)$ (54,665) $ (89,478) =============== =============== ===============
The accompanying notes to combined financial statements are an integral part of these statements.
BLANKENBAKER BUSINESS CENTER AND
LAKESHORE/UNIVERSITY II JOINT VENTURES
COMBINED STATEMENTS OF PARTNERS' EQUITY(1)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Partners' Equity ---------------------- PARTNERS' EQUITY ---------------- Balances at December 31, 1998 $ 4,813,029
Net loss (89,478)
Distributions declared (50,974)
Capital contributions 2,047,425 ----------------------
Balances at December 31, 1999 6,720,002
Net loss (54,665)
Distributions declared (41,398)
Capital contributions 719,690 ----------------------
Balances at December 31, 2000 7,343,629
Net loss (20,760)
Distributions declared (47,140)
Capital contributions 525,000 ----------------------
Balances at December 31, 2001 $ 7,800,729 ======================
For the periods presented, there are no elements of other comprehensive income as defined by the Financial Accounting Standards Board, Statement of Financial Accounting Standards Statement No. 130, "Reporting Comprehensive Income."
The accompanying notes to combined financial statements are an integral part of these statements.
BLANKENBAKER BUSINESS CENTER AND
LAKESHORE/UNIVERSITY II JOINT VENTURES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 --------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES ------------------------------------ Net loss $ (20,760)$ (54,665)$ (89,478) Adjustments to reconcile net loss to net cash provided by operating activities: Gain on sale of assets -- -- (94,347) Loss on disposal of assets 450 149,613 667 Depreciation and amortization 1,244,017 990,078 940,356 Changes in assets and liabilities: Cash and equivalents - restricted (77,638) 56,410 31,027 Accounts receivable (86,139) (107,754) 27,933 Deferred leasing commissions (171,981) (268,508) (139,312) Other assets 87,127 (94,124) 99,339 Accounts payable (1,082) 53,710 126,915 Security deposits (14,753) 37,678 34,679 Other liabilities (95,264) 107,454 (15,459) --------------- ---------------- ----------------
Net cash provided by operating activities 863,977 869,892 922,320 --------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES ------------------------------------ Proceeds from the sale of assets -- -- 467,243 Additions to land, buildings and amenities (538,976) (3,368,921) (662,460) --------------- ---------------- ----------------
Net cash used in investing activities (538,976) (3,368,921) (195,217) --------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES ------------------------------------ Increase in mortgages payable 428,248 1,300,327 -- Principal payments on mortgages payable (1,317,570) (1,206,032) (1,110,768) Cash distributions (47,140) (41,398) (50,974) Capital contributions 525,000 719,690 2,047,425 --------------- ---------------- ----------------
Net cash (used in) provided by financing activities (411,462) 772,587 885,683 --------------- ---------------- ----------------
Net (decrease) increase in cash and equivalents (86,461) (1,726,442) 1,612,786
CASH AND EQUIVALENTS, beginning of year 174,294 1,900,736 287,950 --------------- ---------------- ----------------
CASH AND EQUIVALENTS, end of year $ 87,833 $ 174,294 $ 1,900,736 =============== ================ ================
Interest paid on a cash basis $ 985,416 $ 926,869 $ 1,097,241 =============== ================ ================
The accompanying notes to combined financial statements are an integral part of these statements.
BLANKENBAKER BUSINESS CENTER AND
LAKESHORE/UNIVERSITY II JOINT VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Note 1 - Significant Accounting Policies
A) Organization and Properties
The combined joint ventures include:
Blankenbaker Business Center Joint Venture owns Blankenbaker Business Center 1A, a business center with approximately 50,000 net rentable ground floor square feet and approximately 50,000 net rentable mezzanine square feet located in Louisville, Kentucky.
Lakeshore/University II Joint Venture owns the following:
Lakeshore Business Center Phase I - a business center with approximately 104,000 net rentable square feet located in
Fort Lauderdale, Florida.
Lakeshore Business Center Phase II - a business center with approximately 97,000 net rentable square feet located in
Fort Lauderdale, Florida.
Lakeshore Business Center Phase III - a business center with approximately 39,000 net rentable square feet located in
Fort Lauderdale, Florida.
