Attached files
file | filename |
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EX-31.1 - EX-31.1 - NTS REALTY HOLDINGS LP | a10-17430_1ex31d1.htm |
EX-32.1 - EX-32.1 - NTS REALTY HOLDINGS LP | a10-17430_1ex32d1.htm |
EX-31.2 - EX-31.2 - NTS REALTY HOLDINGS LP | a10-17430_1ex31d2.htm |
EX-32.2 - EX-32.2 - NTS REALTY HOLDINGS LP | a10-17430_1ex32d2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-32389
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware |
|
41-2111139 |
(State of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
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10172 Linn Station Road |
|
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Louisville, Kentucky |
|
40223 |
(Address of principal executive offices) |
|
(Zip Code) |
(502) 426-4800
(Registrants telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer £ |
|
Accelerated filer £ |
|
|
|
Non-accelerated filer £ |
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Smaller reporting company S |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No x
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 3, 2010 there were 11,380,760 of the registrants limited partnership units outstanding.
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
FORM 10-Q
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements included in this Quarterly Report on Form 10-Q, particularly those included in Part I, Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A), constitute forward-looking statements. These forward-looking statements include discussion and analysis of our financial condition, including our ability to rent space on favorable terms, our ability to address debt maturities and fund our liquidity requirements, the value of our assets, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our unit holders and other matters. Words such as may, anticipates, expects, intends, plans, believes, seeks, estimates, would, could, should and variations of these words and similar expressions are intended to identify forward-looking statements and indicate that it is possible that the event may not occur. If these events do not occur, the result, which we expected, also may, or may not, occur in a different manner, which may be more or less favorable to us. We do not undertake any obligation to update these forward-looking statements.
Any forward-looking statements included in MD&A, or elsewhere in this report, are not historical facts, but reflect the intent, belief or current expectations of our managing general partner based on its knowledge and understanding of the business and industry, the economy and other future conditions only as of the date of this report and may ultimately prove to be incorrect or false. These statements are not guarantees of future performance, and we caution unit holders not to place undue reliance on forward-looking statements. Actual results could differ materially from those expressed or forecast in any forward-looking statements as a result of a number of factors, including but not limited to the factors listed and described under Risk Factors in our filings with the Securities and Exchange Commission (the SEC), particularly our most recent Annual Report on Form 10-K, for the year ended December 31, 2009, as filed with the SEC on March 29, 2010.
PART I FINANCIAL INFORMATION
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009
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(Unaudited) |
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||
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September 30, 2010 |
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December 31, 2009 |
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ASSETS: |
|
|
|
|
|
||
Cash and equivalents |
|
$ |
3,324,645 |
|
$ |
11,233,735 |
|
Cash and equivalents - restricted |
|
6,589,588 |
|
2,227,744 |
|
||
Accounts receivable, net of allowance for doubtful accounts of $352,647 at September 30, 2010 and $203,359 at December 31, 2009 |
|
1,590,847 |
|
1,646,142 |
|
||
Note receivable |
|
1,000,000 |
|
1,000,000 |
|
||
Land, buildings and amenities, net |
|
280,267,021 |
|
291,151,198 |
|
||
Long-lived assets held for sale |
|
- |
|
5,549,932 |
|
||
Investments in and advances to tenants in common |
|
2,742,872 |
|
4,174,947 |
|
||
Other assets |
|
4,020,851 |
|
4,598,167 |
|
||
|
|
|
|
|
|
||
Total assets |
|
$ |
299,535,824 |
|
$ |
321,581,865 |
|
|
|
|
|
|
|
||
LIABILITIES: |
|
|
|
|
|
||
Mortgages and notes payable |
|
$ |
233,638,892 |
|
$ |
246,088,305 |
|
Accounts payable and accrued expenses |
|
2,630,989 |
|
2,875,643 |
|
||
Accounts payable and accrued expenses due to affiliate |
|
648,268 |
|
634,930 |
|
||
Distributions payable |
|
569,038 |
|
569,038 |
|
||
Security deposits |
|
869,067 |
|
856,384 |
|
||
Long-lived liabilities held for sale |
|
- |
|
72,321 |
|
||
Other liabilities |
|
5,254,995 |
|
3,754,653 |
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||
|
|
|
|
|
|
||
Total liabilities |
|
243,611,249 |
|
254,851,274 |
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||
|
|
|
|
|
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COMMITMENTS AND CONTINGENCIES (NOTE 12) |
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||
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|
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EQUITY: |
|
|
|
|
|
||
Partners equity |
|
51,553,221 |
|
61,633,718 |
|
||
Noncontrolling interests |
|
4,371,354 |
|
5,096,873 |
|
||
|
|
|
|
|
|
||
Total equity |
|
55,924,575 |
|
66,730,591 |
|
||
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
299,535,824 |
|
$ |
321,581,865 |
|
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Condensed Consolidated Statement of Equity as of September 30, 2010
(Unaudited)
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(Unaudited) |
|
||||||||||||||
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General |
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Limited |
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General |
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Limited |
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Noncontrolling |
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Total |
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||||
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Initial equity |
|
714,491 |
|
10,667,117 |
|
$ |
3,131,381 |
|
$ |
46,750,444 |
|
$ |
5,588,426 |
|
$ |
55,470,251 |
|
Net income (loss) prior years |
|
- |
|
- |
|
2,102,522 |
|
31,387,471 |
|
(491,553 |
) |
32,998,440 |
|
||||
Consolidated net loss current year |
|
- |
|
- |
|
(525,686 |
) |
(7,847,697 |
) |
(823,519 |
) |
(9,196,902 |
) |
||||
Cash distributions declared to date |
|
- |
|
- |
|
(1,471,852 |
) |
(21,973,362 |
) |
(49,000 |
) |
(23,494,214 |
) |
||||
Current year contributions from noncontrolling interests |
|
- |
|
- |
|
- |
|
- |
|
147,000 |
|
147,000 |
|
||||
Retirement of limited partnership interests to date |
|
- |
|
(848 |
) |
- |
|
- |
|
- |
|
- |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances on September 30, 2010 |
|
714,491 |
|
10,666,269 |
|
$ |
3,236,365 |
|
$ |
48,316,856 |
|
$ |
4,371,354 |
|
$ |
55,924,575 |
|
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2010 and 2009
(Unaudited)
|
|
(Unaudited) |
|
(Unaudited) |
|
||||||||
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|
Three
Months Ended |
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Nine
Months Ended |
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||||||||
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2010 |
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2009 |
|
2010 |
|
2009 |
|
||||
REVENUE: |
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Rental income |
|
$ |
11,626,858 |
|
$ |
11,257,042 |
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$ |
34,192,983 |
|
$ |
31,598,434 |
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Tenant reimbursements |
|
608,904 |
|
450,194 |
|
1,472,515 |
|
1,353,674 |
|
||||
|
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|
|
|
|
|
|
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|
||||
Total revenue |
|
12,235,762 |
|
11,707,236 |
|
35,665,498 |
|
32,952,108 |
|
||||
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EXPENSES: |
|
|
|
|
|
|
|
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|
||||
Operating expenses |
|
3,372,891 |
|
3,145,104 |
|
9,789,810 |
|
7,920,667 |
|
||||
Operating expenses reimbursed to affiliate |
|
1,292,446 |
|
1,314,106 |
|
3,912,702 |
|
3,628,559 |
|
||||
Management fees |
|
607,622 |
|
574,270 |
|
1,757,477 |
|
1,630,987 |
|
||||
Property taxes and insurance |
|
1,610,869 |
|
1,631,956 |
|
4,693,526 |
|
4,916,190 |
|
||||
Professional and administrative expenses |
|
181,820 |
|
106,171 |
|
603,789 |
|
755,132 |
|
||||
Professional and administrative expenses reimbursed to affiliate |
|
418,123 |
|
366,534 |
|
1,237,682 |
|
1,151,927 |
|
||||
Depreciation and amortization |
|
4,465,385 |
|
4,518,462 |
|
13,547,913 |
|
12,788,192 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
11,949,156 |
|
11,656,603 |
|
35,542,899 |
|
32,791,654 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
OPERATING INCOME |
|
286,606 |
|
50,633 |
|
122,599 |
|
160,454 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income |
|
50,512 |
|
87,211 |
|
115,435 |
|
226,359 |
|
||||
Interest expense |
|
(3,206,937 |
) |
(3,070,528 |
) |
(9,663,818 |
) |
(8,649,899 |
) |
||||
Loss on disposal of assets |
|
(89,080 |
) |
(109,717 |
) |
(146,528 |
) |
(122,878 |
) |
||||
Loss from investments in tenants in common |
|
(493,948 |
) |
(551,925 |
) |
(1,432,075 |
) |
(1,654,142 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
LOSS FROM CONTINUING OPERATIONS |
|
(3,452,847 |
) |
(3,594,326 |
) |
(11,004,387 |
) |
(10,040,106 |
) |
||||
Discontinued operations, net |
|
(3,827 |
) |
225,566 |
|
24,203 |
|
265,900 |
|
||||
Gain on sale of discontinued operations |
|
- |
|
- |
|
1,783,282 |
|
- |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
CONSOLIDATED NET LOSS |
|
(3,456,674 |
) |
(3,368,760 |
) |
(9,196,902 |
) |
(9,774,206 |
) |
||||
Net loss attributable to noncontrolling interests |
|
(258,841 |
) |
(228,256 |
) |
(823,519 |
) |
(260,108 |
) |
||||
|
|
|
|
|
|
|
|
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|
||||
NET LOSS |
|
$ |
(3,197,833 |
) |
$ |
(3,140,504 |
) |
$ |
(8,373,383 |
) |
$ |
(9,514,098 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Loss from continuing operations allocated to limited partners |
|
$ |
(3,236,075 |
) |
$ |
(3,368,673 |
) |
$ |
(10,313,525 |
) |
$ |
(9,409,782 |
) |
Discontinued operations, net allocated to limited partners |
|
(3,587 |
) |
211,406 |
|
22,684 |
|
249,207 |
|
||||
Gain on sale of discontinued operations allocated to limited partners |
|
- |
|
- |
|
1,671,326 |
|
- |
|
||||
Net loss attributable to noncontrolling interests allocated to limited partners |
|
(242,591 |
) |
(213,926 |
) |
(771,818 |
) |
(243,778 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
NET LOSS ALLOCATED TO LIMITED PARTNERS |
|
$ |
(2,997,071 |
) |
$ |
(2,943,341 |
) |
$ |
(7,847,697 |
) |
$ |
(8,916,797 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Loss from continuing operations per limited partnership unit |
|
$ |
(0.30 |
) |
$ |
(0.32 |
) |
$ |
(0.97 |
) |
$ |
(0.88 |
) |
Discontinued operations, net per limited partnership unit |
|
- |
|
0.02 |
|
- |
|
0.02 |
|
||||
Gain on sale of discontinued operations per limited partnership unit |
|
- |
|
- |
|
0.16 |
|
- |
|
||||
Net loss attributable to noncontrolling interests per limited partnership unit |
|
(0.02 |
) |
(0.02 |
) |
(0.07 |
) |
(0.02 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
NET LOSS PER LIMITED PARTNERSHIP UNIT |
|
$ |
(0.28 |
) |
$ |
(0.28 |
) |
$ |
(0.74 |
) |
$ |
(0.84 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of limited partnership interests |
|
10,666,269 |
|
10,666,269 |
|
10,666,269 |
|
10,666,269 |
|
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009
(Unaudited)
|
|
(Unaudited) |
|
||||
|
|
2010 |
|
2009 |
|
||
OPERATING ACTIVITIES: |
|
|
|
|
|
||
Consolidated net loss |
|
$ |
(9,196,902 |
) |
$ |
(9,774,206 |
) |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: |
|
|
|
|
|
||
Gain from sale of discontinued operations |
|
(1,783,282 |
) |
- |
|
||
Loss on disposal of assets |
|
146,528 |
|
122,878 |
|
||
Depreciation and amortization |
|
14,150,000 |
|
13,477,859 |
|
||
Loss from investments in tenants in common |
|
1,432,075 |
|
1,654,142 |
|
||
Changes in assets and liabilities: |
|
|
|
|
|
||
Cash and equivalents restricted |
|
(4,361,844 |
) |
(1,338,247 |
) |
||
Accounts receivable |
|
55,295 |
|
(118,445 |
) |
||
Other assets |
|
115,643 |
|
(607,151 |
) |
||
Accounts payable and accrued expenses |
|
(249,272 |
) |
509,656 |
|
||
Accounts payable and accrued expenses due to affiliate |
|
6,761 |
|
441,433 |
|
||
Security deposits |
|
12,683 |
|
44,355 |
|
||
Other liabilities |
|
1,439,215 |
|
1,491,727 |
|
||
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
1,766,900 |
|
5,904,001 |
|
||
|
|
|
|
|
|
||
INVESTING ACTIVITIES: |
|
|
|
|
|
||
Additions to land, buildings and amenities |
|
(2,652,505 |
) |
(1,750,614 |
) |
||
Proceeds from sale of discontinued operations |
|
7,331,729 |
|
- |
|
||
Acquisitions |
|
- |
|
(32,175,459 |
) |
||
Investment in joint venture |
|
(224,680 |
) |
- |
|
||
|
|
|
|
|
|
||
Net cash provided by (used in) investing activities |
|
4,454,544 |
|
(33,926,073 |
) |
||
|
|
|
|
|
|
||
FINANCING ACTIVITIES: |
|
|
|
|
|
||
Contributions from noncontrolling interest holders in properties |
|
147,000 |
|
5,588,426 |
|
||
Distributions to noncontrolling interest holders in properties |
|
(49,000 |
) |
- |
|
||
Distributions from tenants in common properties |
|
- |
|
120,000 |
|
||
Proceeds from mortgages payable |
|
- |
|
24,225,000 |
|
||
Revolving note payable, net |
|
- |
|
4,278,089 |
|
||
Principal payments on mortgages payable |
|
(2,002,938 |
) |
(2,492,393 |
) |
||
Additional payments on mortgages payable |
|
(2,246,475 |
) |
- |
|
||
Additional payments on revolving note payable |
|
(8,200,000 |
) |
- |
|
||
Additions to loan costs |
|
(72,007 |
) |
(652,652 |
) |
||
Cash distributions |
|
(1,707,114 |
) |
(1,707,114 |
) |
||
|
|
|
|
|
|
||
Net cash (used in) provided by financing activities |
|
(14,130,534 |
) |
29,359,356 |
|
||
|
|
|
|
|
|
||
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS |
|
(7,909,090 |
) |
1,337,284 |
|
||
|
|
|
|
|
|
||
CASH AND EQUIVALENTS, beginning of period |
|
11,233,735 |
|
- |
|
||
|
|
|
|
|
|
||
CASH AND EQUIVALENTS, end of period |
|
$ |
3,324,645 |
|
$ |
1,337,284 |
|
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
NTS REALTY HOLDINGS LIMITED PARTNERSHIP
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The unaudited condensed consolidated financial statements included herein should be read in conjunction with NTS Realty Holdings Limited Partnerships (NTS Realty) 2009 annual report on Form 10-K as filed with the Securities and Exchange Commission on March 29, 2010. The Condensed Consolidated Balance Sheet as of December 31, 2009, has been derived from the audited consolidated financial statements of NTS Realty. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of NTS Realty Capital, Inc., our managing general partner, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation have been made to the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2010 and 2009. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. As used in this quarterly report on Form 10-Q, the terms we, us or our, as the context requires, may refer to NTS Realty or its interests in its properties and joint ventures.
