**Table of Contents**

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

** **

**(Mark One)**

 

**x**  QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

** **

**For the quarterly period ended June 30, 2008**

** **

**OR**

** **

**o**  TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

 

**For the transition period from                       to                       **

 

**Commission file number 001-32389**

 

**NTS REALTY HOLDINGS LIMITED PARTNERSHIP**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                                                                        | ** ** | **41-2111139**                            |
|-------------------------------------------------------------------------------------|------------|-------------------------------------------|
| **(State of  incorporation or organization)**                                       | ** ** | **(I.R.S.  Employer Identification No.)** |
| ** **                                                                          | ** ** | ** **                                |
| **10172 Linn Station Road**Louisville, Kentucky                                     | ** ** | **40223**                                 |
| (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 whetherthe registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

**Yes**x     **No**o

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Checkone):
| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer o |   | Smaller reporting company x |
|---------------------------|--------|---------------------|--------|-------------------------|--------|-----------------------------|

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).

**Yes**o    ** No**x

 

**APPLICABLEONLY TO CORPORATE ISSUERS**

** **

As of August 11, 2008,there were 11,380,760 of the registrant’s limited partnership unitsoutstanding.

 

 

 

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**NTSREALTY HOLDINGS LIMITED PARTNERSHIP**

** **

**FORM 10-Q**

** **

**TABLE OF CONTENTS**

** **
| **PART I  – FINANCIAL INFORMATION**                                                          | **4**                                                                                               |
|--------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|
| ** **                                                                                             | ** **                                                                                          | ** ** |
| Item 1                                                                                                 | – Unaudited  Financial Statements                                                              | 4 |
| Consolidated  Balance Sheets as of June 30, 2008 and December 31, 2007                       | 4                                                                                                   |
| Consolidated  Statement of Partners’ Equity as of June 30, 2008                              | 4                                                                                                   |
| Consolidated  Statements of Operations for the Three and Six Months Ended June 30,  2008 and 2007 | 5                                                                                                   |
| Consolidated  Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007            | 6                                                                                                   |
| Notes to  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                                  | 30 |
| Item 4                                                                                                 | – Controls and  Procedures                                                                     | 31 |
| Item 4T                                                                                                | – Controls and  Procedures                                                                     | 31 |
|                                                                                                   |                                                                                                |   |
| **PART II  – OTHER INFORMATION**                                                             | **32**                                                                                              |
| ** **                                                                                             | ** **                                                                                          | ** ** |
| Item  1                                                                                                | – Legal Proceedings                                                                            | 32 |
| Item  1A                                                                                               | – Risk Factors                                                                                 | 32 |
| Item 2                                                                                                 | –  Unregistered Sales of Equity Securities and Use of Proceeds                                 | 32 |
| Item 3                                                                                                 | – Defaults  Upon Senior Securities                                                             | 33 |
| Item 4                                                                                                 | –  Submission of Matters to a Vote of Security Holders                                         | 33 |
| Item  5                                                                                                | – Other Information                                                                            | 33 |
| Item 6                                                                                                 | – Exhibits                                                                                     | 34 |
| SIGNATURES                                                                                             | 36                                                                                                  |

 

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**INFORMATIONREGARDING FORWARD-LOOKING STATEMENTS**

** **

Some of thestatements included in this quarterly report on Form 10-Q, particularlythose included in Part I, Item 2 – Management’s Discussion and Analysis ofFinancial Condition and Results of Operations (“MD&A”), may be considered “forward-lookingstatements” because the statements relate to matters which have not yetoccurred. For example, phrases such as “we anticipate,” “believe” or “expect”indicate that it is possible that the event anticipated, believed or expectedmay 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 lessfavorable to us. We do not undertake any obligation to update theseforward-looking statements.

 

Anyforward-looking statements included in MD&A, or elsewhere in this report,reflect our managing general partner’s best judgment based on known factors,but involve risks and uncertainties. Actual results could differ materiallyfrom those anticipated in any forward-looking statements as a result of anumber of factors, including but not limited to those described in our filingswith the Securities and Exchange Commission, particularly our most recentannual report on Form 10-K, which was filed on March 25, 2008. Anyforward-looking information provided by us pursuant to the safe harborestablished by the Private Securities Litigation Reform Act of 1995 should beevaluated in the context of these factors.

 

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# **PART I– FINANCIAL INFORMATION**

## **Item 1 – Unaudited Financial Statements**

## ** **

**NTS REALTY HOLDINGS LIMITEDPARTNERSHIP**

### Consolidated BalanceSheets as of June 30, 2008 and December 31, 2007

 
| ** **                                                                                                                             | ** ** | **(Unaudited)**             | ** **  | ** **                      | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                             | ** ** | **June 30, 2008** | ** **  | **December 31, 2007** | ** ** |
| **ASSETS:**                                                                                                                            |       |                        |        |                            |       |
| Cash and  equivalents                                                                                                                  |       | $                           | 1,145,790   |                            | $          | 1,577,082 |   |
| Cash and  equivalents - restricted                                                                                                     |       | 5,559,753                   |        | 965,862                         |       |
| Accounts  receivable, net of allowance for doubtful accounts of $179,896 at  June 30, 2008 and $100,028 at December 31, 2007 |       | 1,232,334                   |        | 818,430                         |       |
| Notes  receivable                                                                                                                      |       | 3,500,000                   |        | -                               |       |
| Land,  buildings and amenities, net                                                                                                    |       | 355,188,354                 |        | 320,312,690                     |       |
| Long-lived  assets held for sale                                                                                                       |       | 4,710,497                   |        | 38,615,919                      |       |
| Other assets                                                                                                                           |       | 3,567,886                   |        | 3,331,886                       |       |
|                                                                                                                                   |       |                        |        |                            |       |
| **Total  assets**                                                                                                                      |       | $                           | 374,904,614 |                            | $          | 365,621,869 |   |
|                                                                                                                                   |       |                        |        |                            |       |
| **LIABILITIES:**                                                                                                                       |       |                        |        |                            |       |
| Mortgages  and notes payable                                                                                                           |       | $                           | 265,589,903 |                            | $          | 265,176,332 |   |
| Accounts  payable and accrued expenses                                                                                                 |       | 3,856,271                   |        | 4,080,205                       |       |
| Accounts payable  and accrued expenses due to affiliate                                                                                |       | 754,321                     |        | 640,102                         |       |
| Distributions  payable                                                                                                                 |       | 910,461                     |        | 1,138,076                       |       |
| Security  deposits                                                                                                                     |       | 928,682                     |        | 871,225                         |       |
| Long-lived  liabilities held for sale                                                                                                  |       | 244,425                     |        | 3,131,383                       |       |
| Other  liabilities                                                                                                                     |       | 5,757,819                   |        | 4,714,616                       |       |
|                                                                                                                                   |       |                        |        |                            |       |
| **Total  liabilities**                                                                                                                 |       | 278,041,882                 |        | 279,751,939                     |       |
|                                                                                                                                   |       |                        |        |                            |       |
| **MINORITY  INTEREST**                                                                                                                 |       | 8,041,578                   |        | 9,002,023                       |       |
|                                                                                                                                   |       |                        |        |                            |       |
| COMMITMENTS  AND CONTINGENCIES (NOTE 11)                                                                                               |       |                        |        |                            |       |
|                                                                                                                                   |       |                        |        |                            |       |
| **PARTNERS’  EQUITY**                                                                                                             |       | 88,821,154                  |        | 76,867,907                      |       |
|                                                                                                                                   |       |                        |        |                            |       |
| **Total  liabilities and partners’ equity**                                                                                       |       | $                           | 374,904,614 |                            | $          | 365,621,869 |   |

 

**NTS REALTY HOLDINGS LIMITEDPARTNERSHIP**

### Consolidated Statementof Partners’ Equity as of June 30, 2008

(Unaudited)

 
| ** **                                           | ** ** | **General  Partner  Interests** | ** ** | **Limited  Partners  Interests** | ** ** | **General  Partner** | ** ** | **Limited  Partners** | ** ** | **Total**   | ** ** |
|------------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|----------------------|------------|-----------------------|------------|-------------|------------|
| **PARTNERS’  EQUITY:**                          |       |                            |       |                             |       |                 |       |                  |       |        |       |
| Initial  equity                                      |       | 714,491                         |       | 10,667,117                       |       | $                    | 3,131,381  |                  | $          | 46,750,444  |       | $ | 49,881,825 |   |
| Net income  prior years                              |       | -                               |       | -                                |       | 2,694,543            |       | 40,225,451            |       | 42,919,994  |       |
| Net income  current year                             |       | -                               |       | -                                |       | 879,040              |       | 13,122,744            |       | 14,001,784  |       |
| Cash  distributions declared to date                 |       | -                               |       | -                                |       | (1,128,949           | )          | (16,853,500           | )          | (17,982,449 | )          |
| Retirement  of limited partnership interests to date |       | -                               |       | (848                             | )          | -                    |       | -                     |       | -           |       |
|                                                 |       |                            |       |                             |       |                 |       |                  |       |        |       |
| Balances on  June 30, 2008                      |       | 714,491                         |       | 10,666,269                       |       | $                    | 5,576,015  |                  | $          | 83,245,139  |       | $ | 88,821,154 |   |

 

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

 

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** **

**NTS REALTY HOLDINGS LIMITEDPARTNERSHIP**

### Consolidated Statementsof Operations for the Three and Six Months Ended June 30, 2008 and 2007

(Unaudited)

 
| ** **                                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                             | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
| **REVENUE:**                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Rental  income                                                         |       | $                                               | 10,977,445 |                                          | $          | 9,879,199 |   | $ | 21,989,312 |   | $ | 18,618,260 |   |
| Tenant  reimbursements                                                 |       | 381,187                                         |       | 405,610                                       |       | 758,332 |   | 809,249 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Total  revenue**                                                     |       | 11,358,632                                      |       | 10,284,809                                    |       | 22,747,644 |   | 19,427,509 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **EXPENSES:**                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Operating  expenses                                                    |       | 3,154,096                                       |       | 2,652,444                                     |       | 5,152,657 |   | 4,435,791 |   |
| Operating  expenses reimbursed to affiliate                            |       | 1,273,817                                       |       | 1,265,233                                     |       | 2,544,295 |   | 2,373,401 |   |
| Management  fees                                                       |       | 528,448                                         |       | 503,154                                       |       | 1,074,703 |   | 961,187 |   |
| Property  taxes and insurance                                          |       | 1,935,434                                       |       | 1,563,485                                     |       | 3,283,620 |   | 2,649,537 |   |
| Professional  and administrative expenses                              |       | 269,435                                         |       | 346,586                                       |       | 569,302 |   | 672,654 |   |
| Professional  and administrative expenses reimbursed to affiliate      |       | 404,441                                         |       | 402,354                                       |       | 843,263 |   | 909,464 |   |
| Depreciation  and amortization                                         |       | 4,516,196                                       |       | 4,039,737                                     |       | 9,081,561 |   | 7,440,133 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Total  operating expenses**                                          |       | 12,081,867                                      |       | 10,772,993                                    |       | 22,549,401 |   | 19,442,167 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **OPERATING  (LOSS) INCOME**                                           |       | (723,235                                        | )          | (488,184                                      | )          | 198,243 |   | (14,658 | ) |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| Interest and  other income                                             |       | 143,944                                         |       | 13,587                                        |       | 154,292 |   | 62,217 |   |
| Interest  expense                                                      |       | (3,098,511                                      | )          | (3,123,067                                    | )          | (6,778,087 | ) | (5,876,001 | ) |
| Loss on  disposal of assets                                            |       | (26,545                                         | )          | (32,680                                       | )          | (82,588 | ) | (48,919 | ) |
| Gain on sale  of assets                                                |       | -                                               |       | -                                             |       | 2,849 |   | - |   |
| Minority  interest                                                     |       | (460,876                                        | )          | (284,829                                      | )          | (960,445 | ) | (292,296 | ) |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **LOSS  FROM CONTINUING OPERATIONS**                                   |       | (3,243,471                                      | )          | (3,345,515                                    | )          | (5,544,846 | ) | (5,585,065 | ) |
| Discontinued  operations, net                                          |       | (99,319                                         | )          | 277,749                                       |       | 636,497 |   | 375,996 |   |
| Gain on sale  of discontinued operations                               |       | 18,910,133                                      |       | -                                             |       | 18,910,133 |   | 13,482,291 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **NET  INCOME (LOSS)**                                                 |       | $                                               | 15,567,343 |                                          | $          | (3,067,766 | ) | $ | 14,001,784 |   | $ | 8,273,222 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Loss  from continuing operations allocated to limited partners**     |       | $                                               | (3,039,844 | )                                             | $          | (3,135,482 | ) | $ | (5,196,737 | ) | $ | (5,234,484 | ) |
| Discontinued  operations, net allocated to limited partners            |       | (93,084                                         | )          | 260,312                                       |       | 596,537 |   | 352,394 |   |
| Gain on sale  of discontinued operations allocated to limited partners |       | 17,722,944                                      |       | -                                             |       | 17,722,944 |   | 12,635,993 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **NET  INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS**                   |       | $                                               | 14,590,016 |                                          | $          | (2,875,170 | ) | $ | 13,122,744 |   | $ | 7,753,903 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Loss  from continuing operations per limited partnership unit**      |       | $                                               | (0.28      | )                                             | $          | (0.29 | ) | $ | (0.49 | ) | $ | (0.49 | ) |
| Discontinued  operations, net per limited partnership unit             |       | (0.01                                           | )          | 0.02                                          |       | 0.06 |   | 0.03 |   |
| Gain on sale  of discontinued operations per limited partnership unit  |       | 1.66                                            |       | -                                             |       | 1.66 |   | 1.19 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **NET  INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT**                    |       | $                                               | 1.37       |                                          | $          | (0.27 | ) | $ | 1.23 |   | $ | 0.73 |   |
|                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Weighted  average number of limited partnership interest**           |       | 10,666,269                                      |       | 10,666,269                                    |       | 10,666,269 |   | 10,666,377 |   |

