XASE:NLP Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

Table of Contents

 

 

 

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 June 30, 2012

 

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 or other jurisdiction of incorporation or
organization)

 

(I.R.S. Employer Identification No.)

 

600 North Hurstbourne Parkway

Suite 300

Louisville, Kentucky

 

40222

(Address of principal executive offices)

 

(Zip Code)

 

(502) 426-4800

(Registrant’s 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 x No o

 

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.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of August 10, 2012, there were 11,095,274 of the registrant’s limited partnership units outstanding.

 

 

 



Table of Contents

 

NTS REALTY HOLDINGS LIMITED PARTNERSHIP

 

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

4

 

 

Item 1 – Financial Statements

4

Condensed Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011

4

Condensed Consolidated Statement of Equity as of June 30, 2012 (Unaudited)

4

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011 (Unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements

7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

28

Item 4 – Controls and Procedures

28

 

 

PART II – OTHER INFORMATION

29

 

 

Item 1 – Legal Proceedings

29

Item 1A – Risk Factors

29

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3 – Defaults Upon Senior Securities

29

Item 4 – Mine Safety Disclosures

29

Item 5 – Other Information

29

Item 6 – Exhibits

30

Signatures

33

 

2



Table of Contents

 

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 — Management’s 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, 2011, as filed with the SEC on March 23, 2012, as they may be revised or supplemented by us in subsequent reports on Form 10-Q and other filings with the SEC, which are incorporated herein by reference.

 

3



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1 — Financial Statements

 

NTS REALTY HOLDINGS LIMITED PARTNERSHIP

Condensed Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

ASSETS:

 

 

 

 

 

Cash and equivalents

 

$

988,280

 

$

1,165,137

 

Cash and equivalents - restricted

 

3,272,438

 

2,421,608

 

Accounts receivable, net of allowance for doubtful accounts of $98,910 at June 30, 2012 and $214,585 at December 31, 2011, respectively

 

1,648,230

 

1,712,390

 

Land, buildings and amenities, net

 

293,330,843

 

300,235,083

 

Investment in and advances to joint venture

 

4,706,903

 

2,594,879

 

Investment in and advances to tenant in common

 

279,200

 

706,771

 

Other assets

 

4,302,916

 

5,544,842

 

 

 

 

 

 

 

Total assets

 

$

308,528,810

 

$

314,380,710

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Mortgages and notes payable

 

$

264,873,355

 

$

263,584,959

 

Accounts payable and accrued expenses

 

2,979,238

 

4,575,502

 

Accounts payable and accrued expenses due to affiliate

 

401,361

 

372,934

 

Distributions payable

 

554,764

 

554,764

 

Security deposits

 

995,907

 

936,804

 

Other liabilities

 

5,476,203

 

4,273,457

 

Investment in and advances to tenant in common

 

1,311,958

 

669,803

 

 

 

 

 

 

 

Total liabilities

 

276,592,786

 

274,968,223

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE 13)

 

 

 

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

Partners’ equity

 

25,632,667

 

32,335,426

 

Noncontrolling interests

 

6,303,357

 

7,077,061

 

 

 

 

 

 

 

Total equity

 

31,936,024

 

39,412,487

 

 

 

 

 

 

 

Total liabilities and equity

 

$

308,528,810

 

$

314,380,710

 

 

NTS REALTY HOLDINGS LIMITED PARTNERSHIP

Condensed Consolidated Statement of Equity (1) as of June 30, 2012

(Unaudited)

 

 

 

(Unaudited)

 

 

 

General
Partner
Interests

 

Limited
Partners’
Interests

 

General
Partner

 

Limited
Partners

 

Noncontrolling
Interests

 

Total

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial equity

 

714,491

 

10,667,117

 

$

3,131,381

 

$

46,750,444

 

$

 

$

49,881,825

 

Contributions from noncontrolling interests

 

 

 

 

 

9,952,176

 

9,952,176

 

Net income (loss) prior years

 

 

 

619,835

 

9,437,406

 

(2,532,115

)

7,525,126

 

Consolidated net loss current year

 

 

 

(360,182

)

(5,233,050

)

(551,204

)

(6,144,436

)

Cash distributions declared to date

 

 

 

(1,721,923

)

(25,635,185

)

(565,500

)

(27,922,608

)

Retirement of limited partnership interests to date

 

 

(286,334

)

 

(1,356,059

)

 

(1,356,059

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances on June 30, 2012

 

714,491

 

10,380,783

 

$

1,669,111

 

$

23,963,556

 

$

6,303,357

 

$

31,936,024

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 


(1) For the periods presented, there are no elements of other comprehensive income as defined by the Financial Accounting Standards Board, Accounting Standards Codification Topic 220 Comprehensive Income.