Note 1 Summary of Significant Accounting Policies
Organization and Distribution Policy
We are in the business of developing, constructing, owning and operating multifamily properties, commercial and retail real estate. As of September 30, 2010, we owned wholly, as a tenant in common with an unaffiliated third party or through joint venture investments with an unaffiliated third party, 22 properties, comprised of 6 commercial properties, 14 multifamily properties and 2 retail properties. The properties are located in and around Louisville (6) and Lexington (1), Kentucky, Fort Lauderdale (3) and Orlando (2), Florida, Indianapolis (4), Indiana, Memphis (1) and Nashville (2), Tennessee, Richmond (2), Virginia and Atlanta (1), Georgia. Our commercial properties aggregate approximately 605,000 square feet. We own multifamily properties containing 4,029 rental units and retail properties containing approximately 47,000 square feet.
We pay distributions if and when authorized by our managing general partner using proceeds from advances drawn on our revolving note payable to a bank. We are required to pay distributions on a quarterly basis, no less than sixty-five percent (65%) of our net cash flow from operations as this term is defined in regulations promulgated by the Treasury Department under the Internal Revenue Code of 1986, as amended; provided that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity level taxation for federal, state or local income tax purposes, we will adjust the amount distributed to reflect our obligation to pay tax. Any distribution other than a distribution with respect to the final quarter of a calendar year will be made no later than forty-five (45) days after the last day of such quarter based on our estimate of net cash flow from operations for the year. Any distribution with respect to the final quarter of a calendar year will be made no later than ninety (90) days after the last day of such quarter based on actual net cash flow from operations for the year, adjusted for any excess or insufficient distributions made with respect to the first three quarters of the calendar year.
Net cash flow from operations may be reduced by the amount of reserves as determined by us each quarter. Our managing general partner will establish these reserves for, among other things, working capital or capital improvement needs. Therefore, there is no assurance that we will have net cash flow from operations from which to pay distributions in the future. For example, our partnership agreement permits our managing general partner to reinvest sales or refinancing proceeds in new and existing properties or to create reserves to fund future capital expenditures. Because net cash flow from operations is calculated after reinvesting sales or refinancing proceeds or establishing reserves, we may not have any net cash flow from operations from which to pay distributions.
We paid quarterly distributions of $0.05 per unit to limited partners on April 16, 2010, July 16, 2010 and October 15, 2010.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of all wholly-owned properties and properties that are less than wholly-owned, but which we control or for which we are the primary beneficiary. We consolidate a variable interest entity, or VIE, when we are determined to be the primary beneficiary based on the qualitative factors affecting:
· Our power to direct the activities of a variable interest entity that most significantly affect the variable interest entitys economic performance; and
· Our obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.
Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE, including management agreements and other contractual arrangements, when determining the party obligated to absorb the majority of the expected losses, as defined, by accounting standards. Effective January 1, 2010, we adopted the provisions of Auditing Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17) which amends the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, Consolidation (FASB ASC Topic 810). The amendment to FASB ASC Topic 810 revises the consolidation guidance for variable interest entities (VIEs) focusing on a qualitative evaluation of the conditions subjecting the entity to consolidation. There have been no changes during 2010 in conclusions about whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE. During the nine months ended September 30, 2010, we did not provide financial or other support to a previously identified VIE that we were not previously contractually obligated to provide. Our properties owned as a tenant in common with an unaffiliated third party are accounted for under the equity method. Intercompany transactions and balances have been eliminated.
Fair Value of Financial Instruments
FASB ASC Topic 820 Fair Value Measurements and Disclosures requires companies to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. FASB ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity specific measurement.
FASB ASC Topic 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
· Level 1: Quoted market prices in active markets for identical assets or liabilities.
· Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
· Level 3: Unobservable inputs that are not corroborated by market data.
We did not have any material financial assets or liabilities that are required to be recorded at fair value as of September 30, 2010 or December 31, 2009.
Financial Instruments
The book values of cash and equivalents, trade receivables and trade payables are considered to be representative of their respective fair values because of the immediate or short-term maturity of these financial instruments.
FASB ASC Topic 825 Financial Instruments requires disclosures about fair value of financial instruments in both interim and annual financial statements.
Certain of our assets and liabilities are considered financial instruments. Fair value estimates, methods and assumptions are set forth below.
Cash and equivalents and cash and equivalents restricted The carrying amount of these assets approximates fair value as of September 30, 2010 and December 31, 2009, due to the short-term nature of such accounts.
Note receivable As of September 30, 2010 and December 31, 2009, we determined the estimated fair values of our notes receivable were approximately $1.0 million and $0.9 million, respectively, by discounting expected future cash receipts utilizing a discount rate equivalent to the rate at which similar notes receivable would be originated at the reporting date.
Mortgages and notes payable As of September 30, 2010 and December 31, 2009, we determined the estimated fair values of our mortgages and notes payable were approximately $248.9 million and $246.0 million, respectively, by discounting expected future cash payments utilizing a discount rate equivalent to the rate at which similar instruments would be originated at the reporting date.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update No. 2010-06 Improving Disclosures About Fair Value Measurements (ASU 2010-06), which provides amendments to FASB ASC Subtopic 820-10 Fair Value Measurements and Disclosures Overall. ASU 2010-06 requires additional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements. The revised guidance is effective for interim and annual reporting periods beginning after December 15, 2009. ASU 2010-06 concerns disclosure only and will not have a material impact on our financial position or results of operations.
Note 2 Use of Estimates and Reclassifications in the Preparation of Financial Statements
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us 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.
Certain reclassifications have been made to the prior period financial statements to conform with September 30, 2010 classifications. Our Outlet Mall retail property and Sears Office Building were reclassified during 2009 from continuing operations to discontinued operations and were classified as held for sale on our balance sheets. These reclassifications did not have a material impact on the related financial statement line items on our consolidated balance sheets or statement of operations and no effect on previously reported operating results or partners equity.
Note 3 Real Estate Transactions
Acquisitions
Upon acquisition of wholly-owned properties or joint venture investments that are less than wholly-owned, but which we control or for which we are the primary beneficiary, the assets and liabilities purchased are recorded at their fair market value at the date of the acquisition using the acquisition method in accordance with FASB ASC Topic 805 Business Combinations. We recognize the net tangible and identified intangible assets based on fair values (including land, buildings, tenant improvements, acquired above and below market leases and the origination cost of acquired in-place leases) and acquired liabilities. The intangible assets recorded are amortized over the weighted average lease lives. We identify any above or below market leases or customer relationship intangibles that exist at the acquisition date. We recognize mortgages and other liabilities at fair market value at the date of the acquisition. We utilize an independent appraiser to assess fair value based on estimated cash flow projections for the tangible assets acquired that utilize discount and capitalization rates deemed appropriate and available market information.
We expense acquisition costs as incurred. During the three and nine months ended September 30, 2010, we did not acquire any properties.
During the nine months ended September 30, 2009, we made the following property acquisitions:
Property Multifamily |
|
Location |
|
Units |
|
Date of |
|
Purchase Price |
|
|
Sabal Park Apartments (1) |
|
Longwood, FL |
|
162 |
|
June 11, 2009 |
|
$ |
13,000,000 |
|
Golf Brook Apartments (2) |
|
Longwood, FL |
|
195 |
|
June 11, 2009 |
|
19,500,000 |
|
|
(1) Financed by a mortgage payable to a bank of $9.6 million. We own a 51% joint venture interest in this property.
(2) Financed by a mortgage payable to a bank of $14.6 million. We own a 51% joint venture interest in this property.
Dispositions
During the nine months ended September 30, 2010, we made the following property dispositions:
Wholly-Owned Properties |
|
Square Feet |
|
Our Ownership |
|
Date of Sale |
|
Outlet Mall (1) |
|
162,600 |
|
100 |
% |
March, 2010 |
|
Sears Office Building (2) |
|
66,900 |
|
100 |
% |
June, 2010 |
|
(1) Gain of approximately $0.5 million.
(2) Gain of approximately $1.2 million.
Discontinued Operations and Long-Lived Assets and Liabilities Held for Sale
We may engage in transactions structured as like-kind exchanges of property to obtain favorable tax treatment under Section 1031 of the Internal Revenue Code. If we are able to structure an exchange of properties as a like-kind exchange, then any gain we realize from the exchange would not be recognized for federal income tax purposes. The test for determining whether exchanged properties are of like-kind is whether the properties are of the same nature or character.
At September 30, 2010, proceeds of approximately $3.6 million from the sale of our Sears Office Building were held by a third party qualified intermediary to be invested in replacement like-kind property. These funds are included in cash and equivalents - restricted at September 30, 2010. Our ability to successfully invest the proceeds in accordance with Section 1031 of the Internal Revenue Code and qualify the proceeds for deferral of gain recognition for federal income tax purposes is dependent on many factors and there can be no assurance that we will be successful in doing so. We are required to complete the purchase of replacement property by December 27, 2010 to qualify the Sears Office Building proceeds for deferral of gain recognition.