 

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

 

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** **

**NTS REALTY HOLDINGS LIMITEDPARTNERSHIP**

### Consolidated Statementsof Cash Flows for the Six Months Ended June 30, 2008 and 2007

(Unaudited)

 
| ** **                                                                         | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| **OPERATING  ACTIVITIES:**                                                         | ** ** | ** **  | ** ** | ** **  | ** ** |
| **Net  income**                                                                    |       | $           | 14,001,784 |        | $          | 8,273,222 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |        |       |        |       |
| Gain from  sale of discontinued assets                                             |       | (18,910,133 | )          | (13,482,291 | )          |
| Loss on  disposal of assets                                                        |       | 79,739      |       | 93,205      |       |
| Depreciation  and amortization                                                     |       | 9,442,510   |       | 8,528,245   |       |
| Minority  interest                                                                 |       | (960,445    | )          | (292,296    | )          |
| **Changes  in assets and liabilities:**                                            |       |        |       |        |       |
| Cash and  equivalents - restricted                                                 |       | (4,593,891  | )          | (964,277    | )          |
| Accounts  receivable                                                               |       | 405,814     |       | 649,937     |       |
| Other assets                                                                       |       | 1,666,186   |       | 160,712     |       |
| Accounts  payable and accrued expenses                                             |       | (223,934    | )          | (780,074    | )          |
| Accounts  payable and accrued expenses due to affiliate                            |       | 114,219     |       | (256,173    | )          |
| Security deposits                                                                  |       | (89,965     | )          | (65,335     | )          |
| Other  liabilities                                                                 |       | 914,168     |       | 2,429,972   |       |
|                                                                               |       |        |       |        |       |
| **Net cash  provided by operating activities**                                     |       | 1,846,052   |       | 4,294,847   |       |
|                                                                               |       |        |       |        |       |
| **INVESTING  ACTIVITIES:**                                                         |       |        |       |        |       |
| Additions to  land, buildings and amenities                                        |       | (3,117,237  | )          | (2,874,956  | )          |
| Proceeds  from sale of discontinued operations                                     |       | 49,963,973  |       | 26,102,758  |       |
| Investment  in joint venture by minority interest, net                             |       | -           |       | 4,575,173   |       |
| Acquisitions                                                                       |       | (41,000,000 | )          | (45,944,506 | )          |
| Notes  receivable issued                                                           |       | (3,500,000  | )          | -           |       |
| Deposits on  property acquisitions                                                 |       | (42,500     | )          | (200,000    | )          |
|                                                                               |       |        |       |        |       |
| **Net cash  provided by (used in) investing activities**                           |       | 2,304,236   |       | (18,341,531 | )          |
|                                                                               |       |        |       |        |       |
| **FINANCING  ACTIVITIES:**                                                         |       |        |       |        |       |
| Proceeds  from mortgages payable                                                   |       | 33,982,000  |       | 36,000,000  |       |
| Revolving  note payable, net                                                       |       | (17,670,437 | )          | 4,570,242   |       |
| Principal  payments on mortgages payable                                           |       | (1,657,680  | )          | (1,575,469  | )          |
| Additional  payments on mortgage payable                                           |       | (16,850,813 | )          | (21,200,000 | )          |
| Additions to  loan costs                                                           |       | (108,498    | )          | (266,302    | )          |
| Cash  distributions                                                                |       | (2,276,152  | )          | (3,414,398  | )          |
|                                                                               |       |        |       |        |       |
| **Net cash  (used in) provided by financing activities**                           |       | (4,581,580  | )          | 14,114,073  |       |
|                                                                               |       |        |       |        |       |
| **NET  (DECREASE) INCREASE IN CASH AND EQUIVALENTS**                               |       | (431,292    | )          | 67,389      |       |
|                                                                               |       |        |       |        |       |
| **CASH AND  EQUIVALENTS, beginning of period**                                     |       | 1,577,082   |       | 28,250      |       |
|                                                                               |       |        |       |        |       |
| **CASH AND  EQUIVALENTS, end of period**                                           |       | $           | 1,145,790  |        | $          | 95,639 |   |

 

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** **

**NTS REALTY HOLDINGS LIMITEDPARTNERSHIP**

### Notes to ConsolidatedFinancial Statements

(Unaudited)

 

The unaudited consolidated financialstatements included herein should be read in conjunction with NTS RealtyHoldings Limited Partnership’s (“NTS Realty”) 2007 annual report on Form 10-Kas filed with the Securities and Exchange Commission on March 25,2008.  In the opinion of NTS RealtyCapital, Inc., our managing general partner, all adjustments, consistingonly of normal recurring accruals, necessary for a fair presentation have beenmade to the accompanying consolidated financial statements for the three andsix months ended June 30, 2008 and 2007. The results of operations for the interim periods are not necessarilyindicative of the results that may be expected for the full year or any otherinterim period.  As used in thisquarterly report on Form 10-Q, the terms “we,” “us” or “our,” as thecontext requires, may refer to NTS Realty or its interests in its propertiesand 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 andretail real estate.  At June 30,2008 we owned, either wholly or as a tenant in common with an unaffiliatedthird party, 22 properties, comprised of 12 multifamily properties, 7 officeand business centers and three retail properties.  The properties are located in and aroundLouisville (8) and Lexington (1), Kentucky, Fort Lauderdale (3), Florida,Indianapolis (4), Indiana, Memphis (1) and Nashville (2), Tennessee,Richmond (2), Virginia and Atlanta (1), Georgia.  Our office and business centers aggregateapproximately 661,000 square feet.  Ourmultifamily properties consist of approximately 3,672 units while our retailproperties contain approximately 210,000 square feet of space.

 

We pay distributions if and when authorizedby our managing general partner.  We arerequired to pay distributions on a quarterly basis, equal to sixty-five percent(65%) of our “net cash flow from operations” as this term is defined inregulations promulgated by the Treasury Department under the Internal RevenueCode of 1986, as amended; provided that if a law is enacted or existing law ismodified or interpreted in a manner that subjects us to taxation as acorporation or otherwise subjects us to entity level taxation for federal,state or local income tax purposes, we will adjust the amount distributed toreflect our obligation to pay tax.  Anydistribution other than a distribution with respect to the final quarter of acalendar year will be made no later than forty-five (45) days after the lastday of such quarter based on our estimate of “net cash flow from operations”for the year.  Any distribution withrespect to the final quarter of a calendar year will be made no later thanninety (90) days after the last day of such quarter based on actual “net cashflow from operations” for the year, adjusted for any excess or insufficientdistributions made with respect to the first three quarters of the calendaryear.

 

“Net cash flow from operations” may bereduced by the amount of reserves as determined by us each quarter.  Our managing general partner will establishthese reserves for, among other things, working capital or capital improvementneeds.  Therefore, there is no assurancethat we will have “net cash flow from operations” from which to paydistributions in the future.  Forexample, our partnership agreement permits our managing general partner toreinvest sales or refinancing proceeds in new and existing properties or tocreate reserves to fund future capital expenditures.  Because “net cash flow from operations” iscalculated after reinvesting sales or refinancing proceeds or establishingreserves, we may not have any “net cash flow from operations” from which to paydistributions.

 

We paid quarterly distributions of $0.10 and$0.08 per unit to limited partners on April 16, 2008 and July 17,2008, respectively.

 

***Consolidation Policy and Minority Interest***

*** ***

The consolidated financial statements includethe accounts of all wholly-owned properties and properties owned as a tenant incommon with an unaffiliated third party where we are the majority owner.  Intercompany transactions and balances havebeen eliminated.

 

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We include the results of operations,financial position and cash flows of The Overlook at St. Thomas and Creek’sEdge at Stony Point in our consolidated financial statements.  The minority interests in The Overlook at St.Thomas and Creek’s Edge at Stony Point are stated separately in ourconsolidated financial statements.

 

***Recent Accounting Pronouncements***

*** ***

SFAS No. 157, *Fair ValueMeasurements*

 

In September 2006, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 157, *Fair Value Measurements*.  SFAS No. 157 requires companies todetermine fair value based on the price that would be received to sell theasset or paid to transfer the liability to a market participant.  SFAS No. 157 emphasizes that fair valueis a market-based measurement, not an entity-specific measurement.  The provisions of SFAS No. 157 wereeffective as of January 1, 2008; however, FASB Staff Position No. 157-2defers the effective date for certain non-financial assets and liabilities notre-measured at fair value on a recurring basis to fiscal years beginning after November 15,2008 or our first quarter of 2009.

 

SFAS No. 157 requires that assets andliabilities carried at fair value be classified and disclosed in one of thefollowing categories:

 

·                  Level1:  Quoted market prices in activemarkets for identical assets or liabilities.

 

·                  Level2:  Observable market based inputs orunobservable inputs that are corroborated by market data.

 

·                  Level3:  Unobservable inputs that are notcorroborated by market data.

 

Our financial assets and liabilities that aremeasured at fair value on a recurring basis as of June 30, 2008 are approximatelyas follows:

 
| ** **                  | ** ** | **Carrying** | ** ** | **Fair Value Measurements** | ** ** |
|-----------------------------|------------|--------------|------------|---------------------------------------|------------|
| ** **                  | ** ** | **Value**    | ** ** | **Level 1**                      | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| **Financial  liabilities:** |       |         |       |                                  |       |   |   |   |   |
| Interest  rate swap         |       | $            | 406,000    |                                  | $          | - |   | $ | 406,000 |   | $ | - |   |
|                             |            |              |            |                                       |            |  |  |  |  |  |  |  |  |

 

**Note 2 –Use of Estimates and Reclassifications in the Preparation of FinancialStatements**

 

The preparation of financial statements inaccordance with U.S. generally accepted accounting principles requires us tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

 

Certain reclassifications have been made tothe prior period financial statements to conform to the June 30, 2008classifications.  These reclassificationshave no effect on previously reported operating results or partners’ equity.

 

**Note 3 –Real Estate Transactions**

 

***Acquisitions***

*** ***

We account for our acquisitions using thepurchase method of accounting in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 141 “Business Combinations”.  The assets and liabilities purchased arerecorded at their fair market value at the date of the acquisition.  We allocate the purchase price for each ofthe properties to net tangible and identified intangible assets acquired basedon fair values (including land, buildings, tenant improvements, acquired aboveand below market leases and the origination cost of acquired in-place leases)and acquired liabilities.  The intangibleassets recorded in relation to our multifamily properties will be amortizedover a period of one year, which approximates the weighted average leaselives.  No above or below market leases 

 

8

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exist. No customer relationship intangibles exist.  At the date of the acquisition, the carryingvalue of mortgages and other liabilities approximated fair market value.  We retained an independent appraiser toassess fair value based on estimated cash flow projections that utilizediscount and capitalization rates deemed appropriate and available marketinformation.

 

During the six months ended June 30,2008, we made the following property acquisition:

 
| **Property - Multifamily** | ** ** | **Location** | ** ** | **Units** | ** ** | **Date of  Purchase** | ** ** | **Purchase Price** | ** ** |
|--------------------------------------|------------|--------------|------------|-----------|------------|----------------------------|------------|-------------------------|------------|
| Shelby Farms  (1)                    |       | Memphis, TN  |       | 450       |       | June 27, 2008         |       | $                       | 41,000,000 |   |
|                                      |            |              |            |           |            |                            |            |                         |            |  |

 

----

(1)          Financed by notes payable to an unaffiliated third party of $18.6million and $9.2 million, respectively. Ownership percentage at June 30, 2008 was 100%.