 

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Table of Contents

 

NTS REALTY HOLDINGS LIMITED PARTNERSHIP

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011

(Unaudited)

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

REVENUE:

 

 

 

 

 

 

 

 

 

Rental income

 

$

13,820,073

 

$

13,084,930

 

$

27,402,477

 

$

25,893,510

 

Tenant reimbursements

 

476,641

 

452,758

 

935,765

 

892,785

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

14,296,714

 

13,537,688

 

28,338,242

 

26,786,295

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Operating expenses

 

4,115,823

 

4,128,307

 

7,898,746

 

7,683,146

 

Operating expenses reimbursed to affiliate

 

1,516,082

 

1,446,106

 

3,060,378

 

2,876,370

 

Management fees

 

707,938

 

670,029

 

1,409,111

 

1,335,010

 

Property taxes and insurance

 

1,788,008

 

1,315,601

 

3,624,925

 

3,166,473

 

Professional and administrative expenses

 

186,251

 

239,331

 

437,992

 

491,898

 

Professional and administrative expenses reimbursed to affiliate

 

433,534

 

420,171

 

870,248

 

846,915

 

Depreciation and amortization

 

4,467,263

 

4,470,950

 

8,895,754

 

9,256,800

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

13,214,899

 

12,690,495

 

26,197,154

 

25,656,612

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

1,081,815

 

847,193

 

2,141,088

 

1,129,683

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

17,537

 

227,964

 

37,333

 

423,064

 

Interest expense

 

(3,488,704

)

(3,505,400

)

(6,985,240

)

(7,039,680

)

Loss on disposal of assets

 

(65,970

)

(39,962

)

(164,315

)

(71,058

)

Loss from investment in joint venture

 

(71,597

)

(173

)

(163,576

)

(598

)

Loss from investments in tenants in common

 

(595,941

)

(511,066

)

(1,009,726

)

(923,533

)

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED NET LOSS

 

(3,122,860

)

(2,981,444

)

(6,144,436

)

(6,482,122

)

Net loss attributable to noncontrolling interests

 

(256,959

)

(317,347

)

(551,204

)

(426,009

)

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(2,865,901

)

$

(2,664,097

)

$

(5,593,232

)

$

(6,056,113

)

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations allocated to limited partners

 

$

(2,921,760

)

$

(2,792,338

)

$

(5,748,759

)

$

(6,073,241

)

Net loss attributable to noncontrolling interests allocated to limited partners

 

(240,412

)

(297,218

)

(515,709

)

(399,058

)

 

 

 

 

 

 

 

 

 

 

NET LOSS ALLOCATED TO LIMITED PARTNERS

 

$

(2,681,348

)

$

(2,495,120

)

$

(5,233,050

)

$

(5,674,183

)

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations per limited partnership unit

 

$

(0.28

)

$

(0.26

)

$

(0.55

)

$

(0.57

)

Net loss attributable to noncontrolling interests per limited partnership unit

 

(0.02

)

(0.03

)

(0.05

)

(0.04

)

 

 

 

 

 

 

 

 

 

 

NET LOSS PER LIMITED PARTNERSHIP UNIT

 

$

(0.26

)

$

(0.23

)

$

(0.50

)

$

(0.53

)

 

 

 

 

 

 

 

 

 

 

Weighted average number of limited partnership interests

 

10,380,783

 

10,550,192

 

10,380,783

 

10,607,910

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

5



Table of Contents

 

NTS REALTY HOLDINGS LIMITED PARTNERSHIP

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011

(Unaudited)

 

 

 

(Unaudited)

 

 

 

2012

 

2011

 

OPERATING ACTIVITIES:

 

 

 

 

 

Consolidated net loss

 

$

(6,144,436

)

$

(6,482,122

)

Adjustments to reconcile consolidated net loss to net cash provided by operating activities:

 

 

 

 

 

Loss on disposal of assets

 

164,315

 

71,058

 

Depreciation and amortization

 

9,260,908

 

9,768,843

 

Loss from investment in joint venture

 

163,576

 

598

 

Loss from investments in tenants in common

 

1,009,726

 

923,533

 

Changes in assets and liabilities:

 

 

 

 

 

Cash and equivalents – restricted

 

(850,830

)

23,181

 

Accounts receivable

 

64,160

 

(23,220

)

Other assets

 

859,997

 

(519,216

)

Accounts payable and accrued expenses

 

(1,596,264

)

370,256

 

Accounts payable and accrued expenses due to affiliate

 

28,427

 

33,488

 

Security deposits

 

59,103

 

62,448

 

Other liabilities

 

1,202,746

 

494,987

 

 

 

 

 

 

 

Net cash provided by operating activities

 

4,221,428

 

4,723,834

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Additions to land, buildings and amenities

 

(2,139,054

)

(2,235,007

)

Investment in joint venture

 

(2,275,600

)

(699,965

)

 

 

 

 

 

 

Net cash used in investing activities

 

(4,414,654

)

(2,934,972

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Contributions from noncontrolling interest holders