We have presented separately as discontinued operations in all periods the results of operations for the following properties:
Property |
|
Location |
|
Date of Sale |
|
Outlet Mall |
|
Louisville, KY |
|
March, 2010 |
|
Sears Office Building |
|
Louisville, KY |
|
June, 2010 |
|
These assets and liabilities held for sale were separately identified on our balance sheet at December 31, 2009.
The components of discontinued operations are outlined below and include the results of operations for the period in which we owned such assets during the three and nine months ended September 30, 2010 and 2009, respectively.
|
|
(Unaudited) |
|
(Unaudited) |
|
||||||||
|
|
Three
Months Ended |
|
Nine
Months Ended |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
REVENUE: |
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
$ |
- |
|
$ |
182,944 |
|
$ |
145,568 |
|
$ |
548,832 |
|
Tenant reimbursements |
|
- |
|
24,393 |
|
- |
|
24,393 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
- |
|
207,337 |
|
145,568 |
|
573,225 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
EXPENSES: |
|
|
|
|
|
|
|
|
|
||||
Operating expenses and operating expenses reimbursed to affiliate |
|
3,707 |
|
44,563 |
|
89,664 |
|
131,404 |
|
||||
Management fees |
|
- |
|
9,147 |
|
4,229 |
|
30,490 |
|
||||
Property taxes and insurance |
|
- |
|
(558 |
) |
27,097 |
|
36,644 |
|
||||
Depreciation and amortization |
|
- |
|
41,907 |
|
- |
|
179,258 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total expenses |
|
3,707 |
|
95,059 |
|
120,990 |
|
377,796 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
DISCONTINUED OPERATING (LOSS) INCOME |
|
(3,707 |
) |
112,278 |
|
24,578 |
|
195,429 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Interest and other income |
|
- |
|
134,877 |
|
- |
|
134,877 |
|
||||
Interest expense |
|
(120 |
) |
(21,589 |
) |
(375 |
) |
(64,406 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
Discontinued operations, net |
|
$ |
(3,827 |
) |
$ |
225,566 |
|
$ |
24,203 |
|
$ |
265,900 |
|
Note 4 Concentration of Credit Risk
We own and operate wholly, as a tenant in common with an unaffiliated third party or through joint venture investments with an unaffiliated third party, commercial, multifamily and retail properties in Louisville and Lexington, Kentucky; Fort Lauderdale and Orlando, Florida; Indianapolis, Indiana; Memphis and Nashville, Tennessee; Richmond, Virginia and Atlanta, Georgia.
Our financial instruments that are exposed to concentrations of credit risk consist of cash and equivalents and cash and equivalents - restricted. We maintain our cash accounts primarily with banks located in Kentucky.
Note 5 Cash and Equivalents
Cash and equivalents include cash on hand and short-term, highly liquid investments with initial maturities of three months or less. We have a cash management program, which provides for the overnight investment of excess cash balances. Under an agreement with a bank, excess cash is invested in a mutual fund for U.S. government and agency securities each night.
Note 6 Cash and Equivalents - Restricted
Cash and equivalents - restricted represents cash on hand and short-term, highly liquid investments with initial maturities of three months or less which have been escrowed with certain mortgage companies and banks for property taxes, insurance and tenant improvements in accordance with certain loan and lease agreements and certain security deposits. We also hold the proceeds of our recent property sales with a third party intermediary to be invested in replacement like-kind property. See Note 3 Real Estate Transactions for a discussion of the restrictions on these proceeds.
Note 7 Property and Depreciation
Land, buildings and amenities are stated at cost. Costs directly associated with the 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 generally 5-30 years for land improvements, 7-30 years for buildings and
improvements and 5-30 years for amenities. Tenant improvements are generally depreciated over the life of the initial or renewal term of the respective tenant lease. Depreciation expense from continuing operations for the three months ended September 30, 2010 and 2009 was approximately $4.5 million and $4.4 million, respectively. Depreciation expense from continuing operations for the nine months ended September 30, 2010 and 2009 was approximately $13.4 million and $12.5 million, respectively.
FASB ASC Topic 360 Property, Plant and Equipment specifies circumstances in which certain long-lived assets must be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its expected future cash flows, the assets carrying value must be written down to fair value. In determining the value of an investment property and whether the investment property is impaired, management considers several factors such as projected rental and vacancy rates, property operating expenses, capital expenditures and interest rates. The capitalization rate used to determine property valuation is based on the market in which the investment property is located, length of leases, tenant financial strength, the economy in general, demographics, environment, property location, visibility, age and physical condition among others. All of these factors are considered by management in determining the value of any particular investment property. The value of any particular investment property is sensitive to the actual results of any of these factors, either individually or taken as a whole. If the actual results differ from managements judgment, the valuation could be negatively or positively affected. Application of this standard during the three and nine months ended September 30, 2010 and 2009 did not result in an impairment loss.
Note 8 Investments in and Advances to Tenants in Common
We own a tenant in common interest in and operate the following properties:
· The Overlook at St. Thomas Apartments; a 484-unit luxury apartment complex in Louisville, Kentucky. We own a 60% interest as a tenant in common with an unaffiliated third party.
· Creeks Edge at Stony Point Apartments; a 202-unit luxury apartment complex in Richmond, Virginia. We own a 51% interest as a tenant in common with an unaffiliated third party.
Presented below are the unaudited condensed balance sheets and statements of operations for these properties:
|
|
(Unaudited) |
|
(Unaudited) |
|
||
|
|
September 30, 2010 |
|
December 31, 2009 |
|
||
Condensed Balance Sheets |
|
|
|
|
|
||
Land, buildings and amenities |
|
$ |
62,979,000 |
|
$ |
66,186,166 |
|
Other, net |
|
1,914,599 |
|
1,497,712 |
|
||
Total assets |
|
$ |
64,893,599 |
|
$ |
67,683,878 |
|
|
|
|
|
|
|
||
Mortgages payable and other liabilities |
|
$ |
57,948,590 |
|
$ |
58,170,033 |
|
Equity |
|
6,945,009 |
|
9,513,845 |
|
||
Total liabilities and equity |
|
$ |
64,893,599 |
|
$ |
67,683,878 |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
||||||||
|
|
September
30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
||||
Condensed Statements of Operations |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
2,220,200 |
|
$ |
2,090,335 |
|
$ |
6,564,832 |
|
$ |
6,137,906 |
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
560,436 |
|
502,135 |
|
1,472,155 |
|
1,370,609 |
|
||||
Operating expenses reimbursed to affiliate |
|
221,662 |
|
249,362 |
|
698,187 |
|
734,641 |
|
||||
Management fees |
|
75,453 |
|
73,314 |
|
228,713 |
|
213,419 |
|
||||
Property taxes and insurance |
|
220,402 |
|
225,889 |
|
660,996 |
|
698,895 |
|
||||
Depreciation and amortization |
|
1,183,383 |
|
1,172,709 |
|
3,535,268 |
|
3,509,588 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
2,261,336 |
|
2,223,409 |
|
6,595,319 |
|
6,527,152 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Operating loss |
|
$ |
(41,136 |
) |
$ |
(133,074 |
) |
$ |
(30,487 |
) |
$ |
(389,246 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(882,724 |
) |
$ |
(991,045 |
) |
$ |
(2,568,836 |
) |
$ |
(2,972,460 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Distributions |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
The Overlook at St. Thomas Apartments |
|
$ |
- |
|
$ |
200,000 |
|
$ |
- |
|
$ |
200,000 |
|
Creeks Edge at Stony Point Apartments |
|
- |
|
- |
|
- |
|
- |
|
Note 9 Mortgages and Notes Payable
Mortgages and notes payable consist of the following:
|
|
(Unaudited) |
|
|
|
||
|
|
September 30, 2010 |
|
December 31, 2009 |
|
||
Mortgage payable to a bank in monthly installments of principal and interest, bearing interest at a variable rate based on LIBOR one-month rate plus 3.50%, currently 3.76%, due June 1, 2011, secured by certain land, buildings and amenities, with a carrying value of $16,463,219 and a $640,000 letter of credit. The mortgage is guaranteed by Mr. Nichols and Mr. Lavin, the chairman and president, respectively, of our managing general partner |
|
$ |
15,087,000 |
|
$ |
23,566,000 |
|
|
|
|
|
|
|
||
Mortgage payable to GE Commercial Finance Business Property in monthly installments of principal and interest, bearing fixed interest at 9.0%, maturing August 1, 2010, secured by certain land, buildings and amenities |
|
- |
|
2,289,831 |
|
||
|
|
|
|
|
|
||
Mortgage payable to an insurance company in monthly installments of principal and interest, bearing fixed interest at 8.45%, maturing November 1, 2015, secured by certain land, buildings and amenities, with a carrying value of $1,787,967 |
|
1,819,893 |
|
2,002,165 |
|
||
|
|
|
|
|
|
||
Mortgage payable to a bank in monthly installments of principal and interest, bearing fixed interest at 5.11%, maturing December 1, 2014, secured by certain land, buildings and amenities, with a carrying value of $11,166,895 |
|
11,229,893 |
|
11,381,809 |
|
||
|
|
|
|
|
|
||
Mortgage payable to a bank, currently with interest only payable in monthly installments until October 1, 2011, bearing fixed interest at 6.03% maturing September 1, 2018, secured by certain land, buildings and amenities, with a carrying value of $35,251,293 |
|
26,328,500 |
|
26,328,500 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, currently with interest only payable in monthly installments until July 1, 2011, bearing interest at a variable rate based on LIBOR one-month rate plus 3.33%, currently 3.59%, maturing July 1, 2016, secured by certain land, buildings and amenities, with a carrying value of $18,763,155 |
|
14,625,000 |
|
14,625,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, currently with interest only payable in monthly installments until July 1, 2011, bearing interest at a variable rate based on LIBOR one-month rate plus 3.50%, currently 3.76%, maturing July 1, 2016, secured by certain land, buildings and amenities, with a carrying value of $12,339,232 |
|
9,600,000 |
|
9,600,000 |
|
||
|
|
(Unaudited) |
|
|
|
||
|
|
September 30, 2010 |
|
December 31, 2009 |
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $20,339,417 |
|
13,775,303 |
|
13,895,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $35,839,707 |
|
26,767,410 |
|
27,000,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $20,063,643 |
|
16,699,890 |
|
16,845,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $34,651,325 |
|
27,436,595 |
|
27,675,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $17,337,408 |
|
11,291,881 |
|
11,390,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $21,915,100 |
|
30,361,183 |
|
30,625,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $9,463,252 |
|
10,850,715 |
|
10,945,000 |
|
||
|
|
|
|
|
|
||
Mortgage payable to Federal Home Loan Mortgage Corporation, in monthly installments of principal and interest, bearing fixed interest at 5.40%, maturing January 1, 2020, secured by certain land, buildings and amenities, with a carrying value of $12,549,471 |
|
17,765,629 |
|
17,920,000 |
|
||
|
|
|
|
|
|
||
Total mortgages and notes payable |
|
$ |
233,638,892 |
|
$ |
246,088,305 |
|
On February 1, 2010, we amended our $24.0 million mortgage payable to a bank. The amendment converted $8.2 million of the balance to a revolving note payable due June 1, 2011. On February 12, 2010, we made a principal payment of $8.2 million from our proceeds from refinancing on December 17, 2009, on our $8.2 million revolving note payable to a bank. The revolver proceeds may be used to fund capital improvements and were used to payoff our mortgage payable to GE Commercial Finance Business Property on April 30, 2010. Both the $15.2 million mortgage and the $8.2 million revolving note payable are secured by our Lakeshore Business Center properties.
In addition to the $8.2 million revolving note payable to a bank due June 1, 2011, we continue to have our $10.0 million revolving note payable to a bank due May 31, 2011. As of September 30, 2010 we did not have an outstanding balance on either the $8.2 million revolving note payable or the $10.0 million revolving note payable.
Based on the borrowing rates currently available to us for loans with similar terms and average maturities, the fair value of long-term debt at September 30, 2010 was approximately $248.9 million.
Interest paid for the nine months ended September 30, 2010 and 2009 was approximately $8.7 million and $8.9 million, respectively.
Our mortgages may be prepaid but are generally subject to a yield-maintenance premium. Certain mortgages and notes payable contain covenants and requirements that we maintain specified debt limits and ratios related to our debt balances and property values, as well as, specified financial performance requirements. We
complied with all covenants and requirements at September 30, 2010. We anticipate renewing or refinancing our mortgages and notes payable coming due within the next twelve months.