The terms "we," "us" or "our," as the context requires, may refer to the joint ventures or their interests in these properties.
B) Revenue Recognition - Rental Income and Capitalized Leasing Costs
The combined joint ventures recognize revenue in accordance with each tenant's respective lease agreement. Certain of the commercial properties' lease agreements are structured to include scheduled and specified rent increases over the lease term. For financial reporting purposes, the income from these leases is being recognized on a straight-line basis over the lease term. Accrued income connected with these leases is included in accounts receivable and totaled $147,627 and $38,977 at December 31, 2001 and 2000, respectively. All commissions paid to leasing agents are deferred and amortized on a straight-line basis over the term of the lease to which they apply.
C) Cash and Equivalents - Restricted
Cash and equivalents - restricted represents funds escrowed with mortgage companies for property taxes and insurance in accordance with the loan agreements with such mortgage companies.
D) Basis of Property and Depreciation
Land, buildings and amenities are stated at historical cost less accumulated depreciation to the joint ventures. Costs directly associated with the acquisition, development and construction of a project are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which are 5-30 years for land improvements, 5-30 years for buildings 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 market value. Application of this standard by management during the years ended December 31, 2001, 2000 and 1999 did not result in an impairment loss.
E) Advertising
The joint ventures expense advertising costs as incurred. Advertising expense was immaterial to the joint ventures during the years ended December 31, 2001, 2000 and 1999.
F) Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," effective for financial statements issued for fiscal years beginning after December 15, 2001. We will subject our financial statements to the standards of SFAS No. 144 when applicable.
Note 2 - Concentration of Credit Risk
The joint ventures have commercial properties in Louisville, Kentucky and Ft. Lauderdale, Florida. A single tenant occupies 100% of the Louisville, Kentucky property. We recorded rental income for this tenant of $934,612, $907,614 and $914,503 for 2001, 2000 and 1999, respectively. Substantially all of the tenants are local businesses or are businesses which have operations in the location in which they lease space.
Note 3 - Land, Buildings and Amenities
The following schedule provides an analysis of the joint ventures' investment in property held for lease as of December 31:
2001 2000 ------------------- ------------------ Land and improvements $ 10,053,032 $ 9,978,959 Buildings, improvements and amenities 24,815,203 24,636,705 ------------------- ------------------
34,868,235 34,615,664
Less accumulated depreciation (15,683,464) (14,907,152) ------------------- ------------------
$ 19,184,771 $ 19,708,512 =================== ==================
Note 4 - Principles of Combination
The combined joint ventures include the accounts of all less than 50% owned joint ventures considered significant by NTS-Properties Plus Ltd. All intercompany transactions and balances have been eliminated.
Note 5 - Mortgages Payable Mortgages payable as of December 31 consist of the following:
2001 2000 ------------------ ------------------ Mortgage payable with an insurance company, bearing interest at a fixed rate of 8.5%, due in monthly installments through November 15, 2005, secured by land and a building. $ 2,235,829 $ 2,697,393
Mortgage payable with an insurance company, bearing interest at a fixed rate of 8.125%, due in monthly installments through August 1, 2008, secured by land and a building. 4,043,631 4,483,083
Mortgage payable with an insurance company, bearing interest at a fixed rate of 8.125%, due in monthly installments through August 1, 2008, secured by land and buildings. 3,758,395 4,166,849
Mortgage payable to a bank, bearing interest at a variable rate based on LIBOR daily rate plus 2.3%, which was 4.44% at December 31, 2001, due on September 8, 2003, secured by land and a building. 1,720,475 1,300,327 ------------------ ------------------
$ 11,758,330 $ 12,647,652 ================== ==================
Scheduled maturities of debt are as follows:
For the Years Ended December 31, Amount -------------------------------- -------------------------- 2002 $ 1,454,185 2003 3,231,813 2004 1,676,157 2005 1,763,846 2006 1,271,116 Thereafter 2,361,213 --------------------------
$ 11,758,330 ==========================
Based on the borrowing rates currently available to the joint ventures for mortgages with similar terms and average maturities, the fair value of long-term debt is approximately $11,941,000.