 

***Pro Forma Information***

*** ***

The following table presents our unauditedpro forma results of operations and per unit amounts as if we had consummatedour 2008 acquisition as of the beginning of each period presented.

 
| ** **                                                     | ** ** | **(Unaudited)**                                 | ** ** | **(Unaudited)**                               | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                     | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
| ** **                                                     | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
| Revenues                                                       |       | $                                               | 12,418,542 |                                          | $          | 11,393,451 |   | $ | 24,916,196 |   | $ | 21,632,609 |   |
| Expenses and  other income, net                                |       | 16,064,134                                      |       | 15,162,336                                    |       | 31,283,772 |   | 28,059,765 |   |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Loss from  continuing operations                               |       | $                                               | (3,645,592 | )                                             | $          | (3,768,885 | ) | $ | (6,367,576 | ) | $ | (6,427,156 | ) |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Net income  (loss)                                             |       | $                                               | 15,165,222 |                                          | $          | (3,491,136 | ) | $ | 13,179,054 |   | $ | 7,431,131 |   |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Loss from  continuing operations allocated to limited partners |       | $                                               | (3,416,719 | )                                             | $          | (3,532,272 | ) | $ | (5,967,816 | ) | $ | (6,023,716 | ) |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Net income  (loss) allocated to limited partners               |       | $                                               | 14,213,141 |                                          | $          | (3,271,961 | ) | $ | 12,351,665 |   | $ | 6,964,671 |   |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Loss from  continuing operations per limited partnership unit  |       | $                                               | (0.32      | )                                             | $          | (0.32 | ) | $ | (0.56 | ) | $ | (0.57 | ) |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Net income  (loss) per limited partnership unit                |       | $                                               | 1.33       |                                          | $          | (0.30 | ) | $ | 1.16 |   | $ | 0.65 |   |
|                                                           |       |                                            |       |                                          |       |   |   |   |   |
| Weighted  average number of limited partnership interests      |       | 10,666,269                                      |       | 10,666,269                                    |       | 10,666,269 |   | 10,666,377 |   |

 

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***Dispositions***

*** ***

During the six months ended June 30,2008, we made the following property dispositions:

 
| **Property – Commercial**          | ** ** | **Location**   | ** ** | **Square Feet** | ** ** | **Date of Sale** | ** ** |
|---------------------------------------------------|------------|----------------|------------|----------------------|------------|----------------------------|------------|
| Atrium  Center (1)                                |       | Louisville, KY |       | 104,286              |       | May 1, 2008           |       |
| Blankenbaker  Business Center I (1)               |       | Louisville, KY |       | 160,689              |       | May 1, 2008           |       |
| Blankenbaker  Business Center II (1)              |       | Louisville, KY |       | 77,408               |       | May 1, 2008           |       |
| Anthem  Office Center (1)                         |       | Louisville, KY |       | 85,305               |       | May 1, 2008           |       |
| Plainview  Center (1)                             |       | Louisville, KY |       | 98,000               |       | May 1, 2008           |       |
| Plainview  Point Office Center Phase I and II (1) |       | Louisville, KY |       | 57,301               |       | May 1, 2008           |       |
| Plainview  Point Office Center Phase III (1)      |       | Louisville, KY |       | 61,680               |       | May 1, 2008           |       |
| ITT Parking  Lot (1)                              |       | Louisville, KY |       | N/A                  |       | May 1, 2008           |       |

 

----

(1)   We received approximately $56.0 million inconnection with the sale resulting in a gain of approximately $19.0million.  We used proceeds from thisdisposition to pay down $19.4 million on our revolving note payable, repaid our$14.3 million mortgage payable to a bank and to acquire Shelby Farms.

 

***Notes Receivable***

*** ***

We received two promissorynotes of $2,500,000 and $1,000,000 as consideration from the sale of the OfficePortfolio (as defined below).  The notesare with an unaffiliated third party, with interest receivable in monthlyinstallments at LIBOR plus 6.00% with maturity dates of May 1, 2009 and May 1,2011, respectively.

 

***Discontinued Operations and Long Lived Assetsand Liabilities Held for Sale***

*** ***

On June 12, 2007, the board of directorsof NTS Realty Capital, Inc., our managing general partner, authorized thesale of Atrium Center, Blankenbaker Business Center I, Blankenbaker BusinessCenter II, Anthem Office Center, NTS Center, Plainview Center, Plainview PointOffice Center Phase I and II, Plainview Point Office Center Phase III, and theITT Parking Lot (the “Office Portfolio”).

 

On August 2, 2007, we announced that weentered into an agreement to sell the Office Portfolio.  On February 1, 2008, we announced thatwe entered into an amended agreement to sell the Office Portfolio.  The amended agreement removed NTS Center fromthe Office Portfolio.

 

We have presented separately as discontinuedoperations in all periods presented the results of operations for the followingproperties:

 
| **Property**                                  | ** ** | **Location**   | ** ** | **Status**    | ** ** |
|-----------------------------------------------|------------|----------------|------------|---------------|------------|
| NTS Center                                    |       | Louisville, KY |       | Held for Sale |       |
| Atrium  Center                                |       | Louisville, KY |       | Sold 2008     |       |
| Blankenbaker  Business Center I               |       | Louisville, KY |       | Sold 2008     |       |
| Blankenbaker  Business Center II              |       | Louisville, KY |       | Sold 2008     |       |
| Anthem  Office Center                         |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Center                             |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Point Office Center Phase I and II |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Point Office Center Phase III      |       | Louisville, KY |       | Sold 2008     |       |
| ITT Parking  Lot                              |       | Louisville, KY |       | Sold 2008     |       |
| Springs  Medical Office Center                |       | Louisville, KY |       | Sold 2007     |       |
| Springs  Office Center                        |       | Louisville, KY |       | Sold 2007     |       |

 

The assets and liabilities held for sale havebeen separately identified on our balance sheets at June 30, 2008 and December 31,2007.

 

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The components of discontinued operations areoutlined below and include the results of operations for the respective periodsin which we owned such assets during the three and six months ended June 30,2008 and 2007.

 
| ** **                                                         | ** ** | **(Unaudited)**                                 | ** ** | **(Unaudited)**                               | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                         | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
| ** **                                                         | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
| **REVENUE:**                                                       |       |                                            |       |                                          |       |   |   |   |   |
| Rental  income                                                     |       | $                                               | 931,731    |                                          | $          | 2,005,505 |   | $ | 3,075,500 |   | $ | 4,139,801 |   |
| Tenant  reimbursements                                             |       | 79,497                                          |       | 104,514                                       |       | 246,151 |   | 223,858 |   |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| **Total  revenue**                                                 |       | 1,011,228                                       |       | 2,110,019                                     |       | 3,321,651 |   | 4,363,659 |   |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| **EXPENSES:**                                                      |       |                                            |       |                                          |       |   |   |   |   |
| Operating  expenses and operating expenses reimbursed to affiliate |       | 344,044                                         |       | 673,875                                       |       | 1,067,398 |   | 1,495,134 |   |
| Management  fees                                                   |       | 42,297                                          |       | 103,815                                       |       | 154,158 |   | 225,065 |   |
| Property  taxes and insurance                                      |       | 77,829                                          |       | 180,108                                       |       | 242,466 |   | 358,257 |   |
| Depreciation  and amortization                                     |       | -                                               |       | 325,176                                       |       | - |   | 646,760 |   |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| **Total  expenses**                                                |       | 464,170                                         |       | 1,282,974                                     |       | 1,464,022 |   | 2,725,216 |   |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| **DISCONTINUED  OPERATING INCOME**                                 |       | 547,058                                         |       | 827,045                                       |       | 1,857,629 |   | 1,638,443 |   |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| Interest and  other income                                         |       | 4,733                                           |       | 15,781                                        |       | 10,623 |   | 29,279 |   |
| Interest  expense                                                  |       | (651,110                                        | )          | (561,345                                      | )          | (1,231,755 | ) | (1,247,441 | ) |
| Loss on  disposal of assets                                        |       | -                                               |       | (3,732                                        | )          | - |   | (44,285 | ) |
|                                                               |       |                                            |       |                                          |       |   |   |   |   |
| **Discontinued  operations, net**                                  |       | $                                               | (99,319    | )                                             | $          | 277,749 |   | $ | 636,497 |   | $ | 375,996 |   |

 

The components of long-lived assets held forsale consist primarily of land, buildings and amenities for the propertiesbeing sold.  The components of long-livedliabilities held for sale consist primarily of accrued property taxliabilities, security deposit liabilities and any stand-alone mortgage on theproperties being sold.

 

**Note 4 –Concentration of Credit Risk**

 

We own and operate, either wholly or as atenant in common with an unaffiliated third party, multifamily properties,commercial and retail real estate in Louisville and Lexington, Kentucky; FortLauderdale, Florida; Indianapolis, Indiana; Memphis and Nashville, Tennessee;Richmond, Virginia and Atlanta, Georgia.

 

Our financial instruments that are exposed toconcentrations of credit risk consist of cash and equivalents and cash andequivalents - restricted.  We maintainour cash accounts primarily with banks located in Kentucky.  The total cash balances are insured by theFDIC up to $100,000 per bank account.  Wemay at times, in certain accounts, have deposits in excess of $100,000.

 

**Note 5 –Cash and Equivalents**

 

Cash and equivalents include cash on hand andshort-term, highly liquid investments with initial maturities of three monthsor less.  We have a cash managementprogram, which provides for the overnight investment of excess cashbalances.  Under an agreement with abank, excess cash is invested in a mutual fund for U.S. government and agencysecurities each night.

 

**Note 6 –Cash and Equivalents - Restricted**

 

Cash and equivalents - restricted representscash on hand and short-term, highly liquid investments with initial maturitiesof three months or less which have been escrowed with certain mortgagecompanies and banks for property taxes, insurance and tenant improvements inaccordance with certain loan and lease agreements and certain securitydeposits.

 

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**Table of Contents**

 

**Note 7 –Property and Depreciation**

 

Land, buildings and amenities are stated atcost.  Costs directly associated with theacquisition, development and construction of a project are capitalized.  Depreciation is computed using thestraight-line method over the estimated useful lives of the assets, which aregenerally 5-30 years for land improvements, 7-30 years for buildings andimprovements and 5-30 years for amenities. Tenant improvements are generally depreciated over the life of theinitial or renewal term of the respective tenant lease.  Depreciation expense from continuingoperations for the three months ended June 30, 2008 and 2007 wasapproximately $4,456,000 and $3,943,000, respectively.  Depreciation expense from continuingoperations for the six months ended June 30, 2008 and 2007 wasapproximately $8,903,000 and $7,210,000, respectively.

 

SFAS No. 144 “Accounting for theImpairment or Disposal of Long-Lived Assets,” specifies circumstances in whichcertain long-lived assets must be reviewed for impairment.  If the carrying amount of an asset exceedsthe sum of its expected future cash flows, the asset’s carrying value must bewritten down to fair value.  Indetermining the value of an investment property and whether the investmentproperty is impaired, management considers several factors such as projectedrental and vacancy rates, property operating expenses, capital expenditures andinterest rates.  The capitalization rateused to determine property valuation is based on the market in which theinvestment 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 bymanagement in determining the value of any particular investment property.  The value of any particular investmentproperty is sensitive to the actual results of any of these factors, eitherindividually or taken as a whole.  If theactual results differ from management’s judgment, the valuation could benegatively or positively affected. Application of this standard during the three and six months ended June 30,2008 and 2007 did not result in an impairment loss.

 

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**Note 8 –Mortgages and Notes Payable**

 

Mortgages and notes payable consist of thefollowing:

 
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **(Unaudited)**             | ** **  | ** **                      | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|-------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **June 30, 2008** | ** **  | **December 31, 2007** | ** ** |
| Mortgage  payable to an insurance company in monthly installments of principal and  interest, bearing interest at 5.07%, maturing on March 15, 2015, secured  by certain land and buildings, with a carrying value of $43,669,333                                                                                                                                                                                       |       | $                           | 27,891,205  |                            | $          | 28,238,625 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank for $24.0 million with monthly installments of principal  and interest, bearing interest at a variable rate based on LIBOR one-month  rate plus 1.80%, currently 4.30%, due June 1, 2009, secured by certain  land and buildings, with a carrying value of $17,730,446 and a $1.9 million  letter of credit. The mortgage is guaranteed by Mr. Nichols (75%) and  Mr. Lavin (25%) |       | 24,000,000                  |        | 17,818,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to an insurance company in monthly installments of principal and  interest, bearing interest at 5.98%, maturing January 15, 2015, secured  by certain land and buildings, with a carrying value of $150,156,074                                                                                                                                                                                       |       | 71,600,008                  |        | 72,141,872                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to an insurance company in monthly installments of principal and interest,  bearing interest at 5.35%, maturing January 15, 2015, secured by certain  land and buildings, with a carrying value of $150,156,074                                                                                                                                                                                       |       | 32,259,958                  |        | 32,511,394                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Revolving  note payable to a bank for $15.0 million, with interest payable in monthly  installments, unsecured, at a variable rate based on LIBOR plus 1.75%,  currently 4.22%, due May 31, 2009                                                                                                                                                                                                                        |       | 7,259,323                   |        | 24,929,760                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank in monthly installments of principal and interest, bearing  interest at 9.00%, maturing August 1, 2010, secured by certain land and  a building, with a carrying value of $2,691,383                                                                                                                                                                                                        |       | 2,469,666                   |        | 2,524,433                       |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to an insurance company in monthly installments of principal and  interest, bearing interest at 8.45%, maturing November 1, 2015, secured  by certain land and a building, with a carrying value of $2,135,248                                                                                                                                                                                        |       | 2,396,176                   |        | 2,510,076                       |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to an insurance company in monthly installments of principal and  interest, bearing interest at 8.38%, maturing December 1, 2010, secured  by certain land, a building and amenities (1)                                                                                                                                                                                                              |       | -                           |        | 2,610,501                       |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank in monthly installments of principal and interest, bearing  interest at 5.11%, maturing December 1, 2014, secured by certain land  and buildings, with a carrying value of $13,314,485                                                                                                                                                                                                      |       | 11,668,433                  |        | 11,758,589                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank, with interest payable in monthly installments, bearing  interest at LIBOR plus 1.75%, maturing July 1, 2008, secured by certain  land and buildings                                                                                                                                                                                                                                        |       | -                           |        | 14,277,897                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank in monthly installments of principal and interest at 5.72%,  maturing April 11, 2017, secured by certain land, buildings and  amenities, with a carrying value of $42,349,561                                                                                                                                                                                                               |       | 35,495,134                  |        | 35,715,686                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Mortgage  payable to a bank, with interest payable in monthly installments, bearing  interest at 5.99% maturing October 15, 2017, secured by certain land,  buildings and amenities, with a carrying value of $30,689,635                                                                                                                                                                                               |       | 22,750,000                  |        | 22,750,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Note payable  to an unaffiliated third party, with interest payable in monthly  installments, bearing interest at 6.50%, due September 30, 2008, secured  by land, buildings and amenities, with a carrying value of $41,000,000                                                                                                                                                                                        |       | 18,600,000                  |        | -                               |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
| Note payable  to an unaffiliated third party, with interest payable in monthly  installments, bearing interest at 6.50%, due September 30, 2008, secured  by land, buildings and amenities, with a carrying value of $41,000,000                                                                                                                                                                                        |       | 9,200,000                   |        | -                               |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                        |        |                            |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |       | $                           | 265,589,903 |                            | $          | 267,786,833 |   |

 

----

(1)          This mortgage payable has been included in our long-lived liabilitiesheld for sale.