Mortgages payable on our properties owned as a tenant in common with an unaffiliated third party consist of the following:
|
|
(Unaudited) |
|
|
|
||
|
|
September 30, 2010 |
|
December 31, 2009 |
|
||
Mortgage payable to a bank in monthly installments of principal and interest, bearing fixed interest at 5.72%, maturing on April 11, 2017, secured by certain land, buildings and amenities, with a carrying value of $36,581,981 (1) |
|
$ |
34,410,444 |
|
$ |
34,787,919 |
|
|
|
|
|
|
|
||
Mortgage payable to a bank in monthly installments of principal and interest, bearing fixed interest at 5.99% maturing November 15, 2017, secured by certain land, buildings and amenities, with a carrying value of $26,397,019 (2) |
|
$ |
22,517,924 |
|
$ |
22,727,309 |
|
(1) We are proportionately liable for this mortgage, limited to our 60% interest as a tenant in common.
(2) We are jointly and severally liable under this mortgage.
Based on the borrowing rates currently available to us for loans with similar terms and average maturities, the fair value of long-term debt at September 30, 2010, was approximately $64.0 million.
Note 10 Accounts Payable and Accrued Expenses Due to Affiliate
Accounts payable and accrued expenses due to affiliate includes amounts owed to NTS Development Company for reimbursement of employee costs and overhead expenses and fees for services rendered as provided for in our collective management agreements.
Note 11 Related Party Transactions
Pursuant to our collective management agreements, NTS Development Company receives fees for a variety of services performed for our benefit. NTS Development Company also receives fees under separate management agreements for each of our unconsolidated joint venture properties owned as a tenant in common with an unaffiliated third party, each of our consolidated joint venture properties and each of our eight wholly-owned subsidiaries financed through Federal Home Loan Mortgage Corporation, or FHLMC. Property management fees are paid in an amount equal to 5% of the gross collected revenue from our properties. This includes our wholly-owned properties, consolidated joint venture properties and properties owned by our eight wholly-owned subsidiaries financed through FHLMC. Fees are paid in an amount equal to 3.5% of the gross collected revenue from our unconsolidated joint venture properties owned as a tenant in common with an unaffiliated third party. We were the beneficiary of a preferential ownership interest, disproportionately greater than our initial cash investment in each property owned as a tenant in common with an unaffiliated third party. Construction supervision fees are paid in an amount equal to 5% of the costs incurred which relate to capital improvements and significant repairs. NTS Development Company receives commercial leasing fees equal to 4% of the gross rental amount for new leases and 2% of the gross rental amount for new leases in which a broker is used and for renewals or extensions. Disposition fees are paid to NTS Development Company in an amount of 1% to 4% of the aggregate sales price of a property pursuant to our management agreements and up to a 6% fee upon disposition on our properties owned as a tenant in common with an unaffiliated third party under their respective management agreements. NTS Development Company has agreed to accept a lower management fee for the properties we own as a tenant in common with an unaffiliated third party in exchange for a larger potential disposition fee. NTS Development Company is reimbursed its actual costs for services rendered to NTS Realty.
Employee costs are allocated among NTS Realty, other affiliates of our managing general partner and for the benefit of third parties, so that a full time employee can be shared by multiple entities. Each employees services, which are dedicated to a particular entitys operations, are allocated as a percentage of each employees costs to that entity. We only reimburse charges from NTS Development Company for actual costs of employee services incurred for our benefit.
We were charged the following approximate amounts pursuant to our management agreements with NTS Development Company for the three and nine months ended September 30, 2010 and 2009. These charges include items, which have been expensed as operating expenses reimbursed to affiliate or professional and administrative
expenses reimbursed to affiliate and items, which have been capitalized as other assets or as land, buildings and amenities. Certain of these items are included in our results of discontinued operations.
|
|
(Unaudited) |
|
||||
|
|
For the Three Months Ended September 30, |
|
||||
|
|
2010 |
|
2009 |
|
||
Property management fees |
|
$ |
608,000 |
|
$ |
583,000 |
|
|
|
|
|
|
|
||
Operating expenses reimbursement Property |
|
890,000 |
|
885,000 |
|
||
Operating expenses reimbursement Multifamily Leasing |
|
180,000 |
|
184,000 |
|
||
Operating expenses reimbursement Administrative |
|
202,000 |
|
253,000 |
|
||
Operating expenses reimbursement Other |
|
21,000 |
|
15,000 |
|
||
|
|
|
|
|
|
||
Total operating expenses reimbursed to affiliate |
|
1,293,000 |
|
1,337,000 |
|
||
|
|
|
|
|
|
||
Professional and administrative expenses reimbursed to affiliate |
|
418,000 |
|
367,000 |
|
||
|
|
|
|
|
|
||
Construction supervision fees and leasing fees |
|
37,000 |
|
70,000 |
|
||
Disposition fees included in gain on sale of discontinued operations |
|
- |
|
62,000 |
|
||
|
|
|
|
|
|
||
Total related party transactions |
|
$ |
2,356,000 |
|
$ |
2,419,000 |
|
|
|
(Unaudited) |
|
||||
|
|
For the Nine Months Ended September 30, |
|
||||
|
|
2010 |
|
2009 |
|
||
Property management fees |
|
$ |
1,762,000 |
|
$ |
1,661,000 |
|
|
|
|
|
|
|
||
Operating expenses reimbursement Property |
|
2,689,000 |
|
2,462,000 |
|
||
Operating expenses reimbursement Multifamily Leasing |
|
506,000 |
|
459,000 |
|
||
Operating expenses reimbursement Administrative |
|
673,000 |
|
745,000 |
|
||
Operating expenses reimbursement Other |
|
86,000 |
|
39,000 |
|
||
|
|
|
|
|
|
||
Total operating expenses reimbursed to affiliate |
|
3,954,000 |
|
3,705,000 |
|
||
|
|
|
|
|
|
||
Professional and administrative expenses reimbursed to affiliate |
|
1,238,000 |
|
1,152,000 |
|
||
|
|
|
|
|
|
||
Construction supervision fees and leasing fees |
|
127,000 |
|
208,000 |
|
||
Disposition fees included in gain on sale of discontinued operations |
|
310,000 |
|
- |
|
||
|
|
|
|
|
|
||
Total related party transactions |
|
$ |
7,391,000 |
|
$ |
6,726,000 |
|
Property, multifamily leasing, administrative and other operating expenses reimbursed include employee costs charged to us by NTS Development Company and other actual costs incurred by NTS Development Company on our behalf, which were reimbursed by us.
During the three months ended September 30, 2010 and 2009, we were charged approximately $11,000 and $13,000, respectively, for property maintenance fees from affiliates of NTS Development Company. During the nine months ended September 30, 2010 and 2009, we were charged approximately $37,000 and $55,000, respectively, for property maintenance fees from affiliates of NTS Development Company.
NTS Development Company leased 20,368 square feet of office space in NTS Center, at a rental rate of $14.50 per square foot and 2,220 square feet of storage space at a rental rate of $5.50 per square foot. We recognized rents of approximately $77,000 from NTS Development Company for each of the three months ended September 30, 2010 and 2009, respectively. We recognized rents of approximately $231,000 and $229,000 from NTS Development Company for the nine months ended September 30, 2010 and 2009, respectively. The average per square foot rental rate for similar office space in NTS Center as of September 30, 2010 was $14.38 per square foot.
Note 12 Commitments and Contingencies
We, as an owner of real estate, are subject to various environmental laws of federal, state and local governments. Our compliance 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.
Litigation
From time to time, we are involved in litigation and other legal proceedings arising out of the ordinary course of business. There are no pending material legal proceedings to which we are subject.
Note 13 Segment Reporting
Our reportable operating segments include retail, commercial and multifamily real estate operations. The following unaudited financial information of the operating segments has been prepared using a management approach, which is consistent with the basis and manner in which our management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. We evaluate performance based on stand-alone operating segment net income (loss). The non-segment information necessary to reconcile to our total operating results is included in the column labeled Partnership in the following information.
|
|
(Unaudited) |
|
|||||||||||||
|
|
Three Months Ended September 30, 2010 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Rental income |
|
$ |
151,245 |
|
$ |
1,361,183 |
|
$ |
10,123,333 |
|
$ |
(8,903 |
) |
$ |
11,626,858 |
|
Tenant reimbursements |
|
24,170 |
|
584,734 |
|
- |
|
- |
|
608,904 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue |
|
175,415 |
|
1,945,917 |
|
10,123,333 |
|
(8,903 |
) |
12,235,762 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses and operating expenses reimbursed to affiliate |
|
43,393 |
|
665,099 |
|
3,956,845 |
|
- |
|
4,665,337 |
|
|||||
Management fees |
|
7,696 |
|
88,964 |
|
510,962 |
|
- |
|
607,622 |
|
|||||
Property taxes and insurance |
|
14,397 |
|
263,910 |
|
1,300,723 |
|
31,839 |
|
1,610,869 |
|
|||||
Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate |
|
- |
|
- |
|
- |
|
599,943 |
|
599,943 |
|
|||||
Depreciation and amortization |
|
41,671 |
|
457,137 |
|
3,966,577 |
|
- |
|
4,465,385 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses |
|
107,157 |
|
1,475,110 |
|
9,735,107 |
|
631,782 |
|
11,949,156 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
|
68,258 |
|
470,807 |
|
388,226 |
|
(640,685 |
) |
286,606 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other income |
|
- |
|
764 |
|
33,675 |
|
16,073 |
|
50,512 |
|
|||||
Interest expense |
|
(24,306 |
) |
(153,672 |
) |
(2,988,603 |
) |
(40,356 |
) |
(3,206,937 |
) |
|||||
Loss on disposal of assets |
|
- |
|
(7,329 |
) |
(81,751 |
) |
- |
|
(89,080 |
) |
|||||
Loss from investments in tenants in common |
|
- |
|
- |
|
(493,948 |
) |
- |
|
(493,948 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from continuing operations |
|
43,952 |
|
310,570 |
|
(3,142,401 |
) |
(664,968 |
) |
(3,452,847 |
) |
|||||
Discontinued operations, net |
|
(329 |
) |
(3,498 |
) |
- |
|
- |
|
(3,827 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated net income (loss) |
|
43,623 |
|
307,072 |
|
(3,142,401 |
) |
(664,968 |
) |
(3,456,674 |
) |
|||||
Net loss attributable to noncontrolling interests |
|
- |
|
- |
|
(258,841 |
) |
- |
|
(258,841 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
43,623 |
|
$ |
307,072 |
|
$ |
(2,883,560 |
) |
$ |
(664,968 |
) |
$ |
(3,197,833 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Land, buildings and amenities, net |
|
$ |
3,739,875 |
|
$ |
26,847,248 |
|
$ |
249,679,898 |
|
$ |
- |
|
$ |
280,267,021 |
|
|
|
(Unaudited) |
|
|||||||||||||
|
|
Three Months Ended September 30, 2009 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Rental income |
|
$ |
155,326 |
|
$ |
1,269,604 |
|
$ |
9,839,388 |
|
$ |
(7,276 |
) |
$ |
11,257,042 |
|
Tenant reimbursements |
|
26,025 |
|
424,169 |
|
- |
|
- |
|
450,194 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue |
|
181,351 |
|
1,693,773 |
|
9,839,388 |
|
(7,276 |
) |