 

 

4,110,750

 

Distributions to noncontrolling interest holders

 

(222,500

)

(49,000

)

Distributions from tenants in common

 

60,000

 

60,000

 

Retirement of Limited Partnership Units

 

 

(1,356,059

)

Proceeds from mortgages payable

 

 

24,700,000

 

Revolving notes payable, net

 

3,303,880

 

(63,874

)

Principal payments on mortgages payable

 

(2,015,484

)

(1,501,650

)

Additional payments on mortgages payable

 

 

(24,500,000

)

Additions to loan costs

 

 

(364,409

)

Cash distributions

 

(1,109,527

)

(1,138,076

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

16,369

 

(102,318

)

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS

 

(176,857

)

1,686,544

 

 

 

 

 

 

 

CASH AND EQUIVALENTS, beginning of period

 

1,165,137

 

180,053

 

 

 

 

 

 

 

CASH AND EQUIVALENTS, end of period

 

$

988,280

 

$

1,866,597

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

6



Table of Contents

 

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 Partnership’s (“NTS Realty”) 2011 annual report on Form 10-K as filed with the Securities and Exchange Commission on March 23, 2012.  The Condensed Consolidated Balance Sheet as of December 31, 2011, has been derived from the audited consolidated financial statements of NTS Realty as of that date.  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 adjustments, necessary for a fair presentation have been made to the accompanying unaudited condensed consolidated financial statements for the three and six months ended June 30, 2012 and 2011.  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, its wholly-owned properties, properties held by wholly-owned subsidiaries, its interests in consolidated and unconsolidated joint venture investments or interests in properties held as a tenant in common with an unaffiliated third party.

 

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 June 30, 2012, we owned 24 properties, comprised of 15 multifamily properties, 7 commercial properties and 2 retail properties.  The properties are located in and around Louisville (7) and Lexington (1), Kentucky; Fort Lauderdale (3) and Orlando (3), Florida; Indianapolis (4), Indiana; Memphis (1) and Nashville (2), Tennessee; Richmond (2), Virginia; and Atlanta (1), Georgia.  Our commercial properties aggregate approximately 735,000 square feet, which includes 125,000 square feet at our property held as a joint venture with an unaffiliated third party, and our retail properties contain approximately 47,000 square feet.  We own multifamily properties containing 4,393 rental units, which include 686 rental units at our properties held as a tenant in common with an unaffiliated third party.

 

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 of an amount 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 shall 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 shall 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.  NTS Realty Capital may 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 a quarterly distribution of $0.05 per unit to limited partners on April 13, 2012 and July 13, 2012.

 

On May 25, 2011, we retired 285,486 limited partnership units that were purchased for approximately $1.4 million.

 

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Table of Contents

 

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 entity’s 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 with the controlling financial interest, as defined, by accounting standards.  Effective January 1, 2010, we adopted the provisions of Accounting 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 VIEs, focusing on a qualitative evaluation of the conditions subjecting the entity to consolidation.  There have been no changes during 2012 in conclusions about whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE.  During the six months ended June 30, 2012, we did not provide financial or other support to a previously identified VIE that we were not previously contractually obligated to provide.  Our unconsolidated joint venture interest and 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.

 

We own a joint venture investment with an unaffiliated third party in a commercial office building located in Louisville, Kentucky. The building, known as 600 North Hurstbourne, was developed by our affiliate, NTS Development Company.  This joint venture, Campus One, LLC, is a variable interest entity. We are not the primary beneficiary.  NTS Corporation through its subsidiaries, NTS Development Company and NTS Management Company, holds the right to receive significant benefits through its agreement as developer and manager, respectively.  Our interest in this variable interest entity is accounted for using the equity method.  Our ownership interest is reflected as investment in and advances to joint venture on our condensed consolidated balance sheets as of June 30, 2012 and December 31, 201l.

 

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 June 30, 2012 or December 31, 2011.

 

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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.

 

The book values of cash and equivalents, trade receivables and trade payables are considered representative of their respective fair values because of the immediate or short-term maturity of these financial instruments.

 

Cash and equivalents and cash and equivalents — restricted: The carrying amount of these assets and liabilities approximates fair value as of June 30, 2012 and December 31, 2011, due to the short-term nature of such accounts.

 

Deferred Compensation Plans: Our Officer and Director Plans as of June 30, 2012 and December 31, 2011 reflected liabilities of approximately $0.4 million and $0.4 million, respectively, the fair market value of 124,681 and 113,091 units, respectively, and are included in our other liabilities using level 1 measurement. Compensation expense for the Officer and Director Plans for the six months ended June 30, 2012 and 2011 totaled approximately $18,000 and ($5,000) respectively.  The income item resulted from a fluctuation in the fair market value of the respective units.

 

Mortgages and notes payable: As of June 30, 2012 and December 31, 2011, we determined the estimated fair values of our mortgages and notes payable were approximately $291.8 million and $283.0 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.