 

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Based on the borrowing rates currentlyavailable to us for loans with similar terms and average maturities, the fairvalue of long-term debt on June 30, 2008 was approximately $254.0 million.

 

On May 1, 2008, we paid down $19.4million on our revolving note payable in connection with the sale of the OfficePortfolio.  As a result of completing thesale of our Office Portfolio, on May 2, 2008, our total availability todraw on our revolving note payable was reduced from $28.0 million to $20.0million.

 

On May 28, 2008, we reduced our totalavailability to draw on our revolving note payable to $15.0 million.  We extended the maturity of our note payableto May 31, 2009.

 

Interest paid for the six months ended June 30,2008 and 2007 was approximately $7,828,000 and $6,913,000, respectively.

 

Our mortgages may be prepaid but aregenerally subject to a yield-maintenance premium.  Certain mortgages and notes payable containcovenants and requirements that we maintain specified debt limits and ratiosrelated to our debt balances and property values.  We complied with all covenants andrequirements at June 30, 2008.  On May 1,2008, we repaid our mortgage payable to a bank maturing July 1, 2008.

 

We entered into an interest rate swapagreement beginning in September 2007 that effectively converted $18.0million of our variable-rate debt bearing interest at the LIBOR one month rateto a fixed rate basis through September 2009.

 

The fair value of the interest rate swapagreement at June 30, 2008, was approximately $406,000 and is included inother liabilities on our Consolidated Balance Sheets.  During the three months ended June 30,2008, we recognized a net gain of approximately $301,000 and made net paymentsof approximately $108,000.  For the six monthsended June 30, 2008, we recognized a total expense of approximately$188,000.

 

On August 11, 2008, we obtainedpermanent financing for Shelby Farms and paid off the notes payable to anunaffiliated third party for $18.6 million and $9.2 million, respectively.

 

**Note 9 –Accounts Payable and Accrued Expenses Due to Affiliate**

 

Accounts payable and accrued expenses due toaffiliate includes amounts owed to NTS Development Company for reimbursement ofemployee costs and overhead expenses and fees for services rendered as providedfor in our management agreement.

 

**Note 10 –Related Party Transactions**

 

Pursuant to our management agreement, NTSDevelopment Company receives fees for a variety of services performed for ourbenefit.  NTS Development Company alsoreceives fees under separate management agreements for each of our propertiesowned as a tenant in common with an unaffiliated third party.  Property management fees are paid in anamount equal to 5% of the gross collected revenue from our wholly-owned propertiesand 3.5% of the gross collected revenue from our properties owned as a tenantin common with an unaffiliated third party. We were the beneficiary of a preferential ownership interest,disproportionately greater than our initial cash investment in each propertyowned as a tenant in common with an unaffiliated third party.  Construction supervision fees are paid in anamount equal to 5% of the costs incurred which relate to capital improvements.  These construction supervision fees arecapitalized as part of land, buildings and amenities.  Also pursuant to the agreement, NTSDevelopment Company receives commercial leasing fees equal to 4% of the grossrental amount for new leases and 2% of the gross rental amount for new leasesin which a broker is used and for renewals or extensions.  Disposition fees are paid to NTS DevelopmentCompany in an amount of 1% to 4% of the aggregate sales price of a propertypursuant to our management agreement and up to a 6% fee upon disposition on ourproperties owned as a tenant in common with an unaffiliated third party underseparate management agreements.  NTSDevelopment Company is reimbursed its actual costs for services rendered to NTSRealty.  NTS Development Company hasagreed to accept a lower management fee and no construction supervision feesfor the properties we own as a tenant in common with an unaffiliated thirdparty in exchange for a larger potential disposition fee.

 

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Employee costs are allocated among NTSRealty, other affiliates of our managing general partner and for the benefit ofthird parties, so that a full time employee can be shared by multiple entities.  Each employee’s services, which are dedicatedto a particular entity’s operations, are allocated as a percentage of eachemployee’s costs to that entity.  We onlyreimburse charges from NTS Development Company for actual costs of employeeservices incurred for our benefit.

 

We were charged the following amountspursuant to our management agreement with NTS Development Company for the threeand six months ended June 30, 2008 and 2007.  These charges include items, which have beenexpensed as operating expenses reimbursed to affiliate or professional andadministrative expenses reimbursed to affiliate and items, which have beencapitalized as other assets or as land, buildings and amenities.  Certain of these items are included in ourresults of discontinued operations.

 

On March 26, 2008, we and anunaffiliated third party entered into an agreement to purchase a parcel of landtotaling approximately 11 acres for an aggregate purchase price of $5.3 millionfrom an affiliate, Orlando Lake Forest Joint Venture.  On July 31, 2008, the agreement wasterminated.

** **
| ** **                                                            | ** ** | **(Unaudited)**                                                       | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **For the Three Months Ended June 30,** | ** ** |
| ** **                                                            | ** ** | **2008**                                                              | ** ** | **2007** | ** ** |
| Property  management fees                                             | ** ** | $                                                                     | 570,745    |   | $ | 606,969 |   |
|                                                                  |       |                                                                  |       |   |   |
| Operating  expenses reimbursement - Property                          |       | 878,791                                                               |       | 952,083 |   |
| Operating  expenses reimbursement - Multifamily Leasing               |       | 170,769                                                               |       | 142,993 |   |
| Operating  expenses reimbursement - Administrative                    |       | 290,865                                                               |       | 355,749 |   |
| Operating  expenses reimbursement - Other                             |       | 25,893                                                                |       | 31,121 |   |
|                                                                  |       |                                                                  |       |   |   |
| Total  operating expenses reimbursed to affiliate                     |       | 1,366,318                                                             |       | 1,481,946 |   |
|                                                                  |       |                                                                  |       |   |   |
| Professional  and administrative expenses reimbursed to affiliate     |       | 404,441                                                               |       | 402,354 |   |
|                                                                  |       |                                                                  |       |   |   |
| Construction  supervision fees                                        |       | 92,899                                                                |       | 77,024 |   |
| Commercial  leasing fees                                              |       | 2,274                                                                 |       | 236,632 |   |
|                                                                  |       |                                                                  |       |   |   |
| Disposition  fees included in gain on sale of discontinued operations |       | 1,558,390                                                             |       | - |   |
|                                                                  |       |                                                                  |       |   |   |
| **Total  related party transactions**                                 |       | $                                                                     | 3,995,067  |   | $ | 2,804,925 |   |

 
| ** **                                                            | ** ** | **(Unaudited)**                                                     | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **For the Six Months Ended June 30,** | ** ** |
| ** **                                                            | ** ** | **2008**                                                            | ** ** | **2007** | ** ** |
| Property  management fees                                             | ** ** | $                                                                   | 1,228,861  |   | $ | 1,186,252 |   |
|                                                                  |       |                                                                |       |   |   |
| Operating  expenses reimbursement - Property                          |       | 1,844,791                                                           |       | 1,808,618 |   |
| Operating  expenses reimbursement - Multifamily Leasing               |       | 325,194                                                             |       | 235,509 |   |
| Operating  expenses reimbursement - Administrative                    |       | 641,146                                                             |       | 727,647 |   |
| Operating  expenses reimbursement - Other                             |       | 54,470                                                              |       | 63,795 |   |
|                                                                  |       |                                                                |       |   |   |
| Total  operating expenses reimbursed to affiliate                     |       | 2,865,601                                                           |       | 2,835,569 |   |
|                                                                  |       |                                                                |       |   |   |
| Professional  and administrative expenses reimbursed to affiliate     |       | 843,263                                                             |       | 909,464 |   |
|                                                                  |       |                                                                |       |   |   |
| Construction  supervision fees                                        |       | 147,421                                                             |       | 121,910 |   |
| Commercial  leasing fees                                              |       | 7,837                                                               |       | 273,049 |   |
|                                                                  |       |                                                                |       |   |   |
| Disposition  fees included in gain on sale of discontinued operations |       | 1,558,390                                                           |       | 578,000 |   |
|                                                                  |       |                                                                |       |   |   |
| **Total  related party transactions**                                 |       | $                                                                   | 6,651,373  |   | $ | 5,904,244 |   |

 

15

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

 

During the three months ended June 30,2008 and 2007, we were charged approximately $10,000 and $17,000, respectively,for property maintenance fees from affiliates of NTS Development Company.  During the six months ended June 30,2008 and 2007, we were charged approximately $32,000 and $40,000, respectively,for property maintenance fees from affiliates of NTS Development Company.

 

NTS Development Company leased 20,368 squarefeet in NTS Center at a rental rate of $14.50 per square foot.  We received rental payments from NTSDevelopment Company of approximately $74,000 and $148,000 during each of thethree and six months ended June 30, 2008 and 2007.  The average per square foot rental rate forsimilar space in NTS Center as of June 30, 2008 was $13.92 per squarefoot.

 

**Note 11 –Commitments and Contingencies**

 

We, as an owner of real estate, are subjectto various environmental laws of federal, state and local governments.  Our compliance with existing laws has not hada material adverse effect on our financial condition and results ofoperations.  However, we cannot predictthe impact of new or changed laws or regulations on our current properties oron properties that we may acquire in the future.

 

***Litigation***

*** ***

We do not believe there is any litigationthreatened against us other than routine litigation arising out of the ordinarycourse of business, some of which is expected to be covered by insurance, noneof which is expected to have a material effect on our financial position orresults of operations.

 

**Note 12 –Segment Reporting**

 

Our reportable operating segments include –Land, Retail, Commercial and Multifamily Real Estate Operations.  The following unaudited financial informationof the operating segments has been prepared using a management approach, whichis consistent with the basis and manner in which our management internallydisaggregates financial information for the purpose of assisting in makinginternal operating decisions.  Weevaluate performance based on stand-alone operating segment net income or loss.