11,707,236 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses and operating expenses reimbursed to affiliate |
|
30,919 |
|
677,819 |
|
3,750,472 |
|
- |
|
4,459,210 |
|
|||||
Management fees |
|
8,758 |
|
78,746 |
|
486,766 |
|
- |
|
574,270 |
|
|||||
Property taxes and insurance |
|
15,617 |
|
230,421 |
|
1,354,078 |
|
31,840 |
|
1,631,956 |
|
|||||
Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate |
|
- |
|
- |
|
- |
|
472,705 |
|
472,705 |
|
|||||
Depreciation and amortization |
|
40,062 |
|
435,490 |
|
4,042,910 |
|
- |
|
4,518,462 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses |
|
95,356 |
|
1,422,476 |
|
9,634,226 |
|
504,545 |
|
11,656,603 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
|
85,995 |
|
271,297 |
|
205,162 |
|
(511,821 |
) |
50,633 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other income |
|
- |
|
437 |
|
16,655 |
|
70,119 |
|
87,211 |
|
|||||
Interest expense |
|
(89,014 |
) |
(501,961 |
) |
(2,487,932 |
) |
8,379 |
|
(3,070,528 |
) |
|||||
Loss on disposal of assets |
|
- |
|
(91,865 |
) |
(17,852 |
) |
- |
|
(109,717 |
) |
|||||
Loss from investments in tenants in common |
|
- |
|
- |
|
(551,925 |
) |
- |
|
(551,925 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss from continuing operations |
|
(3,019 |
) |
(322,092 |
) |
(2,835,892 |
) |
(433,323 |
) |
(3,594,326 |
) |
|||||
Discontinued operations, net |
|
141,229 |
|
84,337 |
|
- |
|
- |
|
225,566 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated net income (loss) |
|
138,210 |
|
(237,755 |
) |
(2,835,892 |
) |
(433,323 |
) |
(3,368,760 |
) |
|||||
Net loss attributable to noncontrolling interests |
|
- |
|
- |
|
(228,256 |
) |
- |
|
(228,256 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
138,210 |
|
$ |
(237,755 |
) |
$ |
(2,607,636 |
) |
$ |
(433,323 |
) |
$ |
(3,140,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Land, buildings and amenities, net |
|
$ |
3,893,481 |
|
$ |
27,969,523 |
|
$ |
262,546,488 |
|
$ |
- |
|
$ |
294,409,492 |
|
|
|
(Unaudited) |
|
|||||||||||||
|
|
Nine Months Ended September 30, 2010 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Rental income |
|
$ |
459,204 |
|
$ |
4,189,438 |
|
$ |
29,571,049 |
|
$ |
(26,708 |
) |
$ |
34,192,983 |
|
Tenant reimbursements |
|
87,645 |
|
1,384,870 |
|
- |
|
- |
|
1,472,515 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue |
|
546,849 |
|
5,574,308 |
|
29,571,049 |
|
(26,708 |
) |
35,665,498 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses and operating expenses reimbursed to affiliate |
|
136,919 |
|
2,014,471 |
|
11,551,122 |
|
- |
|
13,702,512 |
|
|||||
Management fees |
|
24,501 |
|
255,876 |
|
1,477,100 |
|
- |
|
1,757,477 |
|
|||||
Property taxes and insurance |
|
40,163 |
|
784,864 |
|
3,772,980 |
|
95,519 |
|
4,693,526 |
|
|||||
Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate |
|
- |
|
- |
|
- |
|
1,841,471 |
|
1,841,471 |
|
|||||
Depreciation and amortization |
|
124,780 |
|
1,390,442 |
|
12,032,691 |
|
- |
|
13,547,913 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses |
|
326,363 |
|
4,445,653 |
|
28,833,893 |
|
1,936,990 |
|
35,542,899 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
|
220,486 |
|
1,128,655 |
|
737,156 |
|
(1,963,698 |
) |
122,599 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other income |
|
- |
|
1,594 |
|
56,194 |
|
57,647 |
|
115,435 |
|
|||||
Interest expense |
|
(99,079 |
) |
(481,511 |
) |
(8,888,439 |
) |
(194,789 |
) |
(9,663,818 |
) |
|||||
Loss on disposal of assets |
|
- |
|
(29,816 |
) |
(116,712 |
) |
- |
|
(146,528 |
) |
|||||
Loss from investments in tenants in common |
|
- |
|
- |
|
(1,432,075 |
) |
- |
|
(1,432,075 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from continuing operations |
|
121,407 |
|
618,922 |
|
(9,643,876 |
) |
(2,100,840 |
) |
(11,004,387 |
) |
|||||
Discontinued operations, net |
|
115,173 |
|
(90,970 |
) |
- |
|
- |
|
24,203 |
|
|||||
Gain on sale of discontinued operations |
|
534,884 |
|
1,248,398 |
|
- |
|
- |
|
1,783,282 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated net income (loss) |
|
771,464 |
|
1,776,350 |
|
(9,643,876 |
) |
(2,100,840 |
) |
(9,196,902 |
) |
|||||
Net loss attributable to noncontrolling interests |
|
- |
|
- |
|
(823,519 |
) |
- |
|
(823,519 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
771,464 |
|
$ |
1,776,350 |
|
$ |
(8,820,357 |
) |
$ |
(2,100,840 |
) |
$ |
(8,373,383 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Land, buildings and amenities, net |
|
$ |
3,739,875 |
|
$ |
26,847,248 |
|
$ |
249,679,898 |
|
$ |
- |
|
$ |
280,267,021 |
|
|
|
(Unaudited) |
|
|||||||||||||
|
|
Nine Months Ended September 30, 2009 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Rental income |
|
$ |
458,855 |
|
$ |
3,861,557 |
|
$ |
27,301,802 |
|
$ |
(23,780 |
) |
$ |
31,598,434 |
|
Tenant reimbursements |
|
81,880 |
|
1,271,794 |
|
- |
|
- |
|
1,353,674 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue |
|
540,735 |
|
5,133,351 |
|
27,301,802 |
|
(23,780 |
) |
32,952,108 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses and operating expenses reimbursed to affiliate |
|
111,157 |
|
1,983,050 |
|
9,455,019 |
|
- |
|
11,549,226 |
|
|||||
Management fees |
|
26,953 |
|
251,041 |
|
1,352,993 |
|
- |
|
1,630,987 |
|
|||||
Property taxes and insurance |
|
44,248 |
|
662,135 |
|
4,114,188 |
|
95,619 |
|
4,916,190 |
|
|||||
Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate |
|
- |
|
- |
|
- |
|
1,907,059 |
|
1,907,059 |
|
|||||
Depreciation and amortization |
|
124,607 |
|
1,325,855 |
|
11,337,730 |
|
- |
|
12,788,192 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses |
|
306,965 |
|
4,222,081 |
|
26,259,930 |
|
2,002,678 |
|
32,791,654 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
|
233,770 |
|
911,270 |
|
1,041,872 |
|
(2,026,458 |
) |
160,454 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other income |
|
155 |
|
2,234 |
|
34,233 |
|
189,737 |
|
226,359 |
|
|||||
Interest expense |
|
(268,636 |
) |
(1,459,414 |
) |
(7,000,656 |
) |
78,807 |
|
(8,649,899 |
) |
|||||
Loss on disposal of assets |
|
- |
|
(102,423 |
) |
(20,455 |
) |
- |
|
(122,878 |
) |
|||||
Loss from investments in tenants in common |
|
- |
|
- |
|
(1,654,142 |
) |
- |
|
(1,654,142 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss from continuing operations |
|
(34,711 |
) |
(648,333 |
) |
(7,599,148 |
) |
(1,757,914 |
) |
(10,040,106 |
) |
|||||
Discontinued operations, net |
|
380,217 |
|
(114,317 |
) |
- |
|
- |
|
265,900 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated net income (loss) |
|
345,506 |
|
(762,650 |
) |
(7,599,148 |
) |
(1,757,914 |
) |
(9,774,206 |
) |
|||||
Net loss attributable to noncontrolling interests |
|
- |
|
- |
|
(260,108 |
) |
- |
|
(260,108 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
345,506 |
|
$ |
(762,650 |
) |
$ |
(7,339,040 |
) |
$ |
(1,757,914 |
) |
$ |
(9,514,098 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land, buildings and amenities, net |
|
$ |
3,893,481 |
|
$ |
27,969,523 |
|
$ |
262,546,488 |
|
$ |
- |
|
$ |
294,409,492 |
|
Note 14 - Subsequent Events
On October 15, 2010, we signed a lease agreement with an unaffiliated third party to lease approximately 75,000 square feet of commercial leasing space at our NTS Center office building. The lease obligates us to pay an aggregate amount of $1.1 million in lease commissions and tenant allowances. We expect to fund this amount from cash on hand, cash generated by operations or borrowings on our debt.
On October 28, 2010, we entered into a joint venture investment agreement with an unaffiliated third party to invest in a commercial office building totaling approximately 125,000 square feet. The building is being developed by our affiliate, NTS Development Company, with construction expected to be completed in late 2011 or early 2012. The building will be managed by an affiliate of NTS Development Company. We are obligated to contribute $4.9 million, for a 49% ownership interest. We intend to fund our share of this investment with proceeds from our recent property sales, cash on hand, cash from operations or borrowings on new or existing debt. We anticipate the joint venture entering into a $10.5 million construction financing agreement with a bank. The joint venture expects to invest a total of $20.5 million in the construction of the building and completion of tenant space.
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements in Item 1 and the cautionary statements below.
Critical Accounting Policies
A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgments in certain circumstances. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. Critical accounting policies are not to be confused with accounting principles and methods disclosed in accordance with U.S. generally accepted accounting principles (GAAP). GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. Our critical accounting policies, as previously disclosed in our most recent annual report on Form 10-K, which was filed on March 29, 2010, discuss judgments known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions and remain unchanged during the quarter ended September 30, 2010.
Results of Operations
As of September 30, 2010, we owned wholly, as a tenant in common with an unaffiliated third party or through joint venture investments with an unaffiliated third party, 6 commercial properties, 14 multifamily properties and 2 retail properties. We generate substantially all of our operating income from property operations.
Net losses for the three months ended September 30, 2010 and 2009 were approximately $3.2 million and $3.1 million, respectively. Net loss for the three months ended September 30, 2010 as compared to September 30, 2009 was primarily due to a $0.2 million increase in results of operations in the multifamily segment, a $0.2 million decrease in the retail and commercial discontinued operations, net, a $0.1 million increase in overall interest expense and a $0.1 million increase in professional fees. The decrease was offset by a $0.3 million increase in results of operations in the commercial segment and a $0.1 million decrease in loss from investments in tenants in common. There were no other material offsetting changes in net loss for the three months ended September 30, 2010 and 2009.
Net losses for the nine months ended September 30, 2010 and 2009 were approximately $8.4 million and $9.5 million, respectively. The change in net loss for the nine months ended September 30, 2010 as compared to September 30, 2009 was primarily due to a $1.3 million increase in gain on sale of discontinued operations and a $0.3 million increase in results of operations, net of gain, across the commercial segment, a $0.5 million increase in gain on sale of discontinued operations offset by a $0.3 million decrease in discontinued operations, net, across the retail segment. The change is also due to a $0.1 million decrease in professional fees offset by a $0.1 million decrease in interest and other income from the satisfaction of the $2.5 million note receivable from an unaffiliated third party. There was a $1.0 million increase in overall interest expense which is primarily a $1.9 million increase in the multifamily segment offset by a $1.0 million decrease in the commercial segment, primarily related to additional borrowings and our acquisitions of Golf Brook Apartments and Sabal Park Apartments (June 2009), referred to as our 2009 acquisitions, a $0.2 million increase in results of operations across the multifamily segment, a $0.2 million decrease in loss from investments in tenants in common. There were no other material offsetting changes in net loss for the nine months ended September 30, 2010 and 2009.