 

Noncontrolling interests: Pluris Property Fund I, L.P. (“PPFI”), our joint venture partner, owns a 49% noncontrolling interest in Golf Brook Apartments and Sabal Park Apartments. Pluris Property Fund II, L.P. (“PPFII”), our joint venture partner, owns a 26.5% noncontrolling interest in Lakes Edge Apartments.  PPFI and PPFII are related parties as the son-in-law of our President and CEO, Brian F. Lavin, is a member of the general partner of each of PPFI and PPFII.

 

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.  We made certain reclassifications of prior period amounts in the condensed consolidated financial statements to conform to the 2012 presentation.  These reclassifications had no impact on previously reported net loss attributable to unit holders or net loss per limited partnership unit.

 

Note 3 — Real Estate Transactions

 

Acquisitions

 

FASB ASC Topic 805 Business Combinations requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date.  The statement also requires that acquisition-related transaction costs be expensed as incurred and acquired research and development value be capitalized.  In addition, acquisition-related restructuring costs are to be capitalized.

 

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 for each of the properties acquired 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

 

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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.

 

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 asset’s 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 management’s judgment, the valuation could be negatively or positively affected.  Application of this standard for the three and six months ended June 30, 2012 and 2011, did not result in an impairment loss.

 

During the six months ended June 30, 2012 and 2011, we did not acquire any properties.

 

Dispositions

 

During the six months ended June 30, 2012 and 2011, we did not dispose of any properties.

 

Note 4 — Concentration of Credit Risk

 

We own and operate through wholly-owned subsidiaries, as a tenant in common with an unaffiliated third party or through joint venture investments with both affiliated and unaffiliated third parties, multifamily, commercial 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.

 

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Note 7 — Property and Depreciation

 

Land, buildings and amenities are stated at cost.  Costs directly associated with the acquisition, development and construction of a project are capitalized.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are 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 for the three months ended June 30, 2012 and 2011 was approximately $4.5 million and $4.4 million, respectively.  Depreciation expense for the six months ended June 30, 2012 and 2011 was approximately $8.9 million and $9.1 million, respectively.

 

Note 8 Investment in and Advances to Joint Venture

 

We own a joint venture interest in and operate the following property:

 

·                  600 North Hurstbourne: 125,000 square foot office building in Louisville, Kentucky.  We are obligated to contribute $4.9 million, for a 49% interest as a joint venture with an unaffiliated third party.  At June 30, 2012, we had funded approximately $4.9 million of this commitment.

 

Presented below are the summarized balance sheets and statements of operations for this property:

 

 

 

(Unaudited)

 

 

 

June 30, 2012

 

December 31, 2011

 

Summarized Balance Sheet

 

 

 

 

 

Land, buildings and amenities, net

 

$

16,533,157

 

$

11,415,364

 

Other, net

 

2,154,448

 

1,346,651

 

Total assets

 

$

18,687,605

 

$

12,762,015

 

 

 

 

 

 

 

Mortgage payable and other liabilities

 

$

9,185,763

 

$

7,466,343

 

Equity

 

9,501,842

 

5,295,672

 

Total liabilities and equity

 

$

18,687,605

 

$

12,762,015

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

June 30, 2012

 

June 30, 2011

 

Summarized Statements of Operations

 

 

 

 

 

 

 

 

 

Revenue

 

$

287,588

 

$

 

$

332,839

 

$

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

$

(91,582

)

$

(353

)

$

(257,339

)

$

(1,220

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(146,117

)

$

(353

)

$

(333,829

)

$

(1,220

)

 

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interest

 

(71,597

)

(173

)

(163,576

)

(598

)

 

 

 

 

 

 

 

 

 

 

Net loss attributable to controlling interest

 

$

(74,520

)

$

(180

)

$

(170,253

)

$

(622

)

 

Note 9 — Investment 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: 484-unit luxury apartment complex in Louisville, Kentucky.  We own a 60% interest as a tenant in common with an unaffiliated third party.

 

·                  Creek’s Edge at Stony Point Apartments: 202-unit luxury apartment complex in Richmond, Virginia.  We own a 51% interest as a tenant in common with an unaffiliated third party.