 

16

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| ** **                                                                                                      | ** ** | **(Unaudited)**                                               | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Three Months Ended June 30, 2008** | ** ** |
| ** **                                                                                                      | ** ** | **Land**                                                      | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental  income                                                                                                  |       | $                                                             | -          |   | $ | 308,358 |   | $ | 1,097,686 |   | $ | 9,640,107 |   | $ | (68,706 | ) | $ | 10,977,445 |   |
| Tenant reimbursements                                                                                           |       | -                                                             |       | 27,073 |   | 354,114 |   | - |   | - |   | 381,187 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total  revenue**                                                                                              |       | -                                                             |       | 335,431 |   | 1,451,800 |   | 9,640,107 |   | (68,706 | ) | 11,358,632 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Operating  expenses and operating expenses reimbursed to affiliate                                              |       | -                                                             |       | 50,476 |   | 525,241 |   | 3,852,196 |   | - |   | 4,427,913 |   |
| Management  fees                                                                                                |       | -                                                             |       | 16,247 |   | 62,348 |   | 449,853 |   | - |   | 528,448 |   |
| Property  taxes and insurance                                                                                   |       | -                                                             |       | 14,543 |   | 204,801 |   | 1,684,855 |   | 31,235 |   | 1,935,434 |   |
| Professional  and administrative expenses and professional and administrative expenses  reimbursed to affiliate |       | -                                                             |       | - |   | - |   | - |   | 673,876 |   | 673,876 |   |
| Depreciation  and amortization                                                                                  |       | -                                                             |       | 85,150 |   | 391,595 |   | 4,039,451 |   | - |   | 4,516,196 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total  operating expenses**                                                                                   |       | -                                                             |       | 166,416 |   | 1,183,985 |   | 10,026,355 |   | 705,111 |   | 12,081,867 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Operating  income (loss)**                                                                                    |       | -                                                             |       | 169,015 |   | 267,815 |   | (386,248 | ) | (773,817 | ) | (723,235 | ) |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Interest and  other income                                                                                      |       | -                                                             |       | - |   | 2,336 |   | 15,614 |   | 125,994 |   | 143,944 |   |
| Interest  expense                                                                                               |       | -                                                             |       | (110,718 | ) | (411,292 | ) | (2,817,392 | ) | 240,891 |   | (3,098,511 | ) |
| Loss on  disposal of assets                                                                                     |       | -                                                             |       | - |   | (23,610 | ) | (2,935 | ) | - |   | (26,545 | ) |
| Minority  interest                                                                                              |       | -                                                             |       | - |   | - |   | (460,876 | ) | - |   | (460,876 | ) |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Income  (loss) from continuing operations**                                                                   |       | -                                                             |       | 58,297 |   | (164,751 | ) | (2,730,085 | ) | (406,932 | ) | (3,243,471 | ) |
| Discontinued  operations, net                                                                                   |       | 2,690                                                         |       | - |   | (102,009 | ) | - |   | - |   | (99,319 | ) |
| Gain on sale  of discontinued operations                                                                        |       | 120,598                                                       |       | - |   | 18,789,535 |   | - |   | - |   | 18,910,133 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Net  income (loss)**                                                                                          |       | $                                                             | 123,288    |   | $ | 58,297 |   | $ | 18,522,775 |   | $ | (2,730,085 | ) | $ | (406,932 | ) | $ | 15,567,343 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Land,  buildings and amenities, net                                                                             |       | $                                                             | -          |   | $ | 7,357,221 |   | $ | 26,652,045 |   | $ | 321,179,088 |   | $ | - |   | $ | 355,188,354 |   |

 

17

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| ** **                                                                                                      | ** ** | **(Unaudited)**                                               | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Three Months Ended June 30, 2007** | ** ** |
| ** **                                                                                                      | ** ** | **Land**                                                      | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental  income                                                                                                  |       | $                                                             | -          |   | $ | 388,960 |   | $ | 1,056,793 |   | $ | 8,658,714 |   | $ | (225,268 | ) | $ | 9,879,199 |   |
| Tenant  reimbursements                                                                                          |       | -                                                             |       | 21,323 |   | 384,287 |   | - |   | - |   | 405,610 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total  revenue**                                                                                              |       | -                                                             |       | 410,283 |   | 1,441,080 |   | 8,658,714 |   | (225,268 | ) | 10,284,809 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Operating  expenses and operating expenses reimbursed to affiliate                                              |       | -                                                             |       | 38,412 |   | 424,694 |   | 3,454,571 |   | - |   | 3,917,677 |   |
| Management  fees                                                                                                |       | -                                                             |       | 20,063 |   | 72,163 |   | 410,928 |   | - |   | 503,154 |   |
| Property  taxes and insurance                                                                                   |       | -                                                             |       | 16,972 |   | 202,530 |   | 1,310,246 |   | 33,737 |   | 1,563,485 |   |
| Professional  and administrative expenses and professional and administrative expenses  reimbursed to affiliate |       | -                                                             |       | - |   | - |   | - |   | 748,940 |   | 748,940 |   |
| Depreciation  and amortization                                                                                  |       | -                                                             |       | 67,802 |   | 381,240 |   | 3,590,695 |   | - |   | 4,039,737 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total  operating expenses**                                                                                   |       | -                                                             |       | 143,249 |   | 1,080,627 |   | 8,766,440 |   | 782,677 |   | 10,772,993 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Operating  income (loss)**                                                                                    |       | -                                                             |       | 267,034 |   | 360,453 |   | (107,726 | ) | (1,007,945 | ) | (488,184 | ) |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Interest and  other income                                                                                      |       | -                                                             |       | - |   | 270 |   | 13,317 |   | - |   | 13,587 |   |
| Interest  expense                                                                                               |       | -                                                             |       | (113,503 | ) | (353,505 | ) | (2,582,290 | ) | (73,769 | ) | (3,123,067 | ) |
| Loss on  disposal of assets                                                                                     |       | -                                                             |       | - |   | (29,632 | ) | (3,048 | ) | - |   | (32,680 | ) |
| Minority  interest                                                                                              |       | -                                                             |       | - |   | - |   | (284,829 | ) | - |   | (284,829 | ) |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Income  (loss) from continuing operations**                                                                   |       | -                                                             |       | 153,531 |   | (22,414 | ) | (2,394,918 | ) | (1,081,714 | ) | (3,345,515 | ) |
| Discontinued  operations, net                                                                                   |       | 7,145                                                         |       | - |   | 270,604 |   | - |   | - |   | 277,749 |   |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Net  income (loss)**                                                                                          |       | $                                                             | 7,145      |   | $ | 153,531 |   | $ | 248,190 |   | $ | (2,394,918 | ) | $ | (1,081,714 | ) | $ | (3,067,766 | ) |
|                                                                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Land,  buildings and amenities, net                                                                             |       | $                                                             | -          |   | $ | 7,561,205 |   | $ | 25,603,097 |   | $ | 262,776,021 |   | $ | - |   | $ | 295,940,323 |   |

 

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| ** **                                                                                                      | ** ** | **(Unaudited)**                                             | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Six Months Ended June 30, 2008** | ** ** |
| ** **                                                                                                      | ** ** | **Land**                                                    | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental  income                                                                                                  |       | $                                                           | -          |   | $ | 633,432 |   | $ | 2,429,357 |   | $ | 19,026,220 |   | $ | (99,697 | ) | $ | 21,989,312 |   |
| Tenant  reimbursements                                                                                          |       | -                                                           |       | 47,173 |   | 711,159 |   | - |   | - |   | 758,332 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Total  revenue**                                                                                              |       | -                                                           |       | 680,605 |   | 3,140,516 |   | 19,026,220 |   | (99,697 | ) | 22,747,644 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Operating  expenses and operating expenses reimbursed to affiliate                                              |       | -                                                           |       | 82,876 |   | 995,391 |   | 6,618,685 |   | - |   | 7,696,952 |   |
| Management  fees                                                                                                |       | -                                                           |       | 31,549 |   | 143,159 |   | 899,995 |   | - |   | 1,074,703 |   |
| Property  taxes and insurance                                                                                   |       | -                                                           |       | 29,085 |   | 393,106 |   | 2,798,959 |   | 62,470 |   | 3,283,620 |   |
| Professional  and administrative expenses and professional and administrative expenses  reimbursed to affiliate |       | -                                                           |       | - |   | - |   | - |   | 1,412,565 |   | 1,412,565 |   |
| Depreciation  and amortization                                                                                  |       | -                                                           |       | 152,827 |   | 784,032 |   | 8,144,702 |   | - |   | 9,081,561 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Total  operating expenses**                                                                                   |       | -                                                           |       | 296,337 |   | 2,315,688 |   | 18,462,341 |   | 1,475,035 |   | 22,549,401 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Operating  income (loss)**                                                                                    |       | -                                                           |       | 384,268 |   | 824,828 |   | 563,879 |   | (1,574,732 | ) | 198,243 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Interest and  other income                                                                                      |       | -                                                           |       | - |   | 2,685 |   | 25,613 |   | 125,994 |   | 154,292 |   |
| Interest  expense                                                                                               |       | -                                                           |       | (222,184 | ) | (752,529 | ) | (5,649,423 | ) | (153,951 | ) | (6,778,087 | ) |
| Loss on  disposal of assets                                                                                     |       | -                                                           |       | - |   | (59,681 | ) | (22,907 | ) | - |   | (82,588 | ) |
| Gain on sale  of assets                                                                                         |       | -                                                           |       | - |   | - |   | 2,849 |   | - |   | 2,849 |   |
| Minority  interest                                                                                              |       | -                                                           |       | - |   | - |   | (960,445 | ) | - |   | (960,445 | ) |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Income (loss)  from continuing operations**                                                                   |       | -                                                           |       | 162,084 |   | 15,303 |   | (4,119,544 | ) | (1,602,689 | ) | (5,544,846 | ) |
| Discontinued  operations, net                                                                                   |       | 10,760                                                      |       | - |   | 625,737 |   | - |   | - |   | 636,497 |   |
| Gain on sale  of discontinued operations                                                                        |       | 120,598                                                     |       | - |   | 18,789,535 |   | - |   | - |   | 18,910,133 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Net  income (loss)**                                                                                          |       | $                                                           | 131,358    |   | $ | 162,084 |   | $ | 19,430,575 |   | $ | (4,119,544 | ) | $ | (1,602,689 | ) | $ | 14,001,784 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Land,  buildings and amenities, net                                                                             |       | $                                                           | -          |   | $ | 7,357,221 |   | $ | 26,652,045 |   | $ | 321,179,088 |   | $ | - |   | $ | 355,188,354 |   |

 

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| ** **                                                                                                      | ** ** | **(Unaudited)**                                             | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Six Months Ended June 30, 2007** | ** ** |
| ** **                                                                                                      | ** ** | **Land**                                                    | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Rental  income                                                                                                  |       | $                                                           | -          |   | $ | 713,935 |   | $ | 2,126,061 |   | $ | 16,074,500 |   | $ | (296,236 | ) | $ | 18,618,260 |   |
| Tenant  reimbursements                                                                                          |       | -                                                           |       | 39,828 |   | 769,421 |   | - |   | - |   | 809,249 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Total  revenue**                                                                                              |       | -                                                           |       | 753,763 |   | 2,895,482 |   | 16,074,500 |   | (296,236 | ) | 19,427,509 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Operating  expenses and operating expenses reimbursed to affiliate                                              |       | -                                                           |       | 75,130 |   | 888,615 |   | 5,845,447 |   | - |   | 6,809,192 |   |
| Management  fees                                                                                                |       | -                                                           |       | 36,953 |   | 143,871 |   | 780,363 |   | - |   | 961,187 |   |
| Property  taxes and insurance                                                                                   |       | -                                                           |       | 27,897 |   | 404,529 |   | 2,149,638 |   | 67,473 |   | 2,649,537 |   |
| Professional  and administrative expenses and professional and administrative expenses  reimbursed to affiliate |       | -                                                           |       | - |   | - |   | - |   | 1,582,118 |   | 1,582,118 |   |
| Depreciation  and amortization                                                                                  |       | -                                                           |       | 135,603 |   | 774,666 |   | 6,529,864 |   | - |   | 7,440,133 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Total  operating expenses**                                                                                   |       | -                                                           |       | 275,583 |   | 2,211,681 |   | 15,305,312 |   | 1,649,591 |   | 19,442,167 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Operating  income (loss)**                                                                                    |       | -                                                           |       | 478,180 |   | 683,801 |   | 769,188 |   | (1,945,827 | ) | (14,658 | ) |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Interest and  other income                                                                                      |       | -                                                           |       | - |   | 540 |   | 44,800 |   | 16,877 |   | 62,217 |   |
| Interest  expense                                                                                               |       | -                                                           |       | (216,403 | ) | (659,480 | ) | (4,783,603 | ) | (216,515 | ) | (5,876,001 | ) |
| Loss on  disposal of assets                                                                                     |       | -                                                           |       | - |   | (38,213 | ) | (10,706 | ) | - |   | (48,919 | ) |
| Minority  interest                                                                                              |       | -                                                           |       | - |   | - |   | (292,296 | ) | - |   | (292,296 | ) |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Income  (loss) from continuing operations**                                                                   |       | -                                                           |       | 261,777 |   | (13,352 | ) | (3,688,025 | ) | (2,145,465 | ) | (5,585,065 | ) |
| Discontinued  operations, net                                                                                   |       | 14,426                                                      |       | - |   | 361,570 |   | - |   | - |   | 375,996 |   |
| Gain on sale  of discontinued operations                                                                        |       | -                                                           |       | - |   | 13,482,291 |   | - |   | - |   | 13,482,291 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| **Net  income (loss)**                                                                                          |       | $                                                           | 14,426     |   | $ | 261,777 |   | $ | 13,830,509 |   | $ | (3,688,025 | ) | $ | (2,145,465 | ) | $ | 8,273,222 |   |
|                                                                                                            |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Land,  buildings and amenities, net                                                                             |       | $                                                           | -          |   | $ | 7,561,205 |   | $ | 25,603,097 |   | $ | 262,776,021 |   | $ | - |   | $ | 295,940,323 |   |

## ** **

## **Item 2 – Management’s Discussion and Analysis of FinancialCondition and Results of Operations**

## ** **

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations should be read in conjunctionwith the financial statements in Item 1 and the cautionary statements below.

 

**CriticalAccounting Policies**

 

A critical accounting policy is one thatwould materially affect our operations or financial condition, and requiresmanagement to make estimates or judgments in certain circumstances.  These judgments often result from the need tomake estimates about the effect of matters that are inherently uncertain.  Critical accounting policies are not to beconfused with accounting principles and methods disclosed in accordance withU.S. generally accepted accounting principles (“GAAP”).  GAAP requires information in financialstatements about accounting principles, methods used and disclosures pertainingto significant estimates.  Our CriticalAccounting Policies, as previously disclosed in our most recent annual reporton form 10-K, which was filed on March 25, 2008, discuss judgments knownto management pertaining to trends, events or uncertainties known which weretaken into consideration upon the application of those policies and thelikelihood that materially different amounts would be reported upon taking intoconsideration different conditions and assumptions and remain unchanged duringthe quarter ended June 30, 2008.