The following tables include certain selected summarized operating data for the three and nine months ended September 30, 2010 and 2009. This data should be read in conjunction with our financial statements, including the notes attached hereto.
|
|
(Unaudited) |
|
|||||||||||||
|
|
Three Months Ended September 30, 2010 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Total revenues |
|
$ |
175,415 |
|
$ |
1,945,917 |
|
$ |
10,123,333 |
|
$ |
(8,903 |
) |
$ |
12,235,762 |
|
Operating expenses and operating expenses reimbursed to affiliate |
|
43,393 |
|
665,099 |
|
3,956,845 |
|
- |
|
4,665,337 |
|
|||||
Depreciation and amortization |
|
41,671 |
|
457,137 |
|
3,966,577 |
|
- |
|
4,465,385 |
|
|||||
Total interest expense |
|
(24,306 |
) |
(153,672 |
) |
(2,988,603 |
) |
(40,356 |
) |
(3,206,937 |
) |
|||||
Net income (loss) |
|
43,623 |
|
307,072 |
|
(2,883,560 |
) |
(664,968 |
) |
(3,197,833 |
) |
|||||
|
|
(Unaudited) |
|
|||||||||||||
|
|
Three Months Ended September 30, 2009 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Total revenues |
|
$ |
181,351 |
|
$ |
1,693,773 |
|
$ |
9,839,388 |
|
$ |
(7,276 |
) |
$ |
11,707,236 |
|
Operating expenses and operating expenses reimbursed to affiliate |
|
30,919 |
|
677,819 |
|
3,750,472 |
|
- |
|
4,459,210 |
|
|||||
Depreciation and amortization |
|
40,062 |
|
435,490 |
|
4,042,910 |
|
- |
|
4,518,462 |
|
|||||
Total interest expense |
|
(89,014 |
) |
(501,961 |
) |
(2,487,932 |
) |
8,379 |
|
(3,070,528 |
) |
|||||
Net income (loss) |
|
138,210 |
|
(237,755 |
) |
(2,607,636 |
) |
(433,323 |
) |
(3,140,504 |
) |
|||||
|
|
(Unaudited) |
|
|||||||||||||
|
|
Nine Months Ended September 30, 2010 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Total revenues |
|
$ |
546,849 |
|
$ |
5,574,308 |
|
$ |
29,571,049 |
|
$ |
(26,708 |
) |
$ |
35,665,498 |
|
Operating expenses and operating expenses reimbursed to affiliate |
|
136,919 |
|
2,014,471 |
|
11,551,122 |
|
- |
|
13,702,512 |
|
|||||
Depreciation and amortization |
|
124,780 |
|
1,390,442 |
|
12,032,691 |
|
- |
|
13,547,913 |
|
|||||
Total interest expense |
|
(99,079 |
) |
(481,511 |
) |
(8,888,439 |
) |
(194,789 |
) |
(9,663,818 |
) |
|||||
Net income (loss) |
|
771,464 |
|
1,776,350 |
|
(8,820,357 |
) |
(2,100,840 |
) |
(8,373,383 |
) |
|||||
|
|
(Unaudited) |
|
|||||||||||||
|
|
Nine Months Ended September 30, 2009 |
|
|||||||||||||
|
|
Retail |
|
Commercial |
|
Multifamily |
|
Partnership |
|
Total |
|
|||||
Total revenues |
|
$ |
540,735 |
|
$ |
5,133,351 |
|
$ |
27,301,802 |
|
$ |
(23,780 |
) |
$ |
32,952,108 |
|
Operating expenses and operating expenses reimbursed to affiliate |
|
111,157 |
|
1,983,050 |
|
9,455,019 |
|
- |
|
11,549,226 |
|
|||||
Depreciation and amortization |
|
124,607 |
|
1,325,855 |
|
11,337,730 |
|
- |
|
12,788,192 |
|
|||||
Total interest expense |
|
(268,636 |
) |
(1,459,414 |
) |
(7,000,656 |
) |
78,807 |
|
(8,649,899 |
) |
|||||
Net income (loss) |
|
345,506 |
|
(762,650 |
) |
(7,339,040 |
) |
(1,757,914 |
) |
(9,514,098 |
) |
|||||
Occupancy levels at our continuing properties by segment as of September 30, 2010 and 2009 were as follows:
|
|
2010 |
|
2009 |
|
Commercial |
|
75 |
% |
76 |
% |
Multifamily |
|
97 |
% |
95 |
% |
Retail |
|
100 |
% |
100 |
% |
The average occupancy levels at our continuing properties by segment for the three and nine months ended September 30, 2010 and 2009 were as follows:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
Commercial |
|
75 |
% |
75 |
% |
76 |
% |
75 |
% |
Multifamily |
|
97 |
% |
95 |
% |
96 |
% |
93 |
% |
Retail |
|
100 |
% |
98 |
% |
100 |
% |
98 |
% |
We believe the remaining changes in occupancy on September 30 and in average occupancy from period to period are temporary effects of each propertys specific mix of lease maturities and are not indicative of any known trend or uncertainty.
We have on-site leasing staff, who are employees of NTS Development Company, at each of the multifamily properties. The staff handles all on-site visits from potential tenants, coordinates local advertising with NTS Development Companys marketing staff, makes visits to local companies to promote fully furnished apartments and negotiates lease renewals with current residents.
The leasing and renewal negotiations for our commercial and retail properties are primarily handled by leasing agents that are employees of NTS Development Company. All advertising for the commercial and retail properties is coordinated by NTS Development Companys marketing staff located in Louisville, Kentucky.
The following discussion relating to changes in our results of operations includes only material line items within our unaudited condensed consolidated statements of operations or line items for which there was a material change between the three and nine months ended September 30, 2010 and 2009.
Rental Income and Tenant Reimbursements
Rental income and tenant reimbursements from continuing operations for the three months ended September 30, 2010 and 2009 were approximately $12.2 million and $11.7 million, respectively. Rental income and tenant reimbursements from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $35.7 million and $33.0 million, respectively. The increase of $0.5 million, or 4%, for the three months ended September 30, 2010 and 2009 was primarily the result of a $0.3 million increase in rental income across the multifamily segment primarily related to an overall increase in occupancy and a $0.3 million increase in rental income and tenant reimbursements across the commercial segment primarily related to an increase in tenant reimbursements. The increase of $2.7 million, or 8%, for the nine months ended September 30, 2010 and 2009 was primarily the result of a $2.3 million increase in rental income across the multifamily segment primarily related to our 2009 acquisitions and a $0.4 million increase in rental income and tenant reimbursements across the commercial segment primarily related to an increase in occupancy at Lakeshore Business Center Phase II. There were no other material offsetting changes in rental income and tenant reimbursements from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Operating Expenses and Operating Expenses Reimbursed to Affiliate
Operating expenses from continuing operations for the three months ended September 30, 2010 and 2009 were approximately $3.4 million and $3.1 million, respectively. Operating expenses from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $9.8 million and $7.9 million, respectively. The increase of $0.3 million, or 10%, for the three months ended September 30, 2010 and 2009 was primarily the result of a $0.2 million increase in operating expenses across the multifamily segment primarily related to an increase in repairs and maintenance. The increase of $1.9 million, or 24%, for the nine months ended September 30, 2010 and 2009 was primarily the result of a $1.2 million increase in operating expenses from our 2009 acquisitions and a $0.7 million increase in operating expenses across the remaining multifamily segment primarily related to an increase in repairs and maintenance. There were no other material offsetting changes in operating expenses from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Operating expenses reimbursed to affiliate from continuing operations for each of the three months ended September 30, 2010 and 2009 were approximately $1.3 million. Operating expenses reimbursed to affiliate from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $3.9 million
and $3.6 million, respectively. The increase of $0.3 million, or 8%, for the nine months ended September 30, 2010 and 2009 was primarily the result of a $0.3 million increase in operating expenses reimbursed to affiliate from our 2009 acquisitions. There were no other material offsetting changes in operating expenses reimbursed to affiliate from continuing operations for the nine months ended September 30, 2010 and 2009.
We do not have any employees. Pursuant to our collective management agreements, NTS Development Company employs the individuals who provide services necessary to operate our properties and conduct our business. NTS Development Company provides employees that may also perform services for other properties and business enterprises. In the situation where a particular employee benefits multiple operations, the employees cost is proportionately charged out to the entity receiving the services. We only reimburse charges from NTS Development Company for actual costs of employee services incurred for our benefit. The cost of services provided to us by NTS Development Companys employees are classified in our condensed consolidated statements of operations as operating expenses reimbursed to affiliate. The services provided by others are classified as operating expenses.
Operating expenses reimbursed to affiliate are for services performed by employees of NTS Development Company, an affiliate of our general partner. These employee services include property management, leasing, maintenance, security and other services necessary to manage and operate our business.
Operating expenses reimbursed to affiliate from continuing operations consisted approximately of the following:
|
|
(Unaudited) |
|
(Unaudited) |
|
||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
Property |
|
$ |
890,000 |
|
$ |
879,000 |
|
$ |
2,675,000 |
|
$ |
2,436,000 |
|
Multifamily Leasing |
|
180,000 |
|
184,000 |
|
506,000 |
|
459,000 |
|
||||
Administrative |
|
201,000 |
|
238,000 |
|
650,000 |
|
701,000 |
|
||||
Other |
|
21,000 |
|
13,000 |
|
82,000 |
|
33,000 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
1,292,000 |
|
$ |
1,314,000 |
|
$ |
3,913,000 |
|
$ |
3,629,000 |
|
Management Fees
Management fees from continuing operations for each of the three months ended September 30, 2010 and 2009 were approximately $0.6 million. Management fees from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $1.8 million and $1.6 million, respectively. The increase of $0.2 million, or 13%, for the nine months ended September 30, 2010 and 2009 was primarily the result of our 2009 acquisitions. There were no other material offsetting changes in management fees from continuing operations for the nine months ended September 30, 2010 and 2009.
Pursuant to our collective management agreements, NTS Development Company receives property management fees equal to 5% of the gross collected revenue from our properties. This includes our wholly-owned properties, our consolidated joint venture properties and properties owned by our eight wholly-owned subsidiaries financed through Federal Home Loan Mortgage Corporation, or FHLMC. NTS Development Company receives property management fees from our unconsolidated joint venture properties owned as a tenant in common with an unaffiliated third party equal to 3.5% of their gross collected revenue under separate management agreements. We were the beneficiary of a preferential ownership interest, disproportionately greater than our initial cash investment in each property owned as a tenant in common with an unaffiliated third party. NTS Development Company has agreed to accept a lower management fee for the properties we own as a tenant in common with an unaffiliated third party in exchange for a larger potential disposition fee. Disposition fees of up to 6% of the gross sales price may be paid to NTS Development Company for the sale of one of our properties owned as a tenant in common with an unaffiliated third party. Management fees are calculated as a percentage of cash collections and are recorded on the accrual basis. As a result, the fluctuations in revenue between years will differ from the fluctuations of management fee expense.
Property Taxes and Insurance
Property taxes and insurance from continuing operations for each of the three months ended September 30, 2010 and 2009 were approximately $1.6 million. Property taxes and insurance from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $4.7 million and $4.9 million, respectively. The decrease of $0.2 million, or 4%, for the nine months ended September 30, 2010 and 2009 was primarily the result of a $0.4 million decrease in property taxes at Willow Lake Apartments, Lake Clearwater Apartments and Castle Creek Apartments due to tax rate reductions during the nine months ended September 30, 2010. The decrease was partially offset by a $0.2 million increase in property taxes and insurance from our 2009 acquisitions and an increase in insurance of approximately $0.1 million at our Lakeshore Business Center properties. There were no other material offsetting changes in property taxes and insurance from continuing operations for the nine months ended September 30, 2010 and 2009.
Professional and Administrative Expenses and Professional and Administrative Expenses Reimbursed to Affiliate
Professional and administrative expenses from continuing operations for the three months ended September 30, 2010 and 2009 were approximately $0.2 million and $0.1 million, respectively. Professional and administrative expenses from continuing operations for the nine months ended September 30, 2010 and 2009 were approximately $0.6 million and $0.8 million, respectively. The increase of $0.1 million for the three months ended September 30, 2010 and 2009 was primarily due to an overall increase in professional fees. The decrease of $0.2 million, or 25%, for the nine months ended September 30, 2010 and 2009 was primarily due to an overall decrease in legal and professional fees. There were no other material offsetting changes in professional and administrative expenses from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Professional and administrative expenses reimbursed to affiliate from continuing operations for each of the three months ended September 30, 2010 and 2009 were approximately $0.4 million. Professional and administrative expenses reimbursed to affiliate from continuing operations for each of the nine months ended September 30, 2010 and 2009 were approximately $1.2 million. There were no material offsetting changes in professional and administrative expenses reimbursed to affiliate from continuing operations for the three and nine months ended September 30, 2010 and 2009.
We do not have any employees. Pursuant to our collective management agreements, NTS Development Company employs the individuals who provide services necessary to operate our properties and conduct our business. NTS Development Company provides employees that may also perform services for other properties and business enterprises. In the situation where a particular employee benefits multiple operations, the employees cost is proportionately charged out to the entity receiving the services. We only reimburse charges from NTS Development Company for actual costs of employee services incurred for our benefit. The cost of services provided to us by NTS Development Companys employees are classified in our condensed consolidated statements of operations as professional and administrative expenses reimbursed to affiliate. The services provided by others are classified as professional and administrative.