 

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Presented below are the summarized balance sheets and statements of operations for these properties:

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

Summarized Balance Sheet

 

 

 

 

 

Land, buildings and amenities, net

 

$

55,071,804

 

$

57,105,260

 

Other, net

 

1,572,656

 

1,599,600

 

Total assets

 

$

56,644,460

 

$

58,704,860

 

 

 

 

 

 

 

Mortgage payable and other liabilities

 

$

56,434,875

 

$

56,586,644

 

Equity

 

209,585

 

2,118,216

 

Total liabilities and equity

 

$

56,644,460

 

$

58,704,860

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

June 30, 2012

 

June 30, 2011

 

Summarized Statements of Operations

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,352,976

 

$

2,302,038

 

$

4,688,029

 

$

4,503,871

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

$

(234,792

)

$

(78,373

)

$

(159,335

)

$

(821

)

 

 

 

 

 

 

 

 

 

 

Consolidated net loss

 

$

(1,056,264

)

$

(910,585

)

$

(1,808,632

)

$

(1,667,898

)

 

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interest

 

(460,323

)

(399,519

)

(798,906

)

(744,365

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(595,941

)

$

(511,066

)

$

(1,009,726

)

$

(923,533

)

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Overlook at St. Thomas Apartments

 

$

100,000

 

$

100,000

 

$

100,000

 

$

100,000

 

 

 

 

 

 

 

 

 

 

 

Creek’s Edge at Stony Point Apartments

 

$

 

$

 

$

 

$

 

 

The continuing net losses of The Overlook at St. Thomas Apartments have reduced our investment to zero.  We have recognized the losses in excess of our investment and recorded the resulting liability on our condensed consolidated balance sheets.

 

Note 10 — Mortgages and Notes Payable

 

Mortgages and notes payable consist of the following:

 

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(Unaudited)

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

Revolving note payable to a bank for $10.0 million, with interest payable in monthly installments at a variable rate based on LIBOR one-month rate plus 2.50%, currently 2.75%, due September 30, 2012

 

$

6,446,011

 

$

3,142,131

 

 

 

 

 

 

 

Note payable to an insurance company in monthly installments of principal and interest, bearing fixed interest at 2.79%, maturing October 28, 2012

 

42,683

 

105,960

 

 

 

 

 

 

 

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 3.74%, due September 1, 2014, secured by certain land, buildings and amenities with a carrying value of $16,828,140. The mortgage is guaranteed by Mr. Nichols and Mr. Lavin

 

20,412,602

 

20,628,602

 

 

 

 

 

 

 

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 $1,675,803

 

1,289,773

 

1,449,288

 

 

 

 

 

 

 

Mortgage payable to Federal Home Loan Mortgage Corporation 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 $10,179,272

 

10,851,097

 

10,962,165

 

 

 

 

 

 

 

Mortgage payable to a bank in monthly installments of principal and interest, bearing fixed interest at 6.03%, maturing September 1, 2018, secured by certain land, buildings and amenities with a carrying value of $31,204,707

 

26,106,853

 

26,254,275

 

 

 

 

 

 

 

Mortgage payable to Federal Home Loan Mortgage Corporation in monthly installments of principal and interest, bearing interest at a variable rate based on LIBOR one-month rate plus 3.33%, currently 3.57%, maturing July 1, 2016, secured by certain land, buildings and amenities with a carrying value of $16,870,927

 

14,379,691

 

14,514,457

 

 

 

 

 

 

 

Mortgage payable to Federal Home Loan Mortgage Corporation in monthly installments of principal and interest, bearing interest at a variable rate based on LIBOR one-month rate plus 3.50%, currently 3.74%, maturing July 1, 2016, secured by certain land, buildings and amenities with a carrying value of $11,031,908

 

9,444,041

 

9,529,772

 

 

 

 

 

 

 

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 $18,544,990

 

13,442,096

 

13,539,685

 

 

 

 

 

 

 

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 $33,029,835

 

26,119,942

 

26,309,571

 

 

 

 

 

 

 

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 $17,871,082

 

16,295,942

 

16,414,249

 

 

 

 

 

 

 

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 $32,038,605

 

26,772,940

 

26,967,310

 

 

 

 

 

 

 

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 $15,954,327

 

11,018,746

 

11,098,741

 

 

 

 

 

 

 

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 $21,032,380

 

29,626,786

 

29,841,874

 

 

 

 

 

 

 

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 $9,041,980

 

10,588,250

 

10,665,120

 

 

 

 

 

 

 

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 $12,109,732

 

17,335,902

 

17,461,759

 

 

 

 

 

 

 

Mortgage payable to an insurance company, with interest payable in monthly installments until June 1, 2013, bearing fixed interest at 5.09%, maturing May 1, 2018, secured by certain land, buildings and amenities with a carrying value of $34,290,305

 

24,700,000

 

24,700,000

 

 

 

 

 

 

 

Total mortgages and notes payable

 

$

264,873,355

 

$

263,584,959

 

 

Our $10.0 million revolving note payable to a bank is due September 30, 2012.  As of June 30, 2012, our availability to draw on our revolving note payable was approximately $3.6 million.

 

Based on the borrowing rates currently available to us for loans with similar terms and average maturities, the fair value of our mortgages and notes payable on June 30, 2012 was approximately $291.8 million.

 

Interest paid for the six months ended June 30, 2012 and 2011 was approximately $6.8 million and $6.7 million, respectively.