Note 6 - Rental Income Under Operating Leases
The following is a schedule of minimum future rental income on noncancelable operating leases:
For the Years Ended December 31, Amount -------------------------------- ------------------------- 2002 $ 2,646,602 2003 2,025,620 2004 1,723,946 2005 902,977 2006 169,025 Thereafter 193,694 -------------------------
$ 7,661,864 =========================
Note 7 - Related Party Transactions
Pursuant to an agreement with the partnerships which formed the joint ventures, NTS Development Company, an affiliate of the General Partner of the partnerships, receives property management fees on a monthly basis. The fee is equal to 6% of all revenues from commercial properties. Also permitted by an agreement, NTS Development Company receives a repair and maintenance fee equal to 5.9% of costs incurred which relate to capital improvements. These repair and maintenance fees are capitalized as a part of land, buildings and amenities.
The joint ventures were charged the following amounts pursuant to an agreement with NTS Development Company for the years ended December 31, 2001, 2000 and 1999. These charges include items which have been expensed as operating expenses - affiliated or professional and administrative expenses - affiliated and items which have been capitalized as deferred leasing commissions, other assets or as land, buildings and amenities.
For the Years Ended December 31, --------------------------------------------------------- 2001 2000 1999 ------------------ ------------------ ----------------- Property management fees $ 245,681 $ 222,085 $ 217,826 ------------------ ------------------ -----------------
Property management 204,924 181,766 181,459 Leasing 102,723 92,196 132,369 Administrative - operating 39,603 37,068 41,693 Other 961 971 1,127 ------------------ ------------------ -----------------
Total operating expenses - affiliated 348,211 312,001 356,648 ------------------ ------------------ -----------------
Professional and administrative expenses - affiliated -- 200,000 210,000 ------------------ ------------------ -----------------
Repairs and maintenance fees 24,370 177,897 33,383 Leasing commissions 69,372 103,652 90,345 Other -- 38 -- ------------------ ------------------ -----------------
Total related party transactions capitalized 93,742 281,587 123,728 ------------------ ------------------ -----------------
Total related party transactions $ 687,634 $ 1,015,673 $ 908,202 ================== ================== =================
Note 8 - Sale of Assets
On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of land adjacent to the Lakeshore Business Center for a purchase price of $528,405. The L/U II Joint Venture reflects a gain of approximately $94,000 associated with this sale for the year ended December 31, 1999. The net proceeds from the land sale were used to help fund the construction of Lakeshore Business Center Phase III.
Note 9 - Commitments and Contingencies
The combined joint ventures, as owners of real estate, are subject to various environmental laws of federal, state and local governments. Compliance by the combined joint ventures with existing laws has not had a material adverse effect on the combined joint ventures' financial condition and results of operations. However, the combined joint ventures cannot predict the impact of new or changed laws or regulations on their current properties or on properties that they may acquire in the future.
The combined joint ventures do not believe there is any other litigation threatened against them other than routine litigation arising out of the ordinary course of business some of which is expected to be covered by insurance, none of which is expected to have a material effect on our combined financial position or results of operations as discussed herein. However, due to the recent event on September 11, 2001 affecting the insurance industry, we are unable to determine at what price we will be able to renew our insurance coverage when the current policies expire in September 2002, or if the coverage available will be adequate.
As of December 31, 2001, the L/U II Joint Venture has a commitment for approximately $161,000 at Lakeshore Business Center Phase I for tenant improvements on approximately 15,500 square feet and a commitment for approximately $268,000 at Lakeshore Business Center Phase II for tenant improvements on approximately 32,900 square feet.
The L/U II Joint Venture also has a commitment for approximately $105,600 at Lakeshore Business Center Phase III for tenant improvements on approximately 3,800 square feet. This commitment will be funded from existing debt financing. The Joint Venture has incurred approximately $72,000 of this cost as of December 31, 2001.
The L/U Joint Venture anticipates replacing the roofs in 2002 at Lakeshore Business Center Phase I for a cost of approximately $200,000. Management reassessed the useful lives of the existing roofs and adjusted them accordingly.
The L/U II Joint Venture's partners, NTS-Properties IV, NTS-Properties V and NTS-Properties Plus will be called upon to make capital contributions to provide the funds necessary for working capital tenant improvements and roof replacements.