 

20

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**Resultsof Operations**

 

As of June 30, 2008, weowned wholly or as a tenant in common with an unaffiliated third party, 22properties, comprised of 12 multifamily properties, 7 office and businesscenters and 3 retail properties. Discontinued operations consist of 8 office and business centers and 1ground lease.  We generate substantiallyall of our operating income from property operations.

 

Net income for the three monthsended June 30, 2008 was approximately $15,567,000 and net loss for thethree months ended June 30, 2007 was approximately $3,068,000.  Netincome for the six months ended June 30, 2008 and 2007 was approximately$14,002,000 and $8,273,000, respectively.  The increase was primarily dueto the sale of the Office Portfolio (May 2008).

 

The following tables includecertain selected summarized operating data for the three and six months ended June 30,2008 and 2007.  This data should be readin conjunction with our financial statements, including the notes attachedhereto.

 
| ** **                                                         | ** ** | **(Unaudited)**                                               | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Three Months Ended June 30, 2008** | ** ** |
| ** **                                                         | ** ** | **Land**                                                      | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total  revenues                                                    |       | $                                                             | -          |   | $ | 335,431 |   | $ | 1,451,800 |   | $ | 9,640,107 |   | $ | (68,706 | ) | $ | 11,358,632 |   |
| Operating  expenses and operating expenses reimbursed to affiliate |       | -                                                             |       | 50,476 |   | 525,241 |   | 3,852,196 |   | - |   | 4,427,913 |   |
| Depreciation  and amortization                                     |       | -                                                             |       | 85,150 |   | 391,595 |   | 4,039,451 |   | - |   | 4,516,196 |   |
| Total  interest expense                                            |       | -                                                             |       | (110,718 | ) | (411,292 | ) | (2,817,392 | ) | 240,891 |   | (3,098,511 | ) |
| Net income  (loss)                                                 |       | 123,288                                                       |       | 58,297 |   | 18,522,775 |   | (2,730,085 | ) | (406,932 | ) | 15,567,343 |   |
|                                                                    |            |                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                                         | ** ** | **(Unaudited)**                                               | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Three Months Ended June 30, 2007** | ** ** |
| ** **                                                         | ** ** | **Land**                                                      | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total  revenues                                                    |       | $                                                             | -          |   | $ | 410,283 |   | $ | 1,441,080 |   | $ | 8,658,714 |   | $ | (225,268 | ) | $ | 10,284,809 |   |
| Operating  expenses and operating expenses reimbursed to affiliate |       | -                                                             |       | 38,412 |   | 424,694 |   | 3,454,571 |   | - |   | 3,917,677 |   |
| Depreciation  and amortization                                     |       | -                                                             |       | 67,802 |   | 381,240 |   | 3,590,695 |   | - |   | 4,039,737 |   |
| Total  interest expense                                            |       | -                                                             |       | (113,503 | ) | (353,505 | ) | (2,582,290 | ) | (73,769 | ) | (3,123,067 | ) |
| Net income  (loss)                                                 |       | 7,145                                                         |       | 153,531 |   | 248,190 |   | (2,394,918 | ) | (1,081,714 | ) | (3,067,766 | ) |
|                                                                    |            |                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                                         | ** ** | **(Unaudited)**                                             | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Six Months Ended June 30, 2008** | ** ** |
| ** **                                                         | ** ** | **Land**                                                    | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total  revenues                                                    |       | $                                                           | -          |   | $ | 680,605 |   | $ | 3,140,516 |   | $ | 19,026,220 |   | $ | (99,697 | ) | $ | 22,747,644 |   |
| Operating  expenses and operating expenses reimbursed to affiliate |       | -                                                           |       | 82,876 |   | 995,391 |   | 6,618,685 |   | - |   | 7,696,952 |   |
| Depreciation  and amortization                                     |       | -                                                           |       | 152,827 |   | 784,032 |   | 8,144,702 |   | - |   | 9,081,561 |   |
| Total  interest expense                                            |       | -                                                           |       | (222,184 | ) | (752,529 | ) | (5,649,423 | ) | (153,951 | ) | (6,778,087 | ) |
| Net income  (loss)                                                 |       | 131,358                                                     |       | 162,084 |   | 19,430,575 |   | (4,119,544 | ) | (1,602,689 | ) | 14,001,784 |   |
|                                                                    |            |                                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                                         | ** ** | **(Unaudited)**                                             | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Six Months Ended June 30, 2007** | ** ** |
| ** **                                                         | ** ** | **Land**                                                    | ** ** | **Retail** | ** ** | **Commercial** | ** ** | **Multifamily** | ** ** | **Partnership** | ** ** | **Total** | ** ** |
| Total  revenues                                                    |       | $                                                           | -          |   | $ | 753,763 |   | $ | 2,895,482 |   | $ | 16,074,500 |   | $ | (296,236 | ) | $ | 19,427,509 |   |
| Operating  expenses and operating expenses reimbursed to affiliate |       | -                                                           |       | 75,130 |   | 888,615 |   | 5,845,447 |   | - |   | 6,809,192 |   |
| Depreciation  and amortization                                     |       | -                                                           |       | 135,603 |   | 774,666 |   | 6,529,864 |   | - |   | 7,440,133 |   |
| Total  interest expense                                            |       | -                                                           |       | (216,403 | ) | (659,480 | ) | (4,783,603 | ) | (216,515 | ) | (5,876,001 | ) |
| Net income  (loss)                                                 |       | 14,426                                                      |       | 261,777 |   | 13,830,509 |   | (3,688,025 | ) | (2,145,465 | ) | 8,273,222 |   |
|                                                                    |            |                                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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Occupancy levels at ourcontinuing properties by segment as of June 30, 2008 and 2007 were asfollows:

 
| ** **  | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------|------------|----------|------------|----------|------------|
| Commercial  |       | 75.9     | %          | 73.6     | %          |
| Multifamily |       | 94.3     | %          | 95.5     | %          |
| Retail      |       | 97.0     | %          | 98.2     | %          |
| Land        |       | N/A      |       | N/A      |       |

 

We believe the changes inoccupancy on June 30 from year to year are temporary effects of eachproperty’s specific mix of lease maturities and are not indicative of any knowntrend or uncertainty.

 

The average occupancy levels atour continuing properties by segment for the three and six months ended June 30,2008 and 2007 were as follows:

 
| ** **  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **  | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Commercial  |       | 75.2                                                | %          | 74.1                                              | %          | 72.7 | % | 74.5 | % |
| Multifamily |       | 93.2                                                | %          | 95.7                                              | %          | 93.2 | % | 95.6 | % |
| Retail      |       | 97.4                                                | %          | 98.2                                              | %          | 97.8 | % | 98.2 | % |
| Land        |       | N/A                                                 |       | N/A                                               |       | N/A |   | N/A |   |

 

We believe the changes inaverage occupancy from period to period are temporary effects of each property’sspecific mix of lease maturities and are not indicative of any known trend oruncertainty.

 

The leasing and renewalnegotiations for our commercial and retail properties are primarily handled byleasing agents that are employees of NTS Development Company.  All advertising for the commercial and retailproperties is coordinated by NTS Development Company’s marketing staff locatedin Louisville, Kentucky.

 

We have on-site leasing staff,who are employees of NTS Development Company, at each of the multifamilyproperties.  The staff handles allon-site visits from potential tenants, coordinates local advertising with NTSDevelopment Company’s marketing staff, makes visits to local companies topromote fully furnished apartments and negotiates lease renewals with currentresidents.

 

The following discussionrelating to changes in our results of operations includes only material lineitems within our Statements of Operations or line items for which there was amaterial change between the three and six months ended June 30, 2008 and2007.

 

***Rental Incomeand Tenant Reimbursements***

*** ***

Rental income and tenantreimbursements from continuing operations for the three months ended June 30,2008 and 2007 were approximately $11,359,000 and $10,285,000,respectively.  Rental income and tenantreimbursements from continuing operations for the six months ended June 30,2008 and 2007 were approximately $22,748,000 and $19,428,000,respectively.  The increases of$1,074,000, or 10%, and $3,320,000, or 17% were primarily due to the 2007acquisitions of The Overlook Apartments (March 2007) and Creek’s EdgeApartments (August 2007).

 

***Operating Expensesand Operating Expenses Reimbursed to Affiliate***

*** ***

Operating expenses fromcontinuing operations for the three months ended June 30, 2008 and 2007were approximately $3,154,000 and $2,652,000, respectively.  Operating expenses from continuing operationsfor the six months ended June 30, 2008 and 2007 were approximately$5,153,000 and $4,436,000, respectively. The increases of $502,000, or 19%, and $717,000, or 16%, were primarilydue to the 2007 acquisitions of The Overlook Apartments and Creek’s Edge Apartments.

 

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Operating expenses reimbursedto affiliate from continuing operations for the three months ended June 30,2008 and 2007 were approximately $1,274,000 and $1,265,000, respectively.  Operating expenses reimbursed to affiliatefrom continuing operations for the six months ended June 30, 2008 and 2007were approximately $2,544,000 and $2,373,000, respectively.  The increases of approximately $9,000, or0.7%, and $171,000, or 7%, were primarily due to the cost of reimbursing NTSDevelopment Company for the employees of The Overlook Apartments and Creek’sEdge Apartments, our 2007 acquisitions.

 

We do not have anyemployees.  Pursuant to our managementagreement, NTS Development Company employs the individuals who provide servicesnecessary to operate our properties and conduct our business.  NTS Development Company provides employeesthat may also perform services for other properties and businessenterprises.  In the situation where aparticular employee benefits multiple operations, the employee’s cost isproportionately charged out to the entity receiving the services.    We only reimburse charges from NTS DevelopmentCompany for actual costs of employee services incurred for our benefit.  The cost of services provided to us by NTSDevelopment Company’s employees are classified in our consolidated Statementsof Operations as “Operating expenses reimbursed to affiliate”.  The services provided by others areclassified as “Operating expenses”.

 

Operating expenses reimbursedto affiliate are for services performed by employees of NTS DevelopmentCompany, an affiliate of our general partners. These employee services include property management, leasing,maintenance, security and other services necessary to manage and operate ourbusiness.

 

Operating expenses reimbursedto affiliate consisted approximately of the following:

*** ***
| ** **           | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
|----------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **           | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **           | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Property             |       | $                                                   | 835,000    |                                              | $          | 821,000 |   | $ | 1,657,000 |   | $ | 1,528,000 |   |
| Multifamily  Leasing |       | 171,000                                             |       | 143,000                                           |       | 325,000 |   | 236,000 |   |
| Administrative       |       | 248,000                                             |       | 281,000                                           |       | 524,000 |   | 569,000 |   |
| Other                |       | 20,000                                              |       | 20,000                                            |       | 38,000 |   | 40,000 |   |
|                 |       |                                                |       |                                              |       |   |   |   |   |
| **Total**            |       | $                                                   | 1,274,000  |                                              | $          | 1,265,000 |   | $ | 2,544,000 |   | $ | 2,373,000 |   |

 

***ManagementFees***

*** ***

Management fees from continuingoperations for the three months ended June 30, 2008 and 2007 wereapproximately $528,000 and $503,000, respectively.  Management fees from continuing operationsfor the six months ended June 30, 2008 and 2007 were approximately$1,075,000 and $961,000, respectively. The increases of approximately $25,000, or 5%, and $114,000, or 12%, wereprimarily due to the 2007 acquisitions of The Overlook Apartments and Creek’sEdge Apartments along with our management fee on a one time lease terminationpayment by a former tenant at Lakeshore Business Center II in 2008.

 

Pursuant to our managementagreement, NTS Development Company receives property management fees equal to5% of the gross collected revenue from our wholly-owned properties.  NTS Development Company receives propertymanagement fees from our properties owned as a tenant in common with anunaffiliated third party equal to 3.5% of their gross collected revenue underseparate management agreements.  We werethe beneficiary of a preferential ownership interest, disproportionatelygreater than our initial cash investment in each property owned as a tenant incommon with an unaffiliated third party. NTS Development Company has agreed to accept a lower management fee forthe properties we own as a tenant in common with an unaffiliated third party inexchange for a larger potential disposition fee.  Disposition fees of up to 6% of the grosssales price may be paid to NTS Development Company for the sale of one of ourproperties owned as a tenant in common with an unaffiliated third party.  Management fees are calculated as apercentage of cash collections and are recorded on the accrual basis.  As a result, the fluctuations in revenuebetween years will differ from the fluctuations of management fee expense.

 

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***Property Taxesand Insurance***

*** ***

Property taxes and insurancefrom continuing operations for the three months ended June 30, 2008 and2007 were approximately $1,935,000, and $1,563,000, respectively.  Property taxes and insurance from continuingoperations for the six months ended June 30, 2008 and 2007 wereapproximately $3,284,000 and $2,650,000, respectively.  The increases of approximately $372,000, or24%, and $634,000, or 24%, were primarily due to increased property tax expenseat Castle Creek Apartments, Lake Clearwater Apartments and The Lakes Apartmentsas a result of increased property tax assessments.  We are continuing to appeal the property taxassessments on these three properties located in Marion County, Indiana.  There can be no assurance these appeals willbe successful or completed in a timely manner. If the remaining appeals are not successful, the resulting propertytaxes that we estimate paying during 2008 related to the three remainingproperties under appeal could exceed the 2007 property tax expense on thoseproperties by approximately $1 million.