 

All but one of our mortgages may be prepaid. Mortages where prepayment is permitted are generally subject to either a yield-maintenance premium or defeasance.  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.  We complied with all covenants and requirements at June 30, 2012.  We anticipate renewing or refinancing our mortgages and notes payable coming due within the next twelve months.

 

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Mortgages payable for our unconsolidated tenants in common properties consist of the following:

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

Mortgage payable to a bank in monthly installments of principal and interest, bearing fixed interest at 5.72%, maturing April 11, 2017, secured by certain land, buildings and amenities with a carrying value of $32,074,860 (1)

 

$

33,461,378

 

$

33,740,074

 

 

 

 

 

 

 

Mortgage payable to an insurance company 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 $22,996,945 (2)

 

$

21,991,275

 

$

22,147,406

 

 


(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 our mortgages payable for our unconsolidated tenants in common properties at June 30, 2012, was approximately $62.2 million.

 

Mortgage payable for our unconsolidated joint venture property consists of the following:

 

 

 

(Unaudited)

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

Construction mortgage payable to a bank for $10.5 million with interest payable in monthly installments of interest, bearing a variable rate based on LIBOR one-month rate plus 2.40%, currently 2.64%, maturing December 14, 2014, secured by certain buildings and amenities with a carrying value of $16,533,157 (3)

 

$

8,622,281

 

$

4,584,843

 

 


(3)  We are a guarantor of this construction loan made to Campus One, LLC.  We are proportionately liable for the $10.5 million obligation, limited to our 49% ownership interest.

 

Based on the borrowing rates currently available to us for loans with similar terms and average maturities, the fair value of our mortgage payable for our unconsolidated joint venture property at June 30, 2012, was approximately $8.6 million.

 

Note 11 — Accounts Payable and Accrued Expenses Due to Affiliate

 

Accounts payable and accrued expenses due to affiliate includes amounts owed to NTS Development Company and/or its affiliate, NTS Management Company, (collectively referred to as “NTS Development”), for reimbursement of salary and overhead expenses and fees for services rendered as provided for in our various management agreements.

 

Note 12 — Related Party Transactions

 

Pursuant to our various management agreements, NTS Development receives fees for a variety of services performed for our benefit.  NTS Development also receives fees under separate management agreements for each of our consolidated joint venture properties, our unconsolidated joint venture property, our properties owned as a tenant in common with an unaffiliated third party and our properties owned by our eight wholly-owned subsidiaries financed through Federal Home Loan Mortgage Corporation (“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 and unconsolidated 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 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 generally paid in an amount equal to 5% of the costs incurred which relate to capital improvements and significant repairs.  NTS Development 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 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 separate management agreements.  NTS Development 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

 

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larger potential disposition fee.  NTS Development 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 employee’s services, which are dedicated to a particular entity’s operations, are allocated as a percentage of each employee’s costs to that entity.  We only reimburse charges from NTS Development for actual costs of employee services incurred for our benefit.

 

We were charged the following amounts pursuant to our various agreements with NTS Development for the three and six months ended June 30, 2012 and 2011.  These charges include items which have been expensed as operating expenses reimbursed to affiliate or professional and administrative expenses reimbursed to affiliate and items that have been capitalized as other assets or as land, buildings and amenities.

 

 

 

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

 

2012

 

2011

 

Property management fees

 

$

708,000

 

$

670,000

 

 

 

 

 

 

 

Operating expenses reimbursement - property

 

1,008,000

 

980,000

 

Operating expenses reimbursement - multifamily leasing

 

201,000

 

196,000

 

Operating expenses reimbursement - administrative

 

272,000

 

257,000

 

Operating expenses reimbursement - other

 

35,000

 

13,000

 

 

 

 

 

 

 

Total operating expenses reimbursed to affiliate

 

1,516,000

 

1,446,000

 

 

 

 

 

 

 

Professional and administrative expenses reimbursed to affiliate

 

433,000

 

420,000

 

 

 

 

 

 

 

Construction supervision and leasing fees

 

26,000

 

72,000

 

 

 

 

 

 

 

Total related party transactions

 

$

2,683,000

 

$

2,608,000

 

 

 

 

 

 

 

Total related party transactions with our investment in tenants in common

 

$

363,000

 

$

309,000

 

 

 

 

 

 

 

Total related party transactions with our investment in joint venture

 

$

306,000

 

$

49,000

 

 

 

 

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

Property management fees

 

$

1,409,000

 

$

1,335,000

 

 

 

 

 

 

 

Operating expenses reimbursement - property

 

2,022,000

 

1,962,000

 

Operating expenses reimbursement - multifamily leasing

 

410,000

 

371,000

 

Operating expenses reimbursement - administrative

 

550,000

 

519,000

 

Operating expenses reimbursement - other

 

78,000

 

24,000

 

 

 

 

 

 

 

Total operating expenses reimbursed to affiliate

 

3,060,000

 

2,876,000

 

 

 

 

 

 

 

Professional and administrative expenses reimbursed to affiliate

 

870,000

 

847,000

 

 

 

 

 

 

 

Construction supervision and leasing fees

 

71,000

 

165,000

 

 

 

 

 

 

 

Total related party transactions

 

$

5,410,000

 

$

5,223,000

 

 

 

 

 

 

 

Total related party transactions with our investments in tenants in common

 

$

699,000

 

$

632,000

 

 

 

 

 

 

 

Total related party transactions with our investment in joint venture

 

$

497,000

 

$

82,000

 

 

Property, multifamily leasing, administrative and other operating expenses reimbursed include employee costs charged to us by NTS Development and other actual costs incurred by NTS Development on our behalf, which were reimbursed by us.