Note 10 - Segment Reporting
The combined joint ventures' reportable operating segments include only one segment - Commercial Real Estate Operations.
Item 9
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
None.
PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant
Because we are a limited partnership and not a corporation, we have no directors or officers as such. Management is the responsibility of our General Partner, NTS-Properties Plus Associates. We have entered into a management contract with NTS Development Company, an affiliate of our General Partner, to provide property management services.
The General Partners of NTS-Properties Plus Associates are as follows:
J. D. Nichols Mr. Nichols (age 60) is the managing General Partner of NTS-Properties Plus Associates and is Chairman of the Board of NTS Corporation (since 1985) and NTS Development Company (since 1977).
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 our properties is NTS Development Company, the executive officers and/or directors of which are J. D. Nichols, Brian F. Lavin and Gregory A. Wells.
Brian F. Lavin Mr. Lavin (age 48) serves as President and Chief Operating Officer of NTS Corporation and NTS Development Company. Mr. Lavin joined the Manager in June 1997. From November 1994 through June 1997, Mr. Lavin served as President of the Residential Division of the Paragon Group, Inc., and as a Vice President of Paragon's Midwest Division prior to November 1994. In this capacity, he directed the development, marketing, leasing and management operations for the firms expanding portfolios. Mr. Lavin attended the University of Missouri where he received his Bachelor's Degree in Business Administration. He is a licensed Kentucky Real Estate Broker and Certified Property Manager. Mr. Lavin is a member of the Young President's Organization, the Institute of Real Estate Management, council member of the Urban Land Institute and member of the National Multi-Housing Council. He has served on the Boards of the Louisville Science Center, Louisville Ballet, Greater Louisville Inc., National Multi-Housing Council and Louisville Apartment Association. Currently, Mr. Lavin serves on the Board of Overseers of the University of Louisville, the Board of Trustees for the Louisville Olmsted Parks Conservancy, Inc. and the Home Builders Association's Program Committee.
Gregory A. Wells Mr. Wells (age 43), Senior Vice President and Chief Financial Officer of NTS Corporation and NTS Development Company, joined the Manager in July 1999. From May 1998 through July 1999, Mr. Wells served as Chief Financial Officer of Hokanson Companies, Inc. and as Secretary and Treasurer of Hokanson Construction, Inc., in Indianapolis, Indiana from January 1995 through May 1998. In these capacities, he directed financial and operational activities for commercial rental real estate, managed property, building and suite renovations, out of ground commercial and residential construction and third party management. Mr. Wells previously served as Vice President of Operations and Treasurer of Executive Telecom Systems, Inc., a subsidiary of the Bureau of National Affairs, Inc. (Washington, D.C.). Mr. Wells attended George Mason University, where he received a Bachelor's Degree in Business Administration. Mr. Wells is a Certified Public Accountant in Virginia and Kentucky and is active in various charitable and philanthropic endeavors in the Louisville and Indianapolis areas.
Item 11
Item 11 - Management Remuneration and Transactions
The officers and/or directors of our corporate General Partner receive no direct remuneration in such capacities. We are required to pay a property management fee based on gross revenues to NTS Development Company. We are also required to pay to NTS Development Company a repair and maintenance fee on costs related to specific projects and a refinancing fee on Net Cash Proceeds from the refinancing of any of our properties. Also, NTS Development Company provides certain other services to us. See Item 8 - Note 6 to the Financial Statements which describes these fees and sets forth transactions with affiliates of our General Partner for the years ended December 31, 2001, 2000 and 1999.
Our General Partner is entitled to receive cash distributions and allocations of profits and losses from us. See Note 1H to the Financial Statements which describes the methods used to determine income allocations and cash distributions.
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, along with Cash Flows and Financial Condition, for information concerning recent tender offers for our limited partners.
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management
On March 15, 2002, we filed a Schedule 14C with the Securities and Exchange Commission giving notice of our merger with and into ORIG, LLC. The merger was approved on February 28, 2002, by the written consent of the holders of a majority of our outstanding Interests, in lieu of a meeting of limited partners. The effective date of the merger is unknown at this time.