 

***Professionaland Administrative Expenses and Professional and Administrative ExpensesReimbursed to Affiliate***

*** ***

Professional and administrativeexpenses from continuing operations for the three months ended June 30,2008 and 2007 were approximately $269,000 and $347,000, respectively.  Professional and administrative expenses fromcontinuing operations for the six months ended June 30, 2008 and 2007 wereapproximately $569,000 and $673,000, respectively.  The decreases of approximately $78,000, or22%, and $104,000, or 15%, were primarily due to a decrease in professionalfees.

 

Professional and administrativeexpenses reimbursed to affiliate from continuing operations for the threemonths ended June 30, 2008 and 2007 were approximately $404,000 and$402,000, respectively.  The increase of$2,000, or 0.4%, was primarily due to increased personnel costs reimbursed toNTS Development Company.  Professionaland administrative expenses reimbursed to affiliate from continuing operationsfor the six months ended June 30, 2008 and 2007 were approximately$843,000 and $909,000, respectively.  Thedecrease of $66,000, or 7%, was primarily due to reduced personnel costsreimbursed to NTS Development Company.

 

We do not have anyemployees.  Pursuant to our managementagreement, NTS Development Company employs the individuals who provide servicesnecessary to operate our properties and conduct our business.  NTS Development Company provides employeesthat may also perform services for other properties and businessenterprises.  In the situation where aparticular employee benefits multiple operations, the employee’s cost isproportionately charged out to the entity receiving the services.  We only reimburse charges from NTSDevelopment Company for actual costs of employee services incurred for ourbenefit.  The cost of services providedto us by NTS Development Company’s employees are classified in our consolidatedStatements of Operations as “Professional and administrative expensesreimbursed to affiliate”.  The servicesprovided by others are classified as “Professional and administrative”.

 

Professional and administrativeexpenses reimbursed to affiliate are for the services performed by employees ofNTS Development Company, an affiliate of our general partners.  These employee services include legal,financial and other services necessary to manage and operate our business.

 

Professional and administrative expenses reimbursed to affiliateconsisted approximately of the following:

 
| ** **          | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
|---------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **          | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **          | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Finance             |       | $                                                   | 95,000     |                                              | $          | 97,000 |   | $ | 199,000 |   | $ | 224,000 |   |
| Accounting          |       | 195,000                                             |       | 197,000                                           |       | 411,000 |   | 413,000 |   |
| Investor  Relations |       | 73,000                                              |       | 69,000                                            |       | 151,000 |   | 196,000 |   |
| Human  Resources    |       | 5,000                                               |       | 5,000                                             |       | 10,000 |   | 9,000 |   |
| Overhead            |       | 36,000                                              |       | 34,000                                            |       | 72,000 |   | 67,000 |   |
|                |       |                                                |       |                                              |       |   |   |   |   |
| **Total**           |       | $                                                   | 404,000    |                                              | $          | 402,000 |   | $ | 843,000 |   | $ | 909,000 |   |

 

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***Depreciationand Amortization***

*** ***

Depreciation and amortizationexpense from continuing operations for the three months ended June 30,2008 and 2007 was approximately $4,516,000 and $4,040,000, respectively.  Depreciation and amortization expense fromcontinuing operations for the six months ended June 30, 2008 and 2007 wasapproximately $9,082,000 and $7,440,000, respectively.  The increases of $476,000, or 12%, and$1,642,000, or 22%, were primarily due to the 2007 acquisitions of The OverlookApartments and Creek’s Edge Apartments.

 

***Interest andOther Income***

*** ***

Interest and other income fromcontinuing operations for the three months ended June 30, 2008 and 2007was approximately $144,000 and $14,000, respectively.  Interest and other income from continuingoperations for the six months ended June 30, 2008 and 2007 wasapproximately $154,000 and $62,000, respectively.  The increases of $130,000, and $92,000, wereprimarily due to interest earned on proceeds from the sale of the OfficePortfolio (May 2008) along with interest earned on our notes receivable.

 

***InterestExpense***

*** ***

Interest expense fromcontinuing operations for the three months ended June 30, 2008 and 2007was approximately $3,099,000 and $3,123,000, respectively. The decrease of$24,000, or 0.8%, was primarily due to a net gain recognized of approximately$301,000 to adjust the interest rate swap agreement to fair value which wasoffset by increased interest expense due to the acquisition of Creek’s EdgeApartments. Interest expense from continuing operations for the six monthsended June 30, 2008 and 2007 was approximately $6,778,000 and $5,876,000,respectively.  The increase of $902,000,or 15%, was primarily due to the 2007 acquisitions of The Overlook Apartmentsand Creek’s Edge Apartments and $188,000 of interest expense primarily relatedto net cash payments made under the interest rate swap agreement.

 

***Loss onDisposal of Assets***

*** ***

The loss on disposal of assetsfrom continuing operations for the three and six months ended June 30,2008 and 2007 can be attributed to assets that were not fully depreciated atthe time of replacement, spread primarily amongst the commercial andmultifamily properties.  Thesereplacements included heating and air conditioning units, tenant finishrenovations and signage.

 

***MinorityInterest***

*** ***

Minority interest for the threeand six months ended June 30, 2008 and 2007 includes the net lossattributable to the minority holder of the tenant in common interests in ourproperties acquired in 2007 as a tenant in common with an unaffiliated thirdparty.  The properties are The OverlookApartments and Creek’s Edge at Stony Point Apartments.

 

***DiscontinuedOperations***

*** ***

Discontinued operations, netfor the three months ended June 30, 2008 was a net loss of approximately$99,000 and net income of approximately $278,000, for the three months ended June 30,2007.  Discontinued operations, net forthe six months ended June 30, 2008 and 2007, was approximately $636,000and $376,000, respectively.  Discontinuedoperations, net for the three and six months ended June 30, 2008 and 2007,includes the net operating results for the properties previously sold andcurrently held for sale as listed below.

 

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| **Property**                                  | ** ** | **Location**   | ** ** | **Status**    | ** ** |
|-----------------------------------------------|------------|----------------|------------|---------------|------------|
| NTS Center                                    |       | Louisville, KY |       | Held for sale |       |
| Atrium  Center                                |       | Louisville, KY |       | Sold 2008     |       |
| Blankenbaker  Business Center I               |       | Louisville, KY |       | Sold 2008     |       |
| Blankenbaker  Business Center II              |       | Louisville, KY |       | Sold 2008     |       |
| Anthem  Office Center                         |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Center                             |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Point Office Center Phase I and II |       | Louisville, KY |       | Sold 2008     |       |
| Plainview  Point Office Center Phase III      |       | Louisville, KY |       | Sold 2008     |       |
| ITT Parking  Lot                              |       | Louisville, KY |       | Sold 2008     |       |
| Springs Medical  Office Center                |       | Louisville, KY |       | Sold 2007     |       |
| Springs  Office Center                        |       | Louisville, KY |       | Sold 2007     |       |

 

***Gain on Saleof Discontinued Operations***

*** ***

Gain on sale of discontinuedoperations for the three and six months ended June 30, 2008 wasapproximately $18,910,000, due to the sale of the Office Portfolio on May 1,2008.  Gain on sale of discontinuedoperations for the six months ended June 30, 2007 was approximately$13,482,000, due to the sale of the Springs Medical Office Center and SpringsOffice Center on February 12, 2007.

 

**Liquidityand Capital Resources**

 

Our most liquid asset is ourcash and equivalents, which consist of cash and short-term investments, but donot include any restricted cash. Operating income generated by the properties will be the primary sourcefrom which we generate cash.  Othersources of cash include the proceeds from mortgage loans and notespayable.  Our main uses of cash willrelate to capital expenditures, required payments of mortgages and notespayable, distributions and property taxes.

 

The following table summarizesour approximate sources/uses of cash flow for the six months ended June 30,2008 and 2007:

 
| ** **                                           | ** ** | **(Unaudited)**                                   | ** ** |
|------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                           | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                                           | ** ** | **2008**                                          | ** ** | **2007** | ** ** |
| Operating  activities                                | ** ** | $                                                 | 1,846,000  |   | $ | 4,295,000 |   |
| Investing  activities                                |       | 2,304,000                                         |       | (18,342,000 | ) |
| Financing  activities                                |       | (4,581,000                                        | )          | 14,114,000 |   |
|                                                 |       |                                              |       |   |   |
| **Net  (decrease) increase in cash and equivalents** |       | $                                                 | (431,000   | ) | $ | 67,000 |   |

*** ***

***Cash Flow fromOperating Activities***

*** ***

Net cash provided by operatingactivities decreased to approximately $1,846,000 from $4,295,000, for the sixmonths ended June 30, 2008 and 2007, respectively.  This decrease was primarily due to reservingapproximately $4.3 million of restricted cash at June 30, 2008 from theproceeds of our sale of the Office Portfolio to be used to satisfy therequirements of Section 1031 of the Internal Revenue Code in purchasing “likekind” replacement property in order to defer recognition of gain for federaltax purposes.

 

***Cash Flow fromInvesting Activities***

*** ***

Net cash provided by investingactivities was approximately $2,304,000, compared to net cash used in investingactivities of $18,342,000, for the six months ended June 30, 2008 and2007, respectively.  The change wasprimarily due to $23.8 million additional proceeds related to propertydispositions than in the comparable prior period partially offset by issuingnotes receivable to the unaffiliated third party purchaser of the OfficePortfolio for $3.5 million.

 

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***Cash Flow fromFinancing Activities***

*** ***

Net cash used in financingactivities was approximately $4,581,000, compared to cash provided by financingactivities of $14,114,000, for the six months ended June 30, 2008 and2007, respectively.  Our 2008 activityincluded repayment of mortgages and our revolving note payable from theproceeds of our sale of the Office Portfolio totaling approximately $36.3million and cash distributions of $2.3 million, which was partially offset bymortgages payable of approximately $34.0 million issued in satisfaction of ourpurchase obligation for Shelby Farms.

 

***FutureLiquidity***

*** ***

Our future liquidity dependssignificantly on our properties’ occupancy and operating results remaining at alevel which provides for debt payments, distributions to our limited partnersand adequate working capital, currently and in the future.  If occupancy were to fall below that leveland remain at or below that level for a significant period of time, our abilityto make payments due under our debt agreements and to continue paying dailyoperational costs would be greatly impaired. In the next twelve months, we intend to operate the properties in asimilar manner to their operation in recent years.  Cash reserves, which consist of unrestrictedcash as shown on our balance sheet, were approximately $1,146,000 on June 30,2008.

 

On March 21, 2008, weannounced that the board of directors of our managing general partner approveda quarterly distribution of $0.10 per unit on our limited partnershipunits.  The distribution was paid on April 16,2008, to limited partners of record at the close of business on April 1,2008.

 

On June 25, 2008, weannounced that the board of directors of our managing general partner approveda quarterly distribution of $0.08 per unit on our limited partnershipunits.  The distribution was paid on July 17,2008, to limited partners of record at the close of business on July 10,2008.

 

Pursuant to leasing agreementssigned by June 30, 2008, we are obligated to incur expenditures ofapproximately $0.4 million funded by borrowings on our debt during the nexttwelve months primarily for renovations and tenant origination costs necessaryto continue leasing our properties.  Thisdiscussion of future liquidity details our material commitments.  We anticipate seeking renewal or refinancingof our note payable coming due in the next twelve months.

 

Our availability on therevolving note payable was approximately $7.7 million as of June 30, 2008.

 

***PropertyTransactions***

*** ***

During the six months ended June 30,2008, we made the following property acquisitions:

 

***Acquisitions***

 
| **Property - Multifamily** | ** ** | **Location** | ** ** | **Units** | ** ** | **Date of   Purchase** | ** ** | **Purchase Price** | ** ** |
|--------------------------------------|------------|--------------|------------|-----------|------------|----------------------------------|------------|-------------------------|------------|
| Shelby Farms  (1)                    |       | Memphis, TN  |       | 450       |       | June 27, 2008               |       | $                       | 41,000,000 |   |
|                                      |            |              |            |           |            |                                  |            |                         |            |  |

 

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(1)   Financed by notes payable to an unaffiliatedthird party of $18.6 million and $9.2 million, respectively.  Ownership percentage at June 30, 2008was 100%.