 

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During the three months ended June 30, 2012 and 2011, we were charged approximately $17,000 and $14,000, respectively, for property maintenance fees from affiliates of NTS Development.  During the six months ended June 30, 2012 and 2011, we were charged approximately $33,000 and $32,000, respectively, for property maintenance fees from affiliates of NTS Development.

 

Until May 31, 2012, NTS Development Company leased 20,368 square feet of office space in NTS Center at a rental rate of $14.50 per square foot. Beginning June 1, 2012, NTS Development Company leased 17,843 square feet of office space in 600 North Hurstbourne at a rental rate of $21.50 per square foot. NTS Development Company also leased 1,902 square feet of storage space at a rental rate of $5.50 per square foot. The average per square foot rental rate for similar office space in 600 North Hurstbourne as of June 30, 2012 was $22.00 per square foot.  We recognized rents of approximately $52,000 and $76,000 from NTS Development Company for the three months ended June 30, 2012 and 2011, respectively.  We recognized rents of approximately $128,000 and $153,000 from NTS Development Company for the six months ended June 30, 2012 and 2011, respectively.

 

Our unconsolidated joint venture, Campus One, LLC, recognized rents of approximately $33,000 from NTS Development Company for the three and six months ended June 30, 2012.

 

Note 13 — 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, cash flows 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 that would have a material adverse affect on our financial condition, cash flows or results of operations.

 

Note 14 — Segment Reporting

 

Our reportable operating segments include multifamily, commercial and retail 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.

 

16



Table of Contents

 

 

 

(Unaudited)

 

 

 

Three Months Ended June 30, 2012

 

 

 

Multifamily

 

Commercial

 

Retail

 

Partnership

 

Total

 

Rental income

 

$

12,301,604

 

$

1,392,154

 

$

132,090

 

$

(5,775

)

$

13,820,073

 

Tenant reimbursements

 

 

454,200

 

22,441

 

 

476,641

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

12,301,604

 

1,846,354

 

154,531

 

(5,775

)

14,296,714

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and operating expenses reimbursed to affiliate

 

4,841,069

 

765,636

 

25,200

 

 

5,631,905

 

Management fees

 

608,066

 

92,155

 

7,717

 

 

707,938

 

Property taxes and insurance

 

1,524,046

 

219,890

 

14,899

 

29,173

 

1,788,008

 

Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate

 

 

 

 

619,785

 

619,785

 

Depreciation and amortization

 

3,958,666

 

467,968

 

40,629

 

 

4,467,263

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

10,931,847

 

1,545,649

 

88,445

 

648,958

 

13,214,899

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

1,369,757

 

300,705

 

66,086

 

(654,733

)

1,081,815

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

13,850

 

305

 

 

3,382

 

17,537

 

Interest expense

 

(3,241,063

)

(152,722

)

(13

)

(94,906

)

(3,488,704

)

Loss on disposal of assets

 

(12,893

)

(53,077

)

 

 

(65,970

)

Loss from investment in joint venture

 

 

(71,597

)

 

 

(71,597

)

Loss from investments in tenants in common

 

(595,941

)

 

 

 

(595,941

)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net (loss) income

 

(2,466,290

)

23,614

 

66,073

 

(746,257

)

(3,122,860

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interests

 

(256,959

)

 

 

 

(256,959

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(2,209,331

)

$

23,614

 

$

66,073

 

$

(746,257

)

$

(2,865,901

)

 

 

 

 

 

 

 

 

 

 

 

 

Land, buildings and amenities, net

 

$

263,654,328

 

$

26,211,619

 

$

3,464,896

 

$

 

$

293,330,843

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for land, buildings and amenities

 

$

967,961

 

$

114,626

 

$

 

$

 

$

1,082,587

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment liabilities from continuing operations

 

$

245,843,535

 

$

2,450,978

 

$

49,982

 

$

28,248,291

 

$

276,592,786

 

 

17



Table of Contents

 

 

 

(Unaudited)

 

 

 

Three Months Ended June 30, 2011

 

 

 

Multifamily

 

Commercial

 

Retail

 

Partnership

 

Total

 

Rental income

 

$

11,500,087

 

$

1,449,824

 

$

143,922

 