Professional and administrative expenses reimbursed to affiliate are for the services performed by employees of NTS Development Company, an affiliate of our general partner. These employee services include legal, financial and other services necessary to manage and operate our business.
Professional and administrative expenses reimbursed to affiliate from continuing operations consisted approximately of the following:
|
|
(Unaudited) |
|
(Unaudited) |
|
||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
Finance |
|
$ |
107,000 |
|
$ |
84,000 |
|
$ |
315,000 |
|
$ |
277,000 |
|
Accounting |
|
187,000 |
|
183,000 |
|
580,000 |
|
546,000 |
|
||||
Investor Relations |
|
68,000 |
|
64,000 |
|
201,000 |
|
217,000 |
|
||||
Human Resources |
|
4,000 |
|
4,000 |
|
11,000 |
|
12,000 |
|
||||
Overhead |
|
52,000 |
|
32,000 |
|
131,000 |
|
100,000 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
418,000 |
|
$ |
367,000 |
|
$ |
1,238,000 |
|
$ |
1,152,000 |
|
Depreciation and Amortization
Depreciation and amortization expense from continuing operations for each of the three months ended September 30, 2010 and 2009 was approximately $4.5 million. Depreciation and amortization expense from continuing operations for the nine months ended September 30, 2010 and 2009 was approximately $13.5 million and $12.8 million, respectively. The increase of $0.7 million, or 5%, was primarily due to our 2009 acquisitions of approximately $0.9 million partially offset by a decrease in intangible amortization at Shelby Farms Apartments of approximately $0.2 million. There were no other material offsetting changes in depreciation and amortization from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Interest and Other Income
Interest and other income from continuing operations for the three months ended September 30, 2010 and 2009 were approximately $0.1 million. Interest and other income from continuing operations for the nine months ended September 30, 2010 and 2009 was approximately $0.1 million and $0.2 million, respectively. The decrease of $0.1 million, or 50%, was primarily due to a decrease in interest income earned on our unaffiliated notes receivable. There were no other material offsetting changes in interest and other income from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Interest Expense
Interest expense from continuing operations for the three months ended September 30, 2010 and 2009 was approximately $3.2 million and $3.1 million, respectively. Interest expense from continuing operations for the nine months ended September 30, 2010 and 2009 was approximately $9.7 million and $8.6 million, respectively. The increase of $0.1 million, or 3%, for the three months ended September 30, 2010 and 2009 was primarily due to increased interest expense of $0.3 million related to our increased level of borrowings over the periods partially offset by decreased interest expense of $0.2 million primarily due to the repayment of our revolving notes payable and the payoff of a mortgage payable to a bank. The increase of $1.1 million, or 13%, for the nine months ended September 30, 2010 and 2009 was primarily due to increased interest expense of $0.9 million related to our increased level of borrowings over the periods and $0.4 million for our 2009 acquisitions. In addition, there was an increase of approximately $0.1 million of loan cost amortization expense. The increase was partially offset by decreased interest expense of $0.3 million for the interest rate swap that expired in September 2009, revolving note payable and mortgages payable to a bank. There were no other material offsetting changes in interest expense from continuing operations for the three and nine months ended September 30, 2010 and 2009.
Loss on Disposal of Assets
The loss on disposal of assets from continuing operations for the three and nine months ended September 30, 2010 and 2009 can be attributed to assets that were not fully depreciated at the time of replacement, spread primarily amongst the commercial and multifamily properties. The 2010 loss on disposal of assets was due to the retirement of mailboxes, roofs, microwaves, jacuzzis, lights, exterior signs, and heating and air conditioning units. The 2009 loss on disposal of assets was due to the retirement of exterior lighting, HVAC units and property handrails.
Loss From Investment in Tenants in Common
Loss from investment in tenants in common for the three and nine months ended September 30, 2010 and 2009 includes the net operating losses attributable to our investments in tenants in common with an unaffiliated third party. The properties are The Overlook at St. Thomas Apartments and Creeks Edge at Stony Point Apartments.
Discontinued Operations
Net loss from discontinued operations for the three months ended September 30, 2010 was approximately $4,000 and net income from discontinued operations for the three months ended September 30, 2009 was approximately $0.2 million. Net income from discontinued operations for the nine months ended September 30, 2010 and 2009 was approximately $24,000 and $0.3 million, respectively. Discontinued operations, net for the three and nine months ended September 30, 2010 and 2009 include the net operating results for the properties previously sold as listed below.
Property |
|
Location |
|
Date of Sale |
|
Outlet Mall |
|
Louisville, KY |
|
March, 2010 |
|
Sears Office Building |
|
Louisville, KY |
|
June, 2010 |
|
Gain on Sale of Discontinued Operations
Gain on sale of discontinued operations for the nine months ended September 30, 2010 was approximately $1.8 million due to the sale of the Sears Office Building in June 2010 and the sale of the Outlet Mall in March 2010.
Liquidity and Capital Resources
Our most liquid asset is our cash and equivalents, which consist of cash and short-term investments, but do not include any restricted cash. Operating income generated by the properties will be the primary source from which we generate cash. Other sources of cash include the proceeds from our revolving notes payable. Our main uses of cash relate to capital expenditures, required payments of mortgages and notes payable, distributions and property taxes.
The following table summarizes our approximate sources/uses of cash flow for the nine months ended September 30, 2010 and 2009.
|
|
(Unaudited) |
|
||||
|
|
Nine Months Ended September 30, |
|
||||
|
|
2010 |
|
2009 |
|
||
Operating activities |
|
$ |
1,767,000 |
|
$ |
5,904,000 |
|
Investing activities |
|
4,455,000 |
|
(33,926,000 |
) |
||
Financing activities |
|
(14,131,000 |
) |
29,359,000 |
|
||
|
|
|
|
|
|
||
Net (decrease) increase in cash and equivalents |
|
$ |
(7,909,000 |
) |
$ |
1,337,000 |
|
Cash Flow from Operating Activities
Net cash provided by operating activities was approximately $1.8 million and $5.9 million for the nine months ended September 30, 2010 and 2009, respectively. The change of $4.1 million was primarily due to reserving restricted cash from the proceeds of our sale of our Sears Office Building (June 2010) to be used to satisfy the requirements of Section 1031 of the Internal Revenue Code in purchasing like-kind replacement property in order to defer recognition of gain for federal tax purposes. We also had an increase in cash used of $1.2 million to satisfy accounts payable and accounts payable due to affiliate and $0.7 million used to fund operations. Our cash used is partially offset by a decrease of approximately $0.6 million to fund lender-held cash escrows and an aggregate of approximately $0.7 million due to decreases in prepaid insurance, intangible amortization, leasing commissions and refundable deposits and $0.2 million provided by a decrease in accounts receivable.
Cash Flow from Investing Activities
Net cash provided by investing activities was approximately $4.5 million for the nine months ended September 30, 2010 as compared to cash used in investing activities of approximately $33.9 million for the nine months ended September 30, 2009. The change of $38.4 million was primarily due to our 2009 acquisitions of approximately $32.2 million, proceeds from the sale of our Outlet Mall retail property (March 2010) and the sale of our Sears Office Building (June 2010) of $7.3 million, which was partially offset by an increase in cash used of
approximately $0.9 million for additions to land, buildings and amenities and a $0.2 million increase in cash used to fund joint venture operations.
Cash Flow from Financing Activities
Net cash used in financing activities was approximately $14.1 million for the nine months ended September 30, 2010 as compared to cash provided by financing activities of approximately $29.4 million for the nine months ended September 30, 2009. The change of $43.5 million was primarily due to a decrease in cash provided of $24.2 million to fund 2009 acquisitions, the change in cash used of $12.5 million on our revolving notes payable, the change in cash contributed, net of distributions, of approximately $5.5 million from our noncontrolling interest holders, cash used of $2.2 million in additional principal payments on our mortgages payable, partially offset by a decrease in principal payments on our mortgages payable of $0.5 million and a decrease in loan cost additions of $0.6 million. The remaining increases and decreases in cash were individually immaterial.
Future Liquidity
Our future liquidity depends significantly on our properties occupancy remaining at a level which allows us to make debt payments and have 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, our ability to make payments due under our debt agreements and to continue paying daily operational costs would be greatly impaired. In the next twelve months, we intend to operate the properties in a similar manner to their operation in recent years. Cash reserves, which consist of unrestricted cash as shown on our balance sheet, were approximately $3.3 million on September 30, 2010.
At September 30, 2010, proceeds of approximately $3.6 million from the sale of our Sears Office Building were held by a third party qualified intermediary to be invested in replacement like-kind property. These funds are included in cash and equivalents - restricted at September 30, 2010. Our ability to successfully invest the proceeds in accordance with Section 1031 of the Internal Revenue Code and qualify the proceeds for deferral of gain recognition for federal income tax purposes is dependent on many factors and there can be no assurance that we will be successful in doing so. We are required to complete the purchase of replacement property by December 27, 2010 to qualify the Sears Office Building proceeds for deferral of gain recognition.
We expect to meet our short-term liquidity requirements for normal operating expenses from cash generated by operations. In addition, we anticipate generating proceeds from borrowing activities, property sales and/or equity offerings to provide funds for payment of certain debts and obligations. We expect to incur capital costs related to leasing space and making improvements to properties and expect to meet these obligations with the use of funds held in escrow by lenders, proceeds from property sales and/or borrowing activities.
We have approximately $15.1 million of consolidated and unconsolidated secured debt maturing during the next 12 months. It is our intention to extend, repay or refinance this debt at market terms available at the time of the maturities. We are in active discussions with several lenders to address this maturing debt. We believe that we will be able to refinance this debt; however, there is no assurance that we will obtain terms similar to those of the expiring debt and we may have to incur interest rates that are higher than the rates on the expiring debt. The result of higher interest rates would have a negative impact on our results of operations and ability to pay distributions. Further, as part of any refinancing, we may be required to pledge additional assets as collateral and may not be able to achieve the same loan to value ratios on our secured indebtedness. If we are unable to refinance this debt for any reason we must either pay the remaining balance or borrow additional money to pay off the maturing loan. We may not, however, be able to obtain a new loan, or the terms of the new loan, such as the interest rate or payment schedule, may not be as favorable as the terms of the maturing loan. Additionally, due to the amount of available cash on hand, expected cash generated by operating activities and funds available to us from existing sources of borrowings, there can be no assurance as to our ability to obtain funds necessary to repay the amounts due during the next 12 months. Thus, we may be forced to sell a property at an unfavorable price to pay off the maturing loan or agree to less favorable loan terms.
On March 16, 2010, we announced that the board of directors of our managing general partner approved a quarterly distribution of $0.05 per unit on our limited partnership units. The distribution was paid on April 16, 2010, to limited partners of record at the close of business on March 31, 2010.
On June 15, 2010, we announced that the board of directors of our managing general partner approved a quarterly distribution of $0.05 per unit on our limited partnership units. The distribution was paid on July 16, 2010, to limited partners of record at the close of business on June 30, 2010.
On September 14, 2010, we announced that the board of directors of our managing general partner approved a quarterly distribution of $0.05 per unit on our limited partnership units. The distribution was paid on October 15, 2010, to limited partners of record at the close of business on September 30, 2010.
We pay distributions, if and when, authorized by our managing general partner using proceeds from advances drawn on our revolving note payable to a bank.
Pursuant to leasing agreements signed on or before September 30, 2010, we are obligated to incur expenditures of approximately $1.8 million which we expect to be funded by cash on hand, cash generated by operations or borrowings on our debt during the next twelve months primarily for renovations and tenant origination costs necessary to continue leasing our properties. This discussion of future liquidity details our material commitments. We anticipate repaying, seeking renewal or refinancing of our note and mortgage payable coming due in the next twelve months.
In addition to the $8.2 million revolving note payable to a bank due June 1, 2011, we continue to have our $10.0 million revolving note payable to a bank due May 31, 2011. As of September 30, 2010, we did not have a balance on either the $8.2 million revolving note payable or the $10.0 million revolving note payable.
The aggregate availability on our revolving notes payable was approximately $18.2 million as of September 30, 2010.
We intend to seek a renewal of our expiring $10.0 million and $8.2 million revolving notes payable to a bank due in the next twelve months, but can offer no assurance that we will be successful in doing so, or that favorable terms of renewal can be obtained.