We will merge with and into ORIG, LLC ("ORIG"), an affiliate of ours, with ORIG being the entity which survives the merger. Upon consummation of the merger, all Interests in us will be canceled and no securities in ORIG will be issued in place of our canceled Interests. Following the merger, ORIG will own our joint venture interests in certain commercial real estate properties and will assume all of our liabilities.
ORIG will pay limited partners who are not affiliated with us or ORIG $1.30 per Interest in cash. Limited partners who are affiliates of ours or ORIG will be paid for their Interests and will not have any ownership in ORIG following the merger.
The merger is considered a going-private transaction, because once it is completed, all Interests in us will be canceled, the registration of Interests will be terminated and we will no longer be required to make filings with the Securities and Exchange Commission or to comply with securities laws and the Securities and Exchange Commission's regulations governing publicly-held entities. Further information about the merger may be found in the Schedule 14C we filed with the Securities and Exchange Commission.
Our General Partner is NTS-Properties Plus Associates, a Kentucky limited partnership, 10172 Linn Station Road, Louisville, Kentucky 40223. The partners of our General Partner and their total respective interests in NTS-Properties Plus Associates are as follows:
J. D. Nichols35.05%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation9.95%
10172 Linn Station Road
Louisville, Kentucky 40223
The remaining 55.00% interests are owned by various limited partners of NTS-Properties Associates Plus.
Item 13
Item 13 - Certain Relationships and Related Transactions
As permitted by an agreement, we were charged for administrative salaries by NTS Development Company. These charges which have been expensed as professional and administrative expenses - affiliated totaled $25,210, $20,767 and $45,098 for the years ended December 31, 2001, 2000 and 1999, respectively.
Accounts payable includes approximately $105,900 and $80,700 due NTS Development at December 31, 2001 and 2000, respectively.
Our affiliate, ORIG has participated in tender offers for our Interests. See Item 7 and Item 8, Note - 5 for additional information on these tender offers.
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 1- Financial Statements
The financial statements for the years ended December 31, 2001, 2000 and 1999 together with the report of Arthur Andersen LLP dated March 21, 2002, appear in Part II, Item 8. The following financial statement schedules should be read in conjunction with such financial statements.
2 - Financial Statement Schedules
All 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 and Certificate *
of Limited Partnership of NTS-Properties Plus Ltd.,
a Florida limited partnership.
10. Property Management Agreement and Construction *
Agreement between NTS Development Company
and NTS-Properties Plus Ltd.
99a. Management's letter to the Securities and Exchange **
Commission regarding representation received from
Arthur Andersen LLP.
99b. Complete appraisal in a summary appraisal report ***
for Blankenbaker Center 1A with the effective
date of December 31, 2001.
99c.Complete appraisal in a self contained appraisal report ***
for Lakeshore Business Center III with the effective
date of December 31, 2001.
99d. Complete appraisal in a self contained appraisal report ***
for Lakeshore Business Center I and II with the effective
date of December 31, 2001.
*Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on July 1, 1987
(effective June 24, 1988) under Commission File No. 33-15475.
**Included with this Form 10-K as Exhibit 99a.
***Incorporated by reference to documents filed by NTS-Properties Plus Ltd. with the Securities
and Exchange Commission in connection with the filing of the Information Statement
pursuant to Section 14(c) of the Securities Act of 1934 on March 15, 2002 under
Commission File No. 000-18952.
4 - Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NTS-PROPERTIES PLUS LTD.
By:NTS-Properties Plus Associates,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
Gregory A. Wells
Senior Vice President and
Chief Financial Officer of
NTS Capital Corporation
Date: April 1, 2002
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.
SignatureTitle
/s/ J. D. Nichols
J. D. NicholsGeneral Partner of NTS-Properties Plus Associates and
Chairman of the Board and Sole Director of NTS
Capital Corporation
/s/ Brian F. Lavin
Brian F. LavinPresident and Chief Operating Officer of NTS Capital
Corporation
/s/ Gregory A. Wells
Gregory A. Wells Senior Vice President and Chief Financial Officer of
NTS Capital Corporation
We are a limited partnership and no proxy material has been sent to the limited partners. We will deliver to the limited partners an annual report containing our financial statements and a message from our General Partner.