$

(8,903

)

$

13,084,930

 

Tenant reimbursements

 

 

428,527

 

24,231

 

 

452,758

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

11,500,087

 

1,878,351

 

168,153

 

(8,903

)

13,537,688

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and operating expenses reimbursed to affiliate

 

4,843,864

 

687,191

 

43,358

 

 

5,574,413

 

Management fees

 

572,157

 

89,855

 

7,734

 

283

 

670,029

 

Property taxes and insurance

 

1,027,036

 

246,211

 

13,181

 

29,173

 

1,315,601

 

Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate

 

 

 

 

659,502

 

659,502

 

Depreciation and amortization

 

3,982,662

 

445,714

 

42,574

 

 

4,470,950

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

10,425,719

 

1,468,971

 

106,847

 

688,958

 

12,690,495

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

1,074,368

 

409,380

 

61,306

 

(697,861

)

847,193

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

33,721

 

1,998

 

 

192,245

 

227,964

 

Interest expense

 

(3,229,415

)

(146,083

)

(3,656

)

(126,246

)

(3,505,400

)

Loss on disposal of assets

 

(30,277

)

(9,685

)

 

 

(39,962

)

Loss from investment in joint venture

 

 

(173

)

 

 

(173

)

Loss from investments in tenants in common

 

(511,066

)

 

 

 

(511,066

)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net (loss) income

 

(2,662,669

)

255,437

 

57,650

 

(631,862

)

(2,981,444

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interests

 

(317,347

)

 

 

 

(317,347

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(2,345,322

)

$

255,437

 

$

57,650

 

$

(631,862

)

$

(2,664,097

)

 

 

 

 

 

 

 

 

 

 

 

 

Land, buildings and amenities, net

 

$

276,415,874

 

$

26,543,503

 

$

3,625,938

 

$

 

$

306,585,315

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for land, buildings and amenities

 

$

646,858

 

$

320,015

 

$

 

$

 

$

966,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment liabilities from continuing operations

 

$

246,419,280

 

$

3,071,532

 

$

50,558

 

$

26,438,214

 

$

275,979,584

 

 

18



Table of Contents

 

 

 

(Unaudited)

 

 

 

Six Months Ended June 30, 2012

 

 

 

Multifamily

 

Commercial

 

Retail

 

Partnership

 

Total

 

Rental income

 

$

24,304,789

 

$

2,845,057

 

$

264,180

 

$

(11,549

)

$

27,402,477

 

Tenant reimbursements

 

 

891,253

 

44,512

 

 

935,765

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

24,304,789

 

3,736,310

 

308,692

 

(11,549

)

28,338,242

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses and operating expenses reimbursed to affiliate

 

9,488,121

 

1,416,525

 

54,478

 

 

10,959,124

 

Management fees

 

1,202,320

 

190,512

 

16,279

 

 

1,409,111

 

Property taxes and insurance

 

3,096,791

 

439,948

 

29,840

 

58,346

 

3,624,925

 

Professional and administrative expenses and professional and administrative expenses reimbursed to affiliate

 

 

 

 

1,308,240

 

1,308,240

 

Depreciation and amortization

 

7,901,243

 

913,252

 

81,259

 

 

8,895,754

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

21,688,475

 

2,960,237

 

181,856

 

1,366,586

 

26,197,154

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

2,616,314

 

776,073

 

126,836

 

(1,378,135

)

2,141,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

27,780

 

575

 

 

8,978

 

37,333

 

Interest expense

 

(6,487,043

)

(303,001

)

(24

)

(195,172

)

(6,985,240

)

Loss on disposal of assets

 

(111,238

)

(53,077

)

 

 

(164,315

)

Loss from investment in joint venture

 

 

(163,576

)

 

 

(163,576

)

Loss from investments in tenants in common

 

(1,009,726

)

 

 

 

(1,009,726

)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net (loss) income

 

(4,963,913

)

256,994

 

126,812

 

(1,564,329

)

(6,144,436

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interests

 

(551,204

)

 

 

 

(551,204

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(4,412,709

)

$

256,994

 

$

126,812

 

$

(1,564,329

)

$

(5,593,232

)

 

 

 

 

 

 

 

 

 

 

 

 

Land, buildings and amenities, net

 

$

263,654,328

 

$

26,211,619

 

$

3,464,896

 

$

 

$

293,330,843

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for land, buildings and amenities

 

$

1,450,835

 

$

688,219

 

$

 

$

 

$

2,139,054

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment liabilities from continuing operations

 

$

245,843,535

 

$

2,450,978

 

$

49,982

 

$

28,248,291

 

$

276,592,786

 

 

19



Table of Contents

 

 

 

(Unaudited)

 

 

 

Six Months Ended June 30, 2011

 

 

 

Multifamily

 

Commercial

 

Retail

 

Partnership

 

Total

 

Rental income

 

$

22,783,983

 

$