 

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***Dispositions***

*** ***

During the six months ended June 30,2008, we made the following property dispositions:

 
| **Property – Commercial**          | ** ** | **Location**   | ** ** | **Square Feet** | ** ** | **Date of Sale** | ** ** |
|---------------------------------------------------|------------|----------------|------------|----------------------|------------|----------------------------|------------|
| Atrium  Center (1)                                |       | Louisville, KY |       | 104,286              |       | May 1, 2008           |       |
| Blankenbaker  Business Center I (1)               |       | Louisville, KY |       | 160,689              |       | May 1, 2008           |       |
| Blankenbaker  Business Center II (1)              |       | Louisville, KY |       | 77,408               |       | May 1, 2008           |       |
| Anthem Office  Center (1)                         |       | Louisville, KY |       | 85,305               |       | May 1, 2008           |       |
| Plainview  Center (1)                             |       | Louisville, KY |       | 98,000               |       | May 1, 2008           |       |
| Plainview  Point Office Center Phase I and II (1) |       | Louisville, KY |       | 57,301               |       | May 1, 2008           |       |
| Plainview  Point Office Center Phase III (1)      |       | Louisville, KY |       | 61,680               |       | May 1, 2008           |       |
| ITT Parking  Lot (1)                              |       | Louisville, KY |       | N/A                  |       | May 1, 2008           |       |

 

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(1)   We received approximately $56.0 million inconnection with the sale resulting in a gain of approximately $19.0million.  We used proceeds from thisdisposition to pay down $19.4 million on our revolving note payable, repaid our$14.3 million mortgage payable to a bank and to acquire Shelby Farms.

 

On March 26, 2008, we andan unaffiliated third party entered into an agreement to purchase a parcel ofland totaling approximately 11 acres for an aggregate purchase price of $5.3million from an affiliate, Orlando Lake Forest Joint Venture.  On July 31, 2008, the agreement wasterminated.

 

We may engage in transactionsstructured as “like kind exchanges” of property to obtain favorable taxtreatment under Section 1031 of the Internal Revenue Code.  If we are able to structure an exchange ofproperties as a “like kind exchange,” then any gain we realize from theexchange would not be recognized for federal income tax purposes.  The test for determining whether exchangedproperties are of “like kind” is whether the properties are of the same natureor character.

 

At June 30, 2008 we hadapproximately $4.3 million of proceeds from the sale of the Office Portfolioremaining to be invested in replacement “like kind” property.  Our ability to successfully invest theremaining proceeds in accordance with Section 1031 of the Internal RevenueCode and qualifying all of the proceeds for exclusion from gain recognition forfederal income tax purposes is dependent on many factors and there can be noassurance that we will be successful in doing so.

 

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WebsiteInformation

 

Information concerning NTSRealty Holdings Limited Partnership is available through the NTS DevelopmentCompany 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 orfurnished pursuant to Section 13(a) of the Securities Exchange Actare available and may be accessed free of charge through the “Investor Services”section of our website as soon as reasonably practicable after weelectronically file this material with, or furnish it to, the SEC.  Our website and the information containedtherein or connected thereto are not incorporated into this Quarterly Report onForm 10-Q.

 

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## **Item 3 – Quantitative and Qualitative Disclosures AboutMarket Risk**

## ** **

Our primary market risk exposure, with regardto financial instruments is expected to be our exposure to changes in interestrates.  We refinanced substantially allof our debt acquired at the time of our merger with instruments, which bearinterest at a fixed rate, with the exception of approximately $31.3 million atvariable rates.  We anticipate that ahypothetical 100 basis point increase in interest rates would increase interestexpense on our variable rate debt by approximately $313,000 annually.

 

We entered into an interest rate swapagreement beginning in September 2007 that effectively converts $18.0million of our variable-rate debt bearing interest at the LIBOR one month rateto a 5.05% fixed rate basis for the next two years, thus reducing the impact ofinterest rate changes on future interest expense.  Approximately $18.0 million, or 7%, of ouroutstanding debt had its interest payments converted to a fixed rate by theinterest rate swap agreement at June 30, 2008.

 

The fair value of the interest rate swapagreement at June 30, 2008, was approximately $406,000 and is included inother liabilities on our Consolidated Balance Sheets.  During the three months ended June 30,2008, we recognized a net gain of approximately $301,000 and made net paymentsof approximately $108,000.  For the sixmonths ended June 30, 2008, we recognized a total expense of approximately$188,000.

 

**ContractualObligations and Commercial Commitments**

 

The following table represents ourobligations and commitments to make future payments as of June 30, 2008under contracts, such as debt and lease agreements, and under contingentcommitments, such as debt guarantees.

## ** **

| ** **                              | ** ** | **Total** | ** **  | **Within  One Year** | ** ** | **One - Three  Years** | ** ** | **Three - Five  Years** | ** ** | **After Five  Years** | ** ** |
|-----------------------------------------|------------|-----------|-------------|---------------------------|------------|----------------------------------|------------|-----------------------------------|------------|----------------------------|------------|
| **Contractual  Obligations**            |       |      |        |                      |       |                             |       |                              |       |                       |       |
| Mortgages  and notes payable            |       | $         | 347,650,436 |                      | $          | 76,157,416                       |       | $                                 | 32,705,400 |                       | $          | 30,226,571 |   | $ | 208,561,049 |   |
| Capital  lease obligations              |       | -         |        | -                         |       | -                                |       | -                                 |       | -                          |       |
| Operating  leases (1)                   |       | -         |        | -                         |       | -                                |       | -                                 |       | -                          |       |
| Other  long-term obligations (2)        |       | -         |        | -                         |       | -                                |       | -                                 |       | -                          |       |
|                                    |       |      |        |                      |       |                             |       |                              |       |                       |       |
| **Total  contractual cash obligations** |       | $         | 347,650,436 |                      | $          | 76,157,416                       |       | $                                 | 32,705,400 |                       | $          | 30,226,571 |   | $ | 208,561,049 |   |

 

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(1)   We are party to numerous small operatingleases for office equipment such as copiers, postage machines and fax machines,which represent an insignificant obligation.

(2)   We are party to several annual maintenanceagreements with vendors for such items as outdoor maintenance, pool service andsecurity systems, which represent an insignificant obligation.

 

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## **Item 4 – Controls and Procedures**

## ** **

Our managing general partner has establisheddisclosure controls and procedures to ensure that our material information ismade known to the officers of our managing general partner who certify ourfinancial reports, to our management and to the board of directors of ourmanaging partner.

 

Our managing general partner’s ChiefExecutive Officer and Chief Financial Officer have evaluated the effectivenessof our disclosure controls and procedures as of June 30, 2008.  Based on that evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective as of June 30, 2008.  There were no changes in our internal controlover financial reporting during the quarter ended June 30, 2008 thatmaterially affected or are reasonably likely to materially affect the internalcontrol over financial reporting.

 

## **Item 4T – Controls and Procedures**

## ** **

There were no material changes in ourinternal control over financial reporting during the quarter ended June 30,2008.

 

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# **PART II– OTHER INFORMATION**

# ** **

## **Item 1 – LegalProceedings**

## ** **

None.

 

## **Item 1A – RiskFactors**

## ** **

There have not been material changes to ourRisk Factors as disclosed in our most recent annual report on Form 10-K asfiled with the Securities and Exchange Commission on March 25, 2008.

 

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

## ** **

On March 14, 2008, weannounced that an entity controlled by Mr. J.D. Nichols, Chairman of NTSRealty Capital, Inc., the managing general partner of NTS Realty HoldingsLimited Partnership (the “Company”), commenced a pre-arranged trading plan topurchase limited partnership units of the Company pursuant to Rule 10b5-1under the Securities Exchange Act of 1934, as amended (the “Act”).  The plan authorizes its administrator, WellsFargo Investments, LLC, to purchase up to $600,000 of the Company’s limitedpartnership units from time to time through no later than December 2008.  Under the terms of the plan, Mr. Nicholshas no discretion or control over the timing, effectuation or the amount of eachpurchase.

 

On May 16, 2008, weannounced that entities controlled by Mr. J.D. Nichols commencedpre-arranged trading plans to purchase limited partnership units of the Companypursuant to Rule 10b5-1 under the Act. The plans authorize their administrator, Wells Fargo Investments, LLC,to purchase up to $1,200,000 and $168,000 of the Company’s limited partnershipunits from time to time though no later than April 2010 and November 2008,respectively.  Under the terms of theplan, Mr. Nichols has no discretion or control over the timing,effectuation or the amount of each purchase.

 

During the six months ended June 30,2008, 28,500 units were purchased by the entities controlled or established by Mr. Nicholspursuant to the trading plans announced March 14, 2008 and May 16,2008, respectively.

 

**UnitRepurchase Information:**

 
| **Period**      | ** ** | **Total Number of  Units Purchased** | ** ** | **Average Price Paid  Per Unit** | ** ** | **Total Number of  Units Purchased as  Part of Publicly  Announced Plans or  Programs** | ** ** | **Maximum Number  (or Approximate  Dollar Value) of Units  That May Yet Be  Purchased Under the  Plans or Programs** | ** ** |
|-----------------|------------|-----------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| April 2008 |       | 6,000                                               |       | $                                               | 5.54       |                                                                                                                            | 164,191    | (2)                                                                                                                                                                              |       | (1) |
|            |       |                                                |       |                                            |       |                                                                                                                            |       |                                                                                                                                                                             |       |
| May 2008   |       | 13,000                                              |       | $                                               | 6.14       |                                                                                                                            | 177,191    | (2)                                                                                                                                                                              |       | (1) |
|            |       |                                                |       |                                            |       |                                                                                                                            |       |                                                                                                                                                                             |       |
| June 2008  |       | 4,500                                               |       | $                                               | 6.12       |                                                                                                                            | 181,691    | (2)                                                                                                                                                                              |       | (1) |
|            |       |                                                |       |                                            |       |                                                                                                                            |       |                                                                                                                                                                             |       |
| Total           |       | 23,500                                              |       | $                                               | 5.93       |                                                                                                                            | 181,691    | (2)                                                                                                                                                                              |       | (1) |

 

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(1)   A description of the maximum amount that maybe used to purchase our units under the trading plans is included in thenarrative preceding this table.

(2)   Represents the total number of our limitedpartnership units that have been purchased by the trading plans, controlled byMr. Nichols, pursuant to the current or any previous publicly announcedplan or program by trading plans.

 

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## **Item 3 – DefaultsUpon Senior Securities**

## ** **

None.

 

## **Item 4 – Submissionof Matters to a Vote of Security Holders**

## ** **

None.

 

## **Item 5 – OtherInformation**

## ** **

None.

 

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## **Item 6 – Exhibits**

## ** **

| **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 andNTS  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 ofNational  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 Creek’s Edge Investors, LLC and CG Stony Point,  LLC, dated June 20, 2007 (Creek’s 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)       |
|                 |       |                                                                                                                                                                                                                                                                                       |       |       |
| 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 SecuritiesExchange Act, as amended                                                                                                                                      |       | (15)       |
|                 |       |                                                                                                                                                                                                                                                                                       |       |       |
| 31.2                 |       | Certification of Chief Financial Officer Pursuant to  Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act, as amended                                                                                                                                      |       | (15)       |

 

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| **Exhibit No.** |   |                                                                                                                                                              |   |   |
|----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| 32.1                 |   | Certification of Chief Executive Officer Pursuant to U.S.C. 1350, as  adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002                       |   | (15)   |
|                 |   |                                                                                                                                                              |   |   |
| 32.2                 |   | Certification of Chief Financial Officer Pursuant to U.S.C. 1350, as  adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002                       |   | (15)   |
|                 |   |                                                                                                                                                              |   |   |
| 99.01                |   | Registration Statement on Form S-4/A (Amendment No. 5), as  filed by the Registrant with the Securities andExchange Commission on October 27, 2004 |   | (3)    |

 

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| (1)  |   | Incorporated by reference to the Registrant’s Registration Statement  on Form S-4,as  filed with the Securities and Exchange Commission on February 4, 2004                                   |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | Incorporated by reference to the Registrant’s 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 Registrant’s 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 Registrant’s 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 Registrant’s 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 Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  April 17, 2006                                            |
| (7)  |   | Incorporated by reference to the Registrant’s Information Statement on  Form DEF 14C, as filed with the Securities and Exchange Commission on  May 9, 2006                                    |
| (8)  |   | Incorporated by reference to the Registrant’s 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 Registrant’s 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 Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  February 14, 2007                                         |
| (11) |   | Incorporated by reference to the Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  March 16, 2007                                            |
| (12) |   | Incorporated by reference to the Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  August 17, 2007                                           |
| (13) |   | Incorporated by reference to the Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  May 1, 2008                                               |
| (14) |   | Incorporated by reference to the Registrant’s Current Report on  Form 8-K, as filed with the Securities and Exchange Commission on  June 27, 2008                                             |
| (15) |   | Filed herewith                                                                                                                                                                                               |

 

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## **SIGNATURES**

## ** **

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
| ** ** | **NTS REALTY HOLDINGS LIMITED PARTNERSHIP** |
|------------|---------------------------------------------|
|       |                                        |
|       | By:                                         | NTS REALTY CAPITAL, INC. |
|       |                                        | Its:    Managing General Partner |
|       |                                        |   |
|       |                                        | By: | */s/ Brian F. Lavin* |
|       |                                        |   | Brian F. Lavin |
|       |                                        |   | Its:       President  and Chief Executive Officer |
|       |                                        |   | Date:    August 11,  2008 |
|       |                                        |   |   |
|       |                                        | By: | */s/ Gregory A. Wells* |
|       |                                        |   | Gregory A. Wells |
|       |                                        |   | Its:       Chief  Financial Officer |
|       |                                        |   | Date:    August 11,  2008 |

 

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