We expect to receive $1.0 million on May 1, 2011 to satisfy our unaffiliated note receivable.
On October 15, 2010, we signed a lease agreement with an unaffiliated third party to lease approximately 75,000 square feet of commercial leasing space at our NTS Center office building. The lease obligates us to pay an aggregate amount of $1.1 million in lease commissions and tenant allowances. We expect to fund this amount from cash on hand, cash generated by operations or borrowings on our debt.
On October 28, 2010, we entered into a joint venture investment agreement with an unaffiliated third party to invest in a commercial office building totaling approximately 125,000 square feet. The building is being developed by our affiliate, NTS Development Company, with construction expected to be completed in late 2011 or early 2012. The building will be managed by an affiliate of NTS Development Company. We are obligated to contribute $4.9 million, for a 49% ownership interest. We intend to fund our share of this investment with proceeds from our recent property sales, cash on hand, cash from operations or borrowings on new or existing debt. We anticipate the joint venture entering into a $10.5 million construction financing agreement with a bank. The joint venture expects to invest a total of $20.5 million in the construction of the building and completion of tenant space.
Property Transactions
Acquisitions
During the nine months ended September 30, 2010, we did not acquire any properties. During the nine months ended September 30, 2009, we made the following property acquisitions:
Property Multifamily |
|
Location |
|
Units |
|
Date of |
|
Purchase Price |
|
|
Sabal Park Apartments (1) |
|
Longwood, FL |
|
162 |
|
June 11, 2009 |
|
$ |
13,000,000 |
|
Golf Brook Apartments (2) |
|
Longwood, FL |
|
195 |
|
June 11, 2009 |
|
19,500,000 |
|
|
(1) Financed by a mortgage payable to a bank of $9.6 million. We own a 51% joint venture interest in this property.
(2) Financed by a mortgage payable to a bank of $14.6 million. We own a 51% joint venture interest in this property.
Dispositions
During the nine months ended September 30, 2010, we made the following property dispositions:
Wholly-Owned Properties |
|
Square Feet |
|
Our Ownership |
|
Date of Sale |
|
Outlet Mall (1) |
|
162,600 |
|
100% |
|
March, 2010 |
|
Sears Office Building (2) |
|
66,900 |
|
100% |
|
June, 2010 |
|
(1) Gain of approximately $0.5 million.
(2) Gain of approximately $1.2 million.
During the nine months ended September 30, 2009, we did not dispose of any properties.
We may engage in transactions structured as like kind exchanges of property to obtain favorable tax treatment under Section 1031 of the Internal Revenue Code. If we are able to structure an exchange of properties as a like kind exchange, then any gain we realize from the exchange would not be recognized for federal income tax purposes. The test for determining whether exchanged properties are of like kind is whether the properties are of the same nature or character.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that are reasonably likely to have a current effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Website Information
Information concerning NTS Realty Holdings Limited Partnership is available through the NTS Development Company website (www.ntsdevelopment.com). Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act are available and may be accessed free of charge through the Investor Services section of our website as soon as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. Our website and the information contained therein or connected thereto are not incorporated into this Quarterly Report on Form 10-Q.
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure, with regard to financial instruments is expected to be our exposure to changes in interest rates. Substantially all of our debt bears interest at a fixed rate, with the exception of approximately $39.3 million at variable rates. We anticipate that a hypothetical 100 basis point increase in interest rates would increase interest expense on our variable rate debt by approximately $0.4 million annually. The average variable interest rate at September 30, 2010 was 3.70%.
Item 4 Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated as of September 30, 2010, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2010, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
There have not been material changes to our Risk Factors as disclosed in our most recent annual report on Form 10-K as filed with the Securities and Exchange Commission on March 29, 2010.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
On December 1, 2009, three entities created or controlled by Mr. Nichols commenced pre-arranged trading plans to purchase limited partnership units of NTS Realty pursuant to Rule 10b5-1 under the Act. Each of the plans authorize its administrator, Wells Fargo Investments, LLC, to purchase approximately $225,000, $52,000 and $26,000, respectively, of NTS Realtys limited partnership units from time to time through no later than November 2010. Under the terms of the plans, Mr. Nichols has no discretion or control over the timing, effectuation or the amount of each purchase.
During the nine months ended September 30, 2010, 66,600 units were purchased by the entities created or controlled by Mr. Nichols pursuant to the trading plans announced on December 1, 2009. The table below summarizes activity pursuant to these plans for the quarterly period ended September 30, 2010.
Period |
|
Total Number of |
|
Average Price Paid |
|
Total Number of |
|
Maximum Number |
|
|
July 2010 |
|
1,000 |
|
$ |
3.70 |
|
469,091 |
(2) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
August 2010 |
|
6,000 |
|
$ |
3.85 |
|
475,091 |
(2) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
September 2010 |
|
- |
|
$ |
N/A |
|
475,091 |
(2) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
7,000 |
|
$ |
3.83 |
|
475,091 |
(2) |
|
(1) |
(1) A description of the maximum amount that may be used to purchase our units under the trading plans is included in the narrative preceding this table.
(2) Represents the total number of our limited partnership units that have been purchased to the trading plans by entities created or controlled by Mr. Nichols, pursuant to the current or any previous publicly announced plan or program by trading plans.
Item 3 Defaults Upon Senior Securities
None.
None.
Exhibit No. |
|
|
|
|
2.01 |
|
Agreement and Plan of Merger by and among NTS Realty Holdings Limited Partnership, NTS-Properties III, NTS-Properties IV, NTS-Properties V, a Maryland limited partnership, NTS-Properties VI, a Maryland limited partnership and NTS-Properties VII, Ltd., dated February 3, 2004 |
|
(3) |
|
|
|
|
|
2.02 |
|
Contribution Agreement by and between NTS Realty Holdings Limited Partnership and ORIG, LLC, dated February 3, 2004 |
|
(3) |
|
|
|
|
|
3.01 |
|
Certificate of Limited Partnership of NTS Realty Holdings Limited Partnership |
|
(1) |
|
|
|
|
|
3.02 |
|
Amended and Restated Agreement of Limited Partnership of NTS Realty Holdings Limited Partnership, dated as of December 29, 2005 |
|
(7) |
|
|
|
|
|
3.03 |
|
Certificate of Incorporation of NTS Realty Capital, Inc. |
|
(8) |
|
|
|
|
|
3.04 |
|
By-Laws of NTS Realty Capital, Inc. |
|
(2) |
|
|
|
|
|
10.01 |
|
Amended and Restated Management Agreement between NTS Realty Holdings Limited Partnership and NTS Development Company, dated as of December 29, 2005 |
|
(6) |
|
|
|
|
|
10.02 |
|
Form of Lease Agreement between NTS Realty Holdings Limited Partnership and SHPS, Inc. |
|
(4) |
|
|
|
|
|
10.03 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Investors Capital Mortgage Group, Inc., dated September 30, 2005 (Golf Brook Apartments) |
|
(5) |
|
|
|
|
|
10.04 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Investors Capital Mortgage Group, Inc., dated September 30, 2005 (Sabal Park Apartments) |
|
(5) |
|
|
|
|
|
10.05 |
|
Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P. and NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Richland and The Grove at Whitworth) |
|
(5) |
|
|
|
|
|
10.06 |
|
Agreement for Purchase and Sale between Schaedle Worthington Hyde Properties, L.P. and NTS Realty Holdings Limited Partnership, dated November 1, 2005 (The Grove at Swift Creek) |
|
(5) |
|
|
|
|
|
10.07 |
|
Purchase and Sale Agreement between AMLI at Castle Creek, L.P. and AMLI Residential Properties, L.P. and NTS Realty Holdings Limited Partnership, dated February 7, 2006 (Castle Creek and Lake Clearwater) |
|
(5) |
|
|
|
|
|
10.08 |
|
Unconditional and Continuing Guaranty by NTS Realty Holdings Limited Partnership in favor of National City Bank, dated March 23, 2006 |
|
(5) |
|
|
|
|
|
10.09 |
|
Amended and Restated Master Loan Agreements between NTS Realty Holding Limited Partnership and The Northwestern Mutual Life Insurance Company and between NTS Realty Holdings Limited Partnership and National City Bank, dated October 4, 2006 |
|
(9) |
|
|
|
|
|
10.10 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Meridian Realty Investments, LLC, dated November 10, 2006 (Springs Medical Office Center) |
|
(10) |
|
|
|
|
|
10.11 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Meridian Realty Investments, LLC, dated November 10, 2006 (Springs Office Center) |
|
(10) |
|
|
|
|
|
10.12 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership together with Overlook Associates, LLC and The Northwestern Mutual Life Insurance Company, dated December 8, 2006 (The Overlook at St. Thomas) |
|
(11) |
|
|
|
|
|
10.13 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership together with Creeks Edge Investors, LLC and CG Stony Point, LLC, dated June 20, 2007 (Creeks Edge at Stony Point) |
|
(12) |
|
|
|
|
|
10.14 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Ascent Properties, LLC, dated August 1, 2007 (The Office Portfolio) |
|
(13) |
|
|
|
|
|
10.15 |
|
Purchase and Sale Agreement between NTS Realty Holdings Limited Partnership and Colonial Realty Limited Partnership and Colonial Properties Services, Inc., dated June 11, 2008 (Shelby Farms) |
|
(14) |
|
|
|
|
|
10.16 |
|
Purchase and Sale Agreeement between NTS Realty Holdings Limited Partnership and 302 Sabal Park Place Longwood, LLC and 385 Golf Brook Circle Longwood, LLC, dated April 10, 2009 (Sabal Park and Golf Brook) |
|
(15) |
|
|
|
|
|
14.01 |
|
Code of Conduct and Ethics of NTS Realty Holdings Limited Partnership, adopted as of December 28, 2004 |
|
(4) |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended |
|
(16) |
Exhibit No. |
|
|
|
|
31.2 |
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended |
|
(16) |
|
|
|
|
|
32.1 |
|
Certification of Chief Executive Officer Pursuant to U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
(16) |
|
|
|
|
|
32.2 |
|
Certification of Chief Financial Officer Pursuant to U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
(16) |
|
|
|
|
|
99.01 |
|
Form of Lock-Up Agreement by and between NTS Realty Holdings Limited Partnership and each of the executive officers of NTS Realty Capital, Inc. |
|
(1) |
|
|
|
|
|
99.02 |
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Registration Statement on Form S-4/A (Amendment No. 5), as filed by the Registrant with the Securities and Exchange Commission on October 27, 2004 |
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(3) |
(1) |
Incorporated by reference to the Registrants Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on February 4, 2004 |
(2) |
Incorporated by reference to the Registrants Registration Statement on Form S-4/A (Amendment No. 1), as filed with the Securities and Exchange Commission on June 18, 2004 |
(3) |
Incorporated by reference to the Registrants Registration Statement on Form S-4/A (Amendment No. 5), as filed with the Securities and Exchange Commission on October 27, 2004 |
(4) |
Incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on March 31, 2005 |
(5) |
Incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on April 3, 2006 |
(6) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 17, 2006 |
(7) |
Incorporated by reference to the Registrants Information Statement on Form DEF 14C, as filed with the Securities and Exchange Commission on May 9, 2006 |
(8) |
Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, as filed with the Securities and Exchange Commission on May 15, 2006 |
(9) |
Incorporated by reference to the Registrants Current Report on Form 8-K/A, as filed with the Securities and Exchange Commission on October 23, 2006 |
(10) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on February 14, 2007 |
(11) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 16, 2007 |
(12) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on August 17, 2007 |
(13) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on May 1, 2008 |
(14) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on June 27, 2008 |
(15) |
Incorporated by reference to the Registrants Current Report on Form 8-K, as filed with the Securities and Exchange Commission on June 16, 2009 |
(16) |
Filed herewith |
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.
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NTS REALTY HOLDINGS LIMITED PARTNERSHIP |
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By: |
NTS REALTY CAPITAL, INC. |
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Its: |
Managing General Partner |
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By: |
/s/ Brian F. Lavin |
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Brian F. Lavin |
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Its: |
President and Chief Executive Officer |
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Date: |
November 3, 2010 |
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By: |
/s/ Gregory A. Wells |
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Gregory A. Wells |
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Its: |
Chief Financial Officer and Principal Accounting Officer |
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Date: |
November 3, 2